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FDIC Federal Register Citations
[Federal Register: December 4, 2006 (Volume 71, Number 232)]

[Proposed Rules]

[Page 70325-70330]

From the Federal Register Online via GPO Access [wais.access.gpo.gov]

[DOCID:fr04de06-19]

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[[Page 70325]]

FEDERAL DEPOSIT INSURANCE CORPORATION

5 CFR Part 3201

RIN 3209-AA15

Supplemental Standards of Ethical Conduct for FDIC Employees

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Notice of proposed rulemaking.

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SUMMARY: This proposal would amend existing FDIC ethics regulations

involving extensions of credit, ownership of stock, and definitions.

This proposal would implement the Preserving Independence of Financial

Institution Examinations Act of 2003, which amended sections 212 and

213 of title 18 of the United States Code. These sections continue

generally to impose criminal penalties on examiners borrowing from

banks they have examined, and financial institutions extending a loan

to anyone who examines or has authority to examine that institution.

The statutory amendment, however, decriminalizes extensions of credit

to examiners for credit cards and for primary residential home loans

from institutions that they examine or have authority to examine if

these loans are made on the same terms and conditions as are available

to other cardholders and borrowers and satisfy other criteria contained

in the statute as amended. Additionally, the proposed regulation would

clarify and make minor revisions to definitions and restrictions for

FDIC employees' acquisition, ownership, or control of securities of

FDIC-insured depository institutions and certain holding companies.

DATES: Comments are invited and must be received on or before January 3, 2007.

ADDRESSES: You may submit comments, identified by RIN number by any of

the following methods:

Federal eRulemaking Portal: http://www.regulations.gov.

Follow the instructions for submitting comments.

Agency Web site: http://www.fdic.gov/regulations/[fxsp0

]laws/federal/propose.html. Follow instructions for submitting

comments on the Agency Web site.

E-mail: Comments@FDIC.gov. Include the RIN number in 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/Courier: 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.

Instructions: All submissions received must include the

agency name and RIN for this rulemaking. All comments received will be

posted without change to http://www.fdic.gov/regulations/[fxsp0]laws/

federal/propose.html including any personal information provided.

FOR FURTHER INFORMATION CONTACT: FDIC: Robert J. Fagan, Ethics Program

Manager, Legal Division, (202) 898-6808; and Michelle Borzillo,

Counsel, Legal Division, (202) 898-7400.

SUPPLEMENTARY INFORMATION:

I. Background

This proposed revised regulation addresses issues involving

extensions of credit to all FDIC employees, including FDIC employees

covered by the amended criminal statutes pertaining to examiners,

members of the FDIC Board of Directors, Division and Office Directors,

and their direct subordinates, as well as employees in the Corporate

Employee Program who perform examiner functions (``covered

employees''). This proposal would also clarify and make minor revisions

to the provisions governing employee ownership of stock and the

definitions used in the regulation.

On December 19, 2003, the President signed Public Law 108-198, the

Preserving Independence of Financial Institution Examinations Act of

2003. The bill amended sections 212 and 213 of title 18 of the United

States Code. These sections continue generally to impose criminal

penalties on examiners borrowing from banks they examine, and financial

institutions extending a loan to anyone who examines or has authority

to examine that institution. The amendment, however, decriminalizes

extensions of credit to examiners for credit cards and for primary

residential home loans from institutions that they examine or have

authority to examine if these loans are made on the same terms and

conditions as are available to other cardholders and borrowers.

The amended statute at 18 U.S.C. 212 provides that, subject to the

exception noted above, any officer, director, or employee of a

financial institution, who makes or grants any loan or gratuity, to any

examiner or assistant examiner who examines or has authority to examine

such bank, branch, agency, organization, corporation, association, or

institution is subject to criminal penalties.

Under 18 U.S.C. 213, as amended, any examiner or assistant examiner

who accepts a loan or gratuity, except for primary residential loans or

credit cards described in this proposed rule, from any bank, branch,

agency, organization, corporation, association, or institution examined

by the examiner or from any person connected with it, is subject to

criminal penalties and will be disqualified from holding office as an

examiner.

On April 7, 2004, based on the statutory amendments, FDIC's Board

of Directors adopted the Interim Policy on Credit Cards and Home

Mortgages (``Interim Policy'') pending revisions to the FDIC's existing

regulation on extensions of credit. The Interim Policy permits

extensions of credit in the form of home mortgages for primary

residences and credit cards under certain conditions. This proposed

amended rule, once finalized, would replace the Interim Policy and

supersede the current version of 5 CFR 3201.102.\1\

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\1\ Under the regulation, before being modified by the Interim

Policy adopted by the FDIC Board of Directors in April 2004, the

staff responsible for examination of FDIC-insured depository

institutions were prohibited from obtaining credit from an FDIC-

insured state nonmember bank, any subsidiary of such bank, or any

person associated with such bank. No exceptions were made for home

mortgages. An exception was made for credit cards issued outside the

region or field office of assignment. Corporation officials in top

management positions were prohibited under the existing regulation

from entering into financial obligations with an institution over

which the Corporation had primary Federal supervisory authority and

its subsidiaries. An employee in the Division of Finance, Division

of Insurance and Research, Division of Resolutions and

Receiverships, the Legal Division, or who was a member of a standing

committee of the Board of Directors, was prohibited from obtaining

credit from an FDIC-insured depository institution or its subsidiary

for a period of two years after the employee had participated

personally and substantially in certain matters affecting the

institution, its predecessor, successor, or affiliate. An exception

was made for ordinary credit cards.

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[[Page 70326]]

Additionally, the proposed regulation would clarify and make

revisions to 5 CFR 3201.103, which restricts FDIC employees'

acquisition, ownership, or control of securities of FDIC-insured

depository institutions and certain holding companies. Finally, the

proposed regulation would make appropriate revisions to the definitions

in 5 CFR 3201.101.

In proposing to make these regulatory revisions in part pursuant to

its rulemaking authority under 18 U.S.C. 212(b), the FDIC has consulted

with the other Federal financial institution regulatory agencies. In

addition, the FDIC has determined, with the Office of Government

Ethics' (OGE) concurrence, that, under 5 CFR 2635.403(a) of the

executive branch standards of ethical conduct, these proposed revised

provisions as to FDIC employees, their spouses and minor children, are

needed so that a reasonable person would not question the impartiality

and objectivity with which agency programs are administered. Further,

with respect to the proposed revised restrictions and prohibitions on

the holding of financial interests (including indebtedness, i.e.,

certain extensions of credit and loans) by the spouses and minor

children of FDIC employees and covered FDIC employees, the FDIC has

determined that there is a direct and appropriate nexus between such

restrictions and prohibitions as applied to spouses and minor children

and the efficiency of the service.

II. Description of Proposed Amended Sections of the FDIC Ethics

Regulations

Proposed Amended Section 3201.102--Extensions of Credit and Loans From

FDIC-Insured Institutions

The proposed revision to 5 CFR 3201.102 would retain the existing

general prohibitions on borrowings and disqualification provisions for

FDIC employees and members of the FDIC Board of Directors. Likewise,

under the proposed revision, as with the existing version of this

section a current or contingent financial obligation of an employee's

spouse or minor child would be considered to be an obligation of the

employee. However, the proposed rule in a new paragraph (e) would

authorize the FDIC Ethics Counselor to waive any disqualification under

this proposed revised section based on a determination with the advice

of the Legal Division that the waiver is not inconsistent with the

standards of ethical conduct for employees of the executive branch as

set forth in 5 CFR part 2635 or otherwise prohibited by law and that,

under the particular circumstances, application of the prohibition is

not necessary to avoid the appearance of misuse of position or loss of

impartiality and objectivity with which the FDIC programs are

administered.

The proposed rule, in keeping with the amended statutes at 18

U.S.C. 212 and 213, would eliminate the current regulatory

disqualification for FDIC examiners, FDIC Board members, Division and

Office Directors, and employees in the Corporate Employee Program

performing examiner duties (defined as ``covered employees'' in Sec.

3201.101(d)(3) of the proposed rule), who obtain credit cards on terms

and conditions no more favorable than generally available to other

borrowers. See new proposed paragraphs (c)(1) and (c)(2) of Sec.

3201.102. Covered employees assigned to a bank from which they hold a

credit card would have to inform their supervisor and ethics official

prior to the examination or other participation in a matter involving

the bank if any issue exists such as non-current payments, a billing

dispute, or if negotiating with the bank concerning the debt. In

certain cases, a disqualification would be required. Under proposed

paragraph (d)(4) of Sec. 3201.102, covered employees and their spouses

and minor children are prohibited from applying for or receiving a

credit card from an institution if the covered employee is assigned or

about to be assigned to an examination of that institution.

Under the proposed rule in Sec. 3201.102(c)(3)(ii),

disqualification would continue to be generally required for

residential real property loans on a primary residence. However, such

loans would be permitted in accordance with proposed paragraph

(c)(2)(ii) of Sec. 3201.102, if the terms and conditions were no more

favorable than the terms and conditions of loans generally available to

other similarly situated creditworthy borrowers. Thus, covered FDIC

employees could obtain such permitted loans, but would need to be

recused from official participation in any particular matters involving

the lending institution or person. The proposed rule would also cover

limitations, restrictions, and the mechanism for waiver of the

disqualification from participation in an examination or other matter

in appropriate circumstances, under paragraphs (c)(4), (c)(5), (d) and

(e) of Sec. 3201.102 as proposed for amendment.

As previously noted above, a new general waiver would be available

under the proposed rule in certain circumstances. Specifically, the

proposed rule in paragraph (e) of Sec. 3201.102 would authorize the

Ethics Counselor to waive any disqualification based on a determination

with the advice of the Legal Division that the waiver is not

inconsistent with the standards of ethical conduct for employees of the

executive branch as set forth in 5 CFR part 2635 or otherwise

prohibited by law and that, under the particular circumstances,

application of the prohibition is not necessary to avoid the appearance

of misuse of position or loss of impartiality and objectivity with

which the FDIC programs are administered. A waiver under proposed

paragraph (e) of Sec. 3201.102 could impose appropriate conditions,

such as requiring the execution of a written disqualification.

Under proposed paragraph (c)(5)(i) of Sec. 3201.102, a covered

FDIC employee would not be prohibited from retaining a loan or

extension of credit from a State nonmember bank or its subsidiary on

its original terms if it was obtained prior to FDIC employment or

reassignment to a covered employee position, or a result of the sale,

or transfer of the loan or credit extension to, or the conversion or

merger of the lender into, such a bank (or subsidiary). However, any

renewal or renegotiation of such a pre-existing loan or credit

extension would be subject to the prohibitions in paragraphs (c)(3) and

(c)(4) of Sec. 3201.102 as proposed, subject to an exception noted in

the following sentence. Under proposed paragraph (c)(5)(ii) of Sec.

3201.102, a covered employee who experiences financial or other

hardship unless allowed to renegotiate credit incurred prior to FDIC

employment or reassignment of duties could submit a request for a

waiver to his or her supervisor and the Ethics Counselor setting forth

the reasons for the desired renegotiation and other details. After

consideration, the employee's supervisor and the Ethics Counselor could

jointly grant a written waiver of the prohibition based on a finding

that the renegotiation would not be prohibited by law and that the

waiver would not result in a loss of impartiality or objectivity or

misuse of the employee's position.

Paragraph (d) of Sec. 3201.102 of the proposed rule would also

prohibit an FDIC employee from directly or indirectly accepting or

becoming obligated on any extension of credit from an FDIC-insured

depository

[[Page 70327]]

institution or its subsidiary for a period of two years from the date

of the employee's last personal and substantial participation in an

audit, resolution, liquidation, assistance transaction, supervisory

proceeding, or internal agency deliberation affecting that particular

institution, its predecessor or successor, or any subsidiary of such

institution. This prohibition as proposed would not apply to credit

obtained through the use of a credit card or a residential real

property loan secured by the principal residence of the employee,

subject to the same conditions, limitations, disqualification, and

waiver procedures applicable to covered employees under proposed

paragraphs (c) and (e) of Sec. 3201.102.

Proposed Amended Section 3201.103--Prohibition on Acquisition,

Ownership or Control of Securities of FDIC-Insured Depository

Institutions and Certain Holding Companies

In addition, this proposed rule would amend 5 CFR 3201.103, which

generally provides in paragraph (a), with certain exceptions set forth

in paragraph (b), that no FDIC employee, spouse of an employee, or

minor child of an employee may acquire, own, or control, directly or

indirectly, a security of an FDIC-insured depository institution or its

affiliate. The existing regulation at 5 CFR 3201.103(b) provides six

exceptions to that general prohibition: (1) Acquiring, owning, or

controlling securities of certain bank holding companies or their

nonbank subsidiaries that are publicly traded, not primarily engaged in

banking, and exempt from the Bank Holding Company Act; (2) acquiring,

owning, or controlling securities of certain nonfinancial savings

association holding companies; (3) retaining securities of an FDIC-

insured depository institution or affiliate if retention was permitted

under 12 CFR part 336 prior to a certain date, prior to employment with

the FDIC, or when the securities were acquired by a spouse prior to his

or her marriage to the employee; (4) acquiring, owning, or controlling

securities of an FDIC-insured depository institution or affiliate if

acquired by inheritance, gift, stock split, involuntary stock dividend,

merger, acquisition, or other change in corporate ownership, exercise

of preemptive right, or otherwise without specific intent to acquire

it, or if acquired by a spouse or minor child as part of a compensation

package from their employer, subject to certain disclosure and

disqualification requirements; (5) acquiring, owning, or controlling an

interest in certain publicly traded or publicly available investment

funds; and (6) using an FDIC-insured depository institution or

affiliate as a custodian or trustee of accounts containing tax-deferred

retirement funds. The proposed amendment would narrow the scope of

these prohibitions and generally clarify the prohibitions of this

section.

The proposed amendment at Sec. 3201.103(a) would narrow the scope

of the general prohibition concerning ownership and control of a

security by FDIC employees, spouses and their minor children by

removing the prohibitions on ownership of securities with respect to

insured depository institution affiliates, other than certain holding

companies. The reason for proposing to eliminate other affiliates from

the prohibition is that the potential for a conflict of interest is

generally only present when there is ownership or control of a company

that in turn has control of an insured depository institution.

Affiliates other than holding companies do not own, and generally do

not control, an insured depository institution that is their parent or

sister organization.

The proposed amendment to Sec. 3201.103 would generally prohibit

ownership of a security of, in addition to an FDIC-insured bank or

savings association; a bank holding company that is subject to

supervision by the Federal Reserve Board (FRB); a savings and loan

holding company that is subject to supervision by the Office of Thrift

Supervision (OTS); a financial holding company that is subject to

supervision by the FRB; and a company that (i) owns or controls an

FDIC-insured bank or savings association, (ii) is not an FRB-supervised

bank holding company, an OTS-supervised savings and loan holding

company, nor an FRB-supervised financial holding company, and (iii)

either is primarily engaged in banking or is not publicly traded on a

U.S. securities exchange. These categories, in appropriate cases, cover

companies that control industrial banks.

The proposed amendment of Sec. 3201.103 would also create in

paragraph (b)(1), a specific exception for acquisition, ownership, or

control of securities of a unitary thrift holding company. In addition,

the proposed amendment of the section would reorganize the descriptions

of the prohibited securities and exceptions. The intent of the

reorganization proposed is to make this section clearer and more

useable. The proposed amendment would retain in revised paragraphs (b)

and (c) the other existing exceptions, limitations, and divestiture

requirements of Sec. 3201.103. Moreover, in a new paragraph (d) of

this section, the proposed rule would add a provision for written

waiver in appropriate circumstances by the Ethics Counselor, with Legal

Division advice and legal clearance, of any provision of the section

that is identical to the proposed Sec. 3201.102(e) waiver provision

discussed above.

Proposed Amended Section 3201.101(d)--General Section; Definitions

Finally, the definitional section at paragraph (d) of Sec.

3201.101 would be amended to add and revise certain useful definitions

and delete others (``assisted entity'' and ``assuming entity'') that

would no longer be used.

The term ``covered employees'' would be expanded to include

employees whose duties and responsibilities include the examination of

a financial institution or participation in the examination of any

financial institution. The FDIC is republishing all the definitions in

the paragraph, including those not proposed for revision, for ease of

reference.

Request for Comments

The FDIC welcomes comments on all aspects of this proposal.

Regulatory Flexibility Act Analysis

The Regulatory Flexibility Act (RFA) requires that each Federal

agency either certify that a proposed rule would not, if adopted in

final form, have a significant impact on a substantial number of small

entities or prepare an initial regulatory flexibility analysis (IRFA)

of the proposal and publish the analysis for comment. See 5 U.S.C. 603,

605. The Small Business Administration (SBA) defines small banks as

those with less than $165 million in assets. The proposed rule

decriminalizes under certain circumstances extensions of credit to FDIC

examiners for credit cards and for primary residential home loans from

institutions that they examine and clarifies certain restrictions on

the acquisition, ownership, or control of securities of FDIC-insured

depository institutions and certain holding companies on the part of

FDIC employees. The proposed rule does not impose any obligations or

restrictions on depository institutions, including small depository

institutions. On this basis, the FDIC certifies pursuant to 5 U.S.C.

605(b) that this proposed rule, if it is adopted in final form, will

not have a significant impact on a substantial number of small

entities. Commenters are nevertheless invited to provide the FDIC with

any information they may have about the likely quantitative effects of

the proposal.

[[Page 70328]]

Paperwork Reduction Act

The FDIC has determined that this proposed rule does not involve a

collection of information pursuant to the provisions of the Paperwork

Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

Solicitation of Comments on Use of Plain Language

Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec.

722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the FDIC to use

plain language in all proposed and final rules published after January

1, 2000. Therefore, the FDIC specifically invites your comments on how

to make this proposal easier to understand. For example:

Have we organized the material to suit your needs? If not,

how could this material be better organized?

Are the requirements in the proposed guidelines and

regulations clearly stated? If not, how could the guidelines and

regulations be more clearly stated?

Do the proposed guidelines and regulations contain

language or jargon that is not clear? If so, which language requires

clarification?

Would a different format (grouping and order of sections,

use of headings, paragraphing) make the guidelines and regulations

easier to understand? If so, what changes to the format would make them

easier to understand?

What else could we do to make the guidelines and

regulations easier to understand?

The Treasury and General Government Appropriations Act, 1999--

Assessment of Federal Regulations and Policies on Families

The FDIC has determined that the proposed rule will not affect

family well-being within the meaning of section 654 of the Treasury and

General Government Appropriations Act, enacted as part of the Omnibus

Consolidated and Emergency Supplemental Appropriations Act of 1999

(Pub. L. 105-277, 112 Stat. 2681).

List of Subjects in 5 CFR Part 3201

Conflict of interests, Ethical conduct, Extensions of credit and

loans from FDIC-insured depository institutions, Government employees,

Prohibitions on ownership of securities of FDIC-insured depository

institutions.

For the reasons set forth in the preamble, the Board of Directors

of the FDIC, with the concurrence of OGE, proposes to amend part 3201

of title 5 of the Code of Federal Regulations as follows:

PART 3201--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES

OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

1. The authority citation for 5 CFR part 3201 is revised to read as

follows:

Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government

Act of 1978); 12 U.S.C. 1819(a), 1822; 18 U.S.C. 212, 213; 26 U.S.C.

1043; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as

modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5

CFR 2635.105, 2635.403, 2635.502, 2635.803.

2. Paragraph (d) of Sec. 3201.101 is revised to read as follows:

Sec. 3201.101 General.

* * * * *

(d) Definitions.

For purposes of this part, the following definitions apply:

(1) Affiliate, as defined in 12 U.S.C. 1841(k), means any company

that controls, is controlled by, or is under common control with

another company.

(2) Appropriate director means the head of a Washington office or

division or the highest ranking official assigned to a regional office

in each division or the Ethics Counselor.

(3) Covered employee means:

(i) Members of the FDIC Board of Directors and any employee

required to file a public or confidential financial disclosure under 5

CFR part 2634 who holds a position immediately subordinate to such

Board member;

(ii) The director of any Washington division or office and the

director of any regional office, and any employee required to file a

public or confidential financial disclosure report under 5 CFR part

2634 who holds a position immediately subordinate to such director;

(iii) An FDIC examiner;

(iv) Any other FDIC employee whose duties and responsibilities

include the examination of or the participation in the examination of

any financial institution;

(v) Any other FDIC employee whose duties and responsibilities, as

determined by the Chairman or Ethics Counselor after notice to the

employee, require application of the prohibition on borrowing contained

in Sec. 3201.102 to ensure public confidence that the FDIC's programs

are conducted impartially and objectively.

(4) Employee means an officer or employee, other than a special

Government employee, of the Corporation, including a member of the

Board of Directors appointed under the authority of 12 U.S.C.

1812(a)(1)(C). For purposes of 5 CFR part 2635 and Sec. Sec. 3201.103

and 3201.104, employee includes any individual who, pursuant to a

contract or any other arrangement, performs functions or activities of

the Corporation, under the direct supervision of an officer or employee

of the Corporation.

(5) Ethics Counselor means an officer or employee who is designated

by the head of the agency to coordinate and manage the agency's ethics

program, and includes the Corporation's Alternate Ethics Counselor.

(6) Security includes an interest in debt or equity instruments.

The term includes, without limitation, a secured or unsecured bond,

debenture, note, securitized assets, commercial paper, and all types of

preferred and common stock. The term includes an interest or right in a

security, whether current or contingent, a beneficial or legal interest

derived from a trust, the right to acquire or dispose of any long or

short position, an interest convertible into a security, and an option,

right, warrant, put, or call with respect to a security. The term

security does not include a deposit account.

(7) State nonmember bank means any State bank as defined in 12

U.S.C. 1813(e) that is not a member of the Federal Reserve System.

(8) Subsidiary, as defined in 12 U.S.C. 1813(w), means any company

that is owned or controlled directly or indirectly by another company.

3. Section 3201.102 is revised to read as follows:

Sec. 3201.102 Extensions of credit and loans from FDIC-insured

institutions.

(a) Credit subject to this section. The prohibition,

disqualification, and retention provisions of this section apply to a

current or contingent financial obligation of the employee. For

purposes of this section, a current or contingent financial obligation

of an employee's spouse or minor child is considered to be an

obligation of the employee.

(b) Disqualification applicable to FDIC employees generally. Except

as provided in this section:

(1) No FDIC employee may participate in an examination, audit,

visitation, review, or investigation, or any other particular matter

involving an FDIC-insured institution, subsidiary or other person with

whom the employee has an outstanding extension of credit.

(2) For employees, other than covered employees as defined in Sec.

3201.101(d)(3), disqualification is not required if the credit was

extended through the use of a credit card on the same terms and

conditions as are offered to the general public.

[[Page 70329]]

(3) The Comptroller of the Currency and the Director of the Office

of Thrift Supervision shall be disqualified from any matter pending

before the FDIC Board of Directors to the same extent as an FDIC

employee subject to paragraph (c) of this section.

(c) Prohibited borrowing by covered employees. (1) Prohibition on

covered employee borrowing. Except as provided below, no covered

employee shall, directly or indirectly, accept or become obligated on a

loan or extension of credit, whether current or contingent, from any

FDIC-insured State nonmember bank or its subsidiary or from an officer,

director, or employee, of any FDIC-insured State nonmember bank or its

subsidiary.

(2) Exceptions: (i) Credit Cards. A covered employee (or spouse or

minor child of a covered employee) may obtain and hold a credit card

account established under an open end consumer credit plan and issued

by an FDIC-insured State nonmember bank or its subsidiary subject to

the following conditions:

(A) The cardholder must satisfy all financial requirements for the

credit card account that are generally applicable to all applicants for

the same type of credit card account; and

(B) The terms and conditions applicable with respect to the account

and any credit extended to the cardholder under the account are no more

favorable generally to the cardholder than the terms and conditions

that are generally applicable to credit card accounts offered by the

same bank (or the same subsidiary) to other cardholders in comparable

circumstances under open end consumer credit plans.

(ii) Loans secured primarily by principal residence. A covered

employee (or a spouse or minor child of a covered employee) may obtain

and hold a loan from an FDIC-insured State nonmember bank or its

subsidiary subject to the following conditions:

(A) The loan is secured by residential real property that is the

principal residence of the borrower. The borrower may retain the loan

if the residential real property ceases to be the principal residence.

However, any subsequent renewal or renegotiation of the original terms

of such a loan must meet the requirements of this paragraph;

(B) The borrower may not apply for the loan while the covered

employee participates in any examination, the review of any

application, or any other supervisory or regulatory or other particular

matter directly affecting the State nonmember bank or its subsidiaries;

(C) The borrower must satisfy all financial requirements for the

loan that are generally applicable to all applicants for the same type

of residential real property loan; and

(D) The terms and conditions applicable with respect to the loan

and any credit extended to the borrower under the loan are no more

favorable generally to the borrower than the terms and conditions that

are generally applicable to residential real property loans offered by

the same State nonmember bank or the same subsidiary to other borrowers

in comparable circumstances for residential real property loans.

(3) Disqualification of covered employees. A covered employee shall

not participate in an examination, audit, visitation, review, or

investigation, or other particular matter involving an FDIC-insured

depository institution or other person with whom the covered employee

has an outstanding extension of credit, or with whom the covered

employee is negotiating an extension of credit.

(i) Payment dispute, delinquency, or other significant matter

concerning credit card debt. Disqualification is not required if the

credit is extended through the use of a credit card. However,

disqualification will be required when a covered employee is delinquent

on payments, has a billing dispute, is negotiating with the

institution, or has any other significant issue regarding the credit

card debt. The covered employee must notify his or her supervisor and

deputy ethics counselor of a dispute in writing.

(ii) Primary residence mortgage loan. Disqualification will be

required if the covered employee is negotiating for, has an application

pending for, or enters into a primary residence mortgage loan. This

disqualification will cease when the loan is sold, even if the loan

originator retains the loan servicing.

(4) Other limitations on covered employees. (i) A covered employee

shall not accept or become obligated on an otherwise permissible loan

if the disqualification arising from the credit relationship would

materially impair the covered employee's ability to participate in

matters that are central to the performance of the covered employee's

official duties, or if the covered employee has been advised of an

assignment to handle a matter involving that institution.

(ii) Covered employees to whom the prohibitions in this section

apply may not apply for a credit card or primary residence mortgage

loan from a State nonmember bank or subsidiary that the covered

employee is assigned to examine or participate in a matter involving

that institution, or if such an assignment is imminent.

(5) Pre-existing credit. (i) This section does not prohibit a

covered employee, or any FDIC employee who becomes a covered employee

as a result of any reassignment of duties or position, from retaining a

loan or extension of credit from a State nonmember bank or its

subsidiary on its original terms if the loan or extension of credit was

incurred prior to employment by the FDIC or as a result of the sale or

transfer of a loan or credit to a State nonmember bank or its

subsidiary or the conversion or merger of the lender into a State

nonmember bank or its subsidiary. Any renewal or renegotiation of a

pre-existing loan or extension of credit will be treated as a new loan

or extension of credit subject to the prohibitions at paragraphs (c)(3)

and (c)(4) of this section.

(ii) A covered employee may request that an exception be made to

the prohibitions to permit renegotiation of a pre-existing loan or

extension of credit. If a covered employee would experience financial

or other hardship unless allowed to renegotiate a pre-existing loan or

extension of credit, the covered employee may submit a written request

to his or her supervisor and to the Ethics Counselor, describing the

reasons for renegotiation, the original and the proposed terms and

conditions, including whether the financial institution makes such

terms generally available to the public, and any attempts by the

covered employee to move the loan to a non-prohibited source. After

consideration of the request, the covered employee's supervisor and the

Ethics Counselor jointly may grant the waiver upon a finding that

renegotiation is not prohibited by law, and that the waiver does not

result in a loss of impartiality or objectivity or in misuse of the

employee's position. To be effective, the waiver must be in writing.

(d) Two-year prohibition on acceptance of credit from an FDIC-

insured depository institution. An FDIC employee shall not, directly or

indirectly, accept or become obligated on any extension of credit from

an FDIC-insured depository institution or its subsidiary for a period

of two years from the date of the employee's last personal and

substantial participation in an audit, resolution, liquidation,

assistance transactions, supervisory proceeding, or internal agency

deliberation affecting that particular institution, its predecessor or

successor, or any subsidiary of such institution. This prohibition does

not apply to credit obtained through the use of a

[[Page 70330]]

credit card or a residential real property loan secured by the

principal residence of the employee, subject to the same conditions,

limitations, disqualification, and waiver procedures applicable to

covered employees under paragraphs (c) and (e) of this section.

(e) Waiver. The Ethics Counselor may grant a written waiver from

any provision of this section based on a determination made with the

advice and legal clearance of the Legal Division that the waiver is not

inconsistent with part 2635 of this title or otherwise prohibited by

law, and that, under the particular circumstances, application of the

prohibition is not necessary to avoid the appearance of misuse of

position or loss of impartiality, or otherwise to ensure confidence in

the impartiality and objectivity with which the FDIC's programs are

administered. A waiver under this paragraph may impose appropriate

conditions, such as requiring execution of a written disqualification.

4. Section 3201.103 is revised to read as follows:

Sec. 3201.103 Prohibition on acquisition, ownership, or control of

securities of FDIC-insured depository institutions and certain holding

companies.

(a) Prohibition on acquisition, ownership, or control. Except as

provided in paragraph (b) of this section, no employee, spouse of an

employee, or minor child of an employee may acquire, own, or control,

directly or indirectly, a security of any of the following:

(1) A bank or savings association that is insured by the Federal

Deposit Insurance Corporation (FDIC);

(2) A bank holding company that is subject to supervision by the

Federal Reserve Board (FRB);

(3) A savings and loan holding company that is subject to

supervision by the Office of Thrift Supervision (OTS);

(4) A financial holding company that is subject to FRB supervision;

or

(5) A company that:

(i) Owns or controls an FDIC-insured bank or savings association;

(ii) Is neither an FRB-supervised bank holding company, an OTS-

supervised savings and loan holding company, nor an FRB-supervised

financial holding company; and

(iii) Is either primarily engaged in banking or not publicly traded

on a U.S. securities exchange.

(b) Exceptions. Notwithstanding the prohibitions of paragraph (a)

of this section, but subject to the limitations of paragraph (c) of

this section, an employee, or the spouse or minor child of an employee,

may do any or all of the following:

(1) Acquire, own, or control the securities of a unitary thrift

holding company (i.e., a savings and loan holding company that is

subject to OTS supervision but whose principal business is neither

banking nor activities closely related to banking);

(2) Own or control a security of an entity described in paragraph

(a) of this section if the security was permitted to be retained by the

employee under 12 CFR part 336 prior to May 25, 1995, was obtained

prior to commencement of employment with the Corporation, or was

acquired by a spouse prior to marriage to the employee;

(3) Own, or control a security of an entity described in paragraph

(a) of this section if:

(i) The security was acquired by inheritance, gift, stock-split,

involuntary stock dividend, merger, acquisition, or other change in

corporate ownership, exercise of preemptive right, or otherwise without

specific intent to acquire the security, or, by an employee's spouse or

minor child as part of a compensation package in connection with his or

her employment;

(ii) The employee makes full, written disclosure on FDIC form 2410/

07 to the Ethics Counselor within 30 days of the commencement of

employment or the acquisition of the interest; and

(iii) The employee is disqualified in accordance with 5 CFR part

2635, subpart D, from participating in any particular matter that

affects his or her financial interests, or that of his or her spouse or

minor child;

(4) Acquire, own, or control an interest in a publicly traded or

publicly available investment fund provided that, upon initial or

subsequent investment by the employee (excluding ordinary dividend

reinvestment), the fund does not have invested, or indicate in its

prospectus the intent to invest, more than 30 percent of its assets in

the securities of one or more entities described in paragraph (a) of

this section and the employee neither exercises control nor has the

ability to exercise control over the financial interests held in the

fund; and

(5) Use an FDIC-insured depository institution or an affiliate of

an FDIC-insured depository institution as custodian or trustee of

accounts containing tax-deferred retirement funds.

(c) Divestiture. Based upon a determination of substantial conflict

under 5 CFR 2635.403(b), the Ethics Counselor may require an employee,

or the spouse or minor child of an employee, to divest a security he or

she is otherwise authorized to acquire, own, control, or use under

paragraph (b) of this section.

(d) Waiver. The Ethics Counselor may grant a written waiver from

any provision of this section based on a determination made with the

advice and legal clearance of the Legal Division that the waiver is not

inconsistent with part 2635 of this title or otherwise prohibited by

law, and that, under the particular circumstances, application of the

prohibition is not necessary to avoid the appearance of misuse of

position or loss of impartiality, or otherwise to ensure confidence in

the impartiality and objectivity with which the FDIC's programs are

administered. A waiver under this paragraph may impose appropriate

conditions, such as requiring execution of a written disqualification.

By order of the Board of Directors.

Dated at Washington, DC, this 6th day of October, 2005.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Executive Secretary.

Approved: November 27th, 2006.

Robert I. Cusick,

Director, Office of Government Ethics.

[FR Doc. E6-20400 Filed 11-28-06; 4:06 pm]

BILLING CODE 6714-01-P

 


Last Updated 12/04/2006 Regs@fdic.gov