Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks, 67033-67035 [2018-28267]

Download as PDF 67033 Rules and Regulations Federal Register Vol. 83, No. 248 Friday, December 28, 2018 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 4 [Docket ID OCC–2018–0014] RIN 1557–AE37 FEDERAL RESERVE SYSTEM 12 CFR Parts 208 and 211 [Docket No. R–1615] RIN 7100–AF09 FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Parts 337 and 347 RIN 3064–AE76 Expanded Examination Cycle for Certain Small Insured Depository Institutions and U.S. Branches and Agencies of Foreign Banks Office of the Comptroller of the Currency (OCC), Treasury; Board of Governors of the Federal Reserve System (Board); and Federal Deposit Insurance Corporation (FDIC). ACTION: Final rules. AGENCY: On August 29, 2018, the OCC, Board, and FDIC (collectively, the agencies) issued interim final rules that were effective immediately to implement section 210 of the Economic Growth, Regulatory Relief, and Consumer Protection Act (Economic Growth Act), which was enacted on May 24, 2018. The agencies are now adopting the interim final rules as final without change. The interim final rules and final rules implement section 210 of the Economic Growth Act, which amended section 10(d) of the Federal Deposit Insurance Act (FDI Act) to permit the agencies to examine qualifying insured depository institutions (IDIs) with under $3 billion amozie on DSK3GDR082PROD with RULES SUMMARY: VerDate Sep<11>2014 16:02 Dec 27, 2018 Jkt 247001 in total assets not less than once during each 18-month period. In addition, these final rules adopt as final the parallel changes to the agencies’ regulations governing the on-site examination cycle for U.S. branches and agencies of foreign banks, consistent with the International Banking Act of 1978 (IBA). DATES: These final rules are effective on January 28, 2019. FOR FURTHER INFORMATION CONTACT: OCC: Enice Thomas, Senior Advisor to Senior Deputy Comptroller, Midsize and Community Bank Supervision, (202) 649–5420; and Deborah Katz, Assistant Director, Melissa J. Lisenbee, Senior Attorney, or Christopher Rafferty, Attorney, Chief Counsel’s Office, (202) 649–5490; for persons who are deaf or hearing impaired, TTY, (202) 649–5597. Board: Division of Supervision and Regulation—Richard Naylor, Associate Director, (202) 728–5854; Jonathan Rono, Manager, (202) 721–4568; Assetou Traore, Supervisory Financial Analyst, (202) 974–7066; Virginia Gibbs, Manager, (202) 452–2521; or Alexander Kobulsky, Supervisory Financial Analyst, (202) 452–2031; and Legal Division—Laurie Schaffer, Associate General Counsel, (202) 452–2277; Victoria Szybillo, Senior Counsel, (202) 475–6325; or Mary Watkins, Senior Attorney, (202) 452–3722. FDIC: Policy Branch Division of Risk Management and Supervision—Thomas F. Lyons, Chief, Policy and Program Development, (202) 898–6850, tlyons@ FDIC.gov; Karen J. Currie, Senior Examination Specialist, (202) 898–3981, Policy and Program Development, Division of Risk Management Supervision; Legal Division—Suzanne J. Dawley, Counsel, (202) 898–6509; or Gregory S. Feder, Counsel, (202) 898– 8724. SUPPLEMENTARY INFORMATION: I. Background Section 210 of the Economic Growth Act 1 amended section 10(d) of the FDI Act 2 to permit the agencies to examine qualifying IDIs (generally, those IDIs that are well capitalized and well managed) with under $3 billion in total assets not less than once during each 18month period, rather than not less than 1 Public 2 12 PO 00000 Law 115–174, 132 Stat. 1296 (2018). U.S.C. 1820(d). Frm 00001 Fmt 4700 Sfmt 4700 once during each 12-month period. Prior to the enactment of the Economic Growth Act, only qualifying IDIs with under $1 billion in total assets were eligible for an 18-month on-site examination cycle.3 On August 29, 2018, the agencies issued interim final rules to implement the Economic Growth Act’s amendments to sections 10(d)(4) and 10(d)(10) of the FDI Act 4 that allow qualifying IDIs with under $3 billion in total assets to benefit from the extended 18-month examination cycle. In addition, the interim final rules made parallel changes to the agencies’ regulations governing the on-site examination cycle for U.S. branches and agencies of foreign banks, consistent with the IBA.5 Section 10(d)(1) of the FDI Act 6 generally requires the appropriate Federal banking agency for an IDI 7 to conduct a full-scope, on-site examination of an IDI at least once during each 12-month period. With the enactment of section 210 of the Economic Growth Act, section 10(d)(4) of the FDI Act authorizes the appropriate Federal banking agency to extend the on-site examination cycle for an IDI to at least once during an 18month period if the IDI (1) has total assets of less than $3 billion; (2) is well capitalized (as defined in 12 U.S.C. 1831o (prompt corrective action)); (3) was found, at its most recent examination, to be well managed 8 and 3 See section 83001 of the Fixing America’s Surface Transportation Act (the FAST) Act, enacted on December 4, 2015. Public Law 114–94, 129 Stat. 1312 (permitting the agencies to examine qualifying IDIs with under $1 billion in total assets not less than once during each 18-month period). The agencies published interim final rules implementing the FAST Act amendments in February 2016, and final rules in December 2016. See 81 FR 10069 (Feb. 29, 2016) and 81 FR 90949 (Dec. 16. 2016), respectively, codified at 12 CFR 4.6 and 4.7 (OCC), 12 CFR 208.64 and 211.26 (Board), 12 CFR 337.12 and 347.211 (FDIC). 4 12 U.S.C. 1820(d)(4) and 1820(d)(10). 5 12 U.S.C. 3105(c)(1)(C). 6 12 U.S.C. 1820(d)(1). 7 The Board, FDIC, or OCC. See 12 U.S.C. 1813(q). 8 IDIs are evaluated under the Uniform Financial Institutions Rating System (commonly referred to as CAMELS). CAMELS is an acronym that is drawn from the first letters of the individual components of the rating system: Capital adequacy, Asset quality, Management, Earnings, Liquidity, and Sensitivity to market risk. CAMELS ratings of ‘‘1’’ and ‘‘2’’ correspond with ratings of ‘‘outstanding’’ and ‘‘good,’’ respectively. In addition to having a CAMELS composite rating of ‘‘1’’ or ‘‘2,’’ an IDI is E:\FR\FM\28DER1.SGM Continued 28DER1 67034 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Rules and Regulations to have a composite condition of ‘‘outstanding’’ or, in the case of an IDI with total assets of not more than $200 million, ‘‘outstanding’’ or ‘‘good;’’ (4) is not subject to a formal enforcement proceeding or order by the FDIC or its appropriate Federal banking agency; and (5) has not undergone a change in control during the previous 12-month period in which a full-scope, on-site examination otherwise would have been required. The Economic Growth Act also amended section 10(d)(10) of the FDI Act to give each appropriate Federal banking agency discretionary authority to extend eligibility for an 18-month examination cycle, by regulation, to qualifying IDIs with an ‘‘outstanding’’ or ‘‘good’’ composite condition and total assets not greater than $3 billion, if the agency determines that this amount would be consistent with the principles of safety and soundness for IDIs.9 In addition, section 7(c)(1)(C) of the IBA provides that a Federal or a State branch or agency of a foreign bank shall be subject to on-site examination by its appropriate Federal banking agency or State bank supervisor as frequently as a national or State bank would be subject to such an examination by the agency. amozie on DSK3GDR082PROD with RULES II. Description of the Final Rules The agencies received three comment letters addressing the interim final rules, two from trade associations and one from a multi-bank financial holding company. All three letters were supportive of the interim final rules. After considering the comments on the interim final rules, the agencies are adopting the interim final rules as final without change. The final rules, like the interim final rules implement section 10(d)(4) of the FDI Act to increase, from $1 billion to $3 billion, the total asset threshold under which an agency may apply an 18-month on-site examination cycle for qualified IDIs that have an ‘‘outstanding’’ composite rating. The agencies also are exercising their discretionary authority under section 10(d)(10) of the FDI Act to extend eligibility for an 18-month examination cycle, by regulation, to qualifying IDIs with an ‘‘outstanding’’ or ‘‘good’’ considered to be ‘‘well managed’’ for the purposes of section 10(d) of the FDI Act only if the IDI also received a rating of ‘‘1’’ or ‘‘2’’ for the management component of the CAMELS rating at its most recent examination. See 72 FR 17798 (Apr. 10, 2007). 9 The Board and the FDIC, as the appropriate Federal banking agencies for State-chartered insured banks and savings associations, are permitted to conduct on-site examinations of such IDIs on alternating 12-month or 18-month periods with an IDI’s State supervisor, if the Board or FDIC, as appropriate, determines that the alternating examination conducted by the State carries out the purposes of section 10(d) of the FDI Act. 12 U.S.C. 1820(d)(3). VerDate Sep<11>2014 16:02 Dec 27, 2018 Jkt 247001 composite rating with total assets under $3 billion. The agencies have determined that increasing the maximum asset amount limitation for qualifying IDIs with less than $3 billion in total assets is consistent with the principles of safety and soundness. In determining whether the reduction in examination frequency is consistent with the principles of safety and soundness for such IDIs, the agencies considered several factors. The agencies acknowledge that extending the examination cycle could make it more likely that there will be a delay in an agency’s ability to detect deterioration in an IDI’s performance. However, the agencies believe that extending the examination cycle from 12 months to 18 months for these small IDIs with relatively simple risk profiles should not appreciably increase their risk of financial deterioration or failure. In addition, the agencies will continue their off-site monitoring activities and have the ability to examine IDIs more frequently as necessary or appropriate. The agencies also note that, in order to qualify for an 18-month examination cycle, any IDI with total assets under $3 billion—including one with a composite rating of ‘‘good’’—must meet the other capital, managerial, and supervisory criteria set forth in section 10(d) of the FDI Act and the agencies’ implementing regulations. Considering the agencies’ off-site monitoring activities; their discretion to examine IDIs more frequently as necessary; and the capital, managerial, and supervisory criteria in section 10(d) of the FDI Act, the agencies believe that increasing the maximum asset amount limitation for IDIs from less than $1 billion to less than $3 billion is consistent with the principles of safety and soundness. Additionally, the agencies expect that this increase will allow the agencies to better focus their supervisory resources on the IDIs and U.S. branches and agencies of foreign banks (collectively, financial institutions) that may present capital, managerial, or other issues of supervisory concern, and therefore, the final rules have the potential to enhance safety and soundness collectively for all financial institutions. The agencies will continue to monitor financial institutions in this asset range between examinations and the impact of the extended examination cycle. In accordance with section 7(c)(1)(C) of the IBA, the agencies also are finalizing conforming changes to their regulations governing the on-site examination cycle for the U.S. branches and agencies of foreign banks. For the same reasons as discussed above with PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 respect to qualifying IDIs, the agencies believe that extending similar treatment to qualifying U.S. branches and agencies of foreign banks is consistent with the principles of safety and soundness. Based on data available at publication, the agencies estimate that the number of banks and savings associations that may qualify for an extended 18-month examination cycle increased by approximately 430 (241 of which are supervised by the FDIC, 99 by the OCC, and 90 by the Board), bringing the total number to 4,706 banks and savings associations since the interim rules took effect.10 Approximately 30 U.S. branches and agencies of foreign banks would be eligible for the extended examination cycle based on the final rules (2 of which are supervised by the FDIC, 8 by the OCC, and 20 by the Board).11 For all the reasons described above, the agencies are adopting the interim final rules as final without change. Effective Date The Administrative Procedure Act (APA) generally requires that a final rule be published in the Federal Register no less than 30 days before its effective date.12 Therefore, the final rules will become effective on January 28, 2019. The interim final rules will continue to be in effect until the final rules become effective. Section 302 of the Riegle Community Development and Regulatory Improvement Act of 1994 (RCDRIA) requires that each Federal banking agency, in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosures, or other requirements on IDIs, consider, consistent with the principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations.13 Further, new regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally must take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.14 The RCDRIA does not apply to the final rules because the rules do not impose any additional reporting, 10 Call Report data, Sept. 30, 2018. 11 Id. 12 5 U.S.C. 553(d). U.S.C. 4802(a). 14 12 U.S.C. 4802(b). 13 12 E:\FR\FM\28DER1.SGM 28DER1 Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / Rules and Regulations disclosures, or other new requirements on IDIs. VI. OCC Unfunded Mandates Reform Act of 1995 Determination 2018, is adopted as a final rule without change. III. Use of Plain Language Consistent with section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA), before promulgating any final rule for which a general notice of proposed rulemaking was published, the OCC prepares an economic analysis of the final rules. Because the OCC determined that the publication of a general notice of proposed rulemaking was unnecessary, the OCC has not prepared an economic analysis of the joint final rules under UMRA. FEDERAL RESERVE SYSTEM Section 722 of the Gramm-LeachBliley Act 15 requires the Federal banking agencies to use plain language in all proposed and final rules published after January 1, 2000. The agencies’ staff believe the final rules are presented in a simple and straightforward manner. Having received no comments with respect to making the interim final rules easier to understand, the agencies are adopting the final rules without change. The Regulatory Flexibility Act (RFA) 16 requires an agency to consider whether the rules it proposes will have a significant economic impact on a substantial number of small entities.17 The RFA applies only to rules for which an agency publishes a general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed in the joint interim final rules, consistent with section 553(b)(B) of the APA, the agencies determined for good cause that general notice and opportunity for public comment was unnecessary, and therefore the agencies did not issue a notice of proposed rulemaking. Accordingly, the agencies have concluded that the RFA’s requirements relating to initial and final regulatory flexibility analysis do not apply. Further, the agencies note that no small entities, as defined by the Small Business Administration’s rules implementing the RFA, will be affected by the final rules’ increased asset thresholds. V. Paperwork Reduction Act The Paperwork Reduction Act of 1995 18 states that no agency may conduct or sponsor, nor is the respondent required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. Because the final rules do not create a new, or revise an existing, collection of information, no information collection request submission needs to be made to the OMB. 15 Public Law 106–102, section 722, 113 Stat. 1338, 1471 (1999). 16 5 U.S.C. 601 et seq. 17 Under regulations issued by the Small Business Administration, a small entity includes a depository institution, bank holding company, or savings and loan holding company with total assets of $550 million or less and trust companies with total assets of $38.5 million or less. 18 44 U.S.C. 3501–3521. VerDate Sep<11>2014 16:02 Dec 27, 2018 Jkt 247001 List of Subjects 12 CFR Chapter II PART 208—MEMBERSHIP OF STATE BANKING INSTITUTIONS IN THE FEDERAL RESERVE SYSTEM (REGULATION H) PART 211—INTERNATIONAL BANKING OPERATIONS (REGULATION K) The interim final rule amending parts 208 and 211 of chapter II, title 12 of the Code of Federal Regulations, which was published at 83 FR 43961 on August 29, 2018, is adopted as a final rule without change. ■ 12 CFR Part 4 IV. Regulatory Flexibility Act amozie on DSK3GDR082PROD with RULES 67035 Administrative practice and procedure, Freedom of information, Individuals with disabilities, Minority businesses, Organization and functions (Government agencies), Reporting and recordkeeping requirements, Women. 12 CFR Part 208 FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Chapter III Accounting, Agriculture, Banks, banking, Confidential business information, Crime, Currency, Federal Reserve System, Flood insurance, Mortgages, Reporting and recordkeeping requirements, Safety and soundness, Securities. PART 337—UNSAFE AND UNSOUND BANK PRACTICES PART 347—INTERNATIONAL BANKING The interim final rule amending parts 337 and 347 of chapter III of title 12 of the Code of Federal Regulations, which was published at 83 FR 43961 on August 29, 2018, is adopted as a final rule without change. ■ 12 CFR Part 211 Exports, Federal Reserve System, Foreign banking, Holding companies, Investments, Reporting and recordkeeping requirements. 12 CFR Part 337 Banks, banking, Reporting and recordkeeping requirements, Savings Associations. 12 CFR Part 347 Dated: December 13, 2018. Joseph M. Otting, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System. Office of the Comptroller of the Currency Ann E. Misback, Secretary to the Board. Dated at Washington, DC, on December 18, 2018. By order of the Board of Directors. Federal Deposit Insurance Corporation. Valerie J. Best, Assistant Executive Secretary. 12 CFR Chapter I [FR Doc. 2018–28267 Filed 12–27–18; 8:45 am] Authority delegations (Government agencies), Bank deposit insurance, Banks, banking, Credit, Foreign banking, Investments, Reporting and recordkeeping requirements, U.S. investments abroad. PART 4—ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF INFORMATION, CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT RESTRICTIONS FOR SENIOR EXAMINERS BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P The interim final rule amending 12 CFR part 4 of chapter I, title 12 of the Code of Federal Regulations, which was published at 83 FR 43961 on August 29, ■ PO 00000 Frm 00003 Fmt 4700 Sfmt 9990 E:\FR\FM\28DER1.SGM 28DER1

Agencies

[Federal Register Volume 83, Number 248 (Friday, December 28, 2018)]
[Rules and Regulations]
[Pages 67033-67035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28267]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 

========================================================================


Federal Register / Vol. 83, No. 248 / Friday, December 28, 2018 / 
Rules and Regulations

[[Page 67033]]



DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Part 4

[Docket ID OCC-2018-0014]
RIN 1557-AE37

FEDERAL RESERVE SYSTEM

12 CFR Parts 208 and 211

[Docket No. R-1615]
RIN 7100-AF09

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 337 and 347

RIN 3064-AE76


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

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

ACTION: Final rules.

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

SUMMARY: On August 29, 2018, the OCC, Board, and FDIC (collectively, 
the agencies) issued interim final rules that were effective 
immediately to implement section 210 of the Economic Growth, Regulatory 
Relief, and Consumer Protection Act (Economic Growth Act), which was 
enacted on May 24, 2018. The agencies are now adopting the interim 
final rules as final without change. The interim final rules and final 
rules implement section 210 of the Economic Growth Act, which amended 
section 10(d) of the Federal Deposit Insurance Act (FDI Act) to permit 
the agencies to examine qualifying insured depository institutions 
(IDIs) with under $3 billion in total assets not less than once during 
each 18-month period. In addition, these final rules adopt as final the 
parallel changes to the agencies' regulations governing the on-site 
examination cycle for U.S. branches and agencies of foreign banks, 
consistent with the International Banking Act of 1978 (IBA).

DATES: These final rules are effective on January 28, 2019.

FOR FURTHER INFORMATION CONTACT: 
    OCC: Enice Thomas, Senior Advisor to Senior Deputy Comptroller, 
Midsize and Community Bank Supervision, (202) 649-5420; and Deborah 
Katz, Assistant Director, Melissa J. Lisenbee, Senior Attorney, or 
Christopher Rafferty, Attorney, Chief Counsel's Office, (202) 649-5490; 
for persons who are deaf or hearing impaired, TTY, (202) 649-5597.
    Board: Division of Supervision and Regulation--Richard Naylor, 
Associate Director, (202) 728-5854; Jonathan Rono, Manager, (202) 721-
4568; Assetou Traore, Supervisory Financial Analyst, (202) 974-7066; 
Virginia Gibbs, Manager, (202) 452-2521; or Alexander Kobulsky, 
Supervisory Financial Analyst, (202) 452-2031; and Legal Division--
Laurie Schaffer, Associate General Counsel, (202) 452-2277; Victoria 
Szybillo, Senior Counsel, (202) 475-6325; or Mary Watkins, Senior 
Attorney, (202) 452-3722.
    FDIC: Policy Branch Division of Risk Management and Supervision--
Thomas F. Lyons, Chief, Policy and Program Development, (202) 898-6850, 
tlyons@FDIC.gov; Karen J. Currie, Senior Examination Specialist, (202) 
898-3981, Policy and Program Development, Division of Risk Management 
Supervision; Legal Division--Suzanne J. Dawley, Counsel, (202) 898-
6509; or Gregory S. Feder, Counsel, (202) 898-8724.

SUPPLEMENTARY INFORMATION: 

I. Background

    Section 210 of the Economic Growth Act \1\ amended section 10(d) of 
the FDI Act \2\ to permit the agencies to examine qualifying IDIs 
(generally, those IDIs that are well capitalized and well managed) with 
under $3 billion in total assets not less than once during each 18-
month period, rather than not less than once during each 12-month 
period. Prior to the enactment of the Economic Growth Act, only 
qualifying IDIs with under $1 billion in total assets were eligible for 
an 18-month on-site examination cycle.\3\
---------------------------------------------------------------------------

    \1\ Public Law 115-174, 132 Stat. 1296 (2018).
    \2\ 12 U.S.C. 1820(d).
    \3\ See section 83001 of the Fixing America's Surface 
Transportation Act (the FAST) Act, enacted on December 4, 2015. 
Public Law 114-94, 129 Stat. 1312 (permitting the agencies to 
examine qualifying IDIs with under $1 billion in total assets not 
less than once during each 18-month period). The agencies published 
interim final rules implementing the FAST Act amendments in February 
2016, and final rules in December 2016. See 81 FR 10069 (Feb. 29, 
2016) and 81 FR 90949 (Dec. 16. 2016), respectively, codified at 12 
CFR 4.6 and 4.7 (OCC), 12 CFR 208.64 and 211.26 (Board), 12 CFR 
337.12 and 347.211 (FDIC).
---------------------------------------------------------------------------

    On August 29, 2018, the agencies issued interim final rules to 
implement the Economic Growth Act's amendments to sections 10(d)(4) and 
10(d)(10) of the FDI Act \4\ that allow qualifying IDIs with under $3 
billion in total assets to benefit from the extended 18-month 
examination cycle. In addition, the interim final rules made parallel 
changes to the agencies' regulations governing the on-site examination 
cycle for U.S. branches and agencies of foreign banks, consistent with 
the IBA.\5\
---------------------------------------------------------------------------

    \4\ 12 U.S.C. 1820(d)(4) and 1820(d)(10).
    \5\ 12 U.S.C. 3105(c)(1)(C).
---------------------------------------------------------------------------

    Section 10(d)(1) of the FDI Act \6\ generally requires the 
appropriate Federal banking agency for an IDI \7\ to conduct a full-
scope, on-site examination of an IDI at least once during each 12-month 
period. With the enactment of section 210 of the Economic Growth Act, 
section 10(d)(4) of the FDI Act authorizes the appropriate Federal 
banking agency to extend the on-site examination cycle for an IDI to at 
least once during an 18-month period if the IDI (1) has total assets of 
less than $3 billion; (2) is well capitalized (as defined in 12 U.S.C. 
1831o (prompt corrective action)); (3) was found, at its most recent 
examination, to be well managed \8\ and

[[Page 67034]]

to have a composite condition of ``outstanding'' or, in the case of an 
IDI with total assets of not more than $200 million, ``outstanding'' or 
``good;'' (4) is not subject to a formal enforcement proceeding or 
order by the FDIC or its appropriate Federal banking agency; and (5) 
has not undergone a change in control during the previous 12-month 
period in which a full-scope, on-site examination otherwise would have 
been required. The Economic Growth Act also amended section 10(d)(10) 
of the FDI Act to give each appropriate Federal banking agency 
discretionary authority to extend eligibility for an 18-month 
examination cycle, by regulation, to qualifying IDIs with an 
``outstanding'' or ``good'' composite condition and total assets not 
greater than $3 billion, if the agency determines that this amount 
would be consistent with the principles of safety and soundness for 
IDIs.\9\
---------------------------------------------------------------------------

    \6\ 12 U.S.C. 1820(d)(1).
    \7\ The Board, FDIC, or OCC. See 12 U.S.C. 1813(q).
    \8\ IDIs are evaluated under the Uniform Financial Institutions 
Rating System (commonly referred to as CAMELS). CAMELS is an acronym 
that is drawn from the first letters of the individual components of 
the rating system: Capital adequacy, Asset quality, Management, 
Earnings, Liquidity, and Sensitivity to market risk. CAMELS ratings 
of ``1'' and ``2'' correspond with ratings of ``outstanding'' and 
``good,'' respectively. In addition to having a CAMELS composite 
rating of ``1'' or ``2,'' an IDI is considered to be ``well 
managed'' for the purposes of section 10(d) of the FDI Act only if 
the IDI also received a rating of ``1'' or ``2'' for the management 
component of the CAMELS rating at its most recent examination. See 
72 FR 17798 (Apr. 10, 2007).
    \9\ The Board and the FDIC, as the appropriate Federal banking 
agencies for State-chartered insured banks and savings associations, 
are permitted to conduct on-site examinations of such IDIs on 
alternating 12-month or 18-month periods with an IDI's State 
supervisor, if the Board or FDIC, as appropriate, determines that 
the alternating examination conducted by the State carries out the 
purposes of section 10(d) of the FDI Act. 12 U.S.C. 1820(d)(3).
---------------------------------------------------------------------------

    In addition, section 7(c)(1)(C) of the IBA provides that a Federal 
or a State branch or agency of a foreign bank shall be subject to on-
site examination by its appropriate Federal banking agency or State 
bank supervisor as frequently as a national or State bank would be 
subject to such an examination by the agency.

II. Description of the Final Rules

    The agencies received three comment letters addressing the interim 
final rules, two from trade associations and one from a multi-bank 
financial holding company. All three letters were supportive of the 
interim final rules.
    After considering the comments on the interim final rules, the 
agencies are adopting the interim final rules as final without change. 
The final rules, like the interim final rules implement section 
10(d)(4) of the FDI Act to increase, from $1 billion to $3 billion, the 
total asset threshold under which an agency may apply an 18-month on-
site examination cycle for qualified IDIs that have an ``outstanding'' 
composite rating.
    The agencies also are exercising their discretionary authority 
under section 10(d)(10) of the FDI Act to extend eligibility for an 18-
month examination cycle, by regulation, to qualifying IDIs with an 
``outstanding'' or ``good'' composite rating with total assets under $3 
billion. The agencies have determined that increasing the maximum asset 
amount limitation for qualifying IDIs with less than $3 billion in 
total assets is consistent with the principles of safety and soundness.
    In determining whether the reduction in examination frequency is 
consistent with the principles of safety and soundness for such IDIs, 
the agencies considered several factors. The agencies acknowledge that 
extending the examination cycle could make it more likely that there 
will be a delay in an agency's ability to detect deterioration in an 
IDI's performance. However, the agencies believe that extending the 
examination cycle from 12 months to 18 months for these small IDIs with 
relatively simple risk profiles should not appreciably increase their 
risk of financial deterioration or failure. In addition, the agencies 
will continue their off-site monitoring activities and have the ability 
to examine IDIs more frequently as necessary or appropriate. The 
agencies also note that, in order to qualify for an 18-month 
examination cycle, any IDI with total assets under $3 billion--
including one with a composite rating of ``good''--must meet the other 
capital, managerial, and supervisory criteria set forth in section 
10(d) of the FDI Act and the agencies' implementing regulations.
    Considering the agencies' off-site monitoring activities; their 
discretion to examine IDIs more frequently as necessary; and the 
capital, managerial, and supervisory criteria in section 10(d) of the 
FDI Act, the agencies believe that increasing the maximum asset amount 
limitation for IDIs from less than $1 billion to less than $3 billion 
is consistent with the principles of safety and soundness. 
Additionally, the agencies expect that this increase will allow the 
agencies to better focus their supervisory resources on the IDIs and 
U.S. branches and agencies of foreign banks (collectively, financial 
institutions) that may present capital, managerial, or other issues of 
supervisory concern, and therefore, the final rules have the potential 
to enhance safety and soundness collectively for all financial 
institutions. The agencies will continue to monitor financial 
institutions in this asset range between examinations and the impact of 
the extended examination cycle.
    In accordance with section 7(c)(1)(C) of the IBA, the agencies also 
are finalizing conforming changes to their regulations governing the 
on-site examination cycle for the U.S. branches and agencies of foreign 
banks. For the same reasons as discussed above with respect to 
qualifying IDIs, the agencies believe that extending similar treatment 
to qualifying U.S. branches and agencies of foreign banks is consistent 
with the principles of safety and soundness.
    Based on data available at publication, the agencies estimate that 
the number of banks and savings associations that may qualify for an 
extended 18-month examination cycle increased by approximately 430 (241 
of which are supervised by the FDIC, 99 by the OCC, and 90 by the 
Board), bringing the total number to 4,706 banks and savings 
associations since the interim rules took effect.\10\ Approximately 30 
U.S. branches and agencies of foreign banks would be eligible for the 
extended examination cycle based on the final rules (2 of which are 
supervised by the FDIC, 8 by the OCC, and 20 by the Board).\11\
---------------------------------------------------------------------------

    \10\ Call Report data, Sept. 30, 2018.
    \11\ Id.
---------------------------------------------------------------------------

    For all the reasons described above, the agencies are adopting the 
interim final rules as final without change.

Effective Date

    The Administrative Procedure Act (APA) generally requires that a 
final rule be published in the Federal Register no less than 30 days 
before its effective date.\12\ Therefore, the final rules will become 
effective on January 28, 2019. The interim final rules will continue to 
be in effect until the final rules become effective.
---------------------------------------------------------------------------

    \12\ 5 U.S.C. 553(d).
---------------------------------------------------------------------------

    Section 302 of the Riegle Community Development and Regulatory 
Improvement Act of 1994 (RCDRIA) requires that each Federal banking 
agency, in determining the effective date and administrative compliance 
requirements for new regulations that impose additional reporting, 
disclosures, or other requirements on IDIs, consider, consistent with 
the principles of safety and soundness and the public interest, any 
administrative burdens that such regulations would place on depository 
institutions, including small depository institutions, and customers of 
depository institutions, as well as the benefits of such 
regulations.\13\ Further, new regulations that impose additional 
reporting, disclosures, or other new requirements on IDIs generally 
must take effect on the first day of a calendar quarter that begins on 
or after the date on which the regulations are published in final 
form.\14\ The RCDRIA does not apply to the final rules because the 
rules do not impose any additional reporting,

[[Page 67035]]

disclosures, or other new requirements on IDIs.
---------------------------------------------------------------------------

    \13\ 12 U.S.C. 4802(a).
    \14\ 12 U.S.C. 4802(b).
---------------------------------------------------------------------------

III. Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \15\ requires the Federal 
banking agencies to use plain language in all proposed and final rules 
published after January 1, 2000. The agencies' staff believe the final 
rules are presented in a simple and straightforward manner. Having 
received no comments with respect to making the interim final rules 
easier to understand, the agencies are adopting the final rules without 
change.
---------------------------------------------------------------------------

    \15\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(1999).
---------------------------------------------------------------------------

IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) \16\ requires an agency to 
consider whether the rules it proposes will have a significant economic 
impact on a substantial number of small entities.\17\ The RFA applies 
only to rules for which an agency publishes a general notice of 
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed in the 
joint interim final rules, consistent with section 553(b)(B) of the 
APA, the agencies determined for good cause that general notice and 
opportunity for public comment was unnecessary, and therefore the 
agencies did not issue a notice of proposed rulemaking. Accordingly, 
the agencies have concluded that the RFA's requirements relating to 
initial and final regulatory flexibility analysis do not apply. 
Further, the agencies note that no small entities, as defined by the 
Small Business Administration's rules implementing the RFA, will be 
affected by the final rules' increased asset thresholds.
---------------------------------------------------------------------------

    \16\ 5 U.S.C. 601 et seq.
    \17\ Under regulations issued by the Small Business 
Administration, a small entity includes a depository institution, 
bank holding company, or savings and loan holding company with total 
assets of $550 million or less and trust companies with total assets 
of $38.5 million or less.
---------------------------------------------------------------------------

V. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 \18\ states that no agency may 
conduct or sponsor, nor is the respondent required to respond to, an 
information collection unless it displays a currently valid Office of 
Management and Budget (OMB) control number. Because the final rules do 
not create a new, or revise an existing, collection of information, no 
information collection request submission needs to be made to the OMB.
---------------------------------------------------------------------------

    \18\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

VI. OCC Unfunded Mandates Reform Act of 1995 Determination

    Consistent with section 202 of the Unfunded Mandates Reform Act of 
1995 (UMRA), before promulgating any final rule for which a general 
notice of proposed rulemaking was published, the OCC prepares an 
economic analysis of the final rules. Because the OCC determined that 
the publication of a general notice of proposed rulemaking was 
unnecessary, the OCC has not prepared an economic analysis of the joint 
final rules under UMRA.

List of Subjects

12 CFR Part 4

    Administrative practice and procedure, Freedom of information, 
Individuals with disabilities, Minority businesses, Organization and 
functions (Government agencies), Reporting and recordkeeping 
requirements, Women.

12 CFR Part 208

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

12 CFR Part 211

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

12 CFR Part 337

    Banks, banking, Reporting and recordkeeping requirements, Savings 
Associations.

12 CFR Part 347

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

Office of the Comptroller of the Currency

12 CFR Chapter I

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

0
The interim final rule amending 12 CFR part 4 of chapter I, title 12 of 
the Code of Federal Regulations, which was published at 83 FR 43961 on 
August 29, 2018, is adopted as a final rule without change.

FEDERAL RESERVE SYSTEM

12 CFR Chapter II

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

PART 211--INTERNATIONAL BANKING OPERATIONS (REGULATION K)

0
The interim final rule amending parts 208 and 211 of chapter II, title 
12 of the Code of Federal Regulations, which was published at 83 FR 
43961 on August 29, 2018, is adopted as a final rule without change.

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Chapter III

PART 337--UNSAFE AND UNSOUND BANK PRACTICES

PART 347--INTERNATIONAL BANKING

0
The interim final rule amending parts 337 and 347 of chapter III of 
title 12 of the Code of Federal Regulations, which was published at 83 
FR 43961 on August 29, 2018, is adopted as a final rule without change.

    Dated: December 13, 2018.
Joseph M. Otting,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System.

Ann E. Misback,
Secretary to the Board.
    Dated at Washington, DC, on December 18, 2018.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 2018-28267 Filed 12-27-18; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P