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Financial Institution Letters



[Federal Register: July 16, 2001 (Volume 66, Number 136)]
[Notices]               
[Page 37029-37030]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16jy01-71]                         

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FEDERAL DEPOSIT INSURANCE CORPORATION

 
Request for Comment on Study of Banking Regulations Regarding the 
Online Delivery of Banking Services

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Request for comment.

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SUMMARY: The FDIC is reviewing its regulations regarding the delivery 
of financial services. The purpose of this review is to identify 
changes or additions to its regulations that would facilitate the use 
of new technologies by financial institutions. This Request for Comment 
solicits comment on issues arising from the electronic delivery of 
financial products and services.

DATES: Comments must be received by September 14, 2001.

ADDRESSES: Send written comments to Robert E. Feldman, Executive 
Secretary, Attention: Comments/OES, Federal Deposit Insurance 
Corporation, 550 17th Street, NW., Washington, DC 20429. Comments may 
be hand-delivered to the guard station at the rear of the 550 17th 
Street Building (located on F Street), on business days between 7 a.m. 
and 5 p.m. (facsimile number (202) 898-3838; Internet address: 
comments@fdic.gov mailto:comments@fdic.gov>). Comments may be posted on 
the FDIC internet site at http://www.fdic.gov/regulations/laws/federal/
propose.html and may be inspected and photocopied in the FDIC Public 
Information Center, Room 100, 801 17th Street, NW., Washington, DC 
20429, between 9 a.m. and 4:30 p.m. on business days.

FOR FURTHER INFORMATION CONTACT: Jeffrey M. Kopchik, Senior Policy 
Analyst, Division of Supervision (202) 898-3872; or Robert A. Patrick, 
Counsel, Legal Division (202) 898-3757.

SUPPLEMENTARY INFORMATION:

Introduction

    Section 729 of the Gramm-Leach-Bliley Act, Public Law 106-102 
(GLBA), requires the FDIC, and other federal bank regulatory agencies, 
to review regulations regarding the delivery of financial services and 
report to Congress recommendations for adapting existing requirements 
to online banking and lending. The purpose of this Request for Comment 
is to invite public comment on issues regarding financial institutions' 
involvement in electronic banking, before submission of the 
Corporation's report to Congress. Public comment will help determine 
whether any FDIC regulations should be revised to remove regulatory 
impediments to financial institutions' use of new technologies. The 
FDIC also would like to know whether it should consider promulgating 
regulations that would facilitate financial institutions' use of new 
technologies. Based on the comments received, the FDIC, in its report 
to Congress, may identify possible revisions or additions to FDIC 
regulations or supervisory guidance.

Background

    The application of new technologies to traditional banking products 
and services is dramatically altering the ways in which financial 
institutions conduct business. Advances in telecommunications provide 
financial institutions with faster and more efficient communication and 
data transmission. The Internet provides financial institutions with a 
vehicle to reach a global market area without an investment in ``brick 
and mortar'' offices. Developments in technology are causing financial 
institutions to reevaluate existing delivery channels and business 
practices, develop new products and services, and serve customers more 
efficiently.
    Through the issuance of supervisory guidelines such as the 
Standards for Safeguarding Customer Information, 12 CFR part 364, 
Appendix B (66 FR 8616, Feb. 1, 2001) (FIL 22-2001, March 14, 2001), 
the FDIC is working to identify and educate banks about the risks 
presented by electronic banking and to ensure that its regulations 
appropriately address these risks.\1\
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    \1\ The FDIC issued electronic banking examination procedures in 
January 1997 and implemented an electronic banking subject matter 
expert program in April 1997. The Division of Supervision created an 
Electronic Banking Branch to focus attention on electronic banking 
supervisory issues in September 2000. In addition, the FDIC has 
issued a variety of written guidance concerning risks and 
appropriate procedures for electronic banking. See e.g., FIL 81-
2000, Risk Management of Technology Outsourcing (November 29, 2000); 
FIL 77-2000, Bank Technology Bulletin, Internet Domain Names 
(November 9, 2000); FIL 72-2000, Electronic Signature in Global and 
National Commerce Act (November 2, 2000); FIL 67-2000, Security 
Monitoring of Computer Networks (October 3, 2000); FIL 63-2000, 
Online Banking (September 21, 2000); FIL 131-97, Security Risks 
Associated with the Internet (December 18, 1997).
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General Comments

    Commenters are invited to submit comments and recommendations in 
connection with any of the following questions or any other issues 
relating to the FDIC's policies or procedures for supervising financial 
institutions' use of electronic delivery channels.
     Are there specific regulations the FDIC should modify 
because they impede the use of a new technology that would allow 
financial institutions to offer improved products or services in a more 
efficient manner and at a lower cost?
     Are there areas where financial institutions would benefit 
from additional clarification of rules or guidance concerning the risks 
associated with electronic banking activities?
     Are there specific areas in which regulatory changes are 
needed to enhance consumer acceptance of, confidence in, or access to, 
electronic banking?

[[Page 37030]]

Hyperlinking

    The Internet has made it possible for financial institutions and 
non-financial commercial enterprises to partner in ways that may not be 
apparent to customers visiting a web site. For example, a financial 
institution's web site may include hyperlinks that transfer the 
customer to the web sites of one or more non-financial institutions. 
These other web sites may provide non-financial information or sell 
non-financial products or services. Sites differ in the degree to which 
they inform a person that products or services accessible through the 
selection of a hyperlink are, or are not, offered, sponsored, or 
endorsed by the bank, which may be confusing to site visitors.
     Should the FDIC promulgate a regulation or publish 
guidance setting forth standards for state nonmember banks concerning 
the use of hyperlinks?
     Are there technology solutions to address these issues?

Physical Location

    Internet banking raises issues with respect to how the FDIC should 
interpret existing laws and regulations that reference geographic terms 
or rely on concepts of physical presence. For example, the definition 
of ``branch'' contained in Sec. 303.41(a) of the FDIC's regulations (12 
CFR 303.41(a)) assumes the existence of a building permanently or 
temporarily located at a specific physical location. It does not 
address banking transactions conducted over the Internet where the 
consumer and a bank representative do not meet face to face. See 12 CFR 
part 303, subpart C.
     Does reliance on these terms and concepts create an 
impediment to financial institutions conducting operations on the 
Internet? If so, how should the FDIC clarify its regulations?
     Are there other instances in which online banking or 
lending would benefit from a clarification of references to physical 
location in FDIC regulations? If so, how should the FDIC address those 
instances?

Appraisals

    Certain loans must be supported by written real estate appraisals 
performed in accordance with uniform standards, supported by the 
presentation and analysis of relevant market information. See 12 CFR 
part 323.
     Would online lending benefit from any clarification of the 
FDIC's application of this regulation in terms of what constitutes a 
written appraisal, or the presentation of relevant market information. 
If so, what clarifications should the FDIC make to facilitate the use 
of appraisals in electronic form?
     What types of controls regarding authentication of an 
electronic appraisal, certification of the appraiser, or other 
standards would be appropriate to assure authenticity and integrity in 
connection with filing electronic appraisals?

Electronic Signatures

    The Electronic Signatures in Global and National Commerce Act, 15 
U.S.C. 7001, et seq. (E-Sign Act), provides that contracts and 
signatures with respect to any transaction affecting interstate 
commerce may not be denied validity solely because they are in 
electronic form. The E-Sign Act also provides that records of such 
contracts may be maintained in electronic form, subject to certain 
requirements, i.e., they must accurately reflect the information in the 
contract, be accessible to all persons who are entitled to access them, 
and be capable of being accurately reproduced for later reference.
     Should the FDIC promulgate regulations or publish guidance 
setting forth standards for the use of electronic signatures and 
records? See 15 U.S.C. 7004.

    By order of the Board of Directors.

    Dated at Washington, DC, this 10th day of July, 2001.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 01-17666 Filed 7-13-01; 8:45 am]
BILLING CODE 6714-01-P

Last Updated 08/28/2001 communications@fdic.gov