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FDIC Federal Register Citations

[Federal Register: December 27, 2002 (Volume 67, Number 249)]
[Notices]               
[Page 79276-79278]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr27de02-195]                         


[[Page 79276]]

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FEDERAL DEPOSIT INSURANCE CORPORATION


 
Applications for Deposit Insurance


AGENCY: Federal Deposit Insurance Corporation (FDIC).


ACTION: Final agency policy statement; amendment.


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SUMMARY: The FDIC is amending its Statement of Policy on Applications 
for Deposit Insurance to reflect changes resulting from an internal 
reorganization. The reorganization merged the Division of Supervision 
and the Division of Compliance and Consumer Affairs. Additional changes 
were made to reflect recent statutory requirements. The amended 
statement of policy is intended to be read in conjunction with the 
deposit insurance provisions of the FDIC's revised regulations 
governing applications filed with the FDIC, which appears elsewhere in 
this issue of the Federal Register.


EFFECTIVE DATE: December 27, 2002.


FOR FURTHER INFORMATION CONTACT: Division of Supervision and Consumer 
Protection: Mindy West, Examination Specialist, (202/898-7221); or 
Legal Division: Supervision and Legislation Branch, Robert C. Fick, 
Counsel, Legal Division, (202/898-8962), FDIC, 550 17th Street, NW, 
Washington, DC, 20429.


SUPPLEMENTARY INFORMATION: On June 30, 2002, the FDIC implemented an 
internal reorganization. See: 67 FR 44351, July 2, 2002. The primary 
purpose of the reorganization was to streamline the management and 
decision making process. As part of the reorganization, several 
divisions were merged. In particular, the Division of Supervision was 
merged with the Division of Compliance and Consumer Affairs to create 
the Division of Supervision and Consumer Protection. The reorganization 
has necessitated changes to the Statement of Policy on Applications for 
Deposit Insurance (Statement of Policy) to reflect the new structure, 
since there are references to the former divisions and management 
structure in the prior Statement of Policy.
    In conjunction with the revisions to the Statement of Policy, the 
FDIC is also amending 12 CFR part 303 (part 303) of the FDIC's 
regulations governing application, notice and request procedures. The 
amendments to part 303 reflect the FDIC's new organizational structure. 
The FDIC is also removing and updating the delegations of authority 
previously found in part 303 to provide greater flexibility and 
efficiency when making decisions throughout the application process. As 
a result of these changes, the amended Statement of Policy is intended 
to be read in conjunction with the revised deposit insurance provisions 
of newly-amended part 303, notice of which is published elsewhere in 
this issue of the Federal Register.
    Section 307(c) of the Gramm-Leach-Bliley Act (GLBA) requires the 
FDIC to consult with the appropriate state insurance regulator before 
making any determination relating to the initial affiliation of, or the 
continuing affiliation of, a depository institution with a company 
engaged in insurance activities. On December 12, 2001, the Office of 
the Comptroller of the Currency, the FDIC and the Office of Thrift 
Supervision published a final notice in the Federal Register (66 FR 
64341) revising the Interagency Charter and Federal Deposit Insurance 
Application (Application) to, in part, add an item to the form to 
collect information required by GLBA. The FDIC is now amending the 
Statement of Policy to conform to the recently updated Application to 
include the specified information required therein. The information 
that is required is the name of the affiliated insurance company, a 
description of its insurance activities, a list of each state and the 
lines of business in that state in which the company holds, or will 
hold, an insurance license. The applicant must also indicate the state 
where the company holds a resident license or charter, as applicable.
    The Statement of Policy published August 20, 1998 (63 FR 44756) is 
hereby amended as follows:


FDIC Statement of Policy on Applications for Deposit Insurance


* * * * *


Procedures


    Forms and instructions for applying for deposit insurance may be 
obtained from any FDIC regional director. Completed applications should 
be filed with the appropriate FDIC office. Organizers and incorporators 
(collectively, ``incorporators'') of proposed new depository 
institutions should file their applications with the FDIC and the 
appropriate chartering authority at the same time. Information provided 
to the chartering authority that is also needed as part of the deposit 
insurance application may be provided to the FDIC by appending a copy 
of the information to the FDIC application. Use of the FDIC application 
form is optional; however, the material submitted to the FDIC must 
contain all information requested in the FDIC application form, unless 
the FDIC otherwise indicates. In addition, all incorporators must sign 
and submit the signature page of the FDIC's deposit insurance 
application form, even if the application itself is not being used. It 
is strongly recommended that a representative(s) of the organizing 
group meet with the chartering authority and the FDIC prior to filing 
an application to reach an understanding of the information 
requirements of each agency. This practice typically facilitates 
processing and eliminates unnecessary delays. Information requirements 
may not be as extensive for applications sponsored by existing holding 
companies or other well-established banking groups. The FDIC may take 
final action prior to final action by other regulatory authorities in 
cases in which the FDIC has determined that there is no material 
disagreement on the action to be taken.
* * * * *
    Section 307(c) of the Gramm-Leach-Bliley Act (GLBA) requires the 
FDIC to consult with the appropriate State insurance regulator before 
making any determination relating to the initial affiliation of, or the 
continuing affiliation of, a depository institution with a company 
engaged in insurance activities. As a result of this requirement, 
applicants that are, or will be, affiliated with a company engaged in 
insurance activities that is subject to supervision by a state 
insurance regulator must submit the following information as part of 
its application: (1) The name of the insurance company; (2) a 
description of the insurance activities that the company is engaged in 
and has plans to conduct; and (3) a list of each state and the lines of 
business in that state which the company holds, or will hold, an 
insurance license. Applicants must also indicate the state where the 
company holds a resident license or charter, as applicable.


Proposed Depository Institutions


* * * * *
    Where the proposed depository institution will be a subsidiary of 
an existing bank or thrift holding company, the FDIC will consider the 
financial and managerial resources of the parent organization in 
assessing the overall proposal and in evaluating the statutory factors 
prescribed in section 6 of the Act. In such circumstances, the 
application for deposit insurance should contain a copy of any 
information submitted to the holding company's primary federal 
regulator. Subpart B of part 303 of the FDIC's regulations (12


[[Page 79277]]


CFR 303.20-.25) discusses certain expedited procedures that may be 
available to eligible depository institutions or eligible holding 
companies (as those terms are defined in the regulation).
    The FDIC may conduct examinations and/or investigations to develop 
essential information with respect to deposit insurance applications. 
The FDIC will determine the need to conduct an investigation and its 
scope. Every effort will be made to coordinate any FDIC investigation 
with any investigations conducted by other regulators.
* * * * *


Statutory Factors


* * * * *


2. Adequacy of the Capital Structure


* * * * *
    (b) Wholly owned subsidiary of a holding company--If the applicant 
is being established as a wholly owned subsidiary of an eligible 
holding company (as defined in part 303, subpart B), the FDIC will 
consider the financial resources of the parent organization as a factor 
in assessing the adequacy of the proposed initial capital injection. In 
such cases, the FDIC may find favorably with respect to the adequacy of 
capital factor, when the initial capital injection is sufficient to 
provide for a Tier 1 leverage capital ratio of at least 8% at the end 
of the first year of operation, based on a realistic business plan, or 
the initial capital injection meets the $2 million minimum capital 
standard set forth in this Statement of Policy, or any minimum 
standards established by the chartering authority, whichever is 
greater. The holding company shall also provide a written commitment to 
maintain the proposed institution's Tier 1 leverage capital ratio at no 
less than 8 % throughout the first three years of operation.
    (c) Operating insured offices--If the proposal involves the 
acquisition of an insured operating office or offices, the applicant 
may request that the benchmark for evaluating the adequacy of capital 
be an amount necessary for the newly chartered institution to be 
classified as well capitalized, as defined by its primary federal 
regulator. In such cases, the FDIC may find favorably with respect to 
the capital factor based on a favorable finding with respect to the 
following:
* * * * *


4. General Character and Fitness of the Management


* * * * *
    All proposed depository institutions shall provide at least a five 
member board of directors. The identity and qualifications of the 
proposed full-time chief executive officer should be made known to the 
FDIC as soon as possible, preferably when the application is filed with 
the appropriate FDIC office. Prior to the opening of the institution, 
proponents must advise the FDIC in writing of any change in the 
directorate, senior active management, or a change in the ownership of 
stock which would result in a shareholder owning 10% or more of the 
total shares of either the depository institution or its holding 
company.
* * * * *
    (b) Stock benefit plans--Stock benefit plans, including stock 
options, stock warrants, and other similar stock based compensation 
plans will be reviewed by the FDIC and must be fully disclosed to all 
potential subscribers. Participants in stock benefit plans may include 
incorporators, directors, and officers. A description of any such plans 
proposed must be included in the application submitted to the 
appropriate FDIC office. The structure of stock benefit plans should 
encourage the continued involvement of the participants and serve as an 
incentive for the successful operation of the institution. Stock 
benefit plans should contain no feature that would encourage 
speculative or high risk activities or serve as an obstacle to or 
otherwise impede the sale of additional stock to the general public.
* * * * *
    (c) Background and biographical information--Proposed directors, 
officers, and 10% shareholders must file financial and biographical 
information in connection with the deposit insurance application. The 
FDIC may request a report from the Federal Bureau of Investigation or 
other investigatory agencies on these individuals. Fingerprinting of 
individuals may be required. Background checks and fingerprinting may 
be waived by the FDIC for individuals who are currently associated 
with, or have had a recent past association with, an insured depository 
institution. When the proposed depository institution is being 
established as a wholly owned subsidiary of an eligible holding 
company, the FDIC may waive financial information for those persons who 
are being proposed as directors or officers of the applicant. 
Background checks conducted by other federal financial institution 
regulators in connection with charter applications are generally 
adequate for the FDIC if the other regulators agree to notify the FDIC 
of instances in which further investigation is warranted.
    In the event any present or prospective director, officer, 
employee, controlling stockholder, or agent of the applicant has been 
convicted of any criminal offense involving dishonesty, breach of 
trust, or money laundering, or has agreed to enter into a pretrial 
diversion or similar program in connection with a prosecution of such 
offense, the applicant must obtain the FDIC's written consent under 
section 19 of the Act (12 U.S.C. 1829), before any such person may 
serve in one or more of those capacities. Guidelines regarding section 
19 applications may be obtained from the appropriate FDIC office.
* * * * *


5. Risk Presented to the Bank Insurance Fund or Savings Association 
Insurance Fund


    In order to resolve this factor favorably, the FDIC must be assured 
that the proposed institution does not present an undue risk to the 
Bank Insurance Fund or the Savings Association Insurance Fund. As a 
general matter, the FDIC interprets this factor very broadly. In making 
its determination, the FDIC will rely on any information available to 
it, including, but not limited to the applicant's business plan. The 
FDIC expects that an applicant will submit a business plan commensurate 
with the capabilities of its management and the financial commitment of 
the incorporators. Any significant deviation from the business plan 
within the first three years of operation must be reported by the 
insured depository institution to the primary federal regulator before 
consummation of the change. Submission of an unsound business plan will 
unfavorably impact the finding concerning this factor. An applicant's 
business plan should demonstrate the following:
* * * * *


Proposed Depository Institutions Formed for the Sole Purpose of 
Acquiring Assets and Assuming Liabilities of an Insured Institution in 
Default


    Proponents should contact the appropriate FDIC office as soon as 
possible if they are interested in acquiring assets and/or assuming 
liabilities of an institution in default. Due to the time constraints 
involved with this type of transaction, information submissions and 
applications will be abbreviated. Generally, a letter request 
accompanied by copies of applications filed with


[[Page 79278]]


other federal or state regulatory authorities will be sufficient. Other 
information will be requested only as needed by the FDIC.


    By order of the Board of Directors.


    Dated at Washington, DC, this 3rd day of December, 2002.


Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 02-31920 Filed 12-26-02; 8:45 am]
BILLING CODE 6714-01-P






Last Updated 12/27/2002 regs@fdic.gov