Removal of Transferred OTS Regulations Regarding Lending and Investment; and Conforming Amendments to Other Regulation, 1653-1661 [2018-28084]

Download as PDF Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules of proposed rulemaking for test procedures and energy conservations standards. That notification also solicited nominations for membership to the working group. (83 FR 15514) This notification announces the next round of meetings for this working group. DOE will host a public meeting and webinar on Thursday, February 21, 2019 from 9:00 a.m. to 5:00 p.m. and on Friday, February 22, 2019 from 9:00 a.m. to 1:00 p.m. in Washington, DC. The purpose of these meetings will be to negotiate in an attempt to reach consensus on proposed Federal test procedures and energy conservation standards for VRF multi-split systems. Public Participation Attendance at the Public Meeting The time, date, and location of the public meeting are listed in the DATES and ADDRESSES sections of this document. If you plan to attend the public meeting, please notify the ASRAC staff at asrac@ee.doe.gov. Due to the REAL ID Act implemented by the Department of Homeland Security (DHS), there have been recent changes regarding ID requirements for individuals wishing to enter Federal buildings from specific States and U.S. territories. DHS maintains an updated website identifying the State and territory driver’s licenses that currently are acceptable for entry into DOE facilities at https://www.dhs.gov/real-idenforcement-brief. A driver’s license from a State or territory identified as not compliant by DHS will not be accepted for building entry, and one of the alternate forms of ID listed below will be required. Acceptable alternate forms of Photo-ID include U.S. Passport or Passport Card; an Enhanced Driver’s License or Enhanced ID-Card issued by States and territories as identified on the DHS website (Enhanced licenses issued by these States and territories are clearly marked Enhanced or Enhanced Driver’s License); a military ID or other Federal government-issued Photo-ID card. In addition, you can attend the public meeting via webinar. Webinar registration information, participant instructions, and information about the capabilities available to webinar participants will be published on DOE’s website: https://energy.gov/eere/ buildings/appliance-standards-andrulemaking-federal-advisory-committee. Participants are responsible for ensuring their systems are compatible with the webinar software. VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 Procedure for Submitting Prepared General Statements for Distribution FEDERAL DEPOSIT INSURANCE CORPORATION Any person who has plans to present a prepared general statement may request that copies of his or her statement be made available at the public meeting. Such persons may submit requests, along with an advance electronic copy of their statement in PDF (preferred), Microsoft Word or Excel, WordPerfect, or text (ASCII) file format, to the appropriate address shown in the FOR FURTHER INFORMATION CONTACT section of this notification. The request and advance copy of statements must be received at least one week before the public meeting and may be emailed, hand-delivered, or sent by postal mail. DOE prefers to receive requests and advance copies via email. Please include a telephone number to enable DOE staff to make a follow-up contact, if needed. 12 CFR Parts 365 and 390 Conduct of the Public Meeting ASRAC’s Designated Federal Officer will preside at the public meeting and may also use a professional facilitator to aid discussion. The meeting will not be a judicial or evidentiary-type public hearing, but DOE will conduct it in accordance with section 336 of EPCA (42 U.S.C. 6306). A court reporter will be present to record the proceedings and prepare a transcript. A transcript of the public meeting will be included on DOE’s website: https://energy.gov/eere/ buildings/appliance-standards-andrulemaking-federal-advisory-committee. In addition, any person may buy a copy of the transcript from the transcribing reporter. Public comment and statements will be allowed prior to the close of the meeting. Docket The docket is available for review at https://www.regulations.gov/ docket?D=EERE-2018-BT-STD-0003, including Federal Register notices, public meeting attendee lists and transcripts, comments, and other supporting documents/materials. All documents in the docket are listed in the https://regulations.gov index. However, not all documents listed in the index may be publically available, such as information that is exempt from public disclosure. Signed in Washington, DC, on January 18, 2019. Steven Chalk, Acting Deputy Assistant Secretary for Energy Efficiency and Renewable Energy. [FR Doc. 2019–00885 Filed 2–4–19; 8:45 am] BILLING CODE 6450–01–P PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 1653 RIN 3064–AE22 Removal of Transferred OTS Regulations Regarding Lending and Investment; and Conforming Amendments to Other Regulation Federal Deposit Insurance Corporation. ACTION: Notice of proposed rulemaking. AGENCY: In order to streamline FDIC regulations and reduce regulatory burden, the FDIC proposes to rescind and remove from the Code of Federal Regulations rules entitled ‘‘Lending and Investment’’ (part 390, subpart P) that were transferred to the FDIC from the Office of Thrift Supervision (OTS) on July 21, 2011, in connection with the implementation of Title III of the DoddFrank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act); amend certain sections of existing FDIC regulations governing real estate lending standards to make it clear that such rules apply to all insured depository institutions for which the FDIC is the appropriate Federal banking agency; and amend part 365 by rescinding in its entirety the subpart concerning registration requirements for residential mortgage loan originators because supervision and rulemaking authority in this area was transferred to the Bureau of Consumer Financial Protection (Bureau) by the Dodd-Frank Act. DATES: Comments must be received on or before April 8, 2019. ADDRESSES: You may submit comments by any of the following methods: • FDIC Website: http://www.fdic.gov/ regulations/laws/federal/ Follow instructions for submitting comments on the agency website. • FDIC Email: Comments@fdic.gov. Include RIN 3064–AE22 on the subject line of the message. • FDIC Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, Washington, DC 20429. • Hand Delivery to FDIC: Comments may be hand-delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7 a.m. and 5 p.m. Please include your name, affiliation, address, email address, and telephone number(s) in your comment. All statements received, including attachments and other supporting materials, are part of the public record SUMMARY: E:\FR\FM\05FEP1.SGM 05FEP1 1654 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules and are subject to public disclosure. You should submit only information that you wish to make publicly available. Please note: All comments received will be posted generally without change to http:// www.fdic.gov/regulations/laws/federal/, including any personal information provided. FOR FURTHER INFORMATION CONTACT: Karen J. Currie, Senior Examination Specialist, (202) 898–3981, email address kcurrie@fdic.gov, Division of Risk Management Supervision; Cassandra Duhaney, Senior Policy Analyst, (202) 898–6804, Division of Depositor and Consumer Protection; Rodney D. Ray, Counsel, Legal Division, (202) 898–3556 or Linda Hubble Ku, Counsel, Legal Division, (202) 898– 6634. SUPPLEMENTARY INFORMATION: I. Policy Objectives The policy objectives of the proposed rule are twofold. The first is to simplify the FDIC’s regulations by removing unnecessary regulations, or realigning existing regulations in order to improve the public’s understanding and to improve the ease of reference. The second is to promote parity between State savings associations and State nonmember banks by making both classes of institutions subject to the same requirements regarding real estate lending standards. Thus, as further detailed in this SUPPLEMENTARY INFORMATION Section, the FDIC proposes to rescind and remove from the CFR rules entitled ‘‘Lending and Investment’’ (part 390, subpart P) that were transferred to the FDIC from OTS in connection with the implementation of Title III the Dodd-Frank Act. The FDIC takes the view that other existing regulations that concern permissible activities, safety and soundness standards, and real estate lending standards replicate the current requirements in part 390, subpart P. In addition, the proposal would amend certain sections of part 365 of the FDIC’s existing regulations on real estate lending standards to make it clear that part 365, subpart A, applies to all insured depository institutions for which the FDIC is the appropriate Federal banking agency. Not only would this approach simplify the FDIC’s regulations by removing unnecessary provisions, but it would have the added benefit of creating parity between state savings associations and state nonmenber banks by ensuring that both classes of institutions are subject to the same requirements regarding safety and soundness and real estate lending VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 standards. Finally, the FDIC proposes to amend part 365 by rescinding in its entirety subpart B concerning registration requirements for residential mortgage loan originators because supervision and rulemaking authority in this area was transferred to the Bureau by the Dodd-Frank Act and the Bureau has issued its own regulation, Regulation G. II. Background A. The Dodd-Frank Act The Dodd-Frank Act, signed into law on July 21, 2010, provided for a substantial reorganization of the regulation of State and Federal savings associations and their holding companies.1 Beginning July 21, 2011, the transfer date established by section 311 of the Dodd-Frank Act,2 the powers, duties, and functions formerly performed by the OTS were divided among the FDIC, as to State savings associations, the Office of the Comptroller of the Currency (OCC), as to Federal savings associations, and the Board of Governors of the Federal Reserve System (FRB), as to savings and loan holding companies. Section 316(b) of the Dodd-Frank Act 3 provides the manner of treatment for all orders, resolutions, determinations, regulations, and other advisory materials that have been issued, made, prescribed, or allowed to become effective by the OTS. The section provides that if such materials were in effect on the day before the transfer date, they continue in effect and are enforceable by or against the appropriate successor agency until they are modified, terminated, set aside, or superseded in accordance with applicable law by such successor agency, by any court of competent jurisdiction, or by operation of law. Pursuant to section 316(c) of the Dodd-Frank Act,4 on June 14, 2011, the FDIC’s Board of Directors approved a ‘‘List of OTS Regulations to be Enforced by the OCC and the FDIC Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act.’’ This list was published by the FDIC and the OCC as a Joint Notice in the Federal Register on July 6, 2011.5 Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act,6 granted the OCC rulemaking authority relating to both State and Federal savings associations, nothing in the Dodd-Frank Act affected the FDIC’s existing authority to issue Law 111–203, 124 Stat. 1376 (2010). at 12 U.S.C. 5411. 3 Codified at 12 U.S.C. 5414(b). 4 Codified at 12 U.S.C. 5414(c). 5 76 FR 39246 (July 6, 2011). 6 Codified at 12 U.S.C. 5412(b)(2)(B)(i)(II). regulations under the Federal Deposit Insurance Act (FDI Act) 7 and other laws as the ‘‘appropriate Federal banking agency’’ or under similar statutory terminology. Section 312(c)(1) of the Dodd-Frank Act 8 revised the definition of ‘‘appropriate Federal banking agency’’ contained in section 3(q) of the FDI Act,9 to add State savings associations to the list of entities for which the FDIC is designated as the ‘‘appropriate Federal banking agency.’’ As a result, when the FDIC acts as the designated ‘‘appropriate Federal banking agency’’ (or under similar terminology) for State savings associations, as it does here, the FDIC is authorized to issue, modify, and rescind regulations involving such associations, as well as for State nonmember banks and insured branches of foreign banks. As noted above, on June 14, 2011, operating pursuant to this authority, the FDIC’s Board of Directors (Board) issued a list of regulations of the former OTS that the FDIC would enforce with respect to State savings associations. Also on June 14, 2011, the FDIC’s Board reissued and redesignated certain regulations transferred from the former OTS. These transferred OTS regulations were published as new FDIC regulations in the Federal Register on August 5, 2011.10 When the FDIC republished the transferred OTS regulations as new FDIC regulations, it specifically noted that its staff would evaluate the transferred OTS rules and might later recommend incorporating the transferred OTS regulations into other FDIC regulations, amending them, or rescinding them, as appropriate.11 B. Transferred OTS Regulations (Transferred to the FDIC’s Part 390, Subpart P) A subset of the regulations transferred to the FDIC from the OTS concern lending and investment provisions applicable to State savings associations. The OTS regulations, formerly found at 12 CFR part 560, sections 560.1, 560.3, 560.100, 560.101, 560.120, 560.121, 560.130, 560.160, 560.170, and 560.172, were transferred to the FDIC with only nomenclature changes and now comprise part 390, subpart P. Each provision of part 390, subpart P is discussed in Part III of this SUPPLEMENTARY INFORMATION section, below. The FDIC has conducted a careful review and comparison of part 390, 1 Public 2 Codified PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 7 12 U.S.C. 1811 et seq. at 12 U.S.C. 5412(c)(1). 9 12 U.S.C. 1813(q). 10 76 FR 47652 (Aug. 5, 2011). 11 See 76 FR at 47653. 8 Codified E:\FR\FM\05FEP1.SGM 05FEP1 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules subpart P and other FDIC regulations concerning permissible activities for State savings associations (12 CFR part 362, subpart C (part 362, subpart C)), activities implicating safety and soundness (12 CFR part 364 (part 364 and its appendix A)), and activities implicating real estate lending standards (part 365, subpart A and its appendix A). As discussed in Part III of this SUPPLEMENTARY INFORMATION section, the FDIC proposes to rescind part 390, subpart P because the FDIC considers the provisions contained in part 390, subpart P to be unnecessary because of the applicability of other FDIC regulations. C. Part 365, Subpart A, Real Estate Lending Standards The FDIC proposes to further effectuate the transfer of supervisory authority for State savings associations from the former OTS to the FDIC by amending certain parts of part 365 of the FDIC’s regulations to clarify that part 365, subpart A applies to all insured depository institutions, including State savings associations, for which the FDIC is the appropriate Federal banking agency. As discussed in Part IV of this SUPPLEMENTARY INFORMATION section, the FDIC proposes to amend part 365, subpart A in order to make part 365, subpart A applicable to all insured depository institutions, including State savings associations, for which the FDIC is the appropriate Federal banking agency. D. Part 365, Subpart B, Registration of Residential Mortgage Loan Originators Simultaneously, the FDIC proposes to take the opportunity to rescind, in its entirety, subpart B of part 365, which relates to registration requirements for residential mortgage loan originators, due to the Bureau’s issuance of its 12 regulation, Regulation G, pursuant to the Bureau’s authority under the DoddFrank Act.13 As discussed in Part V of this SUPPLEMENTARY INFORMATION section, the FDIC considers the provisions contained in part 365, 12 The Secure and Fair Mortgage Licensing Act of 2008 (S.A.F.E. Act) was enacted as part of the Housing and Economic Recovery Act of 2008, Public Law 110–289, 122 Stat. 2654, sections 1501– 17 (codified at 12 U.S.C. 5101–16) as amended by Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) (Pub. L. 111–203, 124 Stat. 1376). The S.A.F.E. Act requires residential mortgage loan originators employed by depository institutions, subsidiaries that are owned and controlled by a depository institution and regulated by a federal banking agency, and institutions regulated by the Farm Credit Administration to register with the Nationwide Mortgage Licensing System and Registry, obtain a unique identifier, and maintain such registration. 13 See 81 FR 25323 (April 28, 2016). VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 subpart B to be unnecessary, redundant, or otherwise duplicative of the Bureau regulation governing this area. III. Comparison of FDIC Regulations With the Transferred OTS Regulations To Be Rescinded A. Permissible Activities for State Savings Associations 1. FDIC’s 12 CFR Part 362, Subpart C— Activities of Insured State Savings Associations Part 362 of the FDIC’s regulations governs the activities and investments in which insured State banks and insured State savings associations may engage as principals. Subpart C of part 362 implements section 28 of the FDI Act.14 Subpart C specifically addresses insured State savings associations and restricts their activities and investments to those permissible for a Federal savings association under any statute, including the Home Owners’ Loan Act 15 (HOLA), and to those recognized as permissible for a Federal savings association by the OCC (or former OTS) or in bulletins, orders, or written interpretations of either the OCC or former OTS.16 The FDIC has indicated that it will allow State savings associations and their service corporations to ‘‘undertake only safe and sound activities and investments that do not present significant risks to the Deposit Insurance Fund and that are consistent with the purposes of Federal deposit insurance and other applicable law.’’ 17 2. Former OTS Part 560, Sections 560.120 and 560.121 (Transferred to the FDIC as Sections 390.267 and 390.268) a. Section 390.267—Letters of Credit and Other Independent Undertakings To Pay Against Documents As part of a regulatory reorganization and modernization initiative, section 560.120 was promulgated by the OTS in 1996. At that time, the OTS incorporated the substance of former section 545.48 (authorizing Federal savings associations to issue letters of credit) into new section 560.120 that applied to both Federal and State savings associations.18 Section 560.120 was designed to provide uniform authority, standards and restrictions for all savings associations to consider before issuing a letter of credit or entering into another independent undertaking that had been recognized in law or approved by the OTS.19 The former OTS rule largely mirrored the approach taken by the OCC for national banks, which incorporated market standards and international conventions applicable to letters of credit.20 Section 560.120 was transferred to the FDIC and redesignated as section 390.267 to cover letters of credit and other independent undertakings to pay against documents issued by or entered into by State savings associations, and it was also transferred to the OCC and redesignated as section 160.120 to cover Federal savings associations that issue letters of credit and enter into other independent undertakings.21 Sections 390.267 and 160.120 provide that subject to safety and soundness considerations, ‘‘a [State/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 [FDIC/OCC] (approved undertaking).’’ 22 As noted above in Part III.A.1 of this SUPPLEMENTARY INFORMATION section, part 362, subpart C of the FDIC’s regulations prohibits insured State savings associations and their service corporations from engaging in activities and investments of a type that are not permissible for a Federal savings association and their service corporations. Under subpart C of part 362, the phrase ‘‘activities and investments of a type that are not permissible for a Federal savings association’’ generally means any activity not authorized expressly by HOLA and activities not recognized as permissible by OCC regulation or other written supervisory directive from the OCC or from the OTS to the extent not modified, terminated, set aside, or superseded by the OCC.23 Federal savings associations are permitted to issue letters of credit and may issue other independent undertakings pursuant to 12 CFR 160.50, as transferred by the OCC from the OTS, subject to standards and restrictions found in 12 CFR 160.120, discussed above. Because 12 CFR 362.9 allows State savings associations to exercise the power permitted to Federal savings associations by 12 CFR 160.50 and must 19 12 CFR 560.120. FR at 50958. 21 See 76 FR 48950 (Aug. 9, 2011). 22 12 CFR 390.267 (a). A footnote lists examples of laws or rules of practice applicable to letters of credit and other independent undertakings. 23 12 CFR 362.9(a). 20 61 14 12 U.S.C. 1831e. 12 U.S.C. 1461 et seq. 16 12 CFR 362.9(a). 17 12 CFR 362.9(c). 18 61 FR 50951, 50958 (Sept. 30, 1996). 15 See PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 1655 E:\FR\FM\05FEP1.SGM 05FEP1 1656 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules follow State law, the standards and restrictions applicable to Federal savings associations that issue letters of credit and engage in other independent undertakings set forth in 12 CFR 160.120, and considerations of safety and soundness, the FDIC considers section 390.267 to be unnecessary and proposes that it be rescinded. b. Section 390.268—Investment in State Housing Corporations Section 390.268 of part 390, subpart P, formerly designated as OTS section 560.121, applies to all savings associations and addresses investments in or loans to State housing corporations. Under subpart C of part 362, State savings associations generally are permitted to invest in State housing corporations because Federal savings associations are expressly authorized to invest in State housing corporations pursuant to section 5(c)(1)(P) of HOLA.24 Because such investments are expressly permissible for Federal savings associations to make under HOLA, State savings associations may rely on part 362 in making such investments consistent with State law and in a safe and sound manner. As such, the FDIC considers section 390.268 to be unnecessary and proposes that it be rescinded. B. Activities Implicating Safety and Soundness 1. FDIC’s 12 CFR Part 364—Standards for Safety and Soundness The FDIC’s standards for safety and soundness were promulgated in the mid-1990s jointly by the FDIC, along with the FRB, the OCC, and the OTS (collectively, ‘‘the Agencies’’) pursuant to section 39 of the FDI Act.25 Section 39(a) of the FDI Act 26 required the Agencies to prescribe standards for safety and soundness relating to the following: (A) Internal controls and information systems; (B) internal audit systems; (C) loan documentation; (D) credit underwriting; (E) interest rate exposure; (F) asset growth; (G) asset quality; (H) earnings; and (I) compensation and benefits, as well as such other operational and managerial 24 12 U.S.C. 1464(c)(1)(P); see 12 U.S.C. 1469. U.S.C. 1831p–1. Section 132 of the Federal Deposit Insurance Corporation Improvement Act of 1991, Public Law 102–242, 105 Stat. 2236 (codified at 12 U.S.C. 1831p–1) added section 39 to the FDI Act. Section 39 was later amended by section 956 of the Housing and Community Development Act of 1992, Public Law 102–550, 106 Stat. 3672 and section 318 of the Riegle Community Development and Regulatory Improvement Act of 1994 (CDRI Act), Public Law 103–325, 108 Stat. 2160. 26 12 U.S.C. 1831p–1(a). 25 12 VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 standards as appropriate. Section 39(b) of the FDI Act required the Agencies to prescribe standards for insured depository institutions related to asset quality, earnings, and stock valuation.27 Further, section 39(c) of the FDI Act required the Agencies to develop standards related to preventing unsafe and unsound practices related to compensation arrangements.28 In 1995, the Agencies published part 364 as a final rule with an appendix that implements Section 39(a) of the FDI Act regarding standards for safety and soundness (appendix A).29 Later, part 364, appendix A was amended to reflect subsections 39(b) and (c) of the FDI Act.30 The OTS’s part 570, as amended, implemented section 39 of the FDI Act for all savings associations.31 The FDIC’s part 364, appendix A (regarding safety and soundness) and appendix B (regarding information security) implement section 39 of the FDI Act.32 Section 364.101 of part 364 provides that appendix A and appendix B apply to all insured State nonmember banks, State-licensed insured branches of foreign banks, and State savings associations. Generally, part 364, appendix A addresses operational and managerial standards, compensation standards, and standards related to asset quality, earnings, and stock valuation and also provides that an institution should have internal controls and information systems that are appropriate to the size of the institution and the nature, scope, and risk of its activities and that provide for: (1) An organizational structure that establishes clear lines of authority and responsibility for monitoring adherence to established policies; (2) effective risk assessment; (3) timely and accurate financial, operational, and regulatory reports; (4) adequate procedures to safeguard and manage assets; and (5) compliance with applicable laws and regulations. With respect to timely and accurate financial, operational and regulatory 27 12 U.S.C. 1831p–1(b). U.S.C. 1831p–1(c). 29 60 FR 35674 (Jul. 10, 1995). 30 61 FR 43948 (Aug. 27, 1996). 31 See 60 FR at 35686; 61 FR at 43952. The FDIC transferred part 570 of the OTS’s regulations to part 391, subpart B, of the Code of Federal Regulations. Subsequently, the FDIC rescinded part 391, subpart B and made conforming amendments to 12 CFR part 364 to reflect its applicability to all entities for which the FDIC is the applicable Federal banking agency. See 80 FR 65903 (Oct. 28, 2015). 32 Appendix B was added in accordance with section 501 of the Gramm-Leach-Bliley Financial Modernization Act of 1999, Public Law 106–102, 113 Stat. 1338, codified at 15 U.S.C. 6801, which statute required the Agencies to establish appropriate information security standards in order to protect nonpublic personal information. 28 12 PO 00000 Frm 00016 Fmt 4702 Sfmt 4702 reports, FDIC-supervised institutions are required to prepare such reports in accordance with generally accepted accounting principles 33 (GAAP) and are also required to file quarterly Reports of Condition.34 Appendix A of part 364 also addresses loan documentation, requiring institutions to establish and maintain loan documentation practices that: (1) Enable the institution to make informed lending decisions and to assess risk, as necessary, on an ongoing basis; (2) identify the purpose of a loan and the source of repayment, and assess the ability of the borrower to repay the indebtedness in a timely manner; (3) ensure that any claim against a borrow is legally enforceable; (4) demonstrate appropriate administration monitoring of a loan; and (5) take account the size and complexity of the loan.35 Appendix A of part 364 sets standards for asset quality and provides that an insured depository institution ‘‘establish and maintain a system that is commensurate with the institution’s size and the nature and scope of its operations to identify problem assets and prevent deterioration of those assets’’ 36 by: (1) Conducting periodic asset quality reviews to identify problem assets; (2) estimating the inherent losses in those assets and establish reserves that are sufficient to absorb estimated losses; (3) comparing problem asset totals to capital; (4) taking appropriate corrective action to resolve problem assets; (5) considering the size and potential risks of material asset concentrations; and (6) providing periodic asset reports with adequate information for management and the board of directors to assess the level of asset risk.37 Taken together, part 364 and appendix A constitute the FDIC’s longstanding expectations for all prudently managed insured depository institutions, but leave specific methods of achieving these objectives to each institution. Specifically, they provide a framework for sound corporate governance and the supervision of operations designed to prompt an institution to identify emerging problems and correct deficiencies before capital becomes impaired. The FDIC uses these standards in its supervisory examination process in order to assess an institution’s risk profile and assign an appropriate rating during the supervisory examination process, with 33 12 U.S.C. 1831n. U.S.C. 1817 (a)(3); 12 U.S.C. 1464(v). 35 12 CFR part 364 app. A, sec. II.C. 36 Id. sec. II.G. 37 Id. 34 12 E:\FR\FM\05FEP1.SGM 05FEP1 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules material deficiencies documented in the Report of Examination. Pursuant to section 39(e) of the FDI Act,38 an FDICsupervised institution’s failure to meet the standards may cause the FDIC to require the institution to submit a safety and soundness compliance plan and if the institution does not comply with its plan, the FDIC will issue an order to correct safety and soundness deficiencies.39 2. Former OTS Safety and Soundness— Part 390, Subpart P, Sections 390.260, 390.262, 390.269, 390.270, 390.271, and 390.272 a. Section 390.260—General Former OTS section 560.1, as modified by the FDIC in transferred section 390.260, provided the general authority and scope for safety-andsoundness-based lending and investment for State savings associations. It is substantively similar to 12 CFR 364.101. Because the two regulations are substantively similar and section 364.101 already applies to State savings associations, the FDIC considers it duplicative to retain section 390.260. Accordingly, the FDIC proposes that section 390.260 be rescinded. b. Section 390.262—Definitions Former section 560.3 provided a set of definitions to several commonly used terms related to lending, such as ‘‘consumer loans,’’ home loans,’’ ‘‘real estate loans,’’ and ‘‘credit card,’’ and it is not expressly duplicative of or substantively similar to any corresponding FDIC regulation. However, as transferred and redesignated by the FDIC, the definitions contained in section 390.262 are only relevant to the provisions of part 390, subpart P. Specifically, section 390.262 provides a list of definitions ‘‘[f]or purposes of this subpart.’’ 40 Because the FDIC has concluded that the substantive provisions of part 390, subpart P are unnecessary, redundant, or otherwise duplicative of other FDIC regulations, it follows that the definitions contained in section 390.262 that are only relevant to subpart P are also unnecessary. Accordingly, the FDIC considers section 390.262 to be unnecessary and proposes that it be rescinded. c. Section 390.269—Prohibition on Loan Procurement Fees Former section 560.130 addressed loan procurement fees, and is not expressly duplicative of or substantively similar to any corresponding FDIC regulation. This section was originally transferred to the OTS from the Bank Board in 1989 41 and has been the subject of a regulatory clarification and an OTS interpretative letter.42 Specifically, the provision had applied to affiliated persons of savings associations but, in response to requests for clarification and public comment, the OTS revised it to apply only to natural persons.43 As transferred to the FDIC, section 390.269 provides, If you are a director, officer, or other natural person having the power to direct the management or policies of a State 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 State savings association or a subsidiary of the State savings association.44 Although the OTS maintained this provision in its regulations since 1989, of the other Federal banking agencies, only the OCC has a corresponding provision in its regulations, as the OCC also transferred former section 560.130 from the OTS.45 Rather than identify and prohibit particular types of compensation or fees on a case-by-case basis, the FDIC’s approach has been to act against compensation practices that are unsafe or unsound, or represent a breach of an officer’s or director’s duty not to place his or her own interests ahead of those of the institution; and where necessary, the FDIC can take action under section 8 of the FDI Act.46 Because the FDIC can act against compensation practices that are demonstrably unsafe or unsound or a breach of fiduciary duty, the FDIC considers section 390.269 to be unnecessary and proposes that it be rescinded. d. Section 390.270—Asset Classification Former OTS section 560.160, entitled ‘‘Asset Classification,’’ required savings associations to classify their assets on a regular basis in accordance with the OTS’s Thrift Activities Handbook.47 The 41 See 54 FR 49411, 49560 (Nov. 30, 1989). 61 FR 60173, 60176 (Nov. 27, 1996); OTS Interpretative Letter, Loan Procurement Fees (Dec. 14, 1994), available at http://www.occ.gov/static/ ots/legal-opinions/ots-lo-12-14-1994a.pdf. Former section 560.130 was previously listed as section 563.40(a), see 61 FR at 60176, and the 1994 OTS interpretive letter references this earlier section number. 43 61 FR at 60176. 42 See 44 12 CFR 390.262. OCC prohibition on loan procurement fees is located at 12 CFR 160.130. See 76 FR 48950, 49043 (Aug. 9, 2011). 46 12 U.S.C. 1818. 47 12 CFR 560.160. 1657 regulation originally was transferred to the OTS from the Bank Board in 1989 and it contained specific accounting classification metrics.48 It was revised over time in response to initiatives to modernize and streamline Federal banking regulations.49 Commenters had suggested that the OTS remove the classification metrics from the regulation and move them to the Thrift Activities Handbook.50 In response to these comments, the OTS simplified former section 560.160 but retained portions of the regulation to ensure that a savings association’s board of directors would be responsible for monitoring its classification system. Transferred to the FDIC as section 390.270, the current regulation requires, among other things, State savings associations to classify assets on a regular basis in a manner consistent with the classification system used by the FDIC and to establish adequate valuation allowances or charge-offs, as appropriate, consistent with GAAP and the practices of the Federal banking agencies. The FDIC’s implementation of part 364, appendix A provides the FDIC’s minimum standards for establishing and maintaining ‘‘a system that is commensurate with the institution’s size and the nature and scope of its operations to identify problem assets and prevent deterioration of those assets.’’ 51 State savings associations are already expected to maintain an appropriate level of allowance for loan and lease losses in accordance with GAAP. Because safety and soundness principles require all insured depository institutions for which the FDIC is the appropriate Federal banking agency— including State savings associations—to provide timely and accurate financial, operational, and regulatory reports in accordance with GAAP, the FDIC considers section 390.270 to be unnecessary and proposes that it be rescinded. e. Section 390.271—Records for Lending Transactions As transferred to the FDIC, section 390.271 requires State savings associations to establish and maintain loan documentation practices that mirror all of the requirements of part 364, appendix A. Because the lending documentation practices and requirements contained in section 390.271 are contained in part 364, appendix A, as discussed above, the 45 The 38 12 U.S.C. 1831p–1(e). 12 U.S.C. 1831p–1(e); 12 CFR 308.300, et 39 See seq. 40 12 CFR 390.262. VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 48 See 54 FR at 49415. 61 FR 50951, 50982 (Sept. 30, 1996). 50 Id. at 50963. 51 12 CFR 364, app. A, sec. II.G. 49 See E:\FR\FM\05FEP1.SGM 05FEP1 1658 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules FDIC considers section 390.271 to be unnecessary and proposes that it be rescinded. f. Section 390.272—Re-Evaluation of Real Estate Owned Former OTS section 560.172 also was part of the transfer to OTS and recodification of Bank Board regulations in 1989.52 It originally addressed reevaluation of assets and, among other things, required a savings association to appraise each parcel of real estate owned at the earlier of in-substance foreclosure or at the time of the savings association’s acquisition, and at such times thereafter as dictated by prudent management policy or as required by the OTS’ regional director.53 The provision did not apply to real estate owned by the institution that was sold and reacquired less than 12 months subsequent to the most recent appraisal. The form of the regulation transferred to the FDIC as section 390.272 remains substantively the same as the most recent version adopted by the former OTS.54 As transferred to the FDIC, section 390.272 is not duplicative of any other existing FDIC regulation. However, as discussed in part III.B.1. of this SUPPLEMENTARY INFORMATION section, above, the FDIC relies on part 364, appendix A to convey its expectation that FDIC-supervised institutions should ‘‘establish and maintain a system that is commensurate with the institution’s size and the nature and scope of its operations to identify problem assets and prevent deterioration of those assets’’ 55 and, as State-chartered institutions, to follow State law with respect to the initial and subsequent valuations of other real estate (ORE).56 The FDIC expects all supervised institutions to adhere to part 364 with regard to maintaining a system to identify and manage problem assets (including ORE) and to provide for timely and accurate financial, operational, and regulatory reports according to GAAP and the Call Report Instructions as it pertains to the appropriate carrying value of ORE. Further, State law generally provides for when an appraisal is necessary for Statechartered institutions (including savings associations). Therefore, the FDIC considers section 390.272 to be unnecessary and proposes that it be rescinded. 52 See 54 FR at 49587. 53 12 CFR 563.172 (1994). 54 See 12 CFR 390.272; cf 12 CFR 560.172. 55 12 CFR 364, app. A., sec. II.G. 56 See FIL–62–2008. VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 Accordingly, as explained in the analysis above, the FDIC proposes to remove sections 390.260, 390.262, 390.269, 390.270, 390.271 and 390.272 of part 390, subpart P because these sections are unnecessary, redundant of, or otherwise duplicative of the safety and soundness standards delineated in part 364 and its appendix A. C. Activities Implicating Real Estate Lending Provisions 1. The FDIC’s Part 365—Real Estate Lending Standards Section 304 of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) required the Agencies to adopt uniform regulations prescribing standards for extensions of credit that are secured by liens on interests in real estate or made for the purpose of financing the construction of a building or other improvements to real estate.57 The Agencies published their joint rule and appendices for real estate lending on the last day of 1992, and the rules became effective on March 19, 1993.58 The FDIC’s regulation is found at part 365, subpart A, which includes an appendix A regarding real estate lending. 2. Sections 390.264, 390.265, Including Appendix to 390.265—Real Estate Lending Former OTS sections 560.100 and 560.101 (including the appendix) implemented real estate lending provisions, as required by FDICIA. Former sections 560.100 and 560.101 were transferred to the FDIC as sections 390.264 and 390.265 (including the appendix to part 365, subpart A). These regulations are nearly identical to 12 CFR 365.1 and 365.2 (including appendix A to part 365, subpart A). However, in order to include State savings associations within the scope of part 365 and its appendix A, it is necessary for the FDIC to make the technical amendment as discussed in section IV of this SUPPLEMENTARY INFORMATION section, below. Because the FDIC considers sections 390.264 and 390.265 (including the appendix to section 390.265) to be duplicative of part 365, subpart A, as proposed to be amended herein, the FDIC proposes to rescind and remove them from the Code of Federal Regulations. 57 See Public Law 102–242, 105 Stat. 2236 (codified at 12 U.S.C. 1828(o)). 58 See 57 FR 62890, 62900 (Dec. 31, 1992). PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 IV. Proposed Amendment to Part 365, Subpart A As discussed in part III.C of this the FDIC’s part 365 subpart A addresses real estate lending standards for insured State nonmember banks (including Statelicensed insured branches of foreign banks). The Dodd-Frank Act added State savings associations to the list of entities for which the FDIC is designated as the appropriate Federal banking agency.59 To clarify that part 365 applies to all institutions for which the FDIC is the appropriate Federal banking agency, the FDIC proposes to amend sections 365.1 and 365.2 of part 365 to replace the phrases ‘‘insured state nonmember banks (including state-licensed insured branches of foreign banks)’’ and ‘‘state nonmember bank’’ throughout subpart A with the phrase ‘‘FDIC-supervised institution.’’ Under the proposal, section 365.1 would be revised to add the definition of the term ‘‘FDIC-supervised institution’’ to mean any insured depository institution for which the FDIC is the appropriate Federal banking agency pursuant to section 3(q) of the FDI Act.60 SUPPLEMENTARY INFORMATION, V. Rescinding Part 365, Subpart B The FDIC issued part 365, subpart B to implement the Federal registration requirements for mortgage loan originators required by the S.A.F.E. Act. As relevant here, the S.A.F.E. Act required the Agencies, the Farm Credit Administration, and National Credit Union Administration (the ‘‘S.A.F.E. Act Agencies’’) to develop and maintain a system for registering mortgage loan originators employed by institutions regulated by the agencies.61 However, the Dodd-Frank Act amended the S.A.F.E. Act, transferring that authority from the S.A.F.E. Act Agencies to the Bureau.62 On December 19, 2011, the Bureau published an interim final rule incorporating the S.A.F.E. Act into its Regulation G. On April 28, 2016, the Bureau finalized the interim final rule, which is substantially duplicative to the FDIC’s S.A.F.E. Act regulation at part 365, subpart B. The Bureau’s regulation addresses Federal registration requirements for mortgage loan originators and applies to all FDICsupervised institutions.63 As such, the FDIC proposes to rescind part 365, 59 See section 312(c) of the Dodd-Frank Act, codified at 12 U.S.C. 1813(q). 60 12 U.S.C. 1813(q). 61 12 U.S.C. 5106. 62 See section 1100 of the Dodd-Frank Act. 63 12 CFR 1007.101(c). E:\FR\FM\05FEP1.SGM 05FEP1 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules subpart B because it is outdated and no longer necessary. VI. Summary If the proposal is finalized, 12 CFR part 390, subpart P would be removed because it is largely unnecessary, redundant, or duplicative of existing FDIC regulations; the requirements of part 365, subpart A expressly would apply to all FDIC-supervised insured depository institutions; and part 365 subpart B would be removed because it is outdated and no longer necessary due to the transfer of S.A.F.E. Act rulemaking power to the Bureau. These three initiatives will serve to streamline the FDIC’s regulations and reduce the regulatory burden on FDIC-supervised institutions. VII. Expected Effects As explained in detail in Section III of this SUPPLEMENTARY INFORMATION section, certain OTS regulations transferred to the FDIC by the DoddFrank Act relating to lending and investment are either unnecessary or effectively duplicate existing FDIC regulations. This proposal would eliminate those transferred OTS regulations. The proposal also would clarify that the standards in part 365 apply to State savings associations because the FDIC is the ‘‘appropriate Federal banking agency’’ pursuant to the FDI Act. As of June 30, 2018, the FDIC supervises 3,575 depository institutions, of which 41 (1.1%) are State savings associations. The proposed rule primarily would affect regulations that govern State savings associations. As explained previously, the proposed rule would remove sections 390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268, 390.269, 390.270, 390.271, and 390.272 of part 390, subpart P because these sections are unnecessary, redundant of, or otherwise duplicative of other FDIC regulations regarding safety and soundness. Because these regulations are redundant to existing regulations, rescinding them will not have any substantive effects on FDICsupervised institutions. Thus, for example, as explained previously, part 364 covers State savings associations in section 364.101 and its appendix A. Because the lending documentation practices and standards in part 364, appendix A are substantively similar to existing regulations for State savings associations found in section 390.271, rescission of section 390.271 would not have any substantive effects on FDICsupervised institutions. The same VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 would be true for the other sections of part 390, subpart P. The proposed rule would amend part 365, subpart A so that it would expressly apply to State savings associations. Because the real estate lending requirements in sections 365.1 and 365.2 and appendix A to part 365, subpart A are substantively identical to currently applicable regulations for State savings associations found in 390.264 and 390.265 (including the appendix to 390.265), amending part 365, subpart A to include State savings associations would not have any substantive effects on FDIC-supervised institutions. Finally, as previously explained, the proposed rule would rescind part 365, subpart B because the authority to implement Federal registration requirements for mortgage loan originators has been transferred by statute to the Bureau. Because rulemaking authority for the S.A.F.E. Act was transferred to the Bureau in December 2011, the removal of the FDIC’s S.A.F.E. Act regulations would not have any substantive effects on FDIC-supervised institutions. The FDIC invites comments on all aspects of this analysis. In particular, would the proposed rule have any costs or benefits to covered entities that the FDIC has not identified? VIII. Alternatives The FDIC has considered alternatives to the proposed rule but believes that the proposed amendments represent the most appropriate option for covered institutions. As discussed previously, the Dodd-Frank Act transferred certain powers, duties, and functions formerly performed by the OTS to the FDIC. The FDIC’s Board reissued and redesignated certain transferred regulations from the OTS, but noted that it would evaluate them and might later incorporate them into other FDIC regulations, amend them, or rescind them, as appropriate. The FDIC has evaluated the existing regulations relating to lending and investment of covered entities, including part 365 and part 390, subpart P. The FDIC considered the status quo alternative of retaining the current regulations but did not choose to do so because it would be needlessly complex for substantively similar regulations regarding lending and investment activities of State nonmember banks and State savings associations to be located in different locations within the Code of Federal Regulations. The FDIC believes it would be procedurally complex for FDIC-supervised institutions to continue to refer to these separate sets of regulations. Therefore, the FDIC is PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 1659 proposing to amend and streamline the FDIC’s regulations. IX. Request for Comments The FDIC invites comments on all aspects of this proposed rulemaking. In particular, the FDIC requests comments on the following questions: 1. Are the provisions of 12 CFR parts 362, 364, and 365 sufficient to provide consistent and effective requirements related to permissible lending and investment activities for all insured depository institutions for which the FDIC is the appropriate Federal banking agency? Please provide examples, data, or otherwise substantiate your answer. 2. What negative impacts, if any, can you foresee in the FDIC’s proposal to rescind part 390, subpart P and part 365, subpart B and remove them from the Code of Federal Regulations? 3. As to the OTS’s former rule prohibiting loan procurement fees, the FDIC noted above that no other Federal banking agency has a similar rule. Do you believe that a separate rule is necessary for safety and soundness reasons? Please provide examples, data, or otherwise substantiate your answer. 4. Please provide any other comments you have on the proposal. X. Regulatory Analysis and Procedure A. The Paperwork Reduction Act In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA),64 the FDIC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The proposed rule would rescind and remove from FDIC regulations part 390, subpart P. With regard to part 365, subpart A, the proposed rule would amend sections 365.1 and 365.2 to clarify that State savings associations, as well as State nonmember banks and foreign banks having insured branches are all subject to part 365. It would also rescind and remove from the FDIC’s regulations part 365, subpart B. The proposed rule will not create any new or revise any existing collections of information under the PRA. Therefore, no information collection request will be submitted to the OMB for review. B. The Regulatory Flexibility Act The Regulatory Flexibility Act (RFA), requires that, in connection with a notice of proposed rulemaking, an agency prepare and make available for public comment an initial regulatory flexibility analysis that describes the 64 44 E:\FR\FM\05FEP1.SGM U.S.C. 3501–3521. 05FEP1 1660 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules impact of the proposed rule on small entities.65 However, a regulatory flexibility analysis is not required if the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities, and publishes its certification and a short explanatory statement in the Federal Register together with the rule. The Small Business Administration (SBA) has defined ‘‘small entities’’ to include banking organizations with total assets of less than or equal to $550 million.66 For the reasons provided below, the FDIC certifies that the proposed rule, if adopted in final form, would not have a significant economic impact on a substantial number of small banking organizations. Accordingly, a regulatory flexibility analysis is not required. As of June 30, 2018, the FDIC supervised 3,575 insured financial institutions, of which 2,804 are considered small banking organizations for the purposes of RFA. The proposed rule primarily affects regulations that govern State savings associations. There are 38 State savings associations considered to be small banking organizations for the purposes of the RFA.67 As explained previously, the proposed rule would remove sections 390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268, 390.269, 390.270, 390.271, and 390.272 of part 390, subpart P because these sections are unnecessary, redundant of, or otherwise duplicative of other FDIC regulations for safety and soundness standards. Because these regulations are redundant to existing regulations, rescinding them would not have any substantive effects on small FDIC-supervised institutions. As explained previously, part 364 covers State savings associations in section 364.101 and in appendix A. Because the lending documentation practices and standards in part 364, appendix A are substantively similar to existing regulations for State savings associations found in section 390.271 65 5 U.S.C. 601, et seq. SBA defines a small banking organization as having $550 million or less in assets, where ‘‘a financial institution’s assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.’’ See 13 CFR 121.201 (as amended, effective December 2, 2014). ‘‘SBA counts the receipts, employees, or other measure of size of the concern whose size is at issue and all of its domestic and foreign affiliates.’’ See 13 CFR 121.103. Following these regulations, the FDIC uses a covered entity’s affiliated and acquired assets, averaged over the preceding four quarters, to determine whether the FDIC-supervised institution is ‘‘small’’ for the purposes of RFA. 67 FDIC Call Report, March 31st, 2018. 66 The VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 rescinding section 390.271 and the rest of part 390, subpart P would not have any substantive effects on small FDICsupervised institutions. As stated previously, the proposed rule would amend part 365, subpart A so that it would expressly apply to State savings associations. Because the real estate lending requirements in sections 365.1 and 365.2 and part 364, appendix A are substantively identical to currently applicable regulations for State savings associations found in 390.264 and 390.265 (including the appendix to section 390.265), amending part 365, subpart A so that it would apply to all FDIC-supervised institutions would not have any substantive effects on small FDICsupervised institutions. As explained previously, the proposed rule would rescind part 365, subpart B because the authority to implement Federal registration requirements for mortgage loan originators has been transferred by statute to the Bureau. Because rulemaking authority for the S.A.F.E. Act was transferred to the Bureau in December 30, 2011, the removal of the FDIC’s S.A.F.E. Act regulations would not have any substantive effects on small FDIC-supervised covered institutions. Based on the information above, the FDIC certifies that the proposed rule would not have a significant economic impact on a substantial number of small entities. 5. The FDIC invites comments on all aspects of the supporting information provided in this RFA section. In particular, would this rule have any significant effects on small entities that the FDIC has not identified? C. Plain Language Section 722 of the Gramm-LeachBliley Act 68 requires each Federal banking agency to use plain language in all of its proposed and final rules published after January 1, 2000. As a federal banking agency subject to the provisions of this section, the FDIC has sought to present the proposed rule to rescind part 390, subpart P and amend part 365 in a simple and straightforward manner. 6. The FDIC invites comments on whether the proposal is clearly stated and effectively organized, and how the FDIC might make the proposal easier to understand. 68 Public Law 106–102, 113 Stat. 1338, 1471 (codified at 12 U.S.C. 4809). PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 D. The Economic Growth and Regulatory Paperwork Reduction Act Under section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA), the FDIC is required to review all of its regulations, at least once every 10 years, in order to identify any outdated or otherwise unnecessary regulations imposed on insured institutions.69 The FDIC, along with the other federal banking agencies, submitted a Joint Report to Congress on March 21, 2017, (EGRPRA Report) discussing how the review was conducted, what has been done to date to address regulatory burden, and further measures that will be taken to address issues that were identified. As noted in the EGRPRA Report, the FDIC is continuing to streamline and clarify its regulations through the OTS rule integration process. By removing outdated or unnecessary regulations, such as part 390, subpart P and part 365, subpart B, and amending part 365, subpart A, this rule complements other actions the FDIC has taken, separately and with the other federal banking agencies, to further the EGRPRA mandate. List of Subjects 12 CFR Part 365 Banks, banking, Credit, Mortgages, Savings associations. 12 CFR Part 390 Administrative practice and procedure, Advertising, Aged, Civil rights, Conflict of interests, Credit, Crime, Equal employment opportunity, Fair housing, Government employees, Individuals with disabilities, Reporting and recordkeeping requirements, Savings associations. Authority and Issuance For the reasons stated in the preamble, the Board of Directors of the Federal Deposit Insurance Corporation proposes to amend title 12 of the Code of Federal Regulations as follows: PART 365—REAL ESTATE LENDING STANDARDS Subpart A—Real Estate Lending Standards [Amended] 1. Revise the authority citation for part 365 to read as follows: ■ Authority: 12 U.S.C. 1828(o), 5412. ■ 2. Revise § 365.1 to read as follows: § 365.1 Purpose and scope. This subpart, issued pursuant to section 304 of the Federal Deposit 69 Public E:\FR\FM\05FEP1.SGM Law 104–208, 110 Stat. 3009 (1996). 05FEP1 Federal Register / Vol. 84, No. 24 / Tuesday, February 5, 2019 / Proposed Rules Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o), prescribes standards for real estate lending to be used by FDIC-supervised institutions in adopting internal real estate lending policies. For purposes of this subpart, the term ‘‘FDIC-supervised institution’’ means any insured depository institution for which the Federal Deposit Insurance Corporation is the appropriate Federal banking agency pursuant to section 3(q) of the Federal Deposit Insurance Act, 12 U.S.C. 1813(q). ■ 3. Amend § 365.2 by revising paragraphs (a), (b)(1)(iii), (2)(iii) and (iv), and (c) to read as follows: Dated at Washington, DC, on December 18, 2018. By order of the Board of Directors. Federal Deposit Insurance Corporation. Valerie Best, Assistant Executive Secretary. § 365.2 Noncommercial Use of Pre-1972 Sound Recordings That Are Not Being Commercially Exploited Real estate lending standards. (a) Each FDIC-supervised institution 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) * * * (iii) Be reviewed and approved by the FDIC-supervised institution’s board of directors at least annually. (2) * * * (iii) Loan administration procedures for the FDIC-supervised institution’s real estate portfolio; and (iv) Documentation, approval, and reporting requirements to monitor compliance with the FDIC-supervised institution’s real estate lending policies. (c) Each FDIC-supervised institution 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. * * * * * Subpart B—[Removed and Reserved] 4. Remove and reserve subpart B, consisting of §§ 365.101, 365.102, 365.103, 365.104, 365.105, and appendix A to subpart B. ■ PART 390—REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT SUPERVISION 5. The authority citation for part 390 continues to read as follows: ■ Authority: 12 U.S.C. 1819. Subpart P—[Removed and Reserved] 6. Remove and reserve Subpart P, consisting of §§ 390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268, 390.269, 390.270, 390.271, 390.272. ■ VerDate Sep<11>2014 16:34 Feb 04, 2019 Jkt 247001 [FR Doc. 2018–28084 Filed 2–4–19; 8:45 am] BILLING CODE 6714–01–P LIBRARY OF CONGRESS Copyright Office 37 CFR Part 201 [Docket No. 2018–8] U.S. Copyright Office, Library of Congress. ACTION: Notice of proposed rulemaking. AGENCY: The U.S. Copyright Office (‘‘Copyright Office’’ or ‘‘Office’’) is issuing a notice of proposed rulemaking regarding the Classics Protection and Access Act, title II of the recently enacted Orrin G. Hatch-Bob Goodlatte Music Modernization Act. In connection with the establishment of federal remedies for unauthorized uses of sound recordings fixed before February 15, 1972 (‘‘Pre-1972 Sound Recordings’’), Congress also established an exception for certain noncommercial uses of Pre-1972 Sound Recordings that are not being commercially exploited. To qualify for this exemption, a user must file a notice of noncommercial use after conducting a good faith, reasonable search to determine whether the Pre1972 Sound Recording is being commercially exploited, and the rights owner of the sound recording must not object to the use within 90 days. After soliciting public comments through a notice of inquiry, the Office is proposing regulations identifying the specific steps that a user should take to demonstrate she has made a good faith, reasonable search. The proposed rule also details the filing requirements for the user to submit a notice of noncommercial use and for a rights owner to submit a notice objecting to such use. DATES: Written comments must be received no later than 11:59 p.m. Eastern Time on March 7, 2019. Meeting requests must be received no later than 11:59 p.m. Eastern Time on March 18, 2019, and all meetings must take place no later than Friday, March 22, 2019. The Office will not consider requests to hold meetings after that date. So that the Copyright Office is able to meet the SUMMARY: PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 1661 statutory deadlines set forth in the Music Modernization Act, no further extensions of time will be granted in this rulemaking. ADDRESSES: For reasons of government efficiency, the Copyright Office is using the regulations.gov system for the submission and posting of public comments in this proceeding. All comments are therefore to be submitted electronically through regulations.gov. Specific instructions for submitting comments are available on the Copyright Office’s website at https:// www.copyright.gov/rulemaking/ pre1972-soundrecordingsnoncommercial/. If electronic submission of comments is not feasible due to lack of access to a computer and/ or the internet, please contact the Office using the contact information below for special instructions. FOR FURTHER INFORMATION CONTACT: Regan A. Smith, General Counsel and Associate Register of Copyrights, by email at regans@copyright.gov or Anna Chauvet, Assistant General Counsel, by email at achau@copyright.gov. Each can be contacted by telephone by calling (202) 707–8350. SUPPLEMENTARY INFORMATION: I. Background On October 11, 2018, the president signed into law the Orrin G. Hatch-Bob Goodlatte Music Modernization Act, H.R. 1551 (‘‘MMA’’). Title II of the MMA, the Classics Protection and Access Act, created chapter 14 of the copyright law, title 17, United States Code, which, among other things, extends remedies for copyright infringement to owners of sound recordings fixed before February 15, 1972 (‘‘Pre-1972 Sound Recordings’’). Under the provision, rights owners may be eligible to recover statutory damages and/or attorneys’ fees for the unauthorized use of their Pre-1972 Sound Recordings if certain requirements are met. To be eligible for these remedies, rights owners must typically file schedules listing their Pre1972 Sound Recordings (‘‘Pre-1972 Schedules’’) with the U.S. Copyright Office, which are indexed into the Office’s public records.1 The filing requirement is ‘‘designed to operate in place of a formal registration requirement that normally applies to claims involving statutory damages.’’ 2 The MMA also creates a new mechanism for members of the public to obtain authorization to make noncommercial uses of Pre-1972 Sound 1 17 U.S.C. 1401(f)(5)(A)(i)(I)–(II). Rep. No. 115–651, at 16 (2018); see S. Rep. No. 115–339, at 18 (2018). 2 H.R. E:\FR\FM\05FEP1.SGM 05FEP1

Agencies

[Federal Register Volume 84, Number 24 (Tuesday, February 5, 2019)]
[Proposed Rules]
[Pages 1653-1661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-28084]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Parts 365 and 390

RIN 3064-AE22


Removal of Transferred OTS Regulations Regarding Lending and 
Investment; and Conforming Amendments to Other Regulation

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In order to streamline FDIC regulations and reduce regulatory 
burden, the FDIC proposes to rescind and remove from the Code of 
Federal Regulations rules entitled ``Lending and Investment'' (part 
390, subpart P) that were transferred to the FDIC from the Office of 
Thrift Supervision (OTS) on July 21, 2011, in connection with the 
implementation of Title III of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Dodd-Frank Act); amend certain sections of 
existing FDIC regulations governing real estate lending standards to 
make it clear that such rules apply to all insured depository 
institutions for which the FDIC is the appropriate Federal banking 
agency; and amend part 365 by rescinding in its entirety the subpart 
concerning registration requirements for residential mortgage loan 
originators because supervision and rulemaking authority in this area 
was transferred to the Bureau of Consumer Financial Protection (Bureau) 
by the Dodd-Frank Act.

DATES: Comments must be received on or before April 8, 2019.

ADDRESSES: You may submit comments by any of the following methods:
     FDIC Website: http://www.fdic.gov/regulations/laws/federal/ Follow instructions for submitting comments on the agency 
website.
     FDIC Email: Comments@fdic.gov. Include RIN 3064-AE22 on 
the subject line of the message.
     FDIC Mail: Robert E. Feldman, Executive Secretary, 
Attention: Comments, Federal Deposit Insurance Corporation, 550 17th 
Street NW, Washington, DC 20429.
     Hand Delivery to FDIC: Comments may be hand-delivered to 
the guard station at the rear of the 550 17th Street Building (located 
on F Street) on business days between 7 a.m. and 5 p.m.
    Please include your name, affiliation, address, email address, and 
telephone number(s) in your comment. All statements received, including 
attachments and other supporting materials, are part of the public 
record

[[Page 1654]]

and are subject to public disclosure. You should submit only 
information that you wish to make publicly available.

    Please note:  All comments received will be posted generally 
without change to http://www.fdic.gov/regulations/laws/federal/, 
including any personal information provided.


FOR FURTHER INFORMATION CONTACT: Karen J. Currie, Senior Examination 
Specialist, (202) 898-3981, email address kcurrie@fdic.gov, Division of 
Risk Management Supervision; Cassandra Duhaney, Senior Policy Analyst, 
(202) 898-6804, Division of Depositor and Consumer Protection; Rodney 
D. Ray, Counsel, Legal Division, (202) 898-3556 or Linda Hubble Ku, 
Counsel, Legal Division, (202) 898-6634.

SUPPLEMENTARY INFORMATION:

I. Policy Objectives

    The policy objectives of the proposed rule are twofold. The first 
is to simplify the FDIC's regulations by removing unnecessary 
regulations, or realigning existing regulations in order to improve the 
public's understanding and to improve the ease of reference. The second 
is to promote parity between State savings associations and State 
nonmember banks by making both classes of institutions subject to the 
same requirements regarding real estate lending standards. Thus, as 
further detailed in this SUPPLEMENTARY INFORMATION Section, the FDIC 
proposes to rescind and remove from the CFR rules entitled ``Lending 
and Investment'' (part 390, subpart P) that were transferred to the 
FDIC from OTS in connection with the implementation of Title III the 
Dodd-Frank Act. The FDIC takes the view that other existing regulations 
that concern permissible activities, safety and soundness standards, 
and real estate lending standards replicate the current requirements in 
part 390, subpart P. In addition, the proposal would amend certain 
sections of part 365 of the FDIC's existing regulations on real estate 
lending standards to make it clear that part 365, subpart A, applies to 
all insured depository institutions for which the FDIC is the 
appropriate Federal banking agency. Not only would this approach 
simplify the FDIC's regulations by removing unnecessary provisions, but 
it would have the added benefit of creating parity between state 
savings associations and state nonmenber banks by ensuring that both 
classes of institutions are subject to the same requirements regarding 
safety and soundness and real estate lending standards. Finally, the 
FDIC proposes to amend part 365 by rescinding in its entirety subpart B 
concerning registration requirements for residential mortgage loan 
originators because supervision and rulemaking authority in this area 
was transferred to the Bureau by the Dodd-Frank Act and the Bureau has 
issued its own regulation, Regulation G.

II. Background

A. The Dodd-Frank Act

    The Dodd-Frank Act, signed into law on July 21, 2010, provided for 
a substantial reorganization of the regulation of State and Federal 
savings associations and their holding companies.\1\ Beginning July 21, 
2011, the transfer date established by section 311 of the Dodd-Frank 
Act,\2\ the powers, duties, and functions formerly performed by the OTS 
were divided among the FDIC, as to State savings associations, the 
Office of the Comptroller of the Currency (OCC), as to Federal savings 
associations, and the Board of Governors of the Federal Reserve System 
(FRB), as to savings and loan holding companies. Section 316(b) of the 
Dodd-Frank Act \3\ provides the manner of treatment for all orders, 
resolutions, determinations, regulations, and other advisory materials 
that have been issued, made, prescribed, or allowed to become effective 
by the OTS. The section provides that if such materials were in effect 
on the day before the transfer date, they continue in effect and are 
enforceable by or against the appropriate successor agency until they 
are modified, terminated, set aside, or superseded in accordance with 
applicable law by such successor agency, by any court of competent 
jurisdiction, or by operation of law.
---------------------------------------------------------------------------

    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ Codified at 12 U.S.C. 5411.
    \3\ Codified at 12 U.S.C. 5414(b).
---------------------------------------------------------------------------

    Pursuant to section 316(c) of the Dodd-Frank Act,\4\ on June 14, 
2011, the FDIC's Board of Directors approved a ``List of OTS 
Regulations to be Enforced by the OCC and the FDIC Pursuant to the 
Dodd-Frank Wall Street Reform and Consumer Protection Act.'' This list 
was published by the FDIC and the OCC as a Joint Notice in the Federal 
Register on July 6, 2011.\5\
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    \4\ Codified at 12 U.S.C. 5414(c).
    \5\ 76 FR 39246 (July 6, 2011).
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    Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act,\6\ 
granted the OCC rulemaking authority relating to both State and Federal 
savings associations, nothing in the Dodd-Frank Act affected the FDIC's 
existing authority to issue regulations under the Federal Deposit 
Insurance Act (FDI Act) \7\ and other laws as the ``appropriate Federal 
banking agency'' or under similar statutory terminology. Section 
312(c)(1) of the Dodd-Frank Act \8\ revised the definition of 
``appropriate Federal banking agency'' contained in section 3(q) of the 
FDI Act,\9\ to add State savings associations to the list of entities 
for which the FDIC is designated as the ``appropriate Federal banking 
agency.'' As a result, when the FDIC acts as the designated 
``appropriate Federal banking agency'' (or under similar terminology) 
for State savings associations, as it does here, the FDIC is authorized 
to issue, modify, and rescind regulations involving such associations, 
as well as for State nonmember banks and insured branches of foreign 
banks.
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    \6\ Codified at 12 U.S.C. 5412(b)(2)(B)(i)(II).
    \7\ 12 U.S.C. 1811 et seq.
    \8\ Codified at 12 U.S.C. 5412(c)(1).
    \9\ 12 U.S.C. 1813(q).
---------------------------------------------------------------------------

    As noted above, on June 14, 2011, operating pursuant to this 
authority, the FDIC's Board of Directors (Board) issued a list of 
regulations of the former OTS that the FDIC would enforce with respect 
to State savings associations. Also on June 14, 2011, the FDIC's Board 
reissued and redesignated certain regulations transferred from the 
former OTS. These transferred OTS regulations were published as new 
FDIC regulations in the Federal Register on August 5, 2011.\10\ When 
the FDIC republished the transferred OTS regulations as new FDIC 
regulations, it specifically noted that its staff would evaluate the 
transferred OTS rules and might later recommend incorporating the 
transferred OTS regulations into other FDIC regulations, amending them, 
or rescinding them, as appropriate.\11\
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    \10\ 76 FR 47652 (Aug. 5, 2011).
    \11\ See 76 FR at 47653.
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B. Transferred OTS Regulations (Transferred to the FDIC's Part 390, 
Subpart P)

    A subset of the regulations transferred to the FDIC from the OTS 
concern lending and investment provisions applicable to State savings 
associations. The OTS regulations, formerly found at 12 CFR part 560, 
sections 560.1, 560.3, 560.100, 560.101, 560.120, 560.121, 560.130, 
560.160, 560.170, and 560.172, were transferred to the FDIC with only 
nomenclature changes and now comprise part 390, subpart P. Each 
provision of part 390, subpart P is discussed in Part III of this 
SUPPLEMENTARY INFORMATION section, below.
    The FDIC has conducted a careful review and comparison of part 390,

[[Page 1655]]

subpart P and other FDIC regulations concerning permissible activities 
for State savings associations (12 CFR part 362, subpart C (part 362, 
subpart C)), activities implicating safety and soundness (12 CFR part 
364 (part 364 and its appendix A)), and activities implicating real 
estate lending standards (part 365, subpart A and its appendix A). As 
discussed in Part III of this SUPPLEMENTARY INFORMATION section, the 
FDIC proposes to rescind part 390, subpart P because the FDIC considers 
the provisions contained in part 390, subpart P to be unnecessary 
because of the applicability of other FDIC regulations.

C. Part 365, Subpart A, Real Estate Lending Standards

    The FDIC proposes to further effectuate the transfer of supervisory 
authority for State savings associations from the former OTS to the 
FDIC by amending certain parts of part 365 of the FDIC's regulations to 
clarify that part 365, subpart A applies to all insured depository 
institutions, including State savings associations, for which the FDIC 
is the appropriate Federal banking agency. As discussed in Part IV of 
this SUPPLEMENTARY INFORMATION section, the FDIC proposes to amend part 
365, subpart A in order to make part 365, subpart A applicable to all 
insured depository institutions, including State savings associations, 
for which the FDIC is the appropriate Federal banking agency.

D. Part 365, Subpart B, Registration of Residential Mortgage Loan 
Originators

    Simultaneously, the FDIC proposes to take the opportunity to 
rescind, in its entirety, subpart B of part 365, which relates to 
registration requirements for residential mortgage loan originators, 
due to the Bureau's issuance of its \12\ regulation, Regulation G, 
pursuant to the Bureau's authority under the Dodd-Frank Act.\13\ As 
discussed in Part V of this SUPPLEMENTARY INFORMATION section, the FDIC 
considers the provisions contained in part 365, subpart B to be 
unnecessary, redundant, or otherwise duplicative of the Bureau 
regulation governing this area.
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    \12\ The Secure and Fair Mortgage Licensing Act of 2008 
(S.A.F.E. Act) was enacted as part of the Housing and Economic 
Recovery Act of 2008, Public Law 110-289, 122 Stat. 2654, sections 
1501-17 (codified at 12 U.S.C. 5101-16) as amended by Title X of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-
Frank Act) (Pub. L. 111-203, 124 Stat. 1376). The S.A.F.E. Act 
requires residential mortgage loan originators employed by 
depository institutions, subsidiaries that are owned and controlled 
by a depository institution and regulated by a federal banking 
agency, and institutions regulated by the Farm Credit Administration 
to register with the Nationwide Mortgage Licensing System and 
Registry, obtain a unique identifier, and maintain such 
registration.
    \13\ See 81 FR 25323 (April 28, 2016).
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III. Comparison of FDIC Regulations With the Transferred OTS 
Regulations To Be Rescinded

A. Permissible Activities for State Savings Associations

1. FDIC's 12 CFR Part 362, Subpart C--Activities of Insured State 
Savings Associations
    Part 362 of the FDIC's regulations governs the activities and 
investments in which insured State banks and insured State savings 
associations may engage as principals. Subpart C of part 362 implements 
section 28 of the FDI Act.\14\ Subpart C specifically addresses insured 
State savings associations and restricts their activities and 
investments to those permissible for a Federal savings association 
under any statute, including the Home Owners' Loan Act \15\ (HOLA), and 
to those recognized as permissible for a Federal savings association by 
the OCC (or former OTS) or in bulletins, orders, or written 
interpretations of either the OCC or former OTS.\16\ The FDIC has 
indicated that it will allow State savings associations and their 
service corporations to ``undertake only safe and sound activities and 
investments that do not present significant risks to the Deposit 
Insurance Fund and that are consistent with the purposes of Federal 
deposit insurance and other applicable law.'' \17\
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    \14\ 12 U.S.C. 1831e.
    \15\ See 12 U.S.C. 1461 et seq.
    \16\ 12 CFR 362.9(a).
    \17\ 12 CFR 362.9(c).
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2. Former OTS Part 560, Sections 560.120 and 560.121 (Transferred to 
the FDIC as Sections 390.267 and 390.268)
a. Section 390.267--Letters of Credit and Other Independent 
Undertakings To Pay Against Documents
    As part of a regulatory reorganization and modernization 
initiative, section 560.120 was promulgated by the OTS in 1996. At that 
time, the OTS incorporated the substance of former section 545.48 
(authorizing Federal savings associations to issue letters of credit) 
into new section 560.120 that applied to both Federal and State savings 
associations.\18\ Section 560.120 was designed to provide uniform 
authority, standards and restrictions for all savings associations to 
consider before issuing a letter of credit or entering into another 
independent undertaking that had been recognized in law or approved by 
the OTS.\19\ The former OTS rule largely mirrored the approach taken by 
the OCC for national banks, which incorporated market standards and 
international conventions applicable to letters of credit.\20\
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    \18\ 61 FR 50951, 50958 (Sept. 30, 1996).
    \19\ 12 CFR 560.120.
    \20\ 61 FR at 50958.
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    Section 560.120 was transferred to the FDIC and redesignated as 
section 390.267 to cover letters of credit and other independent 
undertakings to pay against documents issued by or entered into by 
State savings associations, and it was also transferred to the OCC and 
redesignated as section 160.120 to cover Federal savings associations 
that issue letters of credit and enter into other independent 
undertakings.\21\
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    \21\ See 76 FR 48950 (Aug. 9, 2011).
---------------------------------------------------------------------------

    Sections 390.267 and 160.120 provide that subject to safety and 
soundness considerations, ``a [State/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 
[FDIC/OCC] (approved undertaking).'' \22\
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    \22\ 12 CFR 390.267 (a). A footnote lists examples of laws or 
rules of practice applicable to letters of credit and other 
independent undertakings.
---------------------------------------------------------------------------

    As noted above in Part III.A.1 of this SUPPLEMENTARY INFORMATION 
section, part 362, subpart C of the FDIC's regulations prohibits 
insured State savings associations and their service corporations from 
engaging in activities and investments of a type that are not 
permissible for a Federal savings association and their service 
corporations.
    Under subpart C of part 362, the phrase ``activities and 
investments of a type that are not permissible for a Federal savings 
association'' generally means any activity not authorized expressly by 
HOLA and activities not recognized as permissible by OCC regulation or 
other written supervisory directive from the OCC or from the OTS to the 
extent not modified, terminated, set aside, or superseded by the 
OCC.\23\ Federal savings associations are permitted to issue letters of 
credit and may issue other independent undertakings pursuant to 12 CFR 
160.50, as transferred by the OCC from the OTS, subject to standards 
and restrictions found in 12 CFR 160.120, discussed above.
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    \23\ 12 CFR 362.9(a).
---------------------------------------------------------------------------

    Because 12 CFR 362.9 allows State savings associations to exercise 
the power permitted to Federal savings associations by 12 CFR 160.50 
and must

[[Page 1656]]

follow State law, the standards and restrictions applicable to Federal 
savings associations that issue letters of credit and engage in other 
independent undertakings set forth in 12 CFR 160.120, and 
considerations of safety and soundness, the FDIC considers section 
390.267 to be unnecessary and proposes that it be rescinded.
b. Section 390.268--Investment in State Housing Corporations
    Section 390.268 of part 390, subpart P, formerly designated as OTS 
section 560.121, applies to all savings associations and addresses 
investments in or loans to State housing corporations.
    Under subpart C of part 362, State savings associations generally 
are permitted to invest in State housing corporations because Federal 
savings associations are expressly authorized to invest in State 
housing corporations pursuant to section 5(c)(1)(P) of HOLA.\24\ 
Because such investments are expressly permissible for Federal savings 
associations to make under HOLA, State savings associations may rely on 
part 362 in making such investments consistent with State law and in a 
safe and sound manner. As such, the FDIC considers section 390.268 to 
be unnecessary and proposes that it be rescinded.
---------------------------------------------------------------------------

    \24\ 12 U.S.C. 1464(c)(1)(P); see 12 U.S.C. 1469.
---------------------------------------------------------------------------

B. Activities Implicating Safety and Soundness

1. FDIC's 12 CFR Part 364--Standards for Safety and Soundness
    The FDIC's standards for safety and soundness were promulgated in 
the mid-1990s jointly by the FDIC, along with the FRB, the OCC, and the 
OTS (collectively, ``the Agencies'') pursuant to section 39 of the FDI 
Act.\25\ Section 39(a) of the FDI Act \26\ required the Agencies to 
prescribe standards for safety and soundness relating to the following: 
(A) Internal controls and information systems; (B) internal audit 
systems; (C) loan documentation; (D) credit underwriting; (E) interest 
rate exposure; (F) asset growth; (G) asset quality; (H) earnings; and 
(I) compensation and benefits, as well as such other operational and 
managerial standards as appropriate. Section 39(b) of the FDI Act 
required the Agencies to prescribe standards for insured depository 
institutions related to asset quality, earnings, and stock 
valuation.\27\ Further, section 39(c) of the FDI Act required the 
Agencies to develop standards related to preventing unsafe and unsound 
practices related to compensation arrangements.\28\
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    \25\ 12 U.S.C. 1831p-1. Section 132 of the Federal Deposit 
Insurance Corporation Improvement Act of 1991, Public Law 102-242, 
105 Stat. 2236 (codified at 12 U.S.C. 1831p-1) added section 39 to 
the FDI Act. Section 39 was later amended by section 956 of the 
Housing and Community Development Act of 1992, Public Law 102-550, 
106 Stat. 3672 and section 318 of the Riegle Community Development 
and Regulatory Improvement Act of 1994 (CDRI Act), Public Law 103-
325, 108 Stat. 2160.
    \26\ 12 U.S.C. 1831p-1(a).
    \27\ 12 U.S.C. 1831p-1(b).
    \28\ 12 U.S.C. 1831p-1(c).
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    In 1995, the Agencies published part 364 as a final rule with an 
appendix that implements Section 39(a) of the FDI Act regarding 
standards for safety and soundness (appendix A).\29\ Later, part 364, 
appendix A was amended to reflect subsections 39(b) and (c) of the FDI 
Act.\30\ The OTS's part 570, as amended, implemented section 39 of the 
FDI Act for all savings associations.\31\
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    \29\ 60 FR 35674 (Jul. 10, 1995).
    \30\ 61 FR 43948 (Aug. 27, 1996).
    \31\ See 60 FR at 35686; 61 FR at 43952. The FDIC transferred 
part 570 of the OTS's regulations to part 391, subpart B, of the 
Code of Federal Regulations. Subsequently, the FDIC rescinded part 
391, subpart B and made conforming amendments to 12 CFR part 364 to 
reflect its applicability to all entities for which the FDIC is the 
applicable Federal banking agency. See 80 FR 65903 (Oct. 28, 2015).
---------------------------------------------------------------------------

    The FDIC's part 364, appendix A (regarding safety and soundness) 
and appendix B (regarding information security) implement section 39 of 
the FDI Act.\32\ Section 364.101 of part 364 provides that appendix A 
and appendix B apply to all insured State nonmember banks, State-
licensed insured branches of foreign banks, and State savings 
associations.
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    \32\ Appendix B was added in accordance with section 501 of the 
Gramm-Leach-Bliley Financial Modernization Act of 1999, Public Law 
106-102, 113 Stat. 1338, codified at 15 U.S.C. 6801, which statute 
required the Agencies to establish appropriate information security 
standards in order to protect nonpublic personal information.
---------------------------------------------------------------------------

    Generally, part 364, appendix A addresses operational and 
managerial standards, compensation standards, and standards related to 
asset quality, earnings, and stock valuation and also provides that an 
institution should have internal controls and information systems that 
are appropriate to the size of the institution and the nature, scope, 
and risk of its activities and that provide for: (1) An organizational 
structure that establishes clear lines of authority and responsibility 
for monitoring adherence to established policies; (2) effective risk 
assessment; (3) timely and accurate financial, operational, and 
regulatory reports; (4) adequate procedures to safeguard and manage 
assets; and (5) compliance with applicable laws and regulations.
    With respect to timely and accurate financial, operational and 
regulatory reports, FDIC-supervised institutions are required to 
prepare such reports in accordance with generally accepted accounting 
principles \33\ (GAAP) and are also required to file quarterly Reports 
of Condition.\34\
---------------------------------------------------------------------------

    \33\ 12 U.S.C. 1831n.
    \34\ 12 U.S.C. 1817 (a)(3); 12 U.S.C. 1464(v).
---------------------------------------------------------------------------

    Appendix A of part 364 also addresses loan documentation, requiring 
institutions to establish and maintain loan documentation practices 
that: (1) Enable the institution to make informed lending decisions and 
to assess risk, as necessary, on an ongoing basis; (2) identify the 
purpose of a loan and the source of repayment, and assess the ability 
of the borrower to repay the indebtedness in a timely manner; (3) 
ensure that any claim against a borrow is legally enforceable; (4) 
demonstrate appropriate administration monitoring of a loan; and (5) 
take account the size and complexity of the loan.\35\
---------------------------------------------------------------------------

    \35\ 12 CFR part 364 app. A, sec. II.C.
---------------------------------------------------------------------------

    Appendix A of part 364 sets standards for asset quality and 
provides that an insured depository institution ``establish and 
maintain a system that is commensurate with the institution's size and 
the nature and scope of its operations to identify problem assets and 
prevent deterioration of those assets'' \36\ by: (1) Conducting 
periodic asset quality reviews to identify problem assets; (2) 
estimating the inherent losses in those assets and establish reserves 
that are sufficient to absorb estimated losses; (3) comparing problem 
asset totals to capital; (4) taking appropriate corrective action to 
resolve problem assets; (5) considering the size and potential risks of 
material asset concentrations; and (6) providing periodic asset reports 
with adequate information for management and the board of directors to 
assess the level of asset risk.\37\
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    \36\ Id. sec. II.G.
    \37\ Id.
---------------------------------------------------------------------------

    Taken together, part 364 and appendix A constitute the FDIC's long-
standing expectations for all prudently managed insured depository 
institutions, but leave specific methods of achieving these objectives 
to each institution. Specifically, they provide a framework for sound 
corporate governance and the supervision of operations designed to 
prompt an institution to identify emerging problems and correct 
deficiencies before capital becomes impaired. The FDIC uses these 
standards in its supervisory examination process in order to assess an 
institution's risk profile and assign an appropriate rating during the 
supervisory examination process, with

[[Page 1657]]

material deficiencies documented in the Report of Examination. Pursuant 
to section 39(e) of the FDI Act,\38\ an FDIC-supervised institution's 
failure to meet the standards may cause the FDIC to require the 
institution to submit a safety and soundness compliance plan and if the 
institution does not comply with its plan, the FDIC will issue an order 
to correct safety and soundness deficiencies.\39\
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    \38\ 12 U.S.C. 1831p-1(e).
    \39\ See 12 U.S.C. 1831p-1(e); 12 CFR 308.300, et seq.
---------------------------------------------------------------------------

2. Former OTS Safety and Soundness--Part 390, Subpart P, Sections 
390.260, 390.262, 390.269, 390.270, 390.271, and 390.272
a. Section 390.260--General
    Former OTS section 560.1, as modified by the FDIC in transferred 
section 390.260, provided the general authority and scope for safety-
and-soundness-based lending and investment for State savings 
associations. It is substantively similar to 12 CFR 364.101. Because 
the two regulations are substantively similar and section 364.101 
already applies to State savings associations, the FDIC considers it 
duplicative to retain section 390.260. Accordingly, the FDIC proposes 
that section 390.260 be rescinded.
b. Section 390.262--Definitions
    Former section 560.3 provided a set of definitions to several 
commonly used terms related to lending, such as ``consumer loans,'' 
home loans,'' ``real estate loans,'' and ``credit card,'' and it is not 
expressly duplicative of or substantively similar to any corresponding 
FDIC regulation. However, as transferred and redesignated by the FDIC, 
the definitions contained in section 390.262 are only relevant to the 
provisions of part 390, subpart P. Specifically, section 390.262 
provides a list of definitions ``[f]or purposes of this subpart.'' \40\ 
Because the FDIC has concluded that the substantive provisions of part 
390, subpart P are unnecessary, redundant, or otherwise duplicative of 
other FDIC regulations, it follows that the definitions contained in 
section 390.262 that are only relevant to subpart P are also 
unnecessary. Accordingly, the FDIC considers section 390.262 to be 
unnecessary and proposes that it be rescinded.
---------------------------------------------------------------------------

    \40\ 12 CFR 390.262.
---------------------------------------------------------------------------

c. Section 390.269--Prohibition on Loan Procurement Fees
    Former section 560.130 addressed loan procurement fees, and is not 
expressly duplicative of or substantively similar to any corresponding 
FDIC regulation. This section was originally transferred to the OTS 
from the Bank Board in 1989 \41\ and has been the subject of a 
regulatory clarification and an OTS interpretative letter.\42\ 
Specifically, the provision had applied to affiliated persons of 
savings associations but, in response to requests for clarification and 
public comment, the OTS revised it to apply only to natural 
persons.\43\ As transferred to the FDIC, section 390.269 provides,

    \41\ See 54 FR 49411, 49560 (Nov. 30, 1989).
    \42\ See 61 FR 60173, 60176 (Nov. 27, 1996); OTS Interpretative 
Letter, Loan Procurement Fees (Dec. 14, 1994), available at http://www.occ.gov/static/ots/legal-opinions/ots-lo-12-14-1994a.pdf. Former 
section 560.130 was previously listed as section 563.40(a), see 61 
FR at 60176, and the 1994 OTS interpretive letter references this 
earlier section number.
    \43\ 61 FR at 60176.

    If you are a director, officer, or other natural person having 
the power to direct the management or policies of a State 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 State savings association or a 
---------------------------------------------------------------------------
subsidiary of the State savings association.\44\

    \44\ 12 CFR 390.262.

    Although the OTS maintained this provision in its regulations since 
1989, of the other Federal banking agencies, only the OCC has a 
corresponding provision in its regulations, as the OCC also transferred 
former section 560.130 from the OTS.\45\ Rather than identify and 
prohibit particular types of compensation or fees on a case-by-case 
basis, the FDIC's approach has been to act against compensation 
practices that are unsafe or unsound, or represent a breach of an 
officer's or director's duty not to place his or her own interests 
ahead of those of the institution; and where necessary, the FDIC can 
take action under section 8 of the FDI Act.\46\ Because the FDIC can 
act against compensation practices that are demonstrably unsafe or 
unsound or a breach of fiduciary duty, the FDIC considers section 
390.269 to be unnecessary and proposes that it be rescinded.
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    \45\ The OCC prohibition on loan procurement fees is located at 
12 CFR 160.130. See 76 FR 48950, 49043 (Aug. 9, 2011).
    \46\ 12 U.S.C. 1818.
---------------------------------------------------------------------------

d. Section 390.270--Asset Classification
    Former OTS section 560.160, entitled ``Asset Classification,'' 
required savings associations to classify their assets on a regular 
basis in accordance with the OTS's Thrift Activities Handbook.\47\ The 
regulation originally was transferred to the OTS from the Bank Board in 
1989 and it contained specific accounting classification metrics.\48\ 
It was revised over time in response to initiatives to modernize and 
streamline Federal banking regulations.\49\ Commenters had suggested 
that the OTS remove the classification metrics from the regulation and 
move them to the Thrift Activities Handbook.\50\ In response to these 
comments, the OTS simplified former section 560.160 but retained 
portions of the regulation to ensure that a savings association's board 
of directors would be responsible for monitoring its classification 
system.
---------------------------------------------------------------------------

    \47\ 12 CFR 560.160.
    \48\ See 54 FR at 49415.
    \49\ See 61 FR 50951, 50982 (Sept. 30, 1996).
    \50\ Id. at 50963.
---------------------------------------------------------------------------

    Transferred to the FDIC as section 390.270, the current regulation 
requires, among other things, State savings associations to classify 
assets on a regular basis in a manner consistent with the 
classification system used by the FDIC and to establish adequate 
valuation allowances or charge-offs, as appropriate, consistent with 
GAAP and the practices of the Federal banking agencies. The FDIC's 
implementation of part 364, appendix A provides the FDIC's minimum 
standards for establishing and maintaining ``a system that is 
commensurate with the institution's size and the nature and scope of 
its operations to identify problem assets and prevent deterioration of 
those assets.'' \51\
---------------------------------------------------------------------------

    \51\ 12 CFR 364, app. A, sec. II.G.
---------------------------------------------------------------------------

    State savings associations are already expected to maintain an 
appropriate level of allowance for loan and lease losses in accordance 
with GAAP. Because safety and soundness principles require all insured 
depository institutions for which the FDIC is the appropriate Federal 
banking agency--including State savings associations--to provide timely 
and accurate financial, operational, and regulatory reports in 
accordance with GAAP, the FDIC considers section 390.270 to be 
unnecessary and proposes that it be rescinded.
e. Section 390.271--Records for Lending Transactions
    As transferred to the FDIC, section 390.271 requires State savings 
associations to establish and maintain loan documentation practices 
that mirror all of the requirements of part 364, appendix A. Because 
the lending documentation practices and requirements contained in 
section 390.271 are contained in part 364, appendix A, as discussed 
above, the

[[Page 1658]]

FDIC considers section 390.271 to be unnecessary and proposes that it 
be rescinded.
f. Section 390.272--Re-Evaluation of Real Estate Owned
    Former OTS section 560.172 also was part of the transfer to OTS and 
recodification of Bank Board regulations in 1989.\52\ It originally 
addressed re-evaluation of assets and, among other things, required a 
savings association to appraise each parcel of real estate owned at the 
earlier of in-substance foreclosure or at the time of the savings 
association's acquisition, and at such times thereafter as dictated by 
prudent management policy or as required by the OTS' regional 
director.\53\ The provision did not apply to real estate owned by the 
institution that was sold and reacquired less than 12 months subsequent 
to the most recent appraisal. The form of the regulation transferred to 
the FDIC as section 390.272 remains substantively the same as the most 
recent version adopted by the former OTS.\54\
---------------------------------------------------------------------------

    \52\ See 54 FR at 49587.
    \53\ 12 CFR 563.172 (1994).
    \54\ See 12 CFR 390.272; cf 12 CFR 560.172.
---------------------------------------------------------------------------

    As transferred to the FDIC, section 390.272 is not duplicative of 
any other existing FDIC regulation. However, as discussed in part 
III.B.1. of this SUPPLEMENTARY INFORMATION section, above, the FDIC 
relies on part 364, appendix A to convey its expectation that FDIC-
supervised institutions should ``establish and maintain a system that 
is commensurate with the institution's size and the nature and scope of 
its operations to identify problem assets and prevent deterioration of 
those assets'' \55\ and, as State-chartered institutions, to follow 
State law with respect to the initial and subsequent valuations of 
other real estate (ORE).\56\ The FDIC expects all supervised 
institutions to adhere to part 364 with regard to maintaining a system 
to identify and manage problem assets (including ORE) and to provide 
for timely and accurate financial, operational, and regulatory reports 
according to GAAP and the Call Report Instructions as it pertains to 
the appropriate carrying value of ORE. Further, State law generally 
provides for when an appraisal is necessary for State-chartered 
institutions (including savings associations). Therefore, the FDIC 
considers section 390.272 to be unnecessary and proposes that it be 
rescinded.
---------------------------------------------------------------------------

    \55\ 12 CFR 364, app. A., sec. II.G.
    \56\ See FIL-62-2008.
---------------------------------------------------------------------------

    Accordingly, as explained in the analysis above, the FDIC proposes 
to remove sections 390.260, 390.262, 390.269, 390.270, 390.271 and 
390.272 of part 390, subpart P because these sections are unnecessary, 
redundant of, or otherwise duplicative of the safety and soundness 
standards delineated in part 364 and its appendix A.

C. Activities Implicating Real Estate Lending Provisions

1. The FDIC's Part 365--Real Estate Lending Standards
    Section 304 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (FDICIA) required the Agencies to adopt uniform 
regulations prescribing standards for extensions of credit that are 
secured by liens on interests in real estate or made for the purpose of 
financing the construction of a building or other improvements to real 
estate.\57\ The Agencies published their joint rule and appendices for 
real estate lending on the last day of 1992, and the rules became 
effective on March 19, 1993.\58\ The FDIC's regulation is found at part 
365, subpart A, which includes an appendix A regarding real estate 
lending.
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    \57\ See Public Law 102-242, 105 Stat. 2236 (codified at 12 
U.S.C. 1828(o)).
    \58\ See 57 FR 62890, 62900 (Dec. 31, 1992).
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2. Sections 390.264, 390.265, Including Appendix to 390.265--Real 
Estate Lending
    Former OTS sections 560.100 and 560.101 (including the appendix) 
implemented real estate lending provisions, as required by FDICIA. 
Former sections 560.100 and 560.101 were transferred to the FDIC as 
sections 390.264 and 390.265 (including the appendix to part 365, 
subpart A). These regulations are nearly identical to 12 CFR 365.1 and 
365.2 (including appendix A to part 365, subpart A). However, in order 
to include State savings associations within the scope of part 365 and 
its appendix A, it is necessary for the FDIC to make the technical 
amendment as discussed in section IV of this SUPPLEMENTARY INFORMATION 
section, below.
    Because the FDIC considers sections 390.264 and 390.265 (including 
the appendix to section 390.265) to be duplicative of part 365, subpart 
A, as proposed to be amended herein, the FDIC proposes to rescind and 
remove them from the Code of Federal Regulations.

IV. Proposed Amendment to Part 365, Subpart A

    As discussed in part III.C of this SUPPLEMENTARY INFORMATION, the 
FDIC's part 365 subpart A addresses real estate lending standards for 
insured State nonmember banks (including State-licensed insured 
branches of foreign banks). The Dodd-Frank Act added State savings 
associations to the list of entities for which the FDIC is designated 
as the appropriate Federal banking agency.\59\ To clarify that part 365 
applies to all institutions for which the FDIC is the appropriate 
Federal banking agency, the FDIC proposes to amend sections 365.1 and 
365.2 of part 365 to replace the phrases ``insured state nonmember 
banks (including state-licensed insured branches of foreign banks)'' 
and ``state nonmember bank'' throughout subpart A with the phrase 
``FDIC-supervised institution.'' Under the proposal, section 365.1 
would be revised to add the definition of the term ``FDIC-supervised 
institution'' to mean any insured depository institution for which the 
FDIC is the appropriate Federal banking agency pursuant to section 3(q) 
of the FDI Act.\60\
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    \59\ See section 312(c) of the Dodd-Frank Act, codified at 12 
U.S.C. 1813(q).
    \60\ 12 U.S.C. 1813(q).
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V. Rescinding Part 365, Subpart B

    The FDIC issued part 365, subpart B to implement the Federal 
registration requirements for mortgage loan originators required by the 
S.A.F.E. Act. As relevant here, the S.A.F.E. Act required the Agencies, 
the Farm Credit Administration, and National Credit Union 
Administration (the ``S.A.F.E. Act Agencies'') to develop and maintain 
a system for registering mortgage loan originators employed by 
institutions regulated by the agencies.\61\
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    \61\ 12 U.S.C. 5106.
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    However, the Dodd-Frank Act amended the S.A.F.E. Act, transferring 
that authority from the S.A.F.E. Act Agencies to the Bureau.\62\ On 
December 19, 2011, the Bureau published an interim final rule 
incorporating the S.A.F.E. Act into its Regulation G. On April 28, 
2016, the Bureau finalized the interim final rule, which is 
substantially duplicative to the FDIC's S.A.F.E. Act regulation at part 
365, subpart B. The Bureau's regulation addresses Federal registration 
requirements for mortgage loan originators and applies to all FDIC-
supervised institutions.\63\ As such, the FDIC proposes to rescind part 
365,

[[Page 1659]]

subpart B because it is outdated and no longer necessary.
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    \62\ See section 1100 of the Dodd-Frank Act.
    \63\ 12 CFR 1007.101(c).
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VI. Summary

    If the proposal is finalized, 12 CFR part 390, subpart P would be 
removed because it is largely unnecessary, redundant, or duplicative of 
existing FDIC regulations; the requirements of part 365, subpart A 
expressly would apply to all FDIC-supervised insured depository 
institutions; and part 365 subpart B would be removed because it is 
outdated and no longer necessary due to the transfer of S.A.F.E. Act 
rulemaking power to the Bureau. These three initiatives will serve to 
streamline the FDIC's regulations and reduce the regulatory burden on 
FDIC-supervised institutions.

VII. Expected Effects

    As explained in detail in Section III of this SUPPLEMENTARY 
INFORMATION section, certain OTS regulations transferred to the FDIC by 
the Dodd-Frank Act relating to lending and investment are either 
unnecessary or effectively duplicate existing FDIC regulations. This 
proposal would eliminate those transferred OTS regulations. The 
proposal also would clarify that the standards in part 365 apply to 
State savings associations because the FDIC is the ``appropriate 
Federal banking agency'' pursuant to the FDI Act.
    As of June 30, 2018, the FDIC supervises 3,575 depository 
institutions, of which 41 (1.1%) are State savings associations. The 
proposed rule primarily would affect regulations that govern State 
savings associations.
    As explained previously, the proposed rule would remove sections 
390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 
390.268, 390.269, 390.270, 390.271, and 390.272 of part 390, subpart P 
because these sections are unnecessary, redundant of, or otherwise 
duplicative of other FDIC regulations regarding safety and soundness. 
Because these regulations are redundant to existing regulations, 
rescinding them will not have any substantive effects on FDIC-
supervised institutions.
    Thus, for example, as explained previously, part 364 covers State 
savings associations in section 364.101 and its appendix A. Because the 
lending documentation practices and standards in part 364, appendix A 
are substantively similar to existing regulations for State savings 
associations found in section 390.271, rescission of section 390.271 
would not have any substantive effects on FDIC-supervised institutions. 
The same would be true for the other sections of part 390, subpart P.
    The proposed rule would amend part 365, subpart A so that it would 
expressly apply to State savings associations. Because the real estate 
lending requirements in sections 365.1 and 365.2 and appendix A to part 
365, subpart A are substantively identical to currently applicable 
regulations for State savings associations found in 390.264 and 390.265 
(including the appendix to 390.265), amending part 365, subpart A to 
include State savings associations would not have any substantive 
effects on FDIC-supervised institutions.
    Finally, as previously explained, the proposed rule would rescind 
part 365, subpart B because the authority to implement Federal 
registration requirements for mortgage loan originators has been 
transferred by statute to the Bureau. Because rulemaking authority for 
the S.A.F.E. Act was transferred to the Bureau in December 2011, the 
removal of the FDIC's S.A.F.E. Act regulations would not have any 
substantive effects on FDIC-supervised institutions.
    The FDIC invites comments on all aspects of this analysis. In 
particular, would the proposed rule have any costs or benefits to 
covered entities that the FDIC has not identified?

VIII. Alternatives

    The FDIC has considered alternatives to the proposed rule but 
believes that the proposed amendments represent the most appropriate 
option for covered institutions. As discussed previously, the Dodd-
Frank Act transferred certain powers, duties, and functions formerly 
performed by the OTS to the FDIC. The FDIC's Board reissued and 
redesignated certain transferred regulations from the OTS, but noted 
that it would evaluate them and might later incorporate them into other 
FDIC regulations, amend them, or rescind them, as appropriate. The FDIC 
has evaluated the existing regulations relating to lending and 
investment of covered entities, including part 365 and part 390, 
subpart P. The FDIC considered the status quo alternative of retaining 
the current regulations but did not choose to do so because it would be 
needlessly complex for substantively similar regulations regarding 
lending and investment activities of State nonmember banks and State 
savings associations to be located in different locations within the 
Code of Federal Regulations. The FDIC believes it would be procedurally 
complex for FDIC-supervised institutions to continue to refer to these 
separate sets of regulations. Therefore, the FDIC is proposing to amend 
and streamline the FDIC's regulations.

IX. Request for Comments

    The FDIC invites comments on all aspects of this proposed 
rulemaking. In particular, the FDIC requests comments on the following 
questions:
    1. Are the provisions of 12 CFR parts 362, 364, and 365 sufficient 
to provide consistent and effective requirements related to permissible 
lending and investment activities for all insured depository 
institutions for which the FDIC is the appropriate Federal banking 
agency? Please provide examples, data, or otherwise substantiate your 
answer.
    2. What negative impacts, if any, can you foresee in the FDIC's 
proposal to rescind part 390, subpart P and part 365, subpart B and 
remove them from the Code of Federal Regulations?
    3. As to the OTS's former rule prohibiting loan procurement fees, 
the FDIC noted above that no other Federal banking agency has a similar 
rule. Do you believe that a separate rule is necessary for safety and 
soundness reasons? Please provide examples, data, or otherwise 
substantiate your answer.
    4. Please provide any other comments you have on the proposal.

X. Regulatory Analysis and Procedure

A. The Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA),\64\ the FDIC may not conduct or sponsor, and the 
respondent is not required to respond to, an information collection 
unless it displays a currently valid Office of Management and Budget 
(OMB) control number.
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    \64\ 44 U.S.C. 3501-3521.
---------------------------------------------------------------------------

    The proposed rule would rescind and remove from FDIC regulations 
part 390, subpart P. With regard to part 365, subpart A, the proposed 
rule would amend sections 365.1 and 365.2 to clarify that State savings 
associations, as well as State nonmember banks and foreign banks having 
insured branches are all subject to part 365. It would also rescind and 
remove from the FDIC's regulations part 365, subpart B. The proposed 
rule will not create any new or revise any existing collections of 
information under the PRA. Therefore, no information collection request 
will be submitted to the OMB for review.

B. The Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA), requires that, in connection 
with a notice of proposed rulemaking, an agency prepare and make 
available for public comment an initial regulatory flexibility analysis 
that describes the

[[Page 1660]]

impact of the proposed rule on small entities.\65\ However, a 
regulatory flexibility analysis is not required if the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities, and publishes its certification 
and a short explanatory statement in the Federal Register together with 
the rule. The Small Business Administration (SBA) has defined ``small 
entities'' to include banking organizations with total assets of less 
than or equal to $550 million.\66\ For the reasons provided below, the 
FDIC certifies that the proposed rule, if adopted in final form, would 
not have a significant economic impact on a substantial number of small 
banking organizations. Accordingly, a regulatory flexibility analysis 
is not required.
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    \65\ 5 U.S.C. 601, et seq.
    \66\ The SBA defines a small banking organization as having $550 
million or less in assets, where ``a financial institution's assets 
are determined by averaging the assets reported on its four 
quarterly financial statements for the preceding year.'' See 13 CFR 
121.201 (as amended, effective December 2, 2014). ``SBA counts the 
receipts, employees, or other measure of size of the concern whose 
size is at issue and all of its domestic and foreign affiliates.'' 
See 13 CFR 121.103. Following these regulations, the FDIC uses a 
covered entity's affiliated and acquired assets, averaged over the 
preceding four quarters, to determine whether the FDIC-supervised 
institution is ``small'' for the purposes of RFA.
---------------------------------------------------------------------------

    As of June 30, 2018, the FDIC supervised 3,575 insured financial 
institutions, of which 2,804 are considered small banking organizations 
for the purposes of RFA. The proposed rule primarily affects 
regulations that govern State savings associations. There are 38 State 
savings associations considered to be small banking organizations for 
the purposes of the RFA.\67\
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    \67\ FDIC Call Report, March 31st, 2018.
---------------------------------------------------------------------------

    As explained previously, the proposed rule would remove sections 
390.260, 390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 
390.268, 390.269, 390.270, 390.271, and 390.272 of part 390, subpart P 
because these sections are unnecessary, redundant of, or otherwise 
duplicative of other FDIC regulations for safety and soundness 
standards. Because these regulations are redundant to existing 
regulations, rescinding them would not have any substantive effects on 
small FDIC-supervised institutions.
    As explained previously, part 364 covers State savings associations 
in section 364.101 and in appendix A. Because the lending documentation 
practices and standards in part 364, appendix A are substantively 
similar to existing regulations for State savings associations found in 
section 390.271 rescinding section 390.271 and the rest of part 390, 
subpart P would not have any substantive effects on small FDIC-
supervised institutions.
    As stated previously, the proposed rule would amend part 365, 
subpart A so that it would expressly apply to State savings 
associations. Because the real estate lending requirements in sections 
365.1 and 365.2 and part 364, appendix A are substantively identical to 
currently applicable regulations for State savings associations found 
in 390.264 and 390.265 (including the appendix to section 390.265), 
amending part 365, subpart A so that it would apply to all FDIC-
supervised institutions would not have any substantive effects on small 
FDIC-supervised institutions.
    As explained previously, the proposed rule would rescind part 365, 
subpart B because the authority to implement Federal registration 
requirements for mortgage loan originators has been transferred by 
statute to the Bureau. Because rulemaking authority for the S.A.F.E. 
Act was transferred to the Bureau in December 30, 2011, the removal of 
the FDIC's S.A.F.E. Act regulations would not have any substantive 
effects on small FDIC-supervised covered institutions.
    Based on the information above, the FDIC certifies that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities.
    5. The FDIC invites comments on all aspects of the supporting 
information provided in this RFA section. In particular, would this 
rule have any significant effects on small entities that the FDIC has 
not identified?

C. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \68\ requires each 
Federal banking agency to use plain language in all of its proposed and 
final rules published after January 1, 2000. As a federal banking 
agency subject to the provisions of this section, the FDIC has sought 
to present the proposed rule to rescind part 390, subpart P and amend 
part 365 in a simple and straightforward manner.
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    \68\ Public Law 106-102, 113 Stat. 1338, 1471 (codified at 12 
U.S.C. 4809).
---------------------------------------------------------------------------

    6. The FDIC invites comments on whether the proposal is clearly 
stated and effectively organized, and how the FDIC might make the 
proposal easier to understand.

D. The Economic Growth and Regulatory Paperwork Reduction Act

    Under section 2222 of the Economic Growth and Regulatory Paperwork 
Reduction Act of 1996 (EGRPRA), the FDIC is required to review all of 
its regulations, at least once every 10 years, in order to identify any 
outdated or otherwise unnecessary regulations imposed on insured 
institutions.\69\ The FDIC, along with the other federal banking 
agencies, submitted a Joint Report to Congress on March 21, 2017, 
(EGRPRA Report) discussing how the review was conducted, what has been 
done to date to address regulatory burden, and further measures that 
will be taken to address issues that were identified. As noted in the 
EGRPRA Report, the FDIC is continuing to streamline and clarify its 
regulations through the OTS rule integration process. By removing 
outdated or unnecessary regulations, such as part 390, subpart P and 
part 365, subpart B, and amending part 365, subpart A, this rule 
complements other actions the FDIC has taken, separately and with the 
other federal banking agencies, to further the EGRPRA mandate.
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    \69\ Public Law 104-208, 110 Stat. 3009 (1996).
---------------------------------------------------------------------------

List of Subjects

12 CFR Part 365

    Banks, banking, Credit, Mortgages, Savings associations.

12 CFR Part 390

    Administrative practice and procedure, Advertising, Aged, Civil 
rights, Conflict of interests, Credit, Crime, Equal employment 
opportunity, Fair housing, Government employees, Individuals with 
disabilities, Reporting and recordkeeping requirements, Savings 
associations.

Authority and Issuance

    For the reasons stated in the preamble, the Board of Directors of 
the Federal Deposit Insurance Corporation proposes to amend title 12 of 
the Code of Federal Regulations as follows:

PART 365--REAL ESTATE LENDING STANDARDS

Subpart A--Real Estate Lending Standards [Amended]

0
1. Revise the authority citation for part 365 to read as follows:

    Authority: 12 U.S.C. 1828(o), 5412.

0
2. Revise Sec.  365.1 to read as follows:


Sec.  365.1   Purpose and scope.

    This subpart, issued pursuant to section 304 of the Federal Deposit

[[Page 1661]]

Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o), 
prescribes standards for real estate lending to be used by FDIC-
supervised institutions in adopting internal real estate lending 
policies. For purposes of this subpart, the term ``FDIC-supervised 
institution'' means any insured depository institution for which the 
Federal Deposit Insurance Corporation is the appropriate Federal 
banking agency pursuant to section 3(q) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1813(q).
0
3. Amend Sec.  365.2 by revising paragraphs (a), (b)(1)(iii), (2)(iii) 
and (iv), and (c) to read as follows:


Sec.  365.2  Real estate lending standards.

    (a) Each FDIC-supervised institution 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) * * *
    (iii) Be reviewed and approved by the FDIC-supervised institution's 
board of directors at least annually.
    (2) * * *
    (iii) Loan administration procedures for the FDIC-supervised 
institution's real estate portfolio; and
    (iv) Documentation, approval, and reporting requirements to monitor 
compliance with the FDIC-supervised institution's real estate lending 
policies.
    (c) Each FDIC-supervised institution 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.
* * * * *

Subpart B--[Removed and Reserved]

0
4. Remove and reserve subpart B, consisting of Sec. Sec.  365.101, 
365.102, 365.103, 365.104, 365.105, and appendix A to subpart B.

PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT 
SUPERVISION

0
5. The authority citation for part 390 continues to read as follows:

    Authority:  12 U.S.C. 1819.

Subpart P--[Removed and Reserved]

0
6. Remove and reserve Subpart P, consisting of Sec. Sec.  390.260, 
390.261, 390.262, 390.263, 390.264, 390.265, 390.266, 390.267, 390.268, 
390.269, 390.270, 390.271, 390.272.

    Dated at Washington, DC, on December 18, 2018.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie Best,
Assistant Executive Secretary.
[FR Doc. 2018-28084 Filed 2-4-19; 8:45 am]
 BILLING CODE 6714-01-P