Removal of Transferred OTS Regulations Regarding Accounting Requirements for State Savings Associations, 52827-52834 [2019-20770]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
[Proposed Rules]
[Pages 52827-52834]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20770]


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FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 390

RIN 3064-AF15


Removal of Transferred OTS Regulations Regarding Accounting 
Requirements for State Savings Associations

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In order to streamline Federal Deposit Insurance Corporation 
(FDIC) regulations, the FDIC proposes to rescind and remove from the 
Code of Federal Regulations rules entitled Accounting Requirements 
(part 390, subpart T) 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). The proposed rule would 
rescind and remove part 390, subpart T (including the Appendix to 12 
CFR 390.384) because the financial statement and disclosure 
requirements set forth in part 390, subpart T are substantially similar 
to, although more detailed than, otherwise applicable financial 
statement form and content requirements and disclosure requirements 
that a State savings

[[Page 52828]]

association must satisfy under federal banking or securities laws or 
regulations.

DATES: Comments must be received on or before November 4, 2019.

ADDRESSES: You may submit comments by any of the following methods:
     FDIC Website: https://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the agency 
website.
     Email: [email protected]. Include RIN 3064-AF15 on the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW, 
Washington, DC 20429.
     Hand Delivery 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.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the instructions for submitting comments.
    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 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 https://www.fdic.gov/regulations/laws/federal/, including any 
personal information provided.

FOR FURTHER INFORMATION CONTACT: Maureen Loviglio, Senior Staff 
Accountant, Division of Risk Management Supervision, (202) 898-6777, 
[email protected]; Suzanne Dawley, Counsel, Legal Division, (202) 898-
6509, [email protected].

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 accounting requirements. Thus, as further detailed in this 
section, the FDIC proposes to rescind and remove from the Code of 
Federal Regulations rules entitled Accounting Requirements (part 390, 
subpart T) applicable to State savings associations. Such requirements 
prescribe definitions, public accountant qualifications, and the form 
and content of financial statements pertaining to certain securities 
and their related transaction documents. Transaction documents may 
include proxy statements and offering circulars in connection with a 
conversion, any offering of securities by a State savings association, 
and filings by State savings associations requiring financial 
statements under the Securities Exchange Act of 1934 (Exchange Act).\1\ 
The FDIC has determined that the additional financial disclosure 
requirements required by part 390, subpart T for State savings 
associations are substantially similar to, although more detailed than, 
otherwise applicable financial statement form and content requirements 
and disclosure requirements that State nonmember banks must satisfy 
under federal banking or securities laws or regulations. Therefore, the 
FDIC is proposing to remove part 390, subpart T and apply existing 
disclosure requirements, and related form and content of financial 
statements requirements to State savings associations.
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    \1\ 12 U.S.C. 78a et seq.
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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.\2\ Beginning July 21, 
2011, the transfer date established by section 311 of the Dodd-Frank 
Act,\3\ 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,\4\ provides the manner of treatment for all orders, 
resolutions, determinations, regulations, and advisory materials 
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.
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    \2\ Public Law 111-203, 124 Stat. 1376 (2010).
    \3\ 12 U.S.C. 5411.
    \4\ 12 U.S.C. 5414(b).
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    Pursuant to section 316(c) of the Dodd-Frank Act,\5\ 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.\6\
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    \5\ 12 U.S.C. 5414(c).
    \6\ 76 FR 39246 (July 6, 2011).
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    Although section 312(b)(2)(B)(i)(II) of the Dodd-Frank Act \7\ 
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) \8\ and other laws as the ``appropriate Federal 
banking agency'' or under similar statutory terminology. Section 
312(c)(1) of the Dodd-Frank Act \9\ revised the definition of 
``appropriate Federal banking agency'' contained in section 3(q) of the 
FDI Act,\10\ 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. 
Further, section 376 of the Dodd Frank Act \11\ grants rulemaking and 
administrative authority to the FDIC over the Exchange Act \12\ filings 
of State savings associations.
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    \7\ 12 U.S.C. 5412(b)(2)(B)(i)(II).
    \8\ 12 U.S.C. 1811 et seq.
    \9\ 12 U.S.C. 5412(c)(1).
    \10\ 12 U.S.C. 1813(q).
    \11\ Section 376 of the Dodd Frank Act amended section 3(a) of 
the Exchange Act. See, 15 U.S.C. 78c(a)(34).
    \12\ 12 U.S.C. 78a et seq.
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    As noted, on June 14, 2011, operating pursuant to this authority, 
the FDIC's Board of Directors reissued and re-designated certain 
transferring regulations of the former OTS. These transferred OTS 
regulations were published as new FDIC regulations in the Federal 
Register on August 5, 2011.\13\ When it republished the transferred OTS 
regulations as new FDIC regulations, the FDIC specifically noted that 
its staff would evaluate the transferred OTS rules and might later 
recommend incorporating the

[[Page 52829]]

transferred OTS regulations into other FDIC rules, amending them, or 
rescinding them, as appropriate.
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    \13\ 76 FR 47652 (Aug. 5, 2011).
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B. OTS Regulations Transferred to the FDIC's Part 390, Subpart T

    One of the OTS rules transferred to the FDIC governs the accounting 
requirements for State savings associations. The OTS rule, formerly 
found at 12 CFR part 563c, was transferred to the FDIC with nominal 
changes and is now found in the FDIC's rules at part 390, subpart T, 
entitled Accounting Requirements.\14\ This subpart prescribes for State 
savings associations accounting requirements with respect to 
definitions, public accountant qualifications, and the form and content 
of financial statements pertaining to certain securities transaction 
documents. These transaction documents include proxy statements and 
offering circulars in connection with a conversion, any offering of 
securities by a State savings association, and filings by State savings 
associations requiring financial statements under the Exchange Act.\15\ 
Each provision of part 390, subpart T is discussed in Part III of this 
section.
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    \14\ 12 CFR part 390, subpart T.
    \15\ Id.
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III. The Proposal To Rescind the Transferred OTS Accounting 
Requirements Regulations

    After careful review of part 390, subpart T, the FDIC has 
determined that the accounting requirements with respect to financial 
statement and disclosure form and content set forth by part 390, 
subpart T are substantially similar to, although more detailed than, 
other requirements that a State savings association must satisfy under 
federal banking or securities laws or regulations. Therefore, the FDIC 
proposes to rescind and remove part 390, subpart T (including the 
Appendix to 12 CFR 390.384).
    State savings association reports and financial statements are 
required to be uniform and consistent with U.S. generally accepted 
accounting principles (GAAP) pursuant to section 37 of the FDI Act and 
section 4(b) of the Homeowners Owners Loan Act (HOLA).\16\ While 
securities issued by State savings associations are exempt from 
registration requirements of the Securities Act of 1933 (Securities 
Act),\17\ the FDIC reviews for compliance with 12 CFR part 192, 
Conversion from a Mutual to Stock Form, offering circulars related to 
mutual-to-stock conversions involving securities offerings by State 
savings associations. The FDIC will not approve an offering circular 
until concerns regarding the adequacy or accuracy of the offering 
circular or the disclosures are satisfactorily addressed.\18\ The FDIC 
is also responsible for administering and enforcing certain sections of 
the Exchange Act with respect to State savings associations with 
securities that are publicly traded.\19\ As such, a State savings 
association that is an Exchange Act reporting company must file 
required periodic reports such as annual reports on Form 10-K, 
quarterly reports on Form 10-Q, and current reports on Form 8-K with 
the FDIC pursuant to part 335 of the FDIC rules.\20\ With respect to 
the form and content requirements for offerings of mutual capital 
certificates and debt securities of State savings associations set 
forth in part 390, subpart T,\21\ the FDIC has determined that the 
additional disclosures required by part 390, subpart T, may be more 
detailed than otherwise applicable financial statement form and content 
and disclosure requirements that a State savings association must 
satisfy under GAAP, the Exchange Act, FDIC regulations, and state 
regulations, as appropriate. While there may be situations where the 
disclosures required under GAAP, FDIC regulations, and state 
regulations, as appropriate, with respect to the offerings of mutual 
capital certificates and debt securities are less detailed that the 
requirements under part 390, subpart T, there have been no recent 
filings by State savings associations to the FDIC related to the 
offerings of mutual capital certificates and debt securities. 
Therefore, the FDIC has concluded that the practical impact of the 
differences in level of disclosure detail is negligible and does not 
justify maintaining separate disclosure regulations applicable solely 
to State savings associations.
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    \16\ 12 U.S.C. 1831n(a)(2); 12 U.S.C. 1463(b)(2).
    \17\ 15 U.S.C. 77a et seq. Section 3(a)(5) of the Securities Act 
exempts from registration requirements securities issued by State 
savings associations. 15 U.S.C. 77c(a)(5).
    \18\ 12 CFR 192.300.
    \19\ 12 CFR 335.101. Part 335 issued by the FDIC under section 
12(i) of the Exchange Act applies to all securities of State savings 
associations that are subject to the registration requirements of 
section 12(b) or section 12(g) of the Exchange Act. The FDIC is 
vested with the powers, functions, and duties of the Securities and 
Exchange Commission (SEC) to administer and enforce Exchange Act 
sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 14(f), and 16 of the 
Exchange Act (15 U.S.C. 78j-1, 78l, 78m, 78n(a), 78n(c), 78n(d), 
78n(f), and 78p) and sections 302, 303, 304, 306, 401(b), 404, 406, 
and 407 of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley) (15 
U.S.C. 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265) regarding 
State savings associations with one or more classes of securities 
subject to the registration provisions of sections 12(b) or 12(g) of 
the Exchange Act.
    \20\ Pursuant to section 12(a) of the Exchange Act, an issuer 
must register as an Exchange Act reporting company if it elects to 
list a class of securities (debt or equity) on a national securities 
exchange. 15 U.S.C. 78l(a). Generally, an issuer must register 
pursuant to section 12(g) of the Exchange Act if a class of its 
equity securities (other than exempted securities) is held of record 
by either (i) 2,000 persons, or (ii) 500 persons who are not 
accredited investors and, on the last day of the issuer's fiscal 
year, its total assets exceed $10 million. 12 CFR part 335. However, 
for banks, bank holding companies, and savings and loan holding 
companies, the threshold is 2,000 or more holders of record; the 
separate registration trigger for 500 or more non-accredited holders 
of record does not apply. A list of FDIC-supervised depository 
institutions currently reporting to the FDIC under the Exchange Act 
and part 335 can be accessed at https://www.fdic.gov/bank/individual/part335/.
    \21\ 12 CFR 390.384(c).
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    A brief review of the State savings association accounting 
requirements in part 390, subpart T follows.

A. Part 390, Subpart T--Accounting Requirements

    Historically, the Federal Home Loan Bank Board (FHLBB), the 
predecessor to the OTS, established various accounting and financial 
reporting requirements for savings associations.\22\ These requirements 
occasionally differed from GAAP and when this occurred, such 
requirements were referred to as regulatory accounting practices. 
Regulatory accounting practices were often less stringent than 
GAAP.\23\ The Competitive Equality Banking Act of 1987 (CEBA) \24\ 
amended HOLA to require the FHLBB to prescribe uniformly applicable 
accounting standards to be used by all savings associations for the 
purpose of determining compliance with any rule or regulation of the 
FHLBB to the same degree that GAAP is used to determine compliance with 
rules and regulations of the Federal banking agencies. To implement the 
statute, the FHLBB promulgated regulations that required all unaudited 
financial statements and financial reports submitted and Statements of 
Condition be prepared in accordance with GAAP. The Financial 
Institutions Reform, Recovery, and Enforcement Act of 1989 
(FIRREA),\25\ amended section 4(b)(1) of HOLA to require the Director 
of the OTS to prescribe, by regulation, uniform accounting and 
disclosure standards for savings associations, to be used to

[[Page 52830]]

determine savings associations' compliance with all applicable 
regulations. Section 4(b)(2) of HOLA requires that these uniform 
accounting standards for savings associations incorporate GAAP to the 
same degree that such principles are used to determine compliance with 
regulations prescribed by the Federal banking agencies. Consistent with 
these goals, the former OTS savings association accounting 
requirements, formerly found at part 563c, as they applied to State 
savings associations, were transferred to the FDIC with only 
nomenclature changes as part 390, subpart T.
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    \22\ 57 FR 40085 (September 2, 1992). The term ``savings 
association'' includes both any Federal savings association, any 
State savings association, and any corporation (other than a bank) 
that the FDIC Board of Directors and the Comptroller of the Currency 
jointly determine to be operating in substantially the same manner 
as a savings association. 12 U.S.C. 1831(b)(1).
    \23\ Id.
    \24\ Public Law 100-86, 101 Stat. 552 (1978).
    \25\ Public Law 101-73, 103 Stat. 183 (1989).
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390.380 Form and Content of Financial Statements
    This section provides the form and content requirements of 
financial disclosures, including specific statements, to be included by 
a State savings association in a proxy statement or offering circular 
required to be used in connection with a mutual-to-stock conversion 
under 12 CFR part 192 and an offering circular or nonpublic offering 
materials required to be used in connection with an offer or sale of 
securities under part 390, subpart W (Securities Offerings). Unless 
provided for by FDIC rule or order, the financial disclosures governed 
by this subpart must be prepared and presented in accordance with U.S. 
generally accepted accounting principles (GAAP) and be consistent with 
certain provisions of SEC Regulation S-X (Regulation S-X).\26\ In 
addition, this section requires that financial statement disclosures 
comply with the Appendix to Sec.  390.384, which specifies the various 
items that must appear on the face of the financial statements related 
to any proxy statement and offering circular for conversion application 
and any filing under the Exchange Act under this section, and 
additional disclosures that must be included with the financial 
statements in related notes.\27\ Regulation S-X sets forth the specific 
form and content of financial reports for several federal securities 
laws, and extends the meaning of financial statements to include all 
notes to the statements and all related schedules.\28\
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    \26\ 17 CFR part 210, entitled Form and Content of and 
Requirements for Financial Statements, Securities Act of 1933, 
Securities Exchange Act of 1934, Public Utility Holding Company Act 
of 1935, Investment Company Act of 1940, Investment Advisers Act of 
1940, and Energy Policy and Conservation Act of 1975. Such 
provisions include articles 1, 2, 3, 4, 10, and 11 of Regulation S-
X, 17 CFR 210.l-210.4; 210.10, and 210.11. Regulation S-X generally 
sets forth form and content of and requirements for financial 
statements with respect to filing under the Securities Act and 
Exchange Act, among others.
    \27\ Appendix to 12 CFR 390.384.
    \28\ See 17 CFR 210.1-01.
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390.381 Definitions
    Section 390.381 provides a general cross-reference to the 
definitions section of Regulation S-X. This section also includes 
Regulation S-X definitions of registrant and significant subsidiary 
that the OTS modified specifically for State savings associations. 
Under this section, registrant includes an applicant, State savings 
association, or any other person required to prepare financial 
statements pursuant to part 390, subpart T. The definition of 
significant subsidiary pursuant to this subpart means a subsidiary 
(including its subsidiary) for which (1) the State savings association 
or its other subsidiaries' investments in and advances to the 
subsidiary exceed 10 percent of the total consolidated assets of the 
association and its subsidiaries; (2) the State savings association or 
its other subsidiaries' proportionate share of the total assets of the 
subsidiary exceeds 10 percent of the total consolidated assets of the 
State savings association and its subsidiaries; or (3) the State 
savings association or its other subsidiaries' equity in the income 
from continuing operations before income taxes, extraordinary items, 
and cumulative effect of a change in accounting principle of the 
subsidiary exceeds 10 percent of the consolidated income of the State 
savings association and its subsidiaries; all for the most recently 
completed fiscal year.
390.382 Qualification of Public Accountant
    Section 390.382 provides a cross-reference to SEC Rule 2-01 of 
Regulation S-X that sets forth qualifications of accountants.\29\ 
Pursuant to this section, a ``qualified public accountant'' must be a 
certified public accountant certified by, or a licensed public 
accountant licensed by, a regulatory authority of a State or other 
political subdivision of the United States who is in good standing 
under the laws of the jurisdiction where the home office of the 
registrant to be audited is located. Further, any person or firm 
suspended from practice before the SEC or other governmental agency is 
not a qualified public accountant for the purposes of this section.
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    \29\ 17 CFR 210.2-01.
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390.383 Condensed Financial Information [Parent only]
    Section 390.383 applies to the condensed financial information of 
the State savings association as the parent of consolidated 
subsidiaries required to be presented in a note to the financial 
statements when the restricted net assets of consolidated subsidiaries 
exceed 25 percent of the consolidated net assets as of the end of the 
most recent fiscal year, and is closely related to the following 
section, Sec.  390.384, Financial statements for conversions, SEC 
filings, and offering circulars.\30\ Section 390.383 further requires 
that the investment in, and indebtedness of and to, State savings 
association subsidiaries be stated separately in the condensed balance 
sheet from amounts for other subsidiaries, and the amount of cash 
dividends paid to the parent State savings association for each of the 
last three years by the State savings association subsidiaries be 
stated separately in the condensed income statement from amounts from 
other subsidiaries. Restricted net assets of a subsidiary are the 
amount of the State savings association's proportionate share of the 
net assets of the subsidiaries (after intercompany netting) that as of 
the end of the most recent year may not be transferred to the parent 
State savings association by the subsidiaries in the form of loans, 
advances, or cash dividends without the consent of a third party, such 
as a lender, regulatory agency, or foreign government. For the purposes 
of this section, if the restrictions on the amount of the funds that 
may not be loaned or advanced differ from the amount restricted for 
transfer as cash dividends, the State savings association should use 
the amount least restrictive to the subsidiary. Also, redeemable 
preferred stocks and minority interest must be deducted in computing 
net assets.
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    \30\ 12 CFR 390.383.
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390.384 Financial Statements for Conversions, SEC Filings, and Offering 
Circulars
    Section 390.384 and its appendix prescribe the form and content of 
State savings association financial statements used in connection with 
(1) mutual-to-stock conversions pursuant to 12 CFR 192, (2) filings 
under the Exchange Act, and (3) offering circulars used in connection 
with mutual capital certificates \31\ and debt securities.\32\ This 
section reflects items in SEC Rule 9-03 and SEC Rule 9-04 that, if 
applicable, should appear on the face of the balance sheets or its 
notes, or income statement or its notes, respectively, as well as 
incorporating items from other rules in Regulation S-X as modified by 
the OTS to specifically apply to savings

[[Page 52831]]

associations and includes references to Regulation S-X rules as 
well.\33\
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    \31\ 12 CFR 163.74.
    \32\ 12 CFR 390.341.
    \33\ 17 CFR 210-9.03, 210-9.04. Other items included by the OTS 
in the Appendix to Sec.  390.384 are similar to items in SEC Rule 1-
02 Definitions, Rule 3-04 Changes in stockholders' equity and 
noncontrolling interests, Rule 4-08, General notes to financial 
statements, and Rule 10-01, Interim financial statements.
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B. Accounting Requirements Applicable to State Savings Associations

    The FDIC's regulations do not have a direct analog to the 
accounting requirements for State savings association set forth in the 
transferred OTS regulations at part 390, subpart T. However, as 
mentioned above, existing federal banking and securities laws and 
regulations provide requirements that are substantially similar.
Generally Accepted Accounting Principles
    In the United States, GAAP is a commonly recognized set of rules 
and procedures designed to govern corporate accounting and financial 
reporting.\34\ This comprehensive set of accounting practices was 
developed by the Financial Accounting Standards Board (FASB), an 
independent not-for-profit body that derives its authority from the 
SEC.\35\ FASB sets GAAP with input from the SEC, the American Institute 
of Certified Public Accountants, and other stakeholders that include 
preparers, users, and auditors.\36\
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    \34\ Robert Parrino and David Kidwell, Fundamentals of Corporate 
Finance, 3.1 (John Wiley & Sons) (2009).
    \35\ Id
    \36\ Id.
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    Section 37 of the FDI Act, like part 390, subpart T, requires that 
reports and statements to be filed with federal banking agencies by 
insured depository institutions, including insured State saving 
associations, be uniform and consistent with GAAP.\37\ Section 4(b) of 
HOLA also requires that savings associations use accounting standards 
that are no less stringent than GAAP.\38\ Further, the instructions to 
the Consolidated Reports of Condition and Income (Call Report) state 
that the regulatory reporting requirements applicable to the Call 
Report shall conform to GAAP as set forth in the FASB's Accounting 
Standards Codification.\39\ By eliminating regulations that are 
substantially similar to existing statutory directives for State 
savings associations to use GAAP, the FDIC would follow the SEC in 
amending disclosure requirements that have become redundant in light of 
GAAP, among other things.\40\
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    \37\ 12 U.S.C. 1831n(a)(2).
    \38\ 12 U.S.C. 1463(b)(2).
    \39\ Instructions for Preparation of Consolidated Reports of 
Condition and Income, Form FFIEC 031 and 041, https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC031_FFIEC041_201906_i.pdf; Instructions for 
Preparation of Consolidated Reports of Condition and Income for a 
Bank with Domestic Offices Only and Total Assets Less than $1 
Billion, Form FFIEC 051, https://www.ffiec.gov/pdf/FFIEC_forms/FFIEC051_201906_i.pdf.
    \40\ 83 FR 50148 (Oct. 4, 2018).
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Exchange Act Filings
    State saving associations that have securities subject to the 
registration requirements of Section 12(b) or Section 12(g) of the 
Exchange Act are subject to a mandatory periodic disclosure process 
that is designed to require Exchange Act-registered companies to make 
public the information that investors would find pertinent in making 
investment decisions. Section 12(i) of the Exchange Act provides that 
the appropriate Federal banking agencies must issue substantially 
similar regulations to regulations and rules issued by the SEC.\41\ 
Therefore, the FDIC is vested with the powers and duties of the SEC to 
enforce the registration provisions of the Exchange Act with respect to 
State nonmember banks and State savings associations.\42\
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    \41\ 15 U.S.C. 78l(i).
    \42\ Id.
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    Part 335, Securities of State Nonmember Banks and State Savings 
Associations, applies to all securities of State nonmember banks and 
State savings associations (FDIC-supervised institutions). Part 335 
implements section 12(i) of the Exchange Act which vests authority in 
the FDIC to administer and enforce certain sections of the Exchange Act 
and Sarbanes-Oxley, including the accounting standards to be used in 
the preparation of filings and other reports under the respective laws. 
Part 335 incorporates the regulations and rules of the SEC with respect 
to the registration, reporting, and accounting requirements applicable 
to companies subject to the Exchange Act. The FDIC amended the scope of 
part 335 to include State savings associations in 2014, and, therefore, 
the requirement for all FDIC-supervised institutions is the same. These 
requirements are substantially similar to the securities offerings 
disclosure regulations that the OCC promulgated under the same 
authority for national banks and federal savings associations.\43\ 
Therefore, State savings associations would file reports containing 
generally the same information, and the same form and content, that 
would be included in Exchange Act reports, including applicable 
financial statement form and content requirements of Regulation S-X, 
with the FDIC rather than the SEC, and subject to the same regulations 
as State nonmember banks.
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    \43\ 12 CFR part 16.
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Mutual to Stock Conversion Offerings
    Mutually-owned State savings associations may convert from the 
mutual form of ownership, where the institution is owned jointly by the 
association members, to the stock form of ownership, where the 
institution is owned by shareholders. Although section 312 of the Dodd-
Frank Act transferred all functions of the OTS relating to State 
savings associations to the FDIC, rulemaking authority for Federal and 
State savings associations was transferred to the OCC.\44\ As a result, 
the form and content of financial statements included as part of a 
State savings association conversion application is governed by part 
192 of the OCC's Rules (OCC conversion regulations), instead of part 
390, subpart T. Part 192 governs savings association conversions 
generally. These OCC conversion regulations apply to financial 
statements included with proxy solicitations and offering 
circulars.\45\ In reviewing a notice of intent to convert from mutual 
to stock form from an insured state-chartered mutually-owned savings 
association, the FDIC takes into account the extent to which the 
proposed conversion transaction conforms with the OCC conversion 
regulations, providing consistency in standards for financial 
statements included with proxy solicitations and offering circulars for 
mutual State savings association and mutual State bank conversions.\46\ 
Additionally, mutual State savings associations must comply with the 
disclosure requirements for offering materials used in connection with 
the issuance of mutual capital certificates pursuant to 12 CFR 
163.74.\47\
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    \44\ Section 312(b)(2), 124 Stat. at 1522, codified to 12 U.S.C. 
5412(b)(2).
    \45\ 12 CFR part 192, subpart A, Standard Conversions.
    \46\ 12 CFR 303.163(b). Paragraph (b) references the former OTS 
mutual-to-stock regulations that were at 12 CFR part 563b. The OCC 
republished part 563b as part 192 as an interim final rule in August 
2011, 76 FR 49156 (Aug. 9, 2011).
    \47\ Debt securities issued pursuant to 12 CFR 390.341 are also 
subject to the disclosure requirements for offering materials.
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State Savings Association Securities Offerings
    Securities issuances by State savings association are exempt from 
registration requirements pursuant to section 3(a)(5) of the Securities 
Act.\48\ State savings

[[Page 52832]]

associations are subject to a separate and stringent regulatory and 
reporting structure under federal banking laws independent of the SEC, 
such as through ongoing supervision and oversight, as well as extensive 
reporting requirements, frequent safety and soundness examinations \49\ 
and capital requirements \50\ that protect investors from securities 
fraud and improper disclosure that the SEC registration process is 
designed to prevent. The Securities Act registration exemption allows 
State savings associations to issue securities with many of the 
benefits of registered offerings with the efficiency and cost 
effectiveness of private placements, does not place limitations on the 
number or type of investors that can participate, or on the amount of 
securities offered. As a result, State savings associations may access 
capital markets without the time and expense of conducting an SEC-
registered offering.
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    \48\ 15 U.S.C. 77c(a)(5).
    \49\ 12 CFR 337.12.
    \50\ 12 CFR part 324.
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    Nonetheless, as in any other securities offering, the anti-fraud 
provisions of the federal securities laws apply, including section 17 
of the Securities Act and section 10(b) of and Rule 10b-5 under the 
Exchange Act.\51\ Financial statements used in proxy solicitations or 
offering circulars used in marketing securities must disclose the 
information necessary to avoid liability under the anti-fraud 
provisions even if specific disclosure requirements are not imposed. 
The FDIC reviews offering circulars to ensure that they were prepared 
in compliance with the anti-fraud provisions of the federal securities 
laws which require full and adequate disclosure of material facts and 
meet the needs of investors, depositors, and issuers.
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    \51\ 15 U.S.C. 77q; 15 U.S.C. 78j(b) and 17 CFR 240.10b-5.
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    With respect to the form and content requirements for offerings of 
mutual capital certificates and debt securities of State savings 
associations set forth in part 390, subpart T, the FDIC has determined 
that the additional disclosures required by part 390, subpart T may be 
more detailed than otherwise applicable financial statement form and 
content and disclosure requirements that a State savings association 
must satisfy under GAAP, FDIC regulations, and state regulations, as 
appropriate. While there may be situations where the disclosures 
required under GAAP, FDIC regulations, and state regulations, as 
appropriate, with respect to the offerings of mutual capital 
certificates and debt securities are less detailed than the 
requirements under part 390, subpart T, there have been no recent 
filings by State savings associations to the FDIC related to the 
offerings of mutual capital certificates and debt securities. 
Therefore, the FDIC has concluded that the practical impact of the 
differences in level of disclosure detail is negligible and does not 
justify maintaining separate disclosure regulations applicable solely 
to State savings associations. The FDIC continues to evaluate whether 
to update the 1996 statement of policy related to the use of offering 
circulars in connection with the public distribution of bank securities 
to include issuances of mutual capital certificates and debt securities 
by State savings associations. The statement of policy currently 
applies only to insured state nonmember banks.\52\
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    \52\ 44 FR 39381 (July 6, 1979); 61 FR 46808 (Sept. 5, 1996).
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IV. Summary

    If the proposal is finalized, 12 CFR part 390, subpart T would be 
rescinded and removed because the financial statement and disclosure 
requirements set forth in part 390, subpart T are substantially similar 
to, although more detailed than, otherwise applicable financial 
statement form and content requirements and disclosure requirements 
that a State savings association must satisfy under federal banking or 
securities laws or regulations. The FDI Act has long required that 
reports and statements to be filed with the FDIC by insured depository 
institutions, including insured State saving associations, be uniform 
and consistent with GAAP. Moreover, the HOLA has required that savings 
association reports and financial statements be consistent with GAAP 
since CEBA was enacted in 1987. State savings associations with 
securities traded in the secondary market are subject to the 
registration provisions and reporting requirements of the Exchange Act 
as implemented by the FDIC, pursuant to the authority granted by 
Section 12(i) of the Exchange Act. As a result, a State savings 
association, like a State nonmember bank, is required to file reports 
and other filings containing generally the same information that would 
be included in Exchange Act reports with the FDIC pursuant to part 335, 
instead of filing with the SEC.
    The form and content of financial statements used in connection 
with proxy solicitations and offering circulars for the conversion of a 
State savings association from mutual to stock form remain subject to 
the OCC conversion regulations at part 192 and offering materials for 
the issuance of mutual capital certificates remain subject to the OCC 
regulations at 12 CFR 163.74, in addition to GAAP and any applicable 
Exchange Act requirements. While State savings association public 
offerings of securities are exempt from Securities Act registration 
requirements, the FDIC reviews offering circulars to ascertain that 
they were prepared in compliance with the anti-fraud provisions of the 
federal securities laws which require full and adequate disclosure of 
material facts and meet the needs of investors, depositors, and are 
uniform and consistent with GAAP, including financial statement 
disclosure requirements. Removing part 390, subpart T will streamline 
the FDIC's regulations and will not increase regulatory burden for 
FDIC-supervised institutions.

V. Expected Effects

    As of March 31, 2019, the FDIC supervises 3,465 insured depository 
institutions, of which 38 (1.1%) are insured State saving 
associations.\53\ The proposed rule primarily would only affect 
regulations that govern State savings associations. As explained 
previously, the proposed rule would remove sections 390.380, 390.381, 
390.382, 390.383, and 390.384 of part 390, subpart T because other 
federal banking or securities laws or regulations contain similar 
requirements. Because these regulations are largely redundant, 
rescinding them will not have any substantive effects on FDIC-
supervised institutions.
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    \53\ FDIC Call Report, March 31, 2019.
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    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?

VI. Alternatives

    The FDIC 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 State savings association accounting 
requirements and part 390, subpart T (including the

[[Page 52833]]

Appendix to 12 CFR 390.384). The FDIC considered the alternative of 
retaining the current regulations, but did not choose to do so because 
it would be needlessly complex and confusing for its supervised 
institutions if substantively similar regulations regarding accounting 
requirements for Exchange Act filers were located in different 
locations within the Code of Federal Regulations. The FDIC believes it 
would be burdensome for FDIC-supervised institutions to refer to these 
separate sets of regulations. Therefore, the FDIC is proposing to 
rescind part 390, subpart T (including the Appendix to 12 CFR 390.384) 
and streamline the FDIC's regulations.

VII. Request for Comments

    The FDIC invites comments on all aspects of this proposed 
rulemaking, and specifically requests comments on the following:
    1. Are the provisions of part 192, part 335, and section 37 of the 
FDI Act sufficient to provide consistent and effective filing and 
disclosure requirements for securities registered under the Exchange 
Act, mutual-to-stock conversions, and mutual capital certificates and 
debt securities for State savings associations? Please provide a 
detailed response.
    2. Should part 390, subpart T pertaining to the accounting 
requirements for State savings associations be retained in whole or in 
part? Please substantiate your response.
    3. What negative impacts, if any, can you foresee in the FDIC's 
proposal to rescind part 390, subpart T and remove it from the Code of 
Federal Regulations?
    4. What negative impacts to State savings associations, if any, do 
you foresee in the FDIC's proposal to rescind part 390, subpart T and 
rely on 12 CFR part 192 and section 37 of the FDI Act with respect to 
the accounting requirements that would be applicable to public 
offerings?
    5. What negative impacts to State savings associations, if any, do 
you foresee in the FDIC's proposal to rescind the accounting 
requirements in part 390, subpart T that are applicable to State 
savings association mutual-to-stock conversions involving a public 
offering of securities and registration of the securities under the 
Exchange Act?
    Written comments must be received by the FDIC no later than 
November 4, 2019.

VIII. Regulatory Analysis and Procedure

A. The Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA),\54\ 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 T (including the Appendix to 12 CFR 
390.384). 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.
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    \54\ 44 U.S.C. 3501-3521.
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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 impact of the proposed rule on small entities.\55\ 
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 $600 million.\56\ Generally, the FDIC 
considers a significant effect to be a quantified effect in excess of 5 
percent of total annual salaries and benefits per institution, or 2.5 
percent of total non-interest expenses. The FDIC believes that effects 
in excess of these thresholds typically represent significant effects 
for FDIC-supervised institutions. 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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    \55\ 5 U.S.C. 601, et seq.
    \56\ The SBA defines a small banking organization as having $600 
million or less in assets, where an organization'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, by 84 FR 34261, effective August 19, 2019). ``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 
covered entity is ``small'' for the purposes of RFA.
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    As of March 31, 2019, the FDIC supervised 3,465 insured depository 
institutions, of which 2,705 are considered small banking organizations 
for the purposes of RFA. The proposed rule primarily affects 
regulations that govern State savings associations.\57\ There are 36 
State savings associations considered to be small banking organizations 
for the purposes of the RFA.\58\
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    \57\ FDIC Call Report, March 31, 2019.
    \58\ Id.
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    As explained previously, the proposed rule would remove sections 
390.380, 390.381, 390.382, 390.383, and 390.364 of part 390, subpart T 
because these sections are unnecessary or redundant of existing federal 
banking and securities laws or regulations that prescribe accounting 
requirements for State savings associations. Because these regulations 
are redundant to existing regulations, rescinding them would not have 
any substantive effects on small FDIC-supervised 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.
    6. 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 \59\ 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 T in a simple 
and straightforward manner.
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    \59\ Public Law 106-102, 113 Stat. 1338, 1471 (codified at 12 
U.S.C. 4809).
---------------------------------------------------------------------------

    7. 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.\60\ The FDIC, along with the other federal banking 
agencies, submitted a Joint Report to Congress on March 21, 2017,

[[Page 52834]]

(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 T, this 
proposal complements other actions the FDIC has taken, separately and 
with the other federal banking agencies, to further the EGRPRA mandate.
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    \60\ Public Law 104-208, 110 Stat. 3009 (1996).
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List of Subjects in 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 Federal Deposit 
Insurance Corporation proposes to amend 12 CFR 390 as follows:

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

0
1. The authority citation for part 390 is revised to read as follows:

    Authority:  12 U.S.C. 1819.
    Subpart F also issued under 5 U.S.C. 552; 559; 12 U.S.C. 2901 et 
seq.
    Subpart G also issued under 12 U.S.C. 2810 et seq., 2901 et 
seq.; 15 U.S.C. 1691; 42 U.S.C. 1981, 1982, 3601-3619.
    Subpart M also issued under 12 U.S.C. 1818.
    Subpart O also issued under 12 U.S.C. 1828.
    Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464.
    Subpart R also issued under 12 U.S.C. 1463.
    Subpart S also issued under 12 U.S.C. 1462; 1462a; 1463; 1464; 
1468a; 1817; 1820; 1828; 1831e; 1831o; 1831p-1; 1881-1884; 3207; 
3339; 15 U.S.C. 78b; 78l; 78m; 78n; 78p; 78q; 78w; 31 U.S.C. 5318; 
42 U.S.C. 4106.
    Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15 
U.S.C. 78c; 78l; 78m; 78n; 78p; 78w.
    Subpart Y also issued under 12 U.S.C.1831o.

Subpart T--[Removed and Reserved]

0
2. Remove and reserve subpart T, consisting of Sec. Sec.  390.380 
through 390.384.

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on September 17, 2019.
Robert E. Feldman,
    Executive Secretary.
[FR Doc. 2019-20770 Filed 10-2-19; 8:45 am]
 BILLING CODE 6714-01-P