Removal of Transferred OTS Regulations Regarding Prompt Corrective Action Directives and Conforming Amendments to Other Regulations, 8104-8111 [2020-28455]

Agencies

• FEDERAL DEPOSIT INSURANCE CORPORATION

[Federal Register Volume 86, Number 21 (Wednesday, February 3, 2021)]
[Rules and Regulations]
[Pages 8104-8111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28455]


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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: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is adopting a 
final rule 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: The final rule is effective on March 5, 2021.

FOR FURTHER INFORMATION CONTACT: Robert Watkins, Review Examiner, 
[email protected], Division of Risk Management Supervision, (202) 898-
3865; Seth Rosebrock, Assistant General Counsel, Legal Division, (202) 
898-6609, [email protected]; or Kristine Schmidt, Counsel, Legal 
Division, (202) 898-6686, [email protected].

SUPPLEMENTARY INFORMATION: 

I. Policy Objective

    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 rescinding the regulations in 
part 390, subpart Y, and reserving the subpart for future use. In 
addition, the FDIC is amending 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.).
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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.

[[Page 8105]]

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 
concerns 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 is rescinding 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 will combine the regulations to make 
clear the same procedures apply to all FDIC-supervised institutions.

III. Proposed Rule

    On September 28, 2020, the FDIC published a notice of proposed 
rulemaking (NPR) regarding the removal of part 390, subpart Y (formerly 
OTS 12 CFR part 565, Sec. Sec.  565.7, 565.8, 565.9 and 565.10), which 
addressed prompt corrective action provisions applicable to State 
savings associations.\12\ The NPR proposed removing part 390, subpart 
Y, from the Code of Federal Regulations, because, after careful review, 
the FDIC 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 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.\13\ The provisions in the FDIC regulations relating to 
``any company that controls 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.
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    \12\ 85 FR 60738 (Sept. 28, 2020).
    \13\ 12 U.S.C. 5412(b)(1).
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    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 proposed 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 Other Applicable Statutes and 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 proposed that Sec.  390.456 be rescinded in its entirety. 
The 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's 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

[[Page 8106]]

changes made to part 324.\14\ Section 390.457 is equivalent to the 
administrative procedures relating to FDIC-supervised banks found at 12 
CFR 308.202.
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    \14\ See 83 FR 17737.
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    The FDIC proposed that Sec.  390.457 be rescinded in its entirety. 
The 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 proposed that Sec.  390.458 be rescinded in its entirety. 
The 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 proposed that Sec.  390.459 be rescinded in its entirety. 
The 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. 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.\15\ To clarify that part 308, subpart Q, 
applies to all institutions for which the FDIC is the appropriate 
Federal banking agency, the FDIC proposed 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.'' Section 308.200 will 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.\16\
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    \15\ See section 312(c) of the Dodd-Frank Act, codified at 12 
U.S.C. 1813(q).
    \16\ 12 U.S.C. 1813(q).
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    Additionally, the FDIC proposed 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 Sec.  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. Comments

    The FDIC issued the NPR with a 30-day comment period, which closed 
on October 28, 2020. The FDIC received no comments on its NPR, and 
consequently the FDIC is adopting the amendments as proposed.

V. Explanation of the Final Rule

    As discussed in the NPR, the requirements for State savings 
associations in part 390, subpart Y, are largely unnecessary, 
redundant, or duplicative of existing FDIC regulations. To that effect, 
the Final Rule removes and rescinds 12 CFR part 390, subpart Y, and 
amends the FDIC's requirements of part 308, subpart Q to expressly 
apply to all FDIC-supervised insured depository institutions. These 
initiatives will serve to streamline the FDIC's regulations.

VI. 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 rule will eliminate those transferred OTS regulations. The rule 
will also 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 June 30, 2020, 
the FDIC supervised 3,270 depository institutions, of which 35 (1.1 
percent) are State savings associations.\17\ The rule primarily would 
affect regulations that govern State savings associations.
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    \17\ Call Report data, June 30, 2020.
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    As explained previously, the 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

[[Page 8107]]

to significantly affect FDIC-supervised State savings associations.
    The final rule 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 rule is unlikely to substantively affect 
FDIC-supervised State savings associations.
    Finally, the rule revises 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 adopting 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 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 part 
390, subpart Y, are substantively similar to existing regulations for 
state nonmember banks found in part 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.

VII. Alternatives

    The FDIC believes that the amendments represent the most 
appropriate option for covered institutions and, at this time, has not 
identified significant alternatives to 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 not choosing 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 
and is therefore amending and streamlining them in accordance with this 
final rulemaking.

VIII. Regulatory Analysis and Procedure

A. The Paperwork Reduction Act

    In accordance with the requirements of the Paperwork Reduction Act 
of 1995 (PRA),\18\ 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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    \18\ 44 U.S.C. 3501-3521.
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    The final rule rescinds and removes from FDIC regulations part 390, 
subpart Y. With regard to part 308, subpart Q, the final rule amends 
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 final 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 final rulemaking, an agency prepare and make available 
for public comment a final regulatory flexibility analysis that 
describes the impact of the final rule on small entities.\19\ 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.\20\ 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 rule will 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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    \19\ 5 U.S.C. 601, et seq.
    \20\ 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 June 30, 2020, the FDIC supervised 3,270 depository 
institutions,\21\ of which 2,492 were considered small entities for the 
purposes of RFA.\22\ There are 33 State savings associations that are 
small entities for the purposes of RFA, or 1.3 percent of all 
depository institutions considered small entities.\23\ As discussed 
previously, the rule rescinds 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

[[Page 8108]]

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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    \21\ FDIC-supervised institutions are set forth in 12 U.S.C. 
1813(q)(2).
    \22\ FDIC Call Report data, June 30, 2020.
    \23\ Id.
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    The final rule also amends 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 rule revises 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 adopting 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 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 part 
390, subpart Y, are substantively similar to existing regulations for 
state nonmember banks found in part 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 final 
rule will not have a significant economic impact on a substantial 
number of small entities.

C. The Congressional Review Act

    For purposes of Congressional Review Act, the OMB makes a 
determination as to whether a final rule constitutes a ``major rule.'' 
\24\ If a rule is deemed a ``major rule'' by the OMB, the Congressional 
Review Act generally provides that the rule may not take effect until 
at least 60 days following its publication.\25\
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    \24\ Codified at 5 U.S.C. 801 et seq.
    \25\ Codified at 5 U.S.C. 801(a)(3).
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    The Congressional Review Act defines a ``major rule'' as any rule 
that the Administrator of the Office of Information and Regulatory 
Affairs of the OMB finds has resulted in or is likely to result in--(A) 
an annual effect on the economy of $100,000,000 or more; (B) a major 
increase in costs or prices for consumers, individual industries, 
Federal, State, or local government agencies or geographic regions, or 
(C) significant adverse effects on competition, employment, investment, 
productivity, innovation, or on the ability of United States-based 
enterprises to compete with foreign-based enterprises in domestic and 
export markets.\26\
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    \26\ Codified at 5 U.S.C. 804(2).
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    The OMB has determined that the final rule is not a major rule for 
purposes of the Congressional Review Act and the FDIC will submit the 
final rule and other appropriate reports to Congress and the Government 
Accountability Office for review.

D. Plain Language

    Section 722 of the Gramm-Leach-Bliley Act \27\ 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 
final rule in a simple and straightforward manner and did not receive 
any comments on the use of plain language.
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    \27\ Public Law 106-102, section 722, 113 Stat. 1338, 1471 
(codified at 12 U.S.C. 4809).
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E. 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.\28\ 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 burdens, and further measures 
the FDIC will take to address issues that were identified.\29\ 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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    \28\ Public Law 104-208, 110 Stat. 3009 (1996).
    \29\ 82 FR 15900 (March 31, 2017).
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F. Riegle Community Development and Regulatory Improvement Act of 1994

    Pursuant to section 302(a) of the Riegle Community Development and 
Regulatory Improvement Act (RCDRIA),\30\ in determining the effective 
date and administrative compliance requirements for new regulations 
that impose additional reporting, disclosure, or other requirements on 
insured 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.\31\ The FDIC has determined that the final rule would not 
impose any additional reporting, disclosure, or other new requirements 
on IDIs, and thus the requirements of the RCDRIA do not apply.
---------------------------------------------------------------------------

    \30\ 12 U.S.C. 4802(a).
    \31\ 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 amends parts 308 and 390

[[Page 8109]]

of title 12 of the Code of Federal Regulations as follows:

PART 308--RULES OF PRACTICE AND PROCEDURE

0
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.


0
2. Revise subpart Q to read as follows:

Subpart Q--Issuance and Review of Orders Pursuant to the Prompt 
Corrective Action Provisions of the Federal Deposit Insurance Act

Sec.
308.200 Scope.
308.201 Directives to take prompt corrective action.
308.202 Procedures for reclassifying an FDIC-supervised institution 
based on criteria other than capital.
308.203 Order to dismiss a director or senior executive officer.
308.204 Enforcement of directives.


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).


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 section 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 modified. Unless otherwise ordered by the 
FDIC, the directive shall continue in place while such request is 
pending before the FDIC.


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 be 
referred to in this section as reclassification.

[[Page 8110]]

    (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; and
    (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.


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 requiring 
the FDIC-supervised institution to dismiss from office any director or 
senior executive officer under section 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--(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

[[Page 8111]]

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.


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

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

    Authority: 12 U.S.C. 1819.
    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]

0
4. Remove and reserve subpart Y, consisting of Sec. Sec.  390.450 
through 390.459.

Federal Deposit Insurance Corporation.

    By order of the Board of Directors.

    Dated at Washington, DC, on December 15, 2020.
James P. Sheesley,
Assistant Executive Secretary.
[FR Doc. 2020-28455 Filed 2-2-21; 8:45 am]
BILLING CODE 6714-01-P