Removal of Transferred OTS Regulations Regarding Prompt Corrective Action Directives and Conforming Amendments to Other Regulations, 60738-60745 [2020-18812]
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Federal Register / Vol. 85, No. 188 / Monday, September 28, 2020 / Proposed Rules
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[FR Doc. 2020–21276 Filed 9–25–20; 8:45 am]
BILLING CODE 6450–01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Parts 308 and 390
RIN 3064–AF38
Removal of Transferred OTS
Regulations Regarding Prompt
Corrective Action Directives and
Conforming Amendments to Other
Regulations
Federal Deposit Insurance
Corporation.
ACTION: Notice of proposed rulemaking.
AGENCY:
In order to streamline FDIC
regulations, the FDIC proposes to
rescind and remove from the Code of
Federal Regulations rules entitled
‘‘Prompt Corrective Action’’ 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), and
amend certain sections of existing FDIC
regulations governing the issuance and
SUMMARY:
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review of orders pursuant to the prompt
corrective action provisions of the
Federal Deposit Insurance Act to make
it clear that such rules apply to all
insured depository institutions for
which the FDIC is the appropriate
Federal banking agency.
DATES: Comments must be received on
or before October 28, 2020.
ADDRESSES: You may submit comments,
identified by RIN 3064–AF38, 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: Comments@fdic.gov. Include
RIN 3064–AF38 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
NW 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:
Robert Watkins, Review Examiner,
Division of Risk Management
Supervision, (202) 898–3865; Andrea
Winkler, Acting Assistant General
Counsel, Legal Division, (202) 898–
3727; or Kristine Schmidt, Counsel,
Legal Division, (202) 898–6686,
krschmidt@fdic.gov.
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The policy objective of the rule is to
remove unnecessary and duplicative
regulations in order to simplify them
and improve the public’s understanding
of them. Part 390, subpart Y outlines
administrative procedures related to
prompt corrective action that are
equivalent to procedures outlined in
part 308, subpart Q of the FDIC’s
existing regulations. Thus, the FDIC is
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Federal Register / Vol. 85, No. 188 / Monday, September 28, 2020 / Proposed Rules
proposing to rescind the regulations in
part 390, subpart Y and reserve the
subpart for future use. In addition, the
proposal would amend certain sections
of part 308, subpart Q of the FDIC’s
existing regulations on the issuance and
review of orders pursuant to the prompt
corrective action provisions of the
Federal Deposit Insurance Act to make
it clear that part 308, subpart Q, applies
to all insured depository institutions for
which the FDIC is the appropriate
Federal banking agency.
II. Background
Part 390, subpart Y, was included in
the regulations that were transferred to
the FDIC from the Office of Thrift
Supervision (OTS) on July 21, 2011, in
connection with the implementation of
applicable provisions of title III of the
Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank
Act).1
A. The Dodd-Frank Act
As of July 21, 2011, the transfer date
established by section 311 of the DoddFrank 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 had
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 (Board)
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
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
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 Statelicensed branches of foreign banks.
As noted above, on June 14, 2011,
operating pursuant to this authority, the
Board issued a list of regulations of the
former OTS that the FDIC would enforce
with respect to State savings
associations. On that same date, the
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 Y)
A subset of the regulations transferred
to the FDIC from the OTS concern
prompt corrective action provisions
applicable to State savings associations.
The OTS regulations, formerly found at
12 CFR part 565, §§ 565.7, 565.8, 565.9
and 565.10, were transferred to the FDIC
with only nomenclature changes and
5 76
1 Dodd-Frank
Wall Street Reform and Consumer
Protection Act, Public Law 111–203, 124 Stat. 1376
(2010) (codified at 12 U.S.C. 5301 et seq.).
2 Codified at 12 U.S.C. 5411.
3 Codified at 12 U.S.C. 5414(b).
4 Codified at 12 U.S.C. 5414(c).
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FR 39246 (July 6, 2011).
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).
10 76 FR 47652 (Aug. 5, 2011).
11 See 76 FR 47653.
6 Codified
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60739
now comprise part 390, subpart Y. Each
provision of part 390, subpart Y is
discussed in Part III of this
SUPPLEMENTARY INFORMATION section,
below. The FDIC has conducted a
careful review and comparison of part
390, subpart Y. As discussed in Part III
of this SUPPLEMENTARY INFORMATION
section, the FDIC proposes to rescind
part 390, subpart Y because the FDIC
considers the provisions related to State
savings associations contained in part
390, subpart Y substantially similar to
similar regulations related to state nonmember banks. The FDIC proposes
combining the regulations to make clear
the same procedures apply to all FDICsupervised institutions.
C. Part 308, Subpart Q, Issuance and
Review of Orders Pursuant to the
Prompt Corrective Action Provisions of
the Federal Deposit Insurance Act
The FDIC proposes to further clarify
the administrative procedures relevant
to State savings associations by
amending certain parts of part 308 of the
FDIC’s regulations to clarify that part
308, subpart Q applies to all insured
depository institutions, including State
savings associations, for which the FDIC
is the appropriate Federal banking
agency. As discussed in Part III of this
SUPPLEMENTARY INFORMATION section, the
FDIC proposes to amend part 308,
subpart Q in order to make part 308,
subpart Q applicable to all insured
depository institutions, including State
savings associations, for which the FDIC
is the appropriate Federal banking
agency.
III. Proposed Regulation Changes
After careful review, the FDIC has
concluded that the retention of part 390,
subpart Y is unnecessary and that
rescission of subpart Y in its entirety
would streamline the FDIC rules and
regulations. The regulations related to
State savings associations will be
incorporated into the part 308, subpart
Q as described below. Part 390, subpart
Y also references savings and loan
holding companies. When the
regulation was transferred from the
OTS, the references to ‘‘any company
that controls the State savings
association’’ were not deleted with the
other technical amendments. The FDIC
is not the appropriate successor agency
for supervision of savings and loan
holding companies. Under the DoddFrank Act, supervision of savings and
loan holding companies was transferred
to the Federal Reserve Board.12 The
provisions in the FDIC regulations
relating to ‘‘any company that controls
12 12
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the State savings association’’ will
therefore be set aside and not
incorporated into the existing FDIC
regulations at part 308, subpart Q
addressing FDIC-supervised
institutions.
Consistent with its legal authority to
issue and modify regulations as the
appropriate Federal banking agency
under section 3(q) of the Federal
Deposit Insurance Act, the FDIC also
proposes to amend and revise
provisions of part 308, subpart Q to
clarify and state explicitly the
regulations apply to all FDIC-supervised
institutions.
A. Comparison of FDIC Regulations
With the Transferred OTS Regulations
To Be Rescinded
12 CFR 390.456—Directives to take
prompt corrective action.
Section 390.456 describes the
administrative procedures for the FDIC
to issue a directive to take prompt
corrective action against a State savings
association. These administrative
procedures were initially found at 12
CFR 565.7 and are equivalent to the
administrative procedures relating to
FDIC-supervised banks found at 12 CFR
308.201.
The FDIC proposes that § 390.456 be
rescinded in its entirety. The proposed
amendments to subpart Q will clarify in
a single location that the regulations
apply to all FDIC-supervised
institutions. Therefore, it is not
necessary to have a regulation
specifically applicable to State savings
associations.
12 CFR 390.457—Procedures for
reclassifying a State savings association
based on criteria other than capital.
Section 390.457 describes the
administrative procedures to reclassify a
State savings association based on
criteria other than capital. This section
describes how the FDIC may consider
other unsafe or unsound practices to
lower a State saving association capital
category under part 324. The section
also details the procedures for notifying
the State saving association and
contesting the determination. These
administrative procedures were initially
found at 12 CFR 565.8 and were
recently modified to account for
changes made to part 324.13 Section
390.457 is equivalent to the
administrative procedures relating to
FDIC-supervised banks found at 12 CFR
308.202.
The FDIC proposes that § 390.457 be
rescinded in its entirety. The proposed
amendments to subpart Q will clarify in
a single location that the regulations
13 See
16:57 Sep 25, 2020
B. Proposed Changes to FDIC
Regulations
As discussed in part III of this
SUPPLEMENTARY INFORMATION, the FDIC’s
part 308, subpart Q addresses the
administrative procedures related to the
issuance and enforcement of prompt
corrective action directives. The DoddFrank Act added State savings
associations to the list of entities for
which the FDIC is designated as the
appropriate Federal banking agency.14
To clarify that part 308, subpart Q
applies to all institutions for which the
FDIC is the appropriate Federal banking
14 See section 312(c) of the Dodd-Frank Act,
codified at 12 U.S.C. 1813(q).
83 FR 17737.
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apply to all FDIC-supervised
institutions. Therefore, it is not
necessary to have a regulation
specifically applicable to State savings
associations.
12 CFR 390.458—Order to dismiss a
director or senior executive officer.
Section 390.458 describes the
additional administrative procedures
related to prompt corrective action
directives that require the State savings
association to terminate the
employment of a director or officer. This
section also includes provisions to
challenge this type of prompt corrective
order directive. These administrative
procedures were initially found at 12
CFR 565.9. Section 390.458 is
equivalent to the administrative
procedures relating to FDIC-supervised
banks found at 12 CFR 308.203.
The FDIC proposes that § 390.458 be
rescinded in its entirety. The proposed
amendments to subpart Q will clarify in
a single location that the regulations
apply to all FDIC-supervised
institutions. Therefore, it is not
necessary to have a regulation
specifically applicable to State savings
associations.
12 CFR 390.459—Enforcement of
directives.
Section 390.459 describes the
additional remedies the FDIC may take
to seek compliance with prompt
corrective action directives. These
procedures were initially found at 12
CFR 565.10. Section 390.459 is
equivalent to the administrative
procedures relating to FDIC-supervised
banks found at 12 CFR 308.204.
The FDIC proposes that § 390.459 be
rescinded in its entirety. The proposed
amendments to subpart Q will clarify in
a single location that the regulations
apply to all FDIC-supervised
institutions. Therefore, it is not
necessary to have a regulation
specifically applicable to State savings
associations.
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agency, the FDIC proposes to amend
§§ 308.200 through 308.204 to replace
the phrases ‘‘banks’’ and ‘‘insured
branches of foreign banks’’ throughout
subpart Q with the phrase ‘‘FDICsupervised institution.’’ Under the
proposal, § 308.200 would be revised to
add the definition of the term ‘‘FDICsupervised 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.15
Additionally, the FDIC proposes one
additional change to conform the FDIC’s
regulations relating to prompt corrective
action directives that apply to banks and
the former OTS regulations relating to
State savings associations. Sections
308.202 and 390.457 describe the
procedures relating to classifying an
institution due to something other than
capital. These two regulations differ in
one respect. The FDIC regulation at
308.202(a)(6) provides that when a
hearing is ordered, it will begin no later
than 30 days from the date of the
request unless the bank requests a later
date. The former OTS version of this
regulation, incorporated by the FDIC at
§ 390.457, provides that the hearing
should be ordered within 30 days of
request unless the FDIC allows further
time at the request of the State savings
association. While both of these
provisions demonstrate that a hearing is
likely to be delayed at the request of the
institution, the former OTS version of
the regulation is written with greater
clarity that the FDIC will evaluate and
may then provide consent to the
request. The OTS version of the
regulation makes it clear that there is no
automatic extension granted to the
institution. The greater clarity in this
language makes it the preferred choice
when reconciling the two regulations
into one regulation that applies to all
FDIC-supervised institutions. The
changes to this aspect of the regulation
will provide greater clarity to those
institutions going forward.
IV. Summary
If the proposal is finalized, 12 CFR
part 390, subpart Y would be removed
because it is largely unnecessary,
redundant, or duplicative of existing
FDIC regulations, and the requirements
of part 308, subpart Q expressly would
apply to all FDIC-supervised insured
depository institutions. These initiatives
will serve to streamline the FDIC’s
regulations.
15 12
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V. 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 prompt corrective
action directives 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 308,
subpart Q apply to State savings
associations because the FDIC is the
‘‘appropriate Federal banking agency’’
pursuant to the FDI Act. As of March 30,
2020, the FDIC supervised 3,309
depository institutions, of which 35 (1.1
percent) are State savings associations.16
The proposed rule primarily would
affect regulations that govern State
savings associations.
As explained previously, the
proposed rule would rescind 12 CFR
part 390, subpart Y, which includes the
following: § 390.456, which outlines
administrative procedures for issuing a
directive to take prompt corrective
action against a State savings
association; § 390.457, which outlines
administrative procedures for
reclassifying a State savings association
based on criteria other than capital;
§ 390.458, which outlines
administrative procedures related to
prompt corrective action that require a
State savings association to terminate
the employment of a director or officer;
and § 390.459, which outlines
administrative procedures the FDIC may
take to seek compliance with prompt
corrective action directives. The FDIC
has determined that these sections of 12
CFR part 390 are equivalent to
regulations related to prompt corrective
action in the FDIC’s existing regulations.
Therefore, the FDIC does not expect the
removal of the regulations in subpart Y
to significantly affect FDIC-supervised
State savings associations.
The proposal would also amend the
FDIC’s regulations that establish
administrative procedures for prompt
corrective action in 12 CFR 308.200
through 308.204 to make them
applicable to all FDIC-supervised
institutions, including State savings
associations. As discussed previously,
these changes would not change the
required procedures related to prompt
corrective action that are applicable to
State savings associations since the
requirements in subpart Y are
equivalent to requirements in the FDIC’s
existing regulations, therefore this
aspect of the proposed rule is unlikely
16 Call
Report data, March 2020.
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to substantively affect FDIC-supervised
State savings associations.
Finally, the proposal would revise 12
CFR 308.202 to clarify the procedures
for delaying a hearing if an institution
is reclassified based on criteria other
than capital. The FDIC’s regulation
currently states that if a hearing is
scheduled, it will be held within 30
days of the request unless the institution
requests a later date. The regulations in
§ 390.457 state that a hearing will be
held within 30 days of the request
unless the FDIC allows further time at
the request of the institution. The FDIC
is proposing to adopt the language from
§ 390.457 in its own regulations since
§ 390.457 clarifies that requests for an
extension will not be automatically
granted. This aspect of the proposed
rule will pose no change for the 35
FDIC-supervised State savings
associations. The FDIC believes that
adopting the language from § 390.457
should further clarify for State
nonmember institutions that requests
for an extension will not automatically
be granted, however, this change is
unlikely to pose any substantive effects
on State nonmember institutions.
Since the prompt corrective action
directive provisions in § 390 subpart Y
are substantively similar to existing
regulations for state nonmember banks
found in § 308, subpart Q, the FDIC does
not believe that rescission of §§ 390.456
through 390.459 would have any
substantive effects on FDIC-supervised
State savings associations.
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 believes that the proposed
amendments represent the most
appropriate option for covered
institutions and, at this time, has not
identified significant alternatives to
proposing the rule in its current form.
As discussed previously, the DoddFrank 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 prompt corrective
actions, including part 308, subpart Q
and part 390, subpart Y. The FDIC has
available the status quo alternative of
retaining the current regulations but is
proposing not to do so because it would
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60741
be needlessly duplicative for
substantively similar regulations
regarding prompt corrective action
directives for banks and State savings
associations to be located in different
locations within the Code of Federal
Regulations. The FDIC believes it would
be redundant and potentially confusing
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.
VII. 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
308, subpart Q sufficient to provide
consistent and effective requirements
related to the issuance and review of
orders pursuant to the prompt corrective
action 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 Y and remove
it from the Code of Federal Regulations?
Please provide any other comments you
have on the proposal.
VIII. Administrative Law Matters
A. The Paperwork Reduction Act
In accordance with the requirements
of the Paperwork Reduction Act of 1995
(PRA),17 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 Y. With regard to part 308,
subpart Q, the proposed rule would
amend §§ 308.200 through 308.204 to
clarify that State savings associations, as
well as State nonmember banks and
foreign banks having insured branches
are all subject to part 308, subpart Q.
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
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flexibility analysis that describes the
impact of the proposed rule on small
entities.18 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.19 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
noninterest 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 would
not have a significant economic impact
on a substantial number of small
entities. Accordingly, a regulatory
flexibility analysis is not required.
As of March 31, 2020, the FDIC
supervised 3,309 depository
institutions,20 of which 2,548 were
considered small entities for the
purposes of RFA.21 There are 33 (1.3
percent) State savings associations that
are small entities for the purposes of
RFA.22 As discussed previously, the
proposed rule would rescind 12 CFR
part 390, subpart Y, which includes the
following: § 390.456, which outlines
administrative procedures for issuing a
directive to take prompt corrective
action against a State savings
association; § 390.457, which outlines
administrative procedures for
reclassifying a State savings association
based on criteria other than capital;
§ 390.458, which outlines
administrative procedures related to
prompt corrective action that require a
State savings association to terminate
18 5
U.S.C. 601, et seq.
SBA defines a small banking organization
as having $600 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 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
FDIC-supervised institution is ‘‘small’’ for the
purposes of RFA.
20 FDIC-supervised institutions are set forth in 12
U.S.C. 1813(q)(2).
21 FDIC Call Report data, March 31, 2020.
22 Id.
19 The
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the employment of a director or officer;
and § 390.459, which outlines
administrative procedures the FDIC may
take to seek compliance with prompt
corrective action directives. The FDIC
has determined that these sections of 12
CFR part 390 are equivalent to
regulations related to prompt corrective
action in the FDIC’s existing regulations.
Therefore, the FDIC does not expect the
removal of the regulations in subpart Y
to significantly affect small FDICsupervised State savings associations.
The proposal would also amend the
FDIC’s regulations that establish
administrative procedures for prompt
corrective action in 12 CFR 308.200
through 308.204 to make them
applicable to all FDIC-supervised
institutions, including State savings
associations. As discussed previously,
these changes would not change the
required procedures related to prompt
corrective action that are applicable to
small State savings associations since
the requirements in subpart Y are
equivalent to requirements in the FDIC’s
existing regulations.
Finally, the proposal would revise 12
CFR 308.202 to clarify the procedures
for delaying a hearing if an institution
is reclassified based on criteria other
than capital. The FDIC’s regulation
currently states that if a hearing is
scheduled, it will be held within 30
days of the request unless the institution
requests a later date. The regulations in
§ 390.457 state that a hearing will be
held within 30 days of the request
unless the FDIC allows further time at
the request of the institution. The FDIC
is proposing to adopt the language from
§ 390.457 in its own regulations since
§ 390.457 clarifies that requests for an
extension will not be automatically
granted. This aspect of the proposed
rule will pose no change for the 33
small FDIC-supervised State savings
associations. The FDIC believes that
adopting the language from § 390.457
should further clarify for small State
nonmember institutions that requests
for an extension will not automatically
be granted; however, this change is
unlikely to pose any substantive effects
on small State nonmember institutions.
Since the prompt corrective action
directive provisions in § 390 subpart Y
are substantively similar to existing
regulations for state nonmember banks
found in § 308, subpart Q, the FDIC
believes it is unlikely that that
rescission of §§ 390.456 through 390.459
would have any substantive effects on
small FDIC-supervised State savings
associations.
Based on the information above, the
FDIC certifies that the proposed rule
would not have a significant economic
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Fmt 4702
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impact on a substantial number of small
entities.
The FDIC invites comments on all
aspects of the supporting information
provided in this section, and in
particular, whether the proposed rule
would have any significant effects on
small entities that the FDIC has not
identified.
C. Plain Language
Section 722 of the Gramm-LeachBliley Act 23 requires the Federal
banking agencies to use plain language
in all proposed and final rules
published after January 1, 2000. The
FDIC has sought to present the proposed
rule in a simple and straightforward
manner. 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.24 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 the FDIC
will take to address issues that were
identified.25 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 Y, this rule complements
other actions that the FDIC has taken,
separately and with the other Federal
banking agencies, to further the
EGRPRA mandate.
E. Riegle Community Development and
Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the
Riegle Community Development and
Regulatory Improvement Act
(RCDRIA),26 in determining the effective
date and administrative compliance
requirements for new regulations that
impose additional reporting, disclosure,
or other requirements on insured
23 Public Law 106–102, section 722, 113 Stat.
1338, 1471 (1999).
24 Public Law 104–208, 110 Stat. 3009 (1996).
25 82 FR 15900 (March 31, 2017).
26 12 U.S.C. 4802(a).
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depository institutions (IDIs), each
Federal banking agency must consider,
consistent with principles of safety and
soundness and the public interest, any
administrative burdens that such
regulations would place on depository
institutions, including small depository
institutions, and customers of
depository institutions, as well as the
benefits of such regulations. In addition,
section 302(b) of RCDRIA requires new
regulations and amendments to
regulations that impose additional
reporting, disclosures, or other new
requirements on IDIs generally to take
effect on the first day of a calendar
quarter that begins on or after the date
on which the regulations are published
in final form.27 The FDIC invites
comments that further will inform its
consideration of RCDRIA.
List of Subjects
12 CFR Part 308
Administrative practice and
procedure, Bank deposit insurance,
Banks, Banking, Claims, Crime, Equal
access to justice, Fraud, Investigations,
Lawyers, Penalties.
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 parts
308 and 390 of title 12 of the Code of
Federal Regulations as follows:
PART 308—RULES OF PRACTICE AND
PROCEDURE
1. The authority citation for Part 308
continues to read as follows:
■
Authority: 5 U.S.C. 504, 554–557; 12
U.S.C. 93(b), 164, 505, 1464, 1467(d), 1467a,
1468, 1815(e), 1817, 1818, 1819, 1820, 1828,
1829, 1829(b), 1831i, 1831m(g)(4), 1831o,
1831p–1, 1832(c), 1884(b), 1972, 3102,
3108(a), 3349, 3909, 4717, 5412(b)(2)(C),
5414(b)(3); 15 U.S.C. 78(h) and (i), 78o(c)(4),
78o–4(c), 78o–5, 78q–1, 78s, 78u, 78u–2,
78u–3, 78w, 6801(b), 6805(b)(1); 28 U.S.C.
2461 note; 31 U.S.C. 330, 5321; 42 U.S.C.
4012a; Pub. L. 104–134, sec. 31001(s), 110
Stat. 1321; Pub. L. 109–351, 120 Stat. 1966;
Pub. L. 111–203, 124 Stat. 1376; Pub. L. 114–
74, sec. 701, 129 Stat. 584.
■
2. Revise § 308.200 to read as follows:
27 Id.
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§ 308.200
Scope.
The rules and procedures set forth in
this subpart apply to FDIC-supervised
institutions and senior executive
officers and directors of the same that
are subject to the provisions of section
38 of the Federal Deposit Insurance Act
(section 38) (12 U.S.C. 1831o) and
subpart H of part 324 of this chapter.
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. Revise § 308.201 to read as follows:
§ 308.201 Directives to take prompt
corrective action.
(a) Notice of intent to issue directive—
(1) In general. The FDIC shall provide
an undercapitalized, significantly
undercapitalized, or critically
undercapitalized FDIC-supervised
institution prior written notice of the
FDIC’s intention to issue a directive
requiring such FDIC-supervised
institution to take actions or to follow
proscriptions described in section 38
that are within the FDIC’s discretion to
require or impose under section 38 of
the FDI Act, including sections 38(e)(5),
(f)(2), (f)(3), or (f)(5). The FDICsupervised institution shall have such
time to respond to a proposed directive
as provided by the FDIC under
paragraph (c) of this section.
(2) Immediate issuance of final
directive. If the FDIC finds it necessary
in order to carry out the purposes of
section 38 of the FDI Act, the FDIC may,
without providing the notice prescribed
in paragraph (a)(1) of this section, issue
a directive requiring an FDIC-supervised
institution immediately to take actions
or to follow proscriptions described in
section 38 that are within the FDIC’s
discretion to require or impose under
section 38 of the FDI Act, including
section 38(e)(5), (f)(2), (f)(3), or (f)(5). An
FDIC-supervised institution that is
subject to such an immediately effective
directive may submit a written appeal of
the directive to the FDIC. Such an
appeal must be received by the FDIC
within 14 calendar days of the issuance
of the directive, unless the FDIC permits
a longer period. The FDIC shall consider
any such appeal, if filed in a timely
matter, within 60 days of receiving the
appeal. During such period of review,
the directive shall remain in effect
unless the FDIC, in its sole discretion,
stays the effectiveness of the directive.
(b) Contents of notice. A notice of
intention to issue a directive shall
include:
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60743
(1) A statement of the FDICsupervised institution’s capital
measures and capital levels;
(2) A description of the restrictions,
prohibitions or affirmative actions that
the FDIC proposes to impose or require;
(3) The proposed date when such
restrictions or prohibitions would be
effective or the proposed date for
completion of such affirmative actions;
and
(4) The date by which the FDICsupervised institution subject to the
directive may file with the FDIC a
written response to the notice.
(c) Response to notice—
(1) Time for response. An FDICsupervised institution may file a written
response to a notice of intent to issue a
directive within the time period set by
the FDIC. The date shall be at least 14
calendar days from the date of the
notice unless the FDIC determines that
a shorter period is appropriate in light
of the financial condition of the FDICsupervised institution or other relevant
circumstances.
(2) Content of response. The response
should include:
(i) An explanation why the action
proposed by the FDIC is not an
appropriate exercise of discretion under
section 38;
(ii) Any recommended modification
of the proposed directive; and
(iii) Any other relevant information,
mitigating circumstances,
documentation, or other evidence in
support of the position of the FDICsupervised institution regarding the
proposed directive.
(d) FDIC consideration of response.
After considering the response, the FDIC
may:
(1) Issue the directive as proposed or
in modified form;
(2) Determine not to issue the
directive and so notify the FDICsupervised institution; or
(3) Seek additional information or
clarification of the response from the
FDIC-supervised institution or any other
relevant source.
(e) Failure to file response. Failure by
an FDIC-supervised institution to file
with the FDIC, within the specified time
period, a written response to a proposed
directive shall constitute a waiver of the
opportunity to respond and shall
constitute consent to the issuance of the
directive.
(f) Request for modification or
rescission of directive. Any FDICsupervised institution that is subject to
a directive under this subpart may,
upon a change in circumstances, request
in writing that the FDIC reconsider the
terms of the directive and may propose
that the directive be rescinded or
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modified. Unless otherwise ordered by
the FDIC, the directive shall continue in
place while such request is pending
before the FDIC.
■ 4. Revise § 308.202 to read as follows:
§ 308.202 Procedures for reclassifying an
FDIC-supervised institution based on
criteria other than capital.
(a) Reclassification based on unsafe or
unsound condition or practice—
(1) Issuance of notice of proposed
reclassification—
(i) Grounds for reclassification. (A)
Pursuant to § 324.403(d) of this chapter,
the FDIC may reclassify a wellcapitalized FDIC-supervised institution
as adequately capitalized or subject an
adequately capitalized or
undercapitalized institution to the
supervisory actions applicable to the
next lower capital category if:
(1) The FDIC determines that the
FDIC-supervised institution is in unsafe
or unsound condition; or
(2) The FDIC, pursuant to section
8(b)(8) of the FDI Act (12 U.S.C.
1818(b)(8)), deems the FDIC-supervised
institution to be engaged in an unsafe or
unsound practice and not to have
corrected the deficiency.
(B) Any action pursuant to this
paragraph (a)(1)(i) shall hereinafter be
referred to as reclassification.
(ii) Prior notice to institution. Prior to
taking action pursuant to § 324.403(d) of
this chapter, the FDIC shall issue and
serve on the FDIC-supervised institution
a written notice of the FDIC’s intention
to reclassify it.
(2) Contents of notice. A notice of
intention to reclassify an FDICsupervised institution based on unsafe
or unsound condition shall include:
(i) A statement of the FDIC-supervised
institution’s capital measures and
capital levels and the category to which
the FDIC-supervised institution would
be reclassified;
(ii) The reasons for reclassification of
the FDIC-supervised institution;
(iii) The date by which the FDICsupervised institution subject to the
notice of reclassification may file with
the FDIC a written appeal of the
proposed reclassification and a request
for a hearing, which shall be at least 14
calendar days from the date of service
of the notice unless the FDIC determines
that a shorter period is appropriate in
light of the financial condition of the
FDIC-supervised institution or other
relevant circumstances.
(3) Response to notice of proposed
reclassification. An FDIC-supervised
institution may file a written response
to a notice of proposed reclassification
within the time period set by the FDIC.
The response should include:
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(i) An explanation of why the FDICsupervised institution is not in an
unsafe or unsound condition or
otherwise should not be reclassified;
and
(ii) Any other relevant information,
mitigating circumstances,
documentation, or other evidence in
support of the position of the FDICsupervised institution regarding the
reclassification.
(4) Failure to file response. Failure by
an FDIC-supervised institution to file,
within the specified time period, a
written response with the FDIC to a
notice of proposed reclassification shall
constitute a waiver of the opportunity to
respond and shall constitute consent to
the reclassification.
(5) Request for hearing and
presentation of oral testimony or
witnesses. The response may include a
request for an informal hearing before
the FDIC under this section. If the FDICsupervised institution desires to present
oral testimony or witnesses at the
hearing, the FDIC-supervised institution
shall include a request to do so with the
request for an informal hearing. A
request to present oral testimony or
witnesses shall specify the names of the
witnesses and the general nature of their
expected testimony. Failure to request a
hearing shall constitute a waiver of any
right to a hearing, and failure to request
the opportunity to present oral
testimony or witnesses shall constitute
a waiver of any right to present oral
testimony or witnesses.
(6) Order for informal hearing. Upon
receipt of a timely written request that
includes a request for a hearing, the
FDIC shall issue an order directing an
informal hearing to commence no later
than 30 days after receipt of the request,
unless the FDIC allows further time at
the request of the FDIC-supervised
institution. The hearing shall be held in
Washington, DC or at such other place
as may be designated by the FDIC before
a presiding officer(s) designated by the
FDIC to conduct the hearing.
(7) Hearing procedures.
(i) The FDIC-supervised institution
shall have the right to introduce
relevant written materials and to present
oral argument at the hearing. The FDICsupervised institution may introduce
oral testimony and present witnesses
only if expressly authorized by the FDIC
or the presiding officer(s). Neither the
provisions of the Administrative
Procedure Act (5 U.S.C. 554–557)
governing adjudications required by
statute to be determined on the record
nor the Uniform Rules of Practice and
Procedure in this part apply to an
informal hearing under this section
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unless the FDIC orders that such
procedures shall apply.
(ii) The informal hearing shall be
recorded, and a transcript shall be
furnished to the FDIC-supervised
institution upon request and payment of
the cost thereof. Witnesses need not be
sworn, unless specifically requested by
a party or the presiding officer(s). The
presiding officer(s) may ask questions of
any witness.
(iii) The presiding officer(s) may order
that the hearing be continued for a
reasonable period (normally five
business days) following completion of
oral testimony or argument to allow
additional written submissions to the
hearing record.
(8) Recommendation of presiding
officers. Within 20 calendar days
following the date the hearing and the
record on the proceeding are closed, the
presiding officer(s) shall make a
recommendation to the FDIC on the
reclassification.
(9) Time for decision. Not later than
60 calendar days after the date the
record is closed or the date of the
response in a case where no hearing was
requested, the FDIC will decide whether
to reclassify the FDIC-supervised
institution and notify the FDICsupervised institution of the FDIC’s
decision.
(b) Request for rescission of
reclassification. Any FDIC-supervised
institution that has been reclassified
under this section, may, upon a change
in circumstances, request in writing that
the FDIC reconsider the reclassification
and may propose that the
reclassification be rescinded and that
any directives issued in connection with
the reclassification be modified,
rescinded, or removed. Unless
otherwise ordered by the FDIC, the
FDIC-supervised institution shall
remain subject to the reclassification
and to any directives issued in
connection with that reclassification
while such request is pending before the
FDIC.
■ 5. Revise § 308.203 to read as follows:
§ 308.203 Order to dismiss a director or
senior executive officer.
(a) Service of notice. When the FDIC
issues and serves a directive on an
FDIC-supervised institution pursuant to
§ 308.201 of this part requiring the
FDIC-supervised institution to dismiss
from office any director or senior
executive officer under § 38(f)(2)(F)(ii)
of the FDI Act, the FDIC shall also serve
a copy of the directive, or the relevant
portions of the directive where
appropriate, upon the person to be
dismissed.
(b) Response to directive—
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(1) Request for reinstatement. A
director or senior executive officer who
has been served with a directive under
paragraph (a) of this section
(Respondent) may file a written request
for reinstatement. The request for
reinstatement shall be filed within 10
calendar days of the receipt of the
directive by the Respondent, unless
further time is allowed by the FDIC at
the request of the Respondent.
(2) Contents of request; informal
hearing. The request for reinstatement
shall include reasons why the
Respondent should be reinstated and
may include a request for an informal
hearing before the FDIC under this
section. If the Respondent desires to
present oral testimony or witnesses at
the hearing, the Respondent shall
include a request to do so with the
request for an informal hearing. The
request to present oral testimony or
witnesses shall specify the names of the
witnesses and the general nature of their
expected testimony. Failure to request a
hearing shall constitute a waiver of any
right to a hearing, and failure to request
the opportunity to present oral
testimony or witnesses shall constitute
a waiver of any right or opportunity to
present oral testimony or witnesses.
(3) Effective date. Unless otherwise
ordered by the FDIC, the dismissal shall
remain in effect while a request for
reinstatement is pending.
(c) Order for informal hearing. Upon
receipt of a timely written request from
a Respondent for an informal hearing on
the portion of a directive requiring an
FDIC-supervised institution to dismiss
from office any director or senior
executive officer, the FDIC shall issue
an order directing an informal hearing
to commence no later than 30 days after
receipt of the request, unless the
Respondent requests a later date. The
hearing shall be held in Washington,
DC, or at such other place as may be
designated by the FDIC, before a
presiding officer(s) designated by the
FDIC to conduct the hearing.
(d) Hearing procedures.
(1) A Respondent may appear at the
hearing personally or through counsel.
A Respondent shall have the right to
introduce relevant written materials and
to present oral argument. A Respondent
may introduce oral testimony and
present witnesses only if expressly
authorized by the FDIC or the presiding
officer(s). Neither the provisions of the
Administrative Procedure Act governing
adjudications required by statute to be
determined on the record nor the
Uniform Rules of Practice and
Procedure in this part apply to an
informal hearing under this section
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unless the FDIC orders that such
procedures shall apply.
(2) The informal hearing shall be
recorded, and a transcript shall be
furnished to the Respondent upon
request and payment of the cost thereof.
Witnesses need not be sworn, unless
specifically requested by a party or the
presiding officer(s). The presiding
officer(s) may ask questions of any
witness.
(3) The presiding officer(s) may order
that the hearing be continued for a
reasonable period (normally five
business days) following completion of
oral testimony or argument to allow
additional written submissions to the
hearing record.
(e) Standard for review. A Respondent
shall bear the burden of demonstrating
that his or her continued employment
by or service with the FDIC-supervised
institution would materially strengthen
the FDIC-supervised institution’s
ability:
(1) To become adequately capitalized,
to the extent that the directive was
issued as a result of the FDIC-supervised
institution’s capital level or failure to
submit or implement a capital
restoration plan; and
(2) To correct the unsafe or unsound
condition or unsafe or unsound
practice, to the extent that the directive
was issued as a result of classification
of the FDIC-supervised institution based
on supervisory criteria other than
capital, pursuant to section 38(g) of the
FDI Act.
(f) Recommendation of presiding
officers. Within 20 calendar days
following the date the hearing and the
record on the proceeding are closed, the
presiding officer(s) shall make a
recommendation to the FDIC concerning
the Respondent’s request for
reinstatement with the FDIC-supervised
institution.
(g) Time for decision. Not later than
60 calendar days after the date the
record is closed or the date of the
response in a case where no hearing was
requested, the FDIC shall grant or deny
the request for reinstatement and notify
the Respondent of the FDIC’s decision.
If the FDIC denies the request for
reinstatement, the FDIC shall set forth in
the notification the reasons for the
FDIC’s action.
■ 6. Revise § 308.204 to read as follows:
§ 308.204
Enforcement of directives.
(a) Judicial remedies. Whenever an
FDIC-supervised institution fails to
comply with a directive issued under
section 38, the FDIC may seek
enforcement of the directive in the
appropriate United States district court
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60745
pursuant to section 8(i)(1) of the FDI Act
(12 U.S.C. 1818(i)(1)).
(b) Administrative remedies—
(1) Failure to comply with directive.
Pursuant to section 8(i)(2)(A) of the FDI
Act, the FDIC may assess a civil money
penalty against any FDIC-supervised
institution that violates or otherwise
fails to comply with any final directive
issued under section 38 and against any
institution-affiliated party who
participates in such violation or
noncompliance.
(2) Failure to implement capital
restoration plan. The failure of an FDICsupervised institution to implement a
capital restoration plan required under
section 38, or subpart H of part 324 of
this chapter, or the failure of a company
having control of an FDIC-supervised
institution to fulfill a guarantee of a
capital restoration plan made pursuant
to section 38(e)(2) of the FDI Act shall
subject the FDIC-supervised institution
to the assessment of civil money
penalties pursuant to section 8(i)(2)(A)
of the FDI Act.
(c) Other enforcement action. In
addition to the actions described in
paragraphs (a) and (b) of this section,
the FDIC may seek enforcement of the
provisions of section 38 or subpart H of
part 324 of this chapter through any
other judicial or administrative
proceeding authorized by law.
PART 390—REGULATIONS
TRANSFERRED FROM THE OFFICE OF
THRIFT SUPERVISION
7. 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 O also issued under 12 U.S.C.
1828.
Subpart Q also issued under 12 U.S.C.
1462; 1462a; 1463; 1464.
Subpart W also issued under 12 U.S.C.
1462a; 1463; 1464; 15 U.S.C. 78c; 78l; 78m;
78n; 78p; 78w.
Subpart Y—[Removed and Reserved]
8. Remove and reserve part 390,
subpart Y, consisting of §§ 390.456
through 390.459.
■
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 21,
2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020–18812 Filed 9–25–20; 8:45 am]
BILLING CODE 6714–01–P
E:\FR\FM\28SEP1.SGM
28SEP1
]]>Agencies
[Federal Register Volume 85, Number 188 (Monday, September 28, 2020)]
[Proposed Rules]
[Pages 60738-60745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18812]
=======================================================================
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 308 and 390
RIN 3064-AF38
Removal of Transferred OTS Regulations Regarding Prompt
Corrective Action Directives and Conforming Amendments to Other
Regulations
AGENCY: Federal Deposit Insurance Corporation.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In order to streamline FDIC regulations, the FDIC proposes to
rescind and remove from the Code of Federal Regulations rules entitled
``Prompt Corrective Action'' 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), and amend certain
sections of existing FDIC regulations governing the issuance and review
of orders pursuant to the prompt corrective action provisions of the
Federal Deposit Insurance Act to make it clear that such rules apply to
all insured depository institutions for which the FDIC is the
appropriate Federal banking agency.
DATES: Comments must be received on or before October 28, 2020.
ADDRESSES: You may submit comments, identified by RIN 3064-AF38, 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-AF38 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 NW 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: Robert Watkins, Review Examiner,
Division of Risk Management Supervision, (202) 898-3865; Andrea
Winkler, Acting Assistant General Counsel, Legal Division, (202) 898-
3727; or Kristine Schmidt, Counsel, Legal Division, (202) 898-6686,
[email protected].
SUPPLEMENTARY INFORMATION:
I. Policy Objectives
The policy objective of the rule is to remove unnecessary and
duplicative regulations in order to simplify them and improve the
public's understanding of them. Part 390, subpart Y outlines
administrative procedures related to prompt corrective action that are
equivalent to procedures outlined in part 308, subpart Q of the FDIC's
existing regulations. Thus, the FDIC is
[[Page 60739]]
proposing to rescind the regulations in part 390, subpart Y and reserve
the subpart for future use. In addition, the proposal would amend
certain sections of part 308, subpart Q of the FDIC's existing
regulations on the issuance and review of orders pursuant to the prompt
corrective action provisions of the Federal Deposit Insurance Act to
make it clear that part 308, subpart Q, applies to all insured
depository institutions for which the FDIC is the appropriate Federal
banking agency.
II. Background
Part 390, subpart Y, was included in the regulations that were
transferred to the FDIC from the Office of Thrift Supervision (OTS) on
July 21, 2011, in connection with the implementation of applicable
provisions of title III of the Dodd-Frank Wall Street Reform and
Consumer Protection Act (Dodd-Frank Act).\1\
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\1\ Dodd-Frank Wall Street Reform and Consumer Protection Act,
Public Law 111-203, 124 Stat. 1376 (2010) (codified at 12 U.S.C.
5301 et seq.).
---------------------------------------------------------------------------
A. The Dodd-Frank Act
As of 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 had 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.
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\2\ Codified at 12 U.S.C. 5411.
\3\ Codified at 12 U.S.C. 5414(b).
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Pursuant to section 316(c) of the Dodd-Frank Act,\4\ on June 14,
2011, the FDIC's Board of Directors (Board) 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 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 State-licensed 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).
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As noted above, on June 14, 2011, operating pursuant to this
authority, the Board issued a list of regulations of the former OTS
that the FDIC would enforce with respect to State savings associations.
On that same date, the 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 47653.
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B. Transferred OTS Regulations (Transferred to the FDIC's Part 390,
Subpart Y)
A subset of the regulations transferred to the FDIC from the OTS
concern prompt corrective action provisions applicable to State savings
associations. The OTS regulations, formerly found at 12 CFR part 565,
Sec. Sec. 565.7, 565.8, 565.9 and 565.10, were transferred to the FDIC
with only nomenclature changes and now comprise part 390, subpart Y.
Each provision of part 390, subpart Y is discussed in Part III of this
SUPPLEMENTARY INFORMATION section, below. The FDIC has conducted a
careful review and comparison of part 390, subpart Y. As discussed in
Part III of this SUPPLEMENTARY INFORMATION section, the FDIC proposes
to rescind part 390, subpart Y because the FDIC considers the
provisions related to State savings associations contained in part 390,
subpart Y substantially similar to similar regulations related to state
non-member banks. The FDIC proposes combining the regulations to make
clear the same procedures apply to all FDIC-supervised institutions.
C. Part 308, Subpart Q, Issuance and Review of Orders Pursuant to the
Prompt Corrective Action Provisions of the Federal Deposit Insurance
Act
The FDIC proposes to further clarify the administrative procedures
relevant to State savings associations by amending certain parts of
part 308 of the FDIC's regulations to clarify that part 308, subpart Q
applies to all insured depository institutions, including State savings
associations, for which the FDIC is the appropriate Federal banking
agency. As discussed in Part III of this SUPPLEMENTARY INFORMATION
section, the FDIC proposes to amend part 308, subpart Q in order to
make part 308, subpart Q applicable to all insured depository
institutions, including State savings associations, for which the FDIC
is the appropriate Federal banking agency.
III. Proposed Regulation Changes
After careful review, the FDIC has concluded that the retention of
part 390, subpart Y is unnecessary and that rescission of subpart Y in
its entirety would streamline the FDIC rules and regulations. The
regulations related to State savings associations will be incorporated
into the part 308, subpart Q as described below. Part 390, subpart Y
also references savings and loan holding companies. When the regulation
was transferred from the OTS, the references to ``any company that
controls the State savings association'' were not deleted with the
other technical amendments. The FDIC is not the appropriate successor
agency for supervision of savings and loan holding companies. Under the
Dodd-Frank Act, supervision of savings and loan holding companies was
transferred to the Federal Reserve Board.\12\ The provisions in the
FDIC regulations relating to ``any company that controls
[[Page 60740]]
the State savings association'' will therefore be set aside and not
incorporated into the existing FDIC regulations at part 308, subpart Q
addressing FDIC-supervised institutions.
---------------------------------------------------------------------------
\12\ 12 U.S.C. 5412(b)(1).
---------------------------------------------------------------------------
Consistent with its legal authority to issue and modify regulations
as the appropriate Federal banking agency under section 3(q) of the
Federal Deposit Insurance Act, the FDIC also proposes to amend and
revise provisions of part 308, subpart Q to clarify and state
explicitly the regulations apply to all FDIC-supervised institutions.
A. Comparison of FDIC Regulations With the Transferred OTS Regulations
To Be Rescinded
12 CFR 390.456--Directives to take prompt corrective action.
Section 390.456 describes the administrative procedures for the
FDIC to issue a directive to take prompt corrective action against a
State savings association. These administrative procedures were
initially found at 12 CFR 565.7 and are equivalent to the
administrative procedures relating to FDIC-supervised banks found at 12
CFR 308.201.
The FDIC proposes that Sec. 390.456 be rescinded in its entirety.
The proposed amendments to subpart Q will clarify in a single location
that the regulations apply to all FDIC-supervised institutions.
Therefore, it is not necessary to have a regulation specifically
applicable to State savings associations.
12 CFR 390.457--Procedures for reclassifying a State savings
association based on criteria other than capital.
Section 390.457 describes the administrative procedures to
reclassify a State savings association based on criteria other than
capital. This section describes how the FDIC may consider other unsafe
or unsound practices to lower a State saving association capital
category under part 324. The section also details the procedures for
notifying the State saving association and contesting the
determination. These administrative procedures were initially found at
12 CFR 565.8 and were recently modified to account for changes made to
part 324.\13\ Section 390.457 is equivalent to the administrative
procedures relating to FDIC-supervised banks found at 12 CFR 308.202.
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\13\ See 83 FR 17737.
---------------------------------------------------------------------------
The FDIC proposes that Sec. 390.457 be rescinded in its entirety.
The proposed amendments to subpart Q will clarify in a single location
that the regulations apply to all FDIC-supervised institutions.
Therefore, it is not necessary to have a regulation specifically
applicable to State savings associations.
12 CFR 390.458--Order to dismiss a director or senior executive
officer.
Section 390.458 describes the additional administrative procedures
related to prompt corrective action directives that require the State
savings association to terminate the employment of a director or
officer. This section also includes provisions to challenge this type
of prompt corrective order directive. These administrative procedures
were initially found at 12 CFR 565.9. Section 390.458 is equivalent to
the administrative procedures relating to FDIC-supervised banks found
at 12 CFR 308.203.
The FDIC proposes that Sec. 390.458 be rescinded in its entirety.
The proposed amendments to subpart Q will clarify in a single location
that the regulations apply to all FDIC-supervised institutions.
Therefore, it is not necessary to have a regulation specifically
applicable to State savings associations.
12 CFR 390.459--Enforcement of directives.
Section 390.459 describes the additional remedies the FDIC may take
to seek compliance with prompt corrective action directives. These
procedures were initially found at 12 CFR 565.10. Section 390.459 is
equivalent to the administrative procedures relating to FDIC-supervised
banks found at 12 CFR 308.204.
The FDIC proposes that Sec. 390.459 be rescinded in its entirety.
The proposed amendments to subpart Q will clarify in a single location
that the regulations apply to all FDIC-supervised institutions.
Therefore, it is not necessary to have a regulation specifically
applicable to State savings associations.
B. Proposed Changes to FDIC Regulations
As discussed in part III of this SUPPLEMENTARY INFORMATION, the
FDIC's part 308, subpart Q addresses the administrative procedures
related to the issuance and enforcement of prompt corrective action
directives. 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.\14\ To clarify that part 308, subpart Q applies
to all institutions for which the FDIC is the appropriate Federal
banking agency, the FDIC proposes to amend Sec. Sec. 308.200 through
308.204 to replace the phrases ``banks'' and ``insured branches of
foreign banks'' throughout subpart Q with the phrase ``FDIC-supervised
institution.'' Under the proposal, Sec. 308.200 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.\15\
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\14\ See section 312(c) of the Dodd-Frank Act, codified at 12
U.S.C. 1813(q).
\15\ 12 U.S.C. 1813(q).
---------------------------------------------------------------------------
Additionally, the FDIC proposes one additional change to conform
the FDIC's regulations relating to prompt corrective action directives
that apply to banks and the former OTS regulations relating to State
savings associations. Sections 308.202 and 390.457 describe the
procedures relating to classifying an institution due to something
other than capital. These two regulations differ in one respect. The
FDIC regulation at 308.202(a)(6) provides that when a hearing is
ordered, it will begin no later than 30 days from the date of the
request unless the bank requests a later date. The former OTS version
of this regulation, incorporated by the FDIC at Sec. 390.457, provides
that the hearing should be ordered within 30 days of request unless the
FDIC allows further time at the request of the State savings
association. While both of these provisions demonstrate that a hearing
is likely to be delayed at the request of the institution, the former
OTS version of the regulation is written with greater clarity that the
FDIC will evaluate and may then provide consent to the request. The OTS
version of the regulation makes it clear that there is no automatic
extension granted to the institution. The greater clarity in this
language makes it the preferred choice when reconciling the two
regulations into one regulation that applies to all FDIC-supervised
institutions. The changes to this aspect of the regulation will provide
greater clarity to those institutions going forward.
IV. Summary
If the proposal is finalized, 12 CFR part 390, subpart Y would be
removed because it is largely unnecessary, redundant, or duplicative of
existing FDIC regulations, and the requirements of part 308, subpart Q
expressly would apply to all FDIC-supervised insured depository
institutions. These initiatives will serve to streamline the FDIC's
regulations.
[[Page 60741]]
V. 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 prompt corrective action directives 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 308, subpart Q
apply to State savings associations because the FDIC is the
``appropriate Federal banking agency'' pursuant to the FDI Act. As of
March 30, 2020, the FDIC supervised 3,309 depository institutions, of
which 35 (1.1 percent) are State savings associations.\16\ The proposed
rule primarily would affect regulations that govern State savings
associations.
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\16\ Call Report data, March 2020.
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As explained previously, the proposed rule would rescind 12 CFR
part 390, subpart Y, which includes the following: Sec. 390.456, which
outlines administrative procedures for issuing a directive to take
prompt corrective action against a State savings association; Sec.
390.457, which outlines administrative procedures for reclassifying a
State savings association based on criteria other than capital; Sec.
390.458, which outlines administrative procedures related to prompt
corrective action that require a State savings association to terminate
the employment of a director or officer; and Sec. 390.459, which
outlines administrative procedures the FDIC may take to seek compliance
with prompt corrective action directives. The FDIC has determined that
these sections of 12 CFR part 390 are equivalent to regulations related
to prompt corrective action in the FDIC's existing regulations.
Therefore, the FDIC does not expect the removal of the regulations in
subpart Y to significantly affect FDIC-supervised State savings
associations.
The proposal would also amend the FDIC's regulations that establish
administrative procedures for prompt corrective action in 12 CFR
308.200 through 308.204 to make them applicable to all FDIC-supervised
institutions, including State savings associations. As discussed
previously, these changes would not change the required procedures
related to prompt corrective action that are applicable to State
savings associations since the requirements in subpart Y are equivalent
to requirements in the FDIC's existing regulations, therefore this
aspect of the proposed rule is unlikely to substantively affect FDIC-
supervised State savings associations.
Finally, the proposal would revise 12 CFR 308.202 to clarify the
procedures for delaying a hearing if an institution is reclassified
based on criteria other than capital. The FDIC's regulation currently
states that if a hearing is scheduled, it will be held within 30 days
of the request unless the institution requests a later date. The
regulations in Sec. 390.457 state that a hearing will be held within
30 days of the request unless the FDIC allows further time at the
request of the institution. The FDIC is proposing to adopt the language
from Sec. 390.457 in its own regulations since Sec. 390.457 clarifies
that requests for an extension will not be automatically granted. This
aspect of the proposed rule will pose no change for the 35 FDIC-
supervised State savings associations. The FDIC believes that adopting
the language from Sec. 390.457 should further clarify for State
nonmember institutions that requests for an extension will not
automatically be granted, however, this change is unlikely to pose any
substantive effects on State nonmember institutions.
Since the prompt corrective action directive provisions in Sec.
390 subpart Y are substantively similar to existing regulations for
state nonmember banks found in Sec. 308, subpart Q, the FDIC does not
believe that rescission of Sec. Sec. 390.456 through 390.459 would
have any substantive effects on FDIC-supervised State savings
associations.
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 believes that the proposed amendments represent the most
appropriate option for covered institutions and, at this time, has not
identified significant alternatives to proposing the rule in its
current form. 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 prompt corrective actions, including
part 308, subpart Q and part 390, subpart Y. The FDIC has available the
status quo alternative of retaining the current regulations but is
proposing not to do so because it would be needlessly duplicative for
substantively similar regulations regarding prompt corrective action
directives for banks and State savings associations to be located in
different locations within the Code of Federal Regulations. The FDIC
believes it would be redundant and potentially confusing 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.
VII. 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 308, subpart Q sufficient to
provide consistent and effective requirements related to the issuance
and review of orders pursuant to the prompt corrective action 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 Y and remove it from the Code of
Federal Regulations? Please provide any other comments you have on the
proposal.
VIII. Administrative Law Matters
A. The Paperwork Reduction Act
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA),\17\ 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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\17\ 44 U.S.C. 3501-3521.
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The proposed rule would rescind and remove from FDIC regulations
part 390, subpart Y. With regard to part 308, subpart Q, the proposed
rule would amend Sec. Sec. 308.200 through 308.204 to clarify that
State savings associations, as well as State nonmember banks and
foreign banks having insured branches are all subject to part 308,
subpart Q. 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
[[Page 60742]]
flexibility analysis that describes the impact of the proposed rule on
small entities.\18\ 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.\19\ 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 noninterest 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 would
not have a significant economic impact on a substantial number of small
entities. Accordingly, a regulatory flexibility analysis is not
required.
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\18\ 5 U.S.C. 601, et seq.
\19\ The SBA defines a small banking organization as having $600
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 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 FDIC-supervised institution is ``small'' for
the purposes of RFA.
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As of March 31, 2020, the FDIC supervised 3,309 depository
institutions,\20\ of which 2,548 were considered small entities for the
purposes of RFA.\21\ There are 33 (1.3 percent) State savings
associations that are small entities for the purposes of RFA.\22\ As
discussed previously, the proposed rule would rescind 12 CFR part 390,
subpart Y, which includes the following: Sec. 390.456, which outlines
administrative procedures for issuing a directive to take prompt
corrective action against a State savings association; Sec. 390.457,
which outlines administrative procedures for reclassifying a State
savings association based on criteria other than capital; Sec.
390.458, which outlines administrative procedures related to prompt
corrective action that require a State savings association to terminate
the employment of a director or officer; and Sec. 390.459, which
outlines administrative procedures the FDIC may take to seek compliance
with prompt corrective action directives. The FDIC has determined that
these sections of 12 CFR part 390 are equivalent to regulations related
to prompt corrective action in the FDIC's existing regulations.
Therefore, the FDIC does not expect the removal of the regulations in
subpart Y to significantly affect small FDIC-supervised State savings
associations.
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\20\ FDIC-supervised institutions are set forth in 12 U.S.C.
1813(q)(2).
\21\ FDIC Call Report data, March 31, 2020.
\22\ Id.
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The proposal would also amend the FDIC's regulations that establish
administrative procedures for prompt corrective action in 12 CFR
308.200 through 308.204 to make them applicable to all FDIC-supervised
institutions, including State savings associations. As discussed
previously, these changes would not change the required procedures
related to prompt corrective action that are applicable to small State
savings associations since the requirements in subpart Y are equivalent
to requirements in the FDIC's existing regulations.
Finally, the proposal would revise 12 CFR 308.202 to clarify the
procedures for delaying a hearing if an institution is reclassified
based on criteria other than capital. The FDIC's regulation currently
states that if a hearing is scheduled, it will be held within 30 days
of the request unless the institution requests a later date. The
regulations in Sec. 390.457 state that a hearing will be held within
30 days of the request unless the FDIC allows further time at the
request of the institution. The FDIC is proposing to adopt the language
from Sec. 390.457 in its own regulations since Sec. 390.457 clarifies
that requests for an extension will not be automatically granted. This
aspect of the proposed rule will pose no change for the 33 small FDIC-
supervised State savings associations. The FDIC believes that adopting
the language from Sec. 390.457 should further clarify for small State
nonmember institutions that requests for an extension will not
automatically be granted; however, this change is unlikely to pose any
substantive effects on small State nonmember institutions.
Since the prompt corrective action directive provisions in Sec.
390 subpart Y are substantively similar to existing regulations for
state nonmember banks found in Sec. 308, subpart Q, the FDIC believes
it is unlikely that that rescission of Sec. Sec. 390.456 through
390.459 would have any substantive effects on small FDIC-supervised
State savings associations.
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.
The FDIC invites comments on all aspects of the supporting
information provided in this section, and in particular, whether the
proposed rule would have any significant effects on small entities that
the FDIC has not identified.
C. Plain Language
Section 722 of the Gramm-Leach-Bliley Act \23\ requires the Federal
banking agencies to use plain language in all proposed and final rules
published after January 1, 2000. The FDIC has sought to present the
proposed rule in a simple and straightforward manner. 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.
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\23\ Public Law 106-102, section 722, 113 Stat. 1338, 1471
(1999).
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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.\24\ 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 the
FDIC will take to address issues that were identified.\25\ 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 Y, this
rule complements other actions that the FDIC has taken, separately and
with the other Federal banking agencies, to further the EGRPRA mandate.
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\24\ Public Law 104-208, 110 Stat. 3009 (1996).
\25\ 82 FR 15900 (March 31, 2017).
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E. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to section 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA),\26\ in determining the effective
date and administrative compliance requirements for new regulations
that impose additional reporting, disclosure, or other requirements on
insured
[[Page 60743]]
depository institutions (IDIs), each Federal banking agency must
consider, consistent with principles of safety and soundness and the
public interest, any administrative burdens that such regulations would
place on depository institutions, including small depository
institutions, and customers of depository institutions, as well as the
benefits of such regulations. In addition, section 302(b) of RCDRIA
requires new regulations and amendments to regulations that impose
additional reporting, disclosures, or other new requirements on IDIs
generally to take effect on the first day of a calendar quarter that
begins on or after the date on which the regulations are published in
final form.\27\ The FDIC invites comments that further will inform its
consideration of RCDRIA.
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\26\ 12 U.S.C. 4802(a).
\27\ Id.
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List of Subjects
12 CFR Part 308
Administrative practice and procedure, Bank deposit insurance,
Banks, Banking, Claims, Crime, Equal access to justice, Fraud,
Investigations, Lawyers, Penalties.
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 parts 308 and 390 of title 12
of the Code of Federal Regulations as follows:
PART 308--RULES OF PRACTICE AND PROCEDURE
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1. The authority citation for Part 308 continues to read as follows:
Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505,
1464, 1467(d), 1467a, 1468, 1815(e), 1817, 1818, 1819, 1820, 1828,
1829, 1829(b), 1831i, 1831m(g)(4), 1831o, 1831p-1, 1832(c), 1884(b),
1972, 3102, 3108(a), 3349, 3909, 4717, 5412(b)(2)(C), 5414(b)(3); 15
U.S.C. 78(h) and (i), 78o(c)(4), 78o-4(c), 78o-5, 78q-1, 78s, 78u,
78u-2, 78u-3, 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31
U.S.C. 330, 5321; 42 U.S.C. 4012a; Pub. L. 104-134, sec. 31001(s),
110 Stat. 1321; Pub. L. 109-351, 120 Stat. 1966; Pub. L. 111-203,
124 Stat. 1376; Pub. L. 114-74, sec. 701, 129 Stat. 584.
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2. Revise Sec. 308.200 to read as follows:
Sec. 308.200 Scope.
The rules and procedures set forth in this subpart apply to FDIC-
supervised institutions and senior executive officers and directors of
the same that are subject to the provisions of section 38 of the
Federal Deposit Insurance Act (section 38) (12 U.S.C. 1831o) and
subpart H of part 324 of this chapter. 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).
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3. Revise Sec. 308.201 to read as follows:
Sec. 308.201 Directives to take prompt corrective action.
(a) Notice of intent to issue directive--
(1) In general. The FDIC shall provide an undercapitalized,
significantly undercapitalized, or critically undercapitalized FDIC-
supervised institution prior written notice of the FDIC's intention to
issue a directive requiring such FDIC-supervised institution to take
actions or to follow proscriptions described in section 38 that are
within the FDIC's discretion to require or impose under section 38 of
the FDI Act, including sections 38(e)(5), (f)(2), (f)(3), or (f)(5).
The FDIC-supervised institution shall have such time to respond to a
proposed directive as provided by the FDIC under paragraph (c) of this
section.
(2) Immediate issuance of final directive. If the FDIC finds it
necessary in order to carry out the purposes of section 38 of the FDI
Act, the FDIC may, without providing the notice prescribed in paragraph
(a)(1) of this section, issue a directive requiring an FDIC-supervised
institution immediately to take actions or to follow proscriptions
described in section 38 that are within the FDIC's discretion to
require or impose under section 38 of the FDI Act, including section
38(e)(5), (f)(2), (f)(3), or (f)(5). An FDIC-supervised institution
that is subject to such an immediately effective directive may submit a
written appeal of the directive to the FDIC. Such an appeal must be
received by the FDIC within 14 calendar days of the issuance of the
directive, unless the FDIC permits a longer period. The FDIC shall
consider any such appeal, if filed in a timely matter, within 60 days
of receiving the appeal. During such period of review, the directive
shall remain in effect unless the FDIC, in its sole discretion, stays
the effectiveness of the directive.
(b) Contents of notice. A notice of intention to issue a directive
shall include:
(1) A statement of the FDIC-supervised institution's capital
measures and capital levels;
(2) A description of the restrictions, prohibitions or affirmative
actions that the FDIC proposes to impose or require;
(3) The proposed date when such restrictions or prohibitions would
be effective or the proposed date for completion of such affirmative
actions; and
(4) The date by which the FDIC-supervised institution subject to
the directive may file with the FDIC a written response to the notice.
(c) Response to notice--
(1) Time for response. An FDIC-supervised institution may file a
written response to a notice of intent to issue a directive within the
time period set by the FDIC. The date shall be at least 14 calendar
days from the date of the notice unless the FDIC determines that a
shorter period is appropriate in light of the financial condition of
the FDIC-supervised institution or other relevant circumstances.
(2) Content of response. The response should include:
(i) An explanation why the action proposed by the FDIC is not an
appropriate exercise of discretion under section 38;
(ii) Any recommended modification of the proposed directive; and
(iii) Any other relevant information, mitigating circumstances,
documentation, or other evidence in support of the position of the
FDIC-supervised institution regarding the proposed directive.
(d) FDIC consideration of response. After considering the response,
the FDIC may:
(1) Issue the directive as proposed or in modified form;
(2) Determine not to issue the directive and so notify the FDIC-
supervised institution; or
(3) Seek additional information or clarification of the response
from the FDIC-supervised institution or any other relevant source.
(e) Failure to file response. Failure by an FDIC-supervised
institution to file with the FDIC, within the specified time period, a
written response to a proposed directive shall constitute a waiver of
the opportunity to respond and shall constitute consent to the issuance
of the directive.
(f) Request for modification or rescission of directive. Any FDIC-
supervised institution that is subject to a directive under this
subpart may, upon a change in circumstances, request in writing that
the FDIC reconsider the terms of the directive and may propose that the
directive be rescinded or
[[Page 60744]]
modified. Unless otherwise ordered by the FDIC, the directive shall
continue in place while such request is pending before the FDIC.
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4. Revise Sec. 308.202 to read as follows:
Sec. 308.202 Procedures for reclassifying an FDIC-supervised
institution based on criteria other than capital.
(a) Reclassification based on unsafe or unsound condition or
practice--
(1) Issuance of notice of proposed reclassification--
(i) Grounds for reclassification. (A) Pursuant to Sec. 324.403(d)
of this chapter, the FDIC may reclassify a well-capitalized FDIC-
supervised institution as adequately capitalized or subject an
adequately capitalized or undercapitalized institution to the
supervisory actions applicable to the next lower capital category if:
(1) The FDIC determines that the FDIC-supervised institution is in
unsafe or unsound condition; or
(2) The FDIC, pursuant to section 8(b)(8) of the FDI Act (12 U.S.C.
1818(b)(8)), deems the FDIC-supervised institution to be engaged in an
unsafe or unsound practice and not to have corrected the deficiency.
(B) Any action pursuant to this paragraph (a)(1)(i) shall
hereinafter be referred to as reclassification.
(ii) Prior notice to institution. Prior to taking action pursuant
to Sec. 324.403(d) of this chapter, the FDIC shall issue and serve on
the FDIC-supervised institution a written notice of the FDIC's
intention to reclassify it.
(2) Contents of notice. A notice of intention to reclassify an
FDIC-supervised institution based on unsafe or unsound condition shall
include:
(i) A statement of the FDIC-supervised institution's capital
measures and capital levels and the category to which the FDIC-
supervised institution would be reclassified;
(ii) The reasons for reclassification of the FDIC-supervised
institution;
(iii) The date by which the FDIC-supervised institution subject to
the notice of reclassification may file with the FDIC a written appeal
of the proposed reclassification and a request for a hearing, which
shall be at least 14 calendar days from the date of service of the
notice unless the FDIC determines that a shorter period is appropriate
in light of the financial condition of the FDIC-supervised institution
or other relevant circumstances.
(3) Response to notice of proposed reclassification. An FDIC-
supervised institution may file a written response to a notice of
proposed reclassification within the time period set by the FDIC. The
response should include:
(i) An explanation of why the FDIC-supervised institution is not in
an unsafe or unsound condition or otherwise should not be reclassified;
and
(ii) Any other relevant information, mitigating circumstances,
documentation, or other evidence in support of the position of the
FDIC-supervised institution regarding the reclassification.
(4) Failure to file response. Failure by an FDIC-supervised
institution to file, within the specified time period, a written
response with the FDIC to a notice of proposed reclassification shall
constitute a waiver of the opportunity to respond and shall constitute
consent to the reclassification.
(5) Request for hearing and presentation of oral testimony or
witnesses. The response may include a request for an informal hearing
before the FDIC under this section. If the FDIC-supervised institution
desires to present oral testimony or witnesses at the hearing, the
FDIC-supervised institution shall include a request to do so with the
request for an informal hearing. A request to present oral testimony or
witnesses shall specify the names of the witnesses and the general
nature of their expected testimony. Failure to request a hearing shall
constitute a waiver of any right to a hearing, and failure to request
the opportunity to present oral testimony or witnesses shall constitute
a waiver of any right to present oral testimony or witnesses.
(6) Order for informal hearing. Upon receipt of a timely written
request that includes a request for a hearing, the FDIC shall issue an
order directing an informal hearing to commence no later than 30 days
after receipt of the request, unless the FDIC allows further time at
the request of the FDIC-supervised institution. The hearing shall be
held in Washington, DC or at such other place as may be designated by
the FDIC before a presiding officer(s) designated by the FDIC to
conduct the hearing.
(7) Hearing procedures.
(i) The FDIC-supervised institution shall have the right to
introduce relevant written materials and to present oral argument at
the hearing. The FDIC-supervised institution may introduce oral
testimony and present witnesses only if expressly authorized by the
FDIC or the presiding officer(s). Neither the provisions of the
Administrative Procedure Act (5 U.S.C. 554-557) governing adjudications
required by statute to be determined on the record nor the Uniform
Rules of Practice and Procedure in this part apply to an informal
hearing under this section unless the FDIC orders that such procedures
shall apply.
(ii) The informal hearing shall be recorded, and a transcript shall
be furnished to the FDIC-supervised institution upon request and
payment of the cost thereof. Witnesses need not be sworn, unless
specifically requested by a party or the presiding officer(s). The
presiding officer(s) may ask questions of any witness.
(iii) The presiding officer(s) may order that the hearing be
continued for a reasonable period (normally five business days)
following completion of oral testimony or argument to allow additional
written submissions to the hearing record.
(8) Recommendation of presiding officers. Within 20 calendar days
following the date the hearing and the record on the proceeding are
closed, the presiding officer(s) shall make a recommendation to the
FDIC on the reclassification.
(9) Time for decision. Not later than 60 calendar days after the
date the record is closed or the date of the response in a case where
no hearing was requested, the FDIC will decide whether to reclassify
the FDIC-supervised institution and notify the FDIC-supervised
institution of the FDIC's decision.
(b) Request for rescission of reclassification. Any FDIC-supervised
institution that has been reclassified under this section, may, upon a
change in circumstances, request in writing that the FDIC reconsider
the reclassification and may propose that the reclassification be
rescinded and that any directives issued in connection with the
reclassification be modified, rescinded, or removed. Unless otherwise
ordered by the FDIC, the FDIC-supervised institution shall remain
subject to the reclassification and to any directives issued in
connection with that reclassification while such request is pending
before the FDIC.
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5. Revise Sec. 308.203 to read as follows:
Sec. 308.203 Order to dismiss a director or senior executive officer.
(a) Service of notice. When the FDIC issues and serves a directive
on an FDIC-supervised institution pursuant to Sec. 308.201 of this
part requiring the FDIC-supervised institution to dismiss from office
any director or senior executive officer under Sec. 38(f)(2)(F)(ii) of
the FDI Act, the FDIC shall also serve a copy of the directive, or the
relevant portions of the directive where appropriate, upon the person
to be dismissed.
(b) Response to directive--
[[Page 60745]]
(1) Request for reinstatement. A director or senior executive
officer who has been served with a directive under paragraph (a) of
this section (Respondent) may file a written request for reinstatement.
The request for reinstatement shall be filed within 10 calendar days of
the receipt of the directive by the Respondent, unless further time is
allowed by the FDIC at the request of the Respondent.
(2) Contents of request; informal hearing. The request for
reinstatement shall include reasons why the Respondent should be
reinstated and may include a request for an informal hearing before the
FDIC under this section. If the Respondent desires to present oral
testimony or witnesses at the hearing, the Respondent shall include a
request to do so with the request for an informal hearing. The request
to present oral testimony or witnesses shall specify the names of the
witnesses and the general nature of their expected testimony. Failure
to request a hearing shall constitute a waiver of any right to a
hearing, and failure to request the opportunity to present oral
testimony or witnesses shall constitute a waiver of any right or
opportunity to present oral testimony or witnesses.
(3) Effective date. Unless otherwise ordered by the FDIC, the
dismissal shall remain in effect while a request for reinstatement is
pending.
(c) Order for informal hearing. Upon receipt of a timely written
request from a Respondent for an informal hearing on the portion of a
directive requiring an FDIC-supervised institution to dismiss from
office any director or senior executive officer, the FDIC shall issue
an order directing an informal hearing to commence no later than 30
days after receipt of the request, unless the Respondent requests a
later date. The hearing shall be held in Washington, DC, or at such
other place as may be designated by the FDIC, before a presiding
officer(s) designated by the FDIC to conduct the hearing.
(d) Hearing procedures.
(1) A Respondent may appear at the hearing personally or through
counsel. A Respondent shall have the right to introduce relevant
written materials and to present oral argument. A Respondent may
introduce oral testimony and present witnesses only if expressly
authorized by the FDIC or the presiding officer(s). Neither the
provisions of the Administrative Procedure Act governing adjudications
required by statute to be determined on the record nor the Uniform
Rules of Practice and Procedure in this part apply to an informal
hearing under this section unless the FDIC orders that such procedures
shall apply.
(2) The informal hearing shall be recorded, and a transcript shall
be furnished to the Respondent upon request and payment of the cost
thereof. Witnesses need not be sworn, unless specifically requested by
a party or the presiding officer(s). The presiding officer(s) may ask
questions of any witness.
(3) The presiding officer(s) may order that the hearing be
continued for a reasonable period (normally five business days)
following completion of oral testimony or argument to allow additional
written submissions to the hearing record.
(e) Standard for review. A Respondent shall bear the burden of
demonstrating that his or her continued employment by or service with
the FDIC-supervised institution would materially strengthen the FDIC-
supervised institution's ability:
(1) To become adequately capitalized, to the extent that the
directive was issued as a result of the FDIC-supervised institution's
capital level or failure to submit or implement a capital restoration
plan; and
(2) To correct the unsafe or unsound condition or unsafe or unsound
practice, to the extent that the directive was issued as a result of
classification of the FDIC-supervised institution based on supervisory
criteria other than capital, pursuant to section 38(g) of the FDI Act.
(f) Recommendation of presiding officers. Within 20 calendar days
following the date the hearing and the record on the proceeding are
closed, the presiding officer(s) shall make a recommendation to the
FDIC concerning the Respondent's request for reinstatement with the
FDIC-supervised institution.
(g) Time for decision. Not later than 60 calendar days after the
date the record is closed or the date of the response in a case where
no hearing was requested, the FDIC shall grant or deny the request for
reinstatement and notify the Respondent of the FDIC's decision. If the
FDIC denies the request for reinstatement, the FDIC shall set forth in
the notification the reasons for the FDIC's action.
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6. Revise Sec. 308.204 to read as follows:
Sec. 308.204 Enforcement of directives.
(a) Judicial remedies. Whenever an FDIC-supervised institution
fails to comply with a directive issued under section 38, the FDIC may
seek enforcement of the directive in the appropriate United States
district court pursuant to section 8(i)(1) of the FDI Act (12 U.S.C.
1818(i)(1)).
(b) Administrative remedies--
(1) Failure to comply with directive. Pursuant to section
8(i)(2)(A) of the FDI Act, the FDIC may assess a civil money penalty
against any FDIC-supervised institution that violates or otherwise
fails to comply with any final directive issued under section 38 and
against any institution-affiliated party who participates in such
violation or noncompliance.
(2) Failure to implement capital restoration plan. The failure of
an FDIC-supervised institution to implement a capital restoration plan
required under section 38, or subpart H of part 324 of this chapter, or
the failure of a company having control of an FDIC-supervised
institution to fulfill a guarantee of a capital restoration plan made
pursuant to section 38(e)(2) of the FDI Act shall subject the FDIC-
supervised institution to the assessment of civil money penalties
pursuant to section 8(i)(2)(A) of the FDI Act.
(c) Other enforcement action. In addition to the actions described
in paragraphs (a) and (b) of this section, the FDIC may seek
enforcement of the provisions of section 38 or subpart H of part 324 of
this chapter through any other judicial or administrative proceeding
authorized by law.
PART 390--REGULATIONS TRANSFERRED FROM THE OFFICE OF THRIFT
SUPERVISION
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7. 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 O also issued under 12 U.S.C. 1828.
Subpart Q also issued under 12 U.S.C. 1462; 1462a; 1463; 1464.
Subpart W also issued under 12 U.S.C. 1462a; 1463; 1464; 15
U.S.C. 78c; 78l; 78m; 78n; 78p; 78w.
Subpart Y--[Removed and Reserved]
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8. Remove and reserve part 390, subpart Y, consisting of Sec. Sec.
390.456 through 390.459.
Federal Deposit Insurance Corporation.
By order of the Board of Directors.
Dated at Washington, DC, on August 21, 2020.
James P. Sheesley,
Acting Assistant Executive Secretary.
[FR Doc. 2020-18812 Filed 9-25-20; 8:45 am]
BILLING CODE 6714-01-P
