[Federal Register: October 9, 1997 (Volume 62, Number 196)]
[Proposed Rules]
[Page 52809-52868]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr09oc97-18]
[[Page 52809]]
_______________________________________________________________________
Part II
Federal Deposit Insurance Corporation
_______________________________________________________________________
12 CFR Parts 303, 337, et al.
Practice and Procedure: Golden Parachute and Indemnification Payments;
Proposed Rule
Deposit Insurance Applications; Notice
Bank Merger Transactions; Notice
Domestic Branch Establishment Applications; Notice
Main Office or Branch Relocation Applications; Notice
Liability of Commonly Controlled Depository Institutions; Notice
[[Page 52810]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 303, 337, 341, 346, 348, and 359
RIN 3064-AC02
Applications, Requests, Submittals, Delegations of Authority, and
Notices Required To Be Filed by Statute or Regulation; Unsafe and
Unsound Banking Practices; Registration of Transfer Agents; Foreign
Banks; Management Official Interlocks; Golden Parachute and
Indemnification Payments
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Proposed rule.
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SUMMARY: The FDIC is proposing to amend its regulations governing
application, notice and request procedures and delegations of authority
by streamlining, modernizing and clarifying current policies and
practices. Specifically, the FDIC proposes to offer qualifying well-
capitalized and well-managed insured depository institutions and their
holding companies expedited review procedures for several major types
of filings, including deposit insurance, merger and branch
applications. The agency also proposes to centralize substantially all
filing procedures found throughout its rules within the regulation for
ease of reference. Furthermore, the FDIC proposes to reorganize the
requirements for each major application or notice type into a separate
regulatory subpart that will contain all information necessary to
submit a filing to the agency, as well as any relevant internal agency
delegations of authority to approve or deny submissions. In addition,
the agency is incorporating statutory changes to its application
procedures made by the Economic Growth and Regulatory Paperwork
Reduction Act of 1996. Finally, the FDIC is proposing technical
amendments to related regulations to conform these changes.
This action is being taken in accordance with section 303(a) of the
Riegle Community Development and Regulatory Improvement Act of 1994
which requires the federal banking agencies to review and streamline
their regulations and policies in order to improve efficiency, reduce
unnecessary costs, eliminate unwarranted constraints on credit
availability, and remove inconsistencies and outmoded and duplicative
requirements.
The proposal seeks to reduce burden on insured depository
institutions by imposing regulatory requirements only where needed to
address safety and soundness concerns or accomplish other statutory
responsibilities of the FDIC. The proposed rule also strives to more
closely align the FDIC's application processing regulations with those
of the other federal banking agencies.
DATES: Comments must be received by January 7, 1998.
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 17th Street
building (located on F Street), on business days between 7 a.m. and 5
p.m. (Fax number (202) 898-3838; Internet address: comments@fdic.gov).
Comments 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: Division of Supervision: Cary H.
Hiner, Associate Director, (202) 898-6814; Jesse G. Snyder, Assistant
Director, (202) 898-6915; Mark S. Schmidt, Assistant Director, (202)
898-6918. Division of Compliance and Consumer Affairs: Steven D.
Fritts, Associate Director, (202) 942-3454, and Louise N. Kotoshirodo,
Review Examiner, (202) 942-3599. Legal Division: Susan van den Toorn,
Counsel, Regulation and Legislation Section, (202) 898-8707, and Nancy
Schucker Recchia, Counsel, Regulation and Legislation Section, (202)
898-8885. For administrative enforcement issues: Grovetta N. Gardineer,
Counsel, Compliance and Enforcement Section, (202) 736-0665, and Philip
P. Houle, Counsel, Compliance and Enforcement Section, (202) 736-0758.
For foreign bank activities (Subpart J): Jamey G. Basham, Counsel,
Regulation and Legislation Section, Legal Division (202) 898-7265, and
Christie A. Sciacca, Assistant Director, Division of Supervision (202)
898-3671, Federal Deposit Insurance Corporation, 550 17th Street, NW.,
Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Part 303 of the FDIC's regulations (12 CFR part 303) generally
describes the procedures to be followed by both the FDIC and applicants
with respect to applications, notices, or requests required to be filed
by statute or regulation. Additional information concerning processing
is contained in related FDIC statements of policy. Part 303 also sets
forth delegations of authority from the FDIC's Board of Directors to
the Directors of the Division of Supervision (DOS), the Division of
Compliance and Consumer Affairs (DCA), the General Counsel of the Legal
Division, the Executive Secretary, and, in some cases, their designees
to act on certain applications, notices, requests, and enforcement
matters.
The FDIC is proposing comprehensive revisions to part 303 as part
of a systematic review of its regulations and policy statements
undertaken in accordance with section 303(a) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (CDRIA) (12 U.S.C.
4803(a)). Section 303(a) of CDRIA requires the FDIC, the Office of the
Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, and the Office of Thrift Supervision (federal banking
agencies) to streamline and modify their regulations and written
policies in order to improve efficiency, reduce unnecessary costs, and
eliminate unwarranted constraints on credit availability. The statute
also requires each of the federal banking agencies to remove
inconsistencies and outmoded and duplicative requirements from their
regulations and written policies.
To initiate its CDRIA review, the FDIC published in the Federal
Register a notice soliciting comment on its regulations and written
policies. 60 FR 62345, December 6, 1995. In response to that request,
the FDIC received four comments regarding part 303 and one comment
concerning a related policy statement.
One commenter wrote that electronic filing of various reports and
documents has the potential to reduce burden arising from compliance
with filing requirements. In particular, the commenter noted that other
governmental agencies already have recognized the benefits of
electronic filing and that certain application procedures, such as
applications to establish or relocate an office and applications
relating to mergers are well-suited for electronic filing. The FDIC is
working the other federal banking agencies in an attempt to adopt
uniform filing forms for common applications and to have such forms
filed electronically where possible.
Another commenter suggested that with regard to applications by
insured state nonmember banks to establish a branch, move its main
office, or relocate a branch pursuant to Sec. 303.2(c), the regulations
should reduce the regulatory burden of setting up shared automated
teller machines (ATMs). Applications are no longer required for ATMs
and
[[Page 52811]]
remote service units (RSUs) as a result of section 2205 of the Economic
Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) (Pub. L.
104-208, 110 Stat. 3009), which excluded ATMs and RSUs from the
definition of a ``domestic branch'' under section 3(o) of the FDI Act
(12 U.S.C. 1831(o)). Therefore, the definition of ``branch'' in
proposed Sec. 303.41 excludes ATMs and RSUs.
With regard to section 32 notices (change in director or senior
executive officer), a commenter suggested that exceptions be carved out
for two of the three statutory triggering events. Section 32 of the
Federal Deposit Insurance Act (FDI Act) required prior notice from a
depository institution or holding company that (1) was chartered less
than two years; (2) had undergone a change in control within the
preceding two years; or (3) was not in compliance with minimum capital
requirements or was otherwise in ``troubled condition.'' Section 2209
of EGRPRA subsequently amended section 32 by eliminating the prior
notice requirement for institutions and holding companies that are
chartered for less than two years or that have undergone a change in
control within the preceding two years. However, institutions and
holding companies that are not in compliance with minimum capital
requirements or are otherwise in ``troubled condition'' remain subject
to the prior notice requirement. As a result, this comment has been
rendered moot.
One commenter questioned why current Sec. 303.2(a)(4) includes a
requirement that an application by an insured state nonmember bank to
establish a branch, move its main office or relocate a branch contain a
statement as to whether or not the site is included in or is eligible
for inclusion in the National Register of Historic Places, including
evidence that clearance has been obtained from the State Historic
Preservation Officer (SHPO). As a federal agency, the FDIC is subject
to the National Historic Preservation Act (NHPA) (16 U.S.C. 470 et
seq.) which creates a mandatory review and consultation process for
Federal undertakings that may affect properties included in or eligible
for inclusion in the National Register of Historic Places maintained by
the Secretary of the Interior. In order to comply with NHPA, the FDIC
currently requests applicants to state whether the site is included in,
or eligible for inclusion in the National Register and to provide
evidence that clearance has been obtained from the SHPO. See 12 CFR
Sec. 303.2(a)(4). However, the proposed filing procedures at
Sec. 303.42(b)(5) modify the current requirements to provide that
applicants submit a statement that clearance has been or will be
obtained from the SHPO. In addition, the FDIC is undertaking a review
of its statement of policy on the National Historic Preservation Act of
1966 as part of the CDRIA review process and is exploring the
possibility of entering into a programmatic agreement with the Advisory
Council on Historic Preservation which would greatly streamline the
historic preservation review process, especially for those applications
which do not involve a historic site. The FDIC expects to issue a
revised statement of policy on NHPA in 1998.
Finally, the comment received on the FDIC's written policies
concerned the statement of policy on Applications for Deposit
Insurance. Discussion of the comment is contained in the revised
statement of policy on Applications for Deposit Insurance published
elsewhere in today's Federal Register.
The proposed revisions to part 303 seek to reduce regulatory burden
on insured depository institutions, particularly upon state nonmember
banks supervised by the FDIC. The proposed rule also strives to more
closely align the FDIC's application processing regulations with those
of the other federal banking agencies. Furthermore, the proposal
reflects changes to the FDIC's application procedures made by EGRPRA.
II. Discussion
The proposed regulation meets the goals of section 303(a) of CDRIA
in several important ways.
<bullet> New expedited processing procedures have been introduced
for six application types which represent the majority of all filings
(applications for deposit insurance, mergers, branches, consent to
exercise trust powers, retirement of capital, and certain foreign
banking activities).
During the first six months of 1997, the FDIC acted on 1615
applications, notices and requests. Approximately 1500 or 93 percent of
these filings were of the type for which expedited processing or notice
procedures would be available under this proposal. Under present
regulations, only 130 of the filings acted upon during the first six
months of 1997 actually took the form of notices with clear time frames
for regulatory action. In addition to reducing processing time for
filings submitted by well managed and well capitalized banks, the
proposed expedited procedures will add more certainty to the timing of
regulatory decision. This new approach will allow the FDIC to focus its
resources on applications that do not fall within the new expedited
review procedure and are therefore more likely to present safety and
soundness risks or raise CRA or compliance concerns.
<bullet> The processing of some applications has been structured to
act like notices. For example, applications to establish a branch or to
relocate a main office or branch processed under expedited procedures
will generally be deemed approved 21 days after receipt of a
substantially complete application. Branch related applications
represented more than 50 percent of all applications acted upon by the
FDIC in the first six months of 1997.
<bullet> Regulations and guidelines issued by the federal banking
agencies implementing common statutes have been made more uniform. This
is particularly true for filings regarding mergers, changes in bank
control, and changes in director or senior executive officer.
<bullet> Filing contents have been clarified and streamlined
wherever practical. Examples include applications for a merger which
qualifies as a corporate reorganization, a temporary office in an
emergency or disaster situation, applications for deposit insurance for
an interim institution in connection with a related merger transaction,
and applications for continuation for deposit insurance by a state bank
withdrawing from the Federal Reserve System.
<bullet> The procedural requirements for virtually all applications
and notices have been centralized in part 303. Subpart A of the
proposed regulation contains the general rules applicable to all
filings. Each subpart that follows contains all of the procedural
requirements for a particular application type. For example, subpart C
on branching contains definitions applicable to that subpart, filing
procedures, processing procedures, public notice provisions and
delegations of authority. Subpart M contains miscellaneous filings that
do not merit separate subparts. Subpart N contains all administrative
enforcement action delegations.
<bullet> Delegations of authority from the FDIC's Board of
Directors to the Directors of DOS, DCA, the General Counsel of the
Legal Division, and the Executive Secretary to act on certain
applications, notices, requests, and enforcement matters have been
reviewed and updated.
<bullet> Duplicative and outdated material has been deleted from
existing part 303. An example is eliminating application procedures for
the establishment or relocation of a remote service facility,
[[Page 52812]]
which is no longer required pursuant to section 2205 of EGRPRA.
Concurrently with this proposal to amend part 303, the FDIC is
publishing elsewhere in today's Federal Register two revised statements
of policy on Applications for Deposit Insurance and Bank Merger
Transactions for comment. The FDIC is also proposing elsewhere in
today's Federal Register to rescind its statements of policy on
Applications to Establish a Domestic Branch and Applications to
Relocate Main Office or Branch, and to amend its statement of policy on
Liability of Commonly Controlled Depository Institutions. The latter
policy statement is being amended to move the application procedures to
request a waiver of cross-guaranty liability from the policy statement
to proposed part 303. It is recommended that interested parties read
those policy statements in conjunction with the proposed regulatory
text of part 303 and submit combined comments to the agency, if
practicable.
In addition, the FDIC has already rescinded the following policy
statements related to part 303 as unnecessary or duplicative:
<bullet> Changes in Control in Insured State Nonmember Banks (62 FR
24927, May 7, 1997)
<bullet> Applications, Legal Fees, and Other Expenses (62 FR 15479,
April 1, 1997)
<bullet> Eligibility to Make Application to Become an Insured Bank
Under Section 5 of the Federal Deposit Insurance Act (62 FR 15706,
April 2, 1997)
The FDIC rescinded the first two statements of policy because any
necessary substantive information contained in them has been moved to
the proposed regulation or other policy statements. The third statement
of policy was rescinded because the analysis was based on a provision
of the FDI Act that was repealed by the Federal Deposit Insurance
Corporation Improvement Act of 1991 (Pub. L. 102-242, 105 Stat. 2236).
III. Proposed Rule
The discussion below identifies and explains significant proposed
changes to part 303. The FDIC requests general comments on all aspects
of the proposed regulation as well as specific comments on certain
issues as noted throughout the preamble. To aid the reader, a
derivation table follows the preamble which relates the sections of
proposed part 303 to current part 303, as well as other sections of the
FDIC regulations which are being relocated to part 303.
A. Subpart A--Rules of General Applicability
Subpart A of part 303 clarifies and simplifies the rules generally
applicable to processing of applications, notices and requests
(filings) required by regulation or statute by reorganizing the
definitions and general rules of procedure currently found in
Sec. 303.0 and Sec. 303.6, respectively, into one subpart. Subpart A
also explains the availability of expedited processing for an
``eligible depository institution'' (defined in proposed Sec. 303.2(r))
and the criteria under which the FDIC may remove a filing from
expedited processing. Further, subpart A contains general principles
governing delegations of authority from the Board of Directors to
certain FDIC officials, most of which are currently contained in
Sec. 303.10(a) and Sec. 303.11 (a) and (b).
The availability of expedited procedures for several major types of
filings (deposit insurance, branches, and mergers) as well as some
other filings (for example, consent to exercise trust powers and
reduce/retire capital stock or capital debt instruments) will reduce
burden upon the banking industry by enabling banks and thrifts to
undertake corporate activities more quickly. Expedited processing will
also introduce more certainty into the application process for both
applicants and interested parties by establishing fixed timeframes for
decision and receipt of comment letters. Furthermore, centralizing in
one subpart general information that was previously scattered
throughout part 303 will make part 303 much easier to use for the
public, bankers, attorneys and regulators.
In addition to reorganizing existing regulatory text into one
subpart, subpart A also updates terminology, streamlines procedures,
and reflects current FDIC policies and practices.
Definitions. Subpart A alphabetizes the definitions currently set
forth in Sec. 303.0 and adds several new definitions.
New definitions of ``applicant'' and ``filing'' were added for ease
of drafting regulatory text and to add clarity and consistency.
``Applicant'' is intended to replace the terms ``insured depository
institution,'' ``state nonmember bank'' or ``individual'' where they
appear throughout part 303. The scope section of each subpart will
explain whether particular filing procedures are applicable to all
insured depository institutions or only to state nonmember banks. The
term ``filing'' is intended to provide a convenient way to collectively
refer to applications, notices, or requests, where appropriate
throughout part 303. New definitions were also added for
``application'' and ``notice'' to clarify the distinctions between
those types of filings.
A definition of ``insider'' was added to avoid duplication in
several subparts. The current definition of ``protest'' found in
Sec. 303.0(b)(30) has been replaced with three terms (``comment,''
``adverse comment,'' and ``CRA protest'') to distinguish among the
types of comments that DOS and DCA may receive in connection with a
pending filing. The term ``deputy director'' has been defined to
include deputy directors of both DOS and DCA to reflect those
positions. Also, a definition has been added for ``General Counsel'' of
the FDIC. Further, the various types of Section 8 enforcement orders
have been grouped under one category ``Section 8 orders''.
A new definition of ``eligible depository institution'' has been
added to establish criteria that institutions must meet to qualify for
expedited processing, as discussed below.
Definitions of ``Associate General Counsel for Compliance and
Enforcement,'' ``regional manager,'' and ``remote service facility''
are being removed as obsolete or no longer necessary.
Expedited processing. Subpart A sets forth the general procedures
for expedited processing, for which only an eligible depository
institution qualifies. Proposed Sec. 303.2(r) of subpart A defines the
term ``eligible depository institution'' as a depository institution
that meets the following five criteria: (1) Received an FDIC-assigned
composite Uniform Financial Institutions Rating System (UFIRS) rating
of 1 or 2 as a result of its most recent federal or state examination;
\1\ (2) received at least a satisfactory CRA rating from its primary
federal regulator at its last examination; (3) received a compliance
rating of 1 or 2 from its primary federal regulator at its last
examination; (4) is well-capitalized; and (5) is not subject to any
corrective or supervisory order or agreement. Although an institution
must have a satisfactory or better CRA rating in order to qualify for
expedited processing for any filing, the CRA performance of an
institution will serve as a basis for decision only in connection with
``applications for a deposit facility'' as required by section 2903(2)
of the Community Reinvestment Act (12 U.S.C. 2903(2)). Proposed
Sec. 303.5 sets
[[Page 52813]]
forth those relevant filings for which an institution's CRA record will
be taken into account (deposit insurance, mergers, and establishment or
relocation of a branch or main office, including the relocation of an
insured branch of a foreign bank). The FDIC believes that these five
criteria for eligibility are appropriate to ensure that only well-
capitalized, well-managed institutions that do not present any
supervisory, compliance or CRA concerns receive expedited processing.
The FDIC specifically requests comment on whether these standards for
eligibility are appropriate.
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\1\ An FDIC-assigned composite UFIRS rating may be based on the
FDIC's own examination, or based on the review of examination
reports prepared by state banking authorities or the other federal
banking agencies.
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It should be noted that the FDIC recently issued two proposed rules
for comment which would revise and consolidate its international
banking regulations (12 CFR part 347) and regulations governing the
activities and investments of insured state banks and savings
associations (12 CFR part 362). 62 FR 37748, July 16, 1997; 62 FR
47969, Sept. 12, 1997. These proposals also contain expedited
procedures and definitions of an ``eligible'' type of institution which
generally parallel proposed Sec. 303.2(r) of subpart A, but add two
additional criteria: (1) That the institution has been chartered and
operating for at least three years; and (2) that the institution
received a rating of 1 or 2 under the ``management'' component rating
of the UFIRS at its most recent examination. The additional criteria
may be appropriate in connection with the part 347 and 362 proposals to
the extent that the eligibility criteria govern substantive issues
beyond the question of whether an application should receive expedited
processing. The FDIC will evaluate the necessity of the additional
criteria in the context of parts 347 and 362 as it goes forward with
those rulemakings.
Under Sec. 303.11(c) of the proposed rule, expedited processing
will be automatically given to institutions meeting the definition of
an ``eligible depository institution'' (with a few exceptions where
other conditions apply) upon determination by the appropriate regional
director (DOS). Therefore, an applicant need not request expedited
processing or even identify itself as an eligible institution. A filing
may be removed from expedited processing pursuant to proposed
Sec. 303.11(c)(2) if: (1) For filings subject to public notice, an
adverse comment is received that warrants additional investigation or
review; (2) for filings subject to evaluation of CRA performance, a CRA
protest is received that warrants additional investigation or review,
or the appropriate regional director (DCA) determines that the filing
presents a significant CRA or compliance concern; (3) for any filing,
the appropriate regional director (DOS) determines that the filing
presents a significant supervisory concern, or raises a significant
legal or policy issue; or (4) for any filing, the appropriate regional
director (DOS) determines that other good cause exists for removal. If
a filing is removed from expedited processing, the applicant will be
promptly informed in writing of the reason. For filings which the
appropriate regional director has not been delegated authority to
approve, the filing will generally be removed from expedited
processing.
Computation of time. Previously, part 303 simply contained a cross-
reference to Sec. 308.12, which governs computation of time for
purposes of the FDIC's rules of administrative procedure. The proposed
rule clarifies that the FDIC uses a calendar day rule and begins
computing the relevant period on the day after an event occurs (for
example, the day after receipt of a filing or newspaper publication).
Effect of CRA performance on filings. This new section clearly
states that CRA performance will be considered in connection with
applications to establish a domestic branch or relocate a domestic
branch or main office, merger applications, and deposit insurance
applications, and clarifies that CRA applies to applications to
relocate an insured branch of a foreign bank. Although this information
is currently contained in part 345 (Community Reinvestment Act), the
FDIC believes that an explicit statement concerning the filings covered
by CRA better serves the public and the banking industry than providing
a cross-reference.
Public notice. Current Sec. 303.6(f)(4) reproduces a notice that
institutions are required to use when publishing notice of a filing in
a local newspaper. Under Sec. 303.7(c) of the proposed rule, applicants
are offered the choice of a sample notice or a list of contents which
may be used to draft a notice tailored to the needs of the institution.
This choice is designed to reduce burden on the banking industry by
providing more flexibility.
Proposed Sec. 303.7(b) adds a new provision requiring confirmation
of publication. Promptly after publication, the applicant must mail or
otherwise deliver a copy of the newspaper notice to the appropriate
regional director (DOS). This is designed to avoid possible delays in
processing if a defective notice is discovered.
Proposed Sec. 303.7(d) reduces burden by providing that an
applicant may publish a single public notice for multiple transactions
provided that the notice includes an explanation of how the
transactions are related and states the closing date of the longest
public comment period that will apply. Further, Sec. 303.7(e) of the
proposed rule states that the FDIC may accept the publication of a
single joint notice containing information required by both the FDIC
and another federal banking agency or state banking authority provided
that the notice states that comments must be submitted to both
agencies.
Public comments. Current Sec. 303.6(f)(3) permits interested
parties to comment upon a pending filing until the date of final
disposition. Proposed Sec. 303.9(a) provides that comments would be
accepted only during a defined comment period in order to add certainty
to the filing process for both the public and the applicant. Closing
the comment period on a date certain eliminates the risk of final
action being delayed due to a late comment or of final action being
taken while a comment is in the process of being transmitted to the
FDIC.
In order to provide the public with adequate time to submit
meaningful comments, proposed Sec. 303.9(b)(2) grants the appropriate
regional director (DOS) three bases upon which to extend or reopen the
public comment period: (1) If the applicant fails to file all required
information on a timely basis to permit review by the public or makes a
request for confidential treatment not granted by the FDIC that delays
the public availability of that information; (2) if any person
requesting an extension of time satisfactorily demonstrates to the FDIC
that additional time is necessary to develop factual information that
may materially affect the application; or (3) for good cause. Good
cause is currently the only basis for extension of the comment period
under Sec. 303.6(f)(3).
Further, proposed Sec. 303.9(b)(4) clarifies that the FDIC will
provide copies of all comments to the applicant and that the applicant
will be given an opportunity to respond.
Hearings and other meetings. Proposed Sec. 303.10 simplifies the
current rules concerning hearing procedures contained in Sec. 303.6
(h), (i), and (j) and updates those provisions to reflect current FDIC
practices.
Decisions on filings. Proposed Sec. 303.11 sets forth new
provisions concerning multiple transactions, abandonment of filings,
and nullification of decisions. With regard to multiple transactions,
if all related transactions have been granted expedited processing,
then the longest
[[Page 52814]]
expedited processing time will govern for all transactions. The
proposed rule also codifies current FDIC practice concerning
abandonment of filings. If an applicant does not provide additional
information requested by the FDIC within the time period specified, the
FDIC may notify the applicant that the filing has been deemed abandoned
and processing has been discontinued. The proposal also contains three
nullification provisions. The FDIC may nullify a decision on a filing
if: (1) The agency becomes aware of any material misrepresentation or
omission after rendering a decision; (2) the agency is not informed by
the applicant of a subsequent material change in circumstances prior to
rendering a decision; or (3) the decision is contrary to law,
regulation, or FDIC policy, or granted due to clerical or
administrative error, or a material mistake of law or fact. The FDIC
believes these provisions are useful additions to part 303.
Appeals and petitions for reconsideration. Current Sec. 303.6(e)
contains the FDIC's procedures governing petitions for reconsideration
of a denied filing. Proposed Sec. 303.11(f) would clarify that these
procedures cover only requests for reconsideration of filings that do
not otherwise have appeal procedures provided by other regulation or
written guidance, and that decisions to deny a hearing request are
nonappealable.
As proposed, Sec. 303.11(f)(2) provides that within 15 days of
receipt of notice from the FDIC that its filing has been denied, an
applicant may file a petition with the appropriate regional director
containing either a resolution of the board of directors of the
applicant authorizing filing, if the applicant is a corporation or
other entity, or a letter signed by the individual(s) filing the
petition, if the applicant is not a corporation or other entity. As
under the existing rule, the filing must contain substantive
information that for good cause was not previously set forth in the
filing and specific reasons why the FDIC should reconsider its prior
decision.
A regional director or deputy regional director (DOS or DCA) may
approve, but not deny, a petition for reconsideration. However, the
Director or Deputy Director (DOS or DCA) may approve or deny a
petition. If the petition is granted, the filing will be reconsidered
by the Board of Directors if the filing was originally denied by the
Board of Directors or denied by the Director, Deputy Director, or an
associate director (DOS or DCA). The Director or Deputy Director (DOS
or DCA) will reconsider the filing if the filing was originally denied
by a regional director or deputy regional director. Proposed
Sec. 303.11(f) also clarifies that a decision on a petition for
reconsideration by the Director or Deputy Director (DOS or DCA) is a
final agency decision and is not appealable to the Board of Directors.
The FDIC specifically seeks comment on its new petition for
reconsideration procedures, which are designed to provide a more
objective review. It should be noted that the FDIC has separate appeal
procedures regarding material supervisory determinations such as
examination ratings, material disputed asset classifications,
determinations regarding violations of laws and regulations, etc. which
were published in the Federal Register on March 25, 1995. 60 FR 15923.
In addition, procedures for requesting a review of assessment risk
classification and for revision of computation of quarterly assessment
payments are contained in part 327. Therefore, proposed Sec. 303.11(f)
applies only to filings as that term is defined in part 303.
General delegations of authority. Proposed Sec. 303.12 contains the
general principles governing delegations of authority from the Board of
Directors to FDIC officials. Some, but not all, of these principles are
currently contained in Secs. 303.10(a) and 303.11 (a) and (b). This
proposed section states that the Board does not delegate its authority
regarding matters covered in the FDIC's regulations unless such a
delegation is specifically made. However, in matters where the Board
has neither specifically delegated nor retained authority, FDIC
officials may take action with respect to matters which generally
involve conditions or circumstances requiring prompt action to protect
the interests of the FDIC and to achieve flexibility and expedition in
the exercise of FDIC functions under part 303. Delegations are to be
broadly construed in favor of the existence of authority in FDIC
officials who act under delegated authority, and any exercise of
delegated authority by an official is conclusive evidence of that
official's authority. The purpose of this broad construction is to
promote the efficient operation of the FDIC, to allow the public to
rely on actions of FDIC officials, and to discourage frivolous
challenges to the exercise of delegated authority.
Delegations of authority to DOS and DCA officials. Proposed
Sec. 303.13 contains delegations of authority to DOS and DCA officials
to enable them to carry out the FDIC's applications function.
Where a CRA protest is filed and remains unresolved, proposed
Sec. 303.13(a) delegates authority to the regional director or deputy
regional director (DCA) to concur that approval of any filing subject
to CRA is consistent with the purposes of CRA. Previously, receipt of a
CRA protest caused a filing to be forwarded to Washington for review.
This change in policy is expected to improve and expedite decision
making by placing it closer to the source.
For purposes of determining when to commence processing of a
filing, proposed Sec. 303.13(b) delegates authority to DOS officials to
determine whether a filing is substantially complete. This provision
also is intended to clarify that the standard to initiate the
processing period is the receipt of a substantially complete filing.
Proposed Sec. 303.13(c) contains a delegation of authority
permitting DOS officials to enter into memoranda of agreement pursuant
to regulations of the Advisory Council on Historic Preservation which
implement the National Historic Preservation Act (NHPA). This provision
is currently found in Sec. 303.8(g) of the FDIC's regulations and
facilitates the agency's ability to comply with NHPA.
B. Subpart B--Deposit Insurance
Since passage of the Federal Deposit Insurance Corporation
Improvement Act of 1991 (Pub. L. 102-242, 105 Stat. 2236), all proposed
depository institutions or existing noninsured depository institutions
that desire federal deposit insurance have been required to apply to
the FDIC. This includes all nationally chartered banks, state or
federally chartered savings associations, and state chartered banks,
including state member banks.
Subpart B reorganizes and clarifies the filing and processing
procedures for an applicant to follow in applying for deposit insurance
for a proposed or existing noninsured depository institution, for an
interim depository institution (when required), and for continuation of
deposit insurance for a state bank upon withdrawing from membership in
the Federal Reserve System. The proposal updates the regulation to
reflect current statutory requirements and current FDIC policy for
processing such applications. Subpart B also sets forth the delegations
of authority and criteria under which DOS may approve such
applications. The proposed rule should be read in conjunction with the
FDIC's revised policy statement on Applications for Deposit Insurance
found elsewhere in today's Federal Register. Substantive changes to the
regulatory text are discussed below.
[[Page 52815]]
Expedited processing. Under expedited processing, an application
for deposit insurance for a proposed depository institution which will
be a subsidiary of an ``eligible depository institution'' or an
``eligible holding company'' will be processed within 60 days of
receipt of a substantially complete application or 20 days after
publication, whichever is later. Currently, deposit insurance
applications are processed within 120 days. See FDIC Financial
Institutions Letter 26-96 dated May 6, 1996. An eligible depository
institution is defined in proposed Sec. 303.2(r). An eligible holding
company is defined in proposed Sec. 303.22(a) as a bank or thrift
holding company which has consolidated assets of $150 million or more;
has an assigned composite rating of 2 or better; and has at least 75
percent of its consolidated depository institution assets in eligible
depository institutions. If the FDIC does not act within the expedited
processing period, it does not constitute an automatic or default
approval. Public comment is invited on the definition of eligible
holding company and the time frame for processing applications for
deposit insurance under expedited review.
Public notice and comment period. Current regulations state that
notice shall be published on the date the application is mailed or
delivered to the regional director or not more than 30 days prior to
that date. Under proposed Sec. 303.23(a), notice would be published as
close as practicable to the filing date but not more than five days
before the filing date. This provides assurance that the public portion
of the application file will be available for inspection during the
comment period.
Currently, the notice informs the public that comments may be filed
with the regional director at any time before processing of the
application has been completed and that processing will not be
completed earlier than the 15th day following either the date of
publication or date of receipt of the application, whichever is later.
Proposed Sec. 303.23(a) would require that interested parties file
comments with the regional director on or before the 15th day following
the date of publication. Closing the comment period eliminates the risk
of final action being delayed due to a late comment or of final action
being taken while a comment is in the mail to the FDIC. The proposed
15-day comment period is considered adequate time for an interested
party to provide comments. Also, the regional director may extend or
reopen the comment period for good cause, such as when an interested
party cannot provide comments within the 15 days for reasons beyond the
party's control. Comment is invited on the adequacy of the 15 day
comment period, especially in light of the ability of regional
directors to extend or reopen the comment period under
Sec. 303.9(b)(2).
Application for deposit insurance for an interim depository
institution. An interim depository institution is defined in proposed
Sec. 303.24(a) as an institution formed or organized solely to
facilitate a merger transaction which will be reviewed by one of the
four federal banking agencies and that the institution will not open
for business. The filing will consist of a brief letter application and
a copy of the related merger transaction. Also, newspaper publication
requirements concerning the application for deposit insurance for an
interim is being eliminated as unnecessary since public notice would be
required for the merger transaction, which is considered to be the
primary transaction. It is anticipated that the FDIC will consult with
the federal banking agency reviewing the merger application and that
final action on the deposit insurance application will be taken within
21 days after receipt of a substantially complete application. If
additional review by the FDIC is warranted, the applicant will be so
advised in writing.
Continuation of deposit insurance upon withdrawing from membership
in the Federal Reserve System. Procedures are being simplified. Under
Sec. 303.25 of the proposal, the applicant would file a letter
application containing the information specified in the regulation,
including a new requirement that the application must contain a
statement by the bank's management that there are no current
outstanding or proposed corrective programs or supervisory agreements
with the Federal Reserve System. If such programs or agreements exist,
the application must contain a statement that the bank's board of
directors is willing to enter into a similar agreement with the FDIC
which would become effective upon the date of withdrawal from the
Federal Reserve System. The regional director would notify the
applicant in writing within 15 days of the date a substantially
complete application is received that deposit insurance will continue
upon termination of membership in the Federal Reserve System or that
additional review will be necessary. If additional review is warranted,
the regional director would inform the applicant in writing of the
reasons and inform the applicant that it will be notified in writing of
the FDIC's final decision regarding continuation of deposit insurance.
Upon further review, the regional director may approve the continuation
of deposit insurance or, if denial is deemed warranted, forward a
recommendation for action by the FDIC Board of Directors.
Other changes. Current Sec. 303.7(d)(1)(ii) lists a number of
specific criteria that must be met before delegated authority can be
exercised. The criteria relate to initial capitalization, legal fees
and other expenses, projected profitability, investment in fixed assets
and financial arrangements involving insiders, including stock
financing arrangements. These criteria, which have been updated to
reflect current policy, are discussed in the revised policy statement
on Applications for Deposit Insurance which is simply cross-referenced
in the proposed rule to avoid duplication.
Current Sec. 303.7(d)(1)(iii)(A) states that authority to approve
an application for deposit insurance may not be delegated to the
regional director or deputy regional director where a protest under the
Community Reinvestment Act (CRA) is filed. This provision is being
revised to permit approval of a CRA-protested application by the
regional director (DOS) or deputy regional director (DOS) where the
protest has been reviewed by DCA, the regional director (DCA) or deputy
regional director (DCA) concurs that approval is consistent with the
purposes of the CRA, and the applicant agrees in writing to any
conditions imposed regarding the CRA.
Section 303.7(d)(1)(iii)(B) of the current regulation states that
the authority to approve an application may not be delegated to a
regional director or deputy regional director where: (1) There is
direct or indirect financing by proposed directors, officers or 5
percent or more shareholders of more than 75 percent of the purchase
price of the stock subscribed by any one shareholder; (2) there is
aggregate financing of stock subscriptions in excess of 50 percent of
the total capital offered; or (3) warehoused or trusteed stock exceeds
10 percent of initial capital funds. This provision is being eliminated
because the revised policy statement contains a comprehensive
discussion of financing that the FDIC believes provides adequate
guidance. If proposed financing is not within the established
guidelines, the regional director will forward a recommendation to the
Director (DOS).
A new provision found at Sec. 303.26(d)(2) would permit DOS to
impose a condition which requires the maintenance of a leverage capital
ratio of at least 8 percent throughout the first three years of
operation of a depository institution while also providing an
[[Page 52816]]
adequate allowance for loan and lease losses. This clarifies the FDIC's
long-standing position that the minimum ratio of 8 percent is to be
maintained throughout the first three years of operation rather than
only requiring that the ratio be at least 8 percent at the end of the
third year of operation.
Under current Sec. 303.7(d)(2)(i), authority to approve
applications for deposit insurance by operating noninsured institutions
is delegated to the regional director (DOS) or deputy regional director
(DOS) only for those applicant institutions with total assets of less
than $250 million. There is no such restriction on the authority of the
Director or Deputy Director (DOS). Accordingly, this size limitation is
being eliminated from the proposed regulation.
Other minor changes are made within the subpart to facilitate
reorganization and clarification to produce a more concise and user-
friendly regulation.
C. Subpart C--Establishment and Relocation of Domestic Branches and
Offices
Subpart C reorganizes and clarifies the portion of part 303 that
implements section 18(d) of the FDI Act which requires insured state
nonmember banks to obtain the prior written consent of the FDIC in
order to establish a domestic branch, relocate the main office, or
relocate a branch. The most significant changes from the current
regulation are provisions implementing expedited processing for
eligible depository institutions, the addition of several new
definitions, and the exclusion of remote service units, including
automated teller machines and automated loan machines, from the
definition of a branch. As proposed, applications filed by eligible
depository institutions will be deemed approved 21 days after receipt
of a substantially complete application, or 5 days after the expiration
of the comment period, whichever is later. Additional technical
requirements regarding the expedited procedure apply to interstate
branch applications. The average processing time for branch
applications during the first six months of 1997 was 30 days. In
addition to expedited processing, the proposed subpart contains two
special provisions which provide further regulatory relief. One of
these provisions gives advance consent for the relocation of a branch
or main office in the event of a disaster or emergency and the other
provision allows the regional director to waive publication required in
the case of a redesignation of a main office and existing branch.
A section has also been added to allow the regional director (DOS)
to approve an application under this subpart that is the subject of an
unresolved CRA protest, provided the regional director (DCA) finds that
approval of the application would be consistent with the purposes of
CRA and the applicant agrees in writing to any nonstandard conditions
imposed regarding CRA. This provision is expected improve decision
making by placing it closer to the actual decision maker and avoiding
unnecessary delays. In addition, the subpart adds provisions which
implement relevant portions of the FDI Act regarding the establishment
of interstate branches and implements changes contained in section 2205
of EGRPRA.
Finally, as part of the systematic review of its written policies
pursuant to CDRIA, the FDIC is proposing elsewhere in today's Federal
Register to rescind its Statement of Policy of Applications to Relocate
a Main Office or Branch and Statement of Policy on Applications to
Establish a Domestic Branch. Both statements are considered obsolete
and unnecessary in view of the comprehensive approach taken in subpart
C.
Scope. Proposed Sec. 303.40 limits the scope of this subpart to
applications regarding the establishment of domestic branches, and the
relocation of a main office or domestic branch, including provisions
regarding interstate branching. Excluded from the scope of the subpart
are filings for the approval of the acquisition and establishment of
branches in connection with a bank merger transaction. Proposed
regulations for such filings are found in subpart D. The scope of the
subpart also does not include filings by insured branches of foreign
banks to relocate a branch or filings by state nonmember banks to
establish a foreign branch. Proposed regulations regarding foreign
banks and branches are contained in subpart J.
Interstate branching. The Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (Interstate Act) (Pub. L. 103-328, 108
Stat. 2338) became effective on September 29, 1994, and, among other
things, amended the FDI Act to establish a federal framework for
interstate branching effective June 1, 1997. Among the new interstate
branching authorities added by the Interstate Act are a provision
regarding the retention of branches after an interstate relocation of a
main office and a provision regarding interstate branching through de
novo branches.
Section 102(b)(3) of the Interstate Act adds a new paragraph (3) to
section 18(d) of the FDI Act that permits a state nonmember bank, after
the relocation of its main office to another state, to retain branches
in its former home state. Home state means the state by which a state
bank is chartered. This authority is, however, subject to certain
limitations. A bank relocating its main office from one state to
another may retain its branches in the original state only to the
extent that the bank would be authorized, as a bank chartered in the
new state, to establish or acquire those branches. As of June 1, 1997,
an out-of-state bank may establish branches in another state only if it
is authorized to establish such branches (i) as de novo branches under
section 18(d)(4)(A) of the FDI Act, (ii) as a result of an interstate
merger transaction under section 44 of the FDI Act, or (iii) as a
result of an emergency assisted transaction under section 13(f) or
13(k) of the FDI Act. In effect, this provision means that a state
nonmember bank can relocate its main office to another state and retain
its existing branches in the original state if it could, as a bank
chartered in the new state, establish those branches in the original
state. Therefore, if the bank were considered to be chartered in such
new state and could, with such other-state charter, establish those
branches in the original state by means of an interstate de novo branch
transaction, an interstate merger, or an emergency assisted
transaction, then it can retain those branches. Accordingly, the
proposed rule includes a requirement that an applicant seeking to
relocate its main office interstate indicate whether the applicant
intends to retain its existing home state branches.
Section 103(b) of the Interstate Act adds a new paragraph (4) to
section 18(d) of the FDI Act that permits, subject to certain
requirements and conditions, interstate branching through de novo
branches. Under this authority the FDIC may approve an application by a
state nonmember bank to establish and operate a de novo branch in a
state that is not the bank's home state and in which the bank does not
currently maintain a branch. In order to grant such approval, the FDIC
must: (i) Determine that the host state (the state in which the bank
seeks to establish a branch) has in effect a law that applies equally
to all banks and expressly permits all out-of-state banks to establish
de novo branches in such state, (ii) determine that the applicant has
complied with the host state's filing requirements and has submitted to
the host state a copy of the application it filed with the FDIC, (iii)
determine that
[[Page 52817]]
the applicant is adequately capitalized and will continue to be
adequately capitalized and adequately managed upon consummation of the
transaction, and (iv) take the applicant's CRA record into
consideration. Except for item (ii) in the foregoing listing, the FDIC
generally has the resources needed to make the determinations required.
Accordingly, among the application procedures included in this proposed
rule is the requirement that the applicant request that the host state
confirm in writing to the FDIC that the applicant has complied with the
host state's filing requirements and has submitted a copy of its
application with the FDIC to the host state supervisor.
Definitions. In Sec. 303.41 of the proposal, the FDIC has added
definitions for ``messenger service,'' ``mobile,'' ``temporary,'' and
``seasonal branches'' and, as noted above, ``de novo'' branches as well
as definitions of ``home state'' and ``host state'' . In an effort to
promote uniformity and increase the use of common terms, the
definitions used in this subpart are similar to those used by other
federal banking agencies.
With regard to the definition of ``branches,'' the proposed
regulation at Sec. 303.41(a) clarifies that remote service units,
including automated loan machines, are not branches. The exclusion of
automated teller machines and remote service units is a result of
statutory changes contained in section 2205 of EGRPRA.
The definition of ``messenger services'' in Sec. 303.41(a)(1)
provides that branch applications will be required only for those
messenger services operated by a bank or an affiliate that picks up and
delivers items relating to transactions between the bank and its
customer in which deposits are received, checks paid or money lent. A
messenger service established and operated by a non-affiliated third
party generally does not constitute a branch for purposes of this
subpart. Banks contracting with third parties for such services should
consult with the appropriate regional director (DOS) to determine if
the messenger service constitutes a branch.
Section 303.41(a)(2) defines ``mobile branch'' as a branch service
that does not have a permanent site and includes a vehicle that travels
to various public locations and enables the applicant bank to conduct
banking business with its customers. Because of the mobility inherent
in such branches, they may serve regularly scheduled locations or may
be open at irregular times and locations.
The definition of ``temporary branch'' contained in
Sec. 303.41(a)(3) clarifies that a bank may operate such a branch as a
public service such as during an emergency or disaster to provide
necessary banking services. A temporary branch can be approved for a
period not to exceed one year. Such a time period should provide
sufficient time for the applicant to restore appropriate services to
the community.
The definition of ``seasonal branch'' in Sec. 303.41(a)(4) provides
that such a branch operate at periodically recurring intervals, such as
during state fairs. This definition differs from the temporary branch
in that once an application is approved for a seasonal branch, the
applicant bank may return to that site on a recurring basis without the
need to reapply.
``Branch relocation'' is defined in Sec. 303.41(b) as a move within
the same immediate neighborhood of the existing branch that does not
substantially affect the nature of the business of the branch or the
customers of the branch. Moving a branch to another location outside
its immediate neighborhood is considered the establishment of a new
branch and the closing of an existing branch.
The proposed regulation at Sec. 303.41(c) defines a ``de novo
branch'' to mean a branch of a bank which is originally established by
the bank and which does not become a branch of such bank as a result of
the acquisition, conversion, merger, or consolidation of an insured
depository institution or a branch of an insured depository
institution.
Definitions are also proposed for ``home state'' and ``host state''
at Sec. 303.41 (d) and (e). A home state means the state by which the
bank is chartered and host state means a state, other than the home
state of the bank, in which the bank maintains, or seeks to establish
and maintain, a branch.
Filing procedures. The proposed regulation also changes various
application requirements. Changes address the timing of filing, the
submission of copies of the publication, the inclusion of the
geographic area in which a messenger service will operate, the
inclusion of the community or communities in which a mobile branch will
operate, and whether the mobile branch will serve various regularly
scheduled locations or be open at irregular times and locations.
As proposed in Sec. 303.42, an applicant must submit a letter
application on the date the notice required by proposed Sec. 303.44 is
published or within 5 days after the date of the last required
publication. Previously, applicants could file up to 30 days subsequent
to the first publication date. By filing applications 5 days after the
date of the last newspaper publication, banks are able to submit all
copies of the newspaper publications required by the proposed
regulation and the public will have the assurance that the application
will be on file during the comment period.
Proposed Sec. 303.42(b)(7) has been added to require applicants to
submit a copy of each newspaper publication in addition to providing
the date of publication and the name and address of the newspaper. In
the past, applicants have been required to immediately notify the FDIC
after the publication. Submitting a copy of the newspaper notice allows
FDIC to verify publication and the contents of the notice.
The proposed regulation at Sec. 303.42(b)(2) clarifies the filing
procedures for messenger services and mobile branches. Since messenger
services by their very nature are not serving a fixed location, the
designation of a specific site for operation is not practical. Rather
these types of branches will operate in defined geographic areas, such
as a neighborhood, city or county. By approving such applications on a
geographic area, banks will be able to operate freely without
reapplying for changes to schedules. Filings relative to mobile
branches however must disclose the community or communities to be
served and the intention to serve defined locations on a regular
schedule or to be open at varing times and locations. Knowledge of the
community or communities to be served assists the FDIC in determining
compliance with the applicable statutory and regulatory provisions
relating to branch filings. Applicants must, however, reapply when the
geographic area to be served changes.
Processing. Pursuant to proposed Sec. 303.43(a), the FDIC proposes
to expedite processing for eligible depository institutions. It is the
FDIC's intent to reduce regulatory burden for well-run, well-managed
institutions by providing expeditious approvals of routine applications
to establish a branch or to relocate the main office or branch.
Pursuant to expedited processing procedures contained in proposed
Sec. 303.11(c), an application submitted by an eligible depository
institution as defined in proposed Sec. 303.2(r) will be acknowledged
in writing by the FDIC and will receive expedited processing unless the
FDIC removes the application from expedited processing for any of the
reasons set forth in Sec. 303.11(c)(2). Section 303.43(a) provides that
the FDIC may remove an application from expedited processing at any
time before
[[Page 52818]]
the approval date and will promptly notify the applicant in writing of
the reason for such action. Absent such removal, an application
processed under expedited processing will be deemed approved on the
latest of the following: (1) The 21st day after receipt of a
substantially complete application by the FDIC, (2) the 5th day after
expiration of the comment period described in Sec. 303.44 of this
proposal, or (3) in the case of an application to establish and operate
a de novo branch in a state that is not the applicant's home state and
in which the applicant does not maintain a branch, the 5th day after
the FDIC receives from the host state confirmation that the applicant
has both complied with the filing requirements of the host state and
submitted a copy of the application with the FDIC to the host state
bank supervisor.
The automatic approval date for an application under expedited
procedures provides an applicant with a firm date by which its
application will be approved. Under the existing regulation, the FDIC
can approve applications immediately after expiration of the comment
period, but applications can also be approved much later.
For applicants not eligible for expedited processing, the FDIC will
provide the applicant with written notification of the final action
taken with regard to the particular application as soon as a decision
is rendered.
Public notice requirements. The proposed regulation at Sec. 303.44
generally would amend and clarify the publication requirements relating
to relocating a main office and establishing or relocating branch
offices. It also provides for a specific time frame in which comments
must be received.
The proposed section retains current newspaper publication
requirements contained in Sec. 303.6(f)(1)(ii) of the existing
regulation, except for relocation of branches which will now require
publication only in the community which the branch serves. A branch
relocation can only occur in the same immediate neighborhood; hence,
publication is needed in only one newspaper since it is likely that the
one newspaper will cover all of the affected community. In such cases,
the FDIC has deemed publication in the community in which the home
office is located unnecessary. Furthermore, a single publication is
consistent with the requirements of the other federal banking agencies.
Section 303.44(a) continues the existing requirement that for
applications to relocate a main office, publication must be made at
least once each week on the same day for two consecutive weeks.
Currently in Sec. 303.6, individuals may comment until processing
of the application is completed. In order to eliminate the uncertainty
regarding the close of the comment period, it is proposed that the
comment period be limited as specified in Sec. 303.44. Proposed
Sec. 303.44 provides that comments must be received by the appropriate
regional director (DOS) within 15 days of the date of the last
newspaper publication. Proposed Sec. 303.9 provides for extension or
reopening of the comment period in certain situations.
Special provisions. Section 303.45 of the proposed regulation adds
several new provisions regarding procedures for opening temporary
branches in emergency or disaster situations, re-designating a main
office, and providing for the expiration of approved applications.
The proposed regulation at Sec. 303.45(a) clarifies procedures
relating to establishing temporary branches in emergency or disaster
situations. The current regulation on branching contains no specific
guidance on this issue. The FDIC recognizes the need in limited
circumstances, such as emergency or disaster situations, where there
exists a clear public need to continue banking services, that
applicants may not be in a position to follow the normal application
procedures for relocation of a main office or branch. As a result, the
proposed regulation provides that in the case of an emergency or
disaster at a main office or branch which requires that an office be
immediately relocated to a temporary location, the applicant notify the
appropriate regional director (DOS) within 3 days of such temporary
location. In such limited cases, the FDIC will accept initial
notification by whatever means appropriate. The FDIC is making this
limited exception to allow for the public's need to have uninterrupted
access to banking services. Such prior consent to relocate the office
is appropriate because it may not always be possible for a bank to
comply with the normal application procedures for relocating a main
office or branch in such circumstances.
The proposal further provides that within 10 days of the temporary
relocation resulting from the emergency or disaster, the bank shall
submit a written filing to the appropriate regional director (DOS) that
identifies the nature of the emergency or disaster, specifies the
location of the temporary branch, and provides an estimate of the
duration the bank plans to operate the temporary branch. Finally,
depending on the particular circumstances, as part of the review
process, the appropriate regional director (DOS) may waive public
notice requirements.
Section 303.45(b) of the proposed regulation provides that in cases
where an applicant desires to designate an existing branch as its main
office and redesignate its main office as a branch, an application must
be submitted to relocate the main office and to establish or relocate a
branch, as appropriate. The appropriate regional director (DOS) may
waive the public notice requirements in instances where an application
presents no significant or novel policy, supervisory, CRA, compliance,
or legal concern. Such waiver will be granted only within the
applicant's home state.
With regard to the expiration of approvals, applications which have
been approved by the FDIC to establish branches and to relocate main
offices and branches currently have no expiration date. The FDIC
believes that approvals should not remain in effect indefinitely
because circumstances surrounding an application may change over time.
Therefore, proposed Sec. 303.45(c) provides that approval of an
application expires if a branch has not commenced business or if a
relocation has not been completed within 18 months of approval.
Delegation of authority. Section 303.46 of the proposed regulations
adds a delegation for the appropriate regional director to approve
interstate branches. Additionally, the proposed regulation provides for
a delegation to permit approval of a CRA-protested application by the
regional director (DOS) or deputy regional director (DOS) where the
protest has been reviewed by DCA, and the regional director (DCA) or
deputy regional director (DCA) concurs that approval is consistent with
the purposes of the CRA, and the applicant agrees in writing to any
conditions imposed regarding CRA.
New Sec. 303.46(c)(8) makes clear that the Board of Directors has
not delegated authority to approve a branch application by a bank which
the FDIC has determined is not reasonably helping to meet the credit
needs of the community served by the bank in a host state pursuant to
section 109 of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (12 U.S.C. 1835a).
The proposed regulation provides that appropriate regional
directors may exercise delegated authority to act on applications for
establishment of temporary branches or messenger services without a
favorable resolution of the statutory factors in section 6 of
[[Page 52819]]
the FDI Act. This delegation recognizes the limited nature of these
types of branches.
The proposed regulation eliminates an obsolete delegation of
authority relating to applications to establish and operate new
teller's windows, drive-in facilities, or any like office, as an
adjunct to the main office or branch (including offices not considered
branches under state law). Applications to establish a new teller's
window, drive-in facility, or any like offices are required when such a
facility is a branch office. If such facilities are extensions of
already approved main office and branches, no application to establish
the facility is necessary.
Other changes. Several other changes are proposed that affect the
new subpart C. These modifications involve changing the term ``move a
main office'' to ``relocate the main office,'' changing the term
``courier service'' to ``messenger service,'' and deleting provisions
relating to remote service facilities.
Public comment. In addition to seeking public comments on the above
revisions to subpart C associated with the establishment of branches
and relocation of branches and the main office, the FDIC also seeks
specific public comments on the following issues.
Comment period: Since the FDIC is proposing in Sec. 303.44(b) to
change from a comment period that was essentially open-ended in current
Sec. 303.6 to a specific time frame (i.e., 15 days), the FDIC seeks
comment on whether a 30-day comment period is more appropriate than the
proposed 15 days and if so, the reasons why 15 days would not be a
feasible period of time within which to submit comments.
Mobile branch applications: The FDIC is proposing that the
geographic location for a mobile branch be designated as to which
community or communities are to be served. The FDIC seeks comment on
whether such a designation is appropriate. The FDIC also seeks comment
on whether a new application should be required if a change is made in
the community or communities to be served.
D. Subpart D--Mergers
Subpart D covers transactions subject to FDIC approval under the
Bank Merger Act (12 U.S.C. 1828(c)). This includes mergers,
consolidations, and similar transactions involving insured depository
institutions (collectively, ``mergers''). This subpart gathers together
from various sections of part 303 the existing provisions governing
merger applications and reorganizes them to make the regulatory
requirements easier to understand. Substantive changes have been made
in processing procedures to reduce regulatory burden.
The principal changes proposed in subpart D include the addition of
an expedited processing procedure (proposed Sec. 303.64(a)); the
modification and centralization of various definitions applicable to
merger transactions, such as replacement of the term ``phantom merger''
used only by the FDIC with the more commonly-used ``interim merger''
(proposed Sec. 303.61(c)); and the addition of references to other
statutory or regulatory provisions often applicable to merger
transactions. These references, included at Sec. 303.62(b), are to the
interstate merger provisions of section 44 of the FDI Act (12 U.S.C.
1831u), applications for deposit insurance, insurance fund conversion
transactions, branch closings, prompt corrective action considerations,
and certification of assumption of deposit liabilities.
The most significant change from the existing merger approval
regulations is the proposed expedited processing procedure. This
procedure would be available for transactions to which all parties are
eligible depository institutions (as defined in proposed
Sec. 303.2(r)), and immediately following which the resulting
institution would be well-capitalized. Under expedited processing,
which is generally applicable only to merger applications that can be
approved under delegated authority, the application would be acted upon
by the latest of 45 days after the FDIC receives a substantially
complete application; 10 days after the last newspaper publication of
the notice of the proposed merger; 5 days after the FDIC receives the
Attorney General's comments on the competitive impact of the merger;
or, for an interstate merger, 5 days after the FDIC confirms that the
applicant has satisfactorily complied with the filing requirements of
the resulting institution's host state. An application that otherwise
qualifies for expedited processing may be removed from such treatment
for the reasons stated in subpart A, at proposed Sec. 303.11(c)(2).
Among the new references mentioned above, the reference to deposit
insurance applications at proposed Sec. 303.62(b)(2) clarifies that the
FDIC will not require a deposit insurance application to secure
insurance coverage for an institution resulting from a statutory merger
between a federally-chartered interim institution and an FDIC-insured
institution, even if the resulting institution will operate under the
interim federal charter. However, the FDIC will continue to require an
application for deposit insurance if the entity merging with the
interim federal institution is not insured and the parties wish the
resulting institution to be insured.2
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\2\ The Board does not believe that it is consistent with the
language or intent of the FDI Act to insure without FDIC approval an
institution resulting from a combination of institutions that
themselves have never been granted deposit insurance by the FDIC.
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In addition to reorganizing and enhancing the merger application
provisions to make them easier to use, the proposal reduces the
procedural burden on applicants. For example, in addition to
establishing an expedited processing procedure, the proposal would no
longer call for copies of the charter or articles of incorporation of
the resulting institution to be routinely submitted with a merger
application. The proposal also simplifies the application requirements
for mergers between institutions that are commonly-owned outside of a
bank holding company structure by treating such transactions as
``corporate reorganizations'' (proposed Sec. 303.61(b)).
Further, in order to add predictability to the procedure for
receiving and reviewing public comment on proposed mergers, the
proposal provides that the comment period for non-emergency
transactions will end on the 35th day after the applicant's first
newspaper publication of notice of the merger (proposed
Sec. 303.65(d)). This period provides additional time for interested
parties to respond to the final publication which occurs approximately
on the 30th day. No change is being made to the public notice
requirements for transactions determined to be an emergency requiring
expeditious action.
The proposal also relaxes the FDIC's current practice of requiring
that the first newspaper notice of the merger not be published until
after the merger application is filed with the FDIC. Under the
proposal, the applicant may publish its first notice up to 5 days
before filing with the FDIC (proposed Sec. 303.65(a)(1)).
With regard to CRA considerations, the proposal would expand the
existing delegation to permit approval of a CRA-protested application
by the regional director (DOS) or deputy regional director (DOS) where
the protest has been reviewed by DCA, the regional director (DCA) or
deputy regional director (DCA) concurs that approval is consistent with
the purposes of the CRA, and the applicant agrees in writing to any
conditions imposed regarding the CRA (proposed Sec. 303.66(b)(5)). This
would modify the existing merger regulations, which provide that
mergers
[[Page 52820]]
that are the subject of an unresolved CRA protest may be approved under
delegated authority by senior supervisory officials in Washington, but
may not be acted upon at the regional level.
The proposed rule eliminates consideration and favorable resolution
of compliance with the National Environmental Policy Act (NEPA) (42
U.S.C. 4321 et seq.) as a criteria for DOS officials to exercise
delegated authority to approve a merger transaction. This provision is
currently found in Sec. 303.7(b)(7)(ii). The FDIC has found that the
physical environment is unlikely to be affected by the FDIC's
consideration of bank merger transactions and that, typically, the
provisions of the NEPA would not be implicated. Since the FDIC is in
the process of reviewing its policy statement on NEPA, the agency
believes it is not advisable to include a reference to NEPA in the
proposed regulatory text.
The FDIC invites comment on all aspects of the proposed revisions
to the merger provisions of part 303. Comments are more specifically
invited regarding the expansion of the term ``corporate
reorganization,'' elements of the expedited processing procedures as
proposed for merger applications, and the inclusion of cross-references
to related provisions. In addition, comment is sought on the proposal
to require that comments regarding a particular merger application be
filed with the FDIC no later than the 35th day after the first
publication of notice of the merger.
E. Subpart E--Change in Bank Control
The FDIC proposes to reorganize, clarify, and simplify its
regulation implementing the Change in Bank Control Act of 1978. The
proposed changes, developed in consultation with the other federal
banking agencies, attempt to harmonize the scope and procedural
requirements of the FDIC's regulation with those of the other federal
banking agencies and to reduce unnecessary burden.
The proposal defines the previously undefined term ``acting in
concert'' to clarify the scope of the regulation. It also incorporates
the current FDIC position that the acquisition of a loan in default
that is secured by voting shares of an insured state nonmember bank is
presumed to be an acquisition of the underlying shares. Further, the
proposal lengthens the period of time for notifying the FDIC from 30 to
90 days for shares acquired in satisfaction of a debt previously
contracted in good faith or through testate or intestate succession or
a bona fide gift. In the case of shares acquired in satisfaction of a
debt previously contracted, the proposal adds language that reflects
FDIC practice of requiring the acquiror of a defaulted loan secured by
a controlling amount of a state nonmember bank's voting securities to
file a notice before the loan is acquired.
The proposal also would reduce regulatory burden on persons whose
ownership percentage increases as the result of a redemption of voting
shares by the issuing bank or the action of a third party not within
the acquiring person's control. In these situations, the proposal would
permit the person affected by the bank or third party action to file a
notice within 90 calendar days after receiving notice of the
transaction. Currently, these persons must file notice under the Change
in Bank Control Act prior to the action that increases the person's
percentage ownership, and, because these persons cannot control the
third party action that causes the increased percentage ownership, they
are often put in violation of the Change in Bank Control Act and the
FDIC's Rules and Regulations.
The FDIC also proposes to provide more flexible timing for
newspaper announcements of filings under the Change in Bank Control Act
by permitting notificants to publish the announcement as close as
practicable to filing the notice of change in control. The proposed
rule removes the requirement that the notificant have confirmation that
the FDIC has accepted the notice before publishing the announcement.
The FDIC also proposes to delete the provision governing notices
filed in contemplation of a public tender offer which permits an
acquiror to delay publication of the newspaper announcement. None of
the other federal banking agencies has such a provision.
The FDIC invites comment on all of its proposed revisions to the
regulation implementing the Change in Bank Control Act. In particular,
the FDIC requests comment on whether the definition of ``acting in
concert'' is appropriate, and whether there is reason to retain the
public tender offer provision.
F. Subpart F--Change of Director or Senior Executive Officer
Section 32 of the FDI Act (12 U.S.C. 1831i) requires certain
insured depository institutions and their depository institution
holding companies to provide at least 30 days' prior notice to the
appropriate federal banking agency before adding any individual to the
board of directors or employing any individual as a senior executive
officer. The agency may issue a notice of disapproval prior to
expiration of the 30-day period if it determines, based upon the
proposed individual's competence, experience, character or integrity,
that it would not be in the best interests of the depositors or the
public to permit the individual to be employed by, or associated with,
the institution. Section 32 permits the agency to waive the prior
notice requirement, but the agency may still disapprove an individual's
association with the institution within 30 days after granting such a
waiver.
Until recently, section 32 required prior notice from a depository
institution or holding company that was chartered less than two years;
had undergone a change in control within the preceding two years; or
was not in compliance with minimum capital requirements or was
otherwise in ``troubled condition.'' Section 2209 of EGRPRA amended
section 32 by eliminating the prior notice requirement for institutions
and holding companies that are chartered for less than two years or
that have undergone a change in control within the preceding two years.
However, institutions and holding companies that are not in compliance
with minimum capital requirements or are otherwise in ``troubled
condition'' remain subject to the prior notice requirement. In
addition, EGRPRA provides that prior notice will be required if the
agency determines, in connection with its review of a capital
restoration plan required under section 38 of the FDI Act (governing
prompt corrective action) or otherwise, that such prior notice is
appropriate. Also, the EGRPRA amendments provide the agencies with more
latitude to determine the prior notice period and allow the agencies up
to 90 days to issue a notice of disapproval.
The FDIC published an interim rule implementing section 32 as
applied to insured state nonmember banks on December 27, 1989 (54 FR
53040) and requested comments. The interim rule, which added a new
Sec. 303.14 to part 303 of the FDIC's regulations, remains in effect.
Only seven commenters responded, and the principal issues raised
concerned the definitions of ``change in control'' and ``troubled
condition.'' Objections to the definition of change in control have
been rendered moot by the EGRPRA amendments since a change of control
within the preceding two years is no longer a triggering event for a
section 32 notice. Two commenters objected to the definition of
``troubled condition.'' One objected to an insured
[[Page 52821]]
state nonmember bank being considered in troubled condition if it is
subject to a cease-and-desist order on the grounds that not all such
orders result from safety and soundness concerns and/or financial
difficulties. The other commenter objected to the fact that an insured
state nonmember bank can be designated in troubled condition based upon
a visitation, examination, or report of condition. The proposed rule
clearly indicates that only a cease and desist order or written
agreement that requires action to improve financial condition of the
bank triggers the designation of troubled condition. However, such
designation may also be made based upon an examination or report of
condition. The FDIC believes that it is appropriate to use all
information it deems reliable in making such a designation.
The proposed regulation reflects the EGRPRA amendments to section
32 and reorganizes, clarifies, and simplifies notice procedures. The
proposal also strives to harmonize the procedural requirements of the
FDIC's regulation with those of the other federal banking agencies and
to reduce any unnecessary regulatory burden.
Although the EGRPRA amendments appear to provide the agencies with
authority to increase the prior notice period to 90 days, the FDIC
proposes to retain the 30-day prior notice currently required by
Sec. 303.14. This established 30-day regulatory period has proven
sufficient to process the majority of filings, and reflects the FDIC's
time line for processing section 32 notices adopted in FDIC Financial
Institutions Letter 26-96 dated May 6, 1996. However, the agency
proposes to amend the regulation to allow the agency to take an
additional period of up to 60 days, if necessary, to issue a notice of
disapproval. It is anticipated that this additional 60-day period would
be used infrequently. In all such cases, the notificant will be advised
in writing prior to expiration of the 30-day prior notice period of the
reason the FDIC could not take action and of the projected additional
time needed.
Other than the revisions prompted by the EGRPRA amendments, there
is little substantive change to the FDIC's regulation. Current
Sec. 303.14(c)(2)(ii) provides that if a new member of a bank's board
of directors is elected at a shareholder's meeting, prior notice is
automatically waived. However, notice must be filed with the
appropriate regional director (DOS) within 48 hours after the election.
Proposed Sec. 303.103(c)(2) modifies this provision slightly to clarify
that the automatic waiver applies to new board members not proposed by
management and to state that the notice must be submitted within two
business days, rather than 48 hours. Section 308.12 of the FDIC's
regulations, which governs computation of processing time for purposes
of part 303, refers to time in increments of days and not hours. This
modification results in a more liberal computation of processing time
in that intervening Saturdays, Sundays and federal holidays are not
counted.
The FDIC invites public comment on retention of the 30-day
processing timeframe (subject to a possible 60-day extension) and the
change in the automatic waiver filing period. The agency also welcomes
suggestions for further reducing unnecessary burden on insured state
nonmember banks when reviewing changes in officers and directors,
consistent with the requirements of section 32.
G. Activities and Investments of Insured State Banks
Subpart G is reserved for filing procedures related to activities
and equity investments of insured state banks which are currently
contained in part 362 (12 CFR part 362). Part 362 implements section 24
of the FDI Act (12 U.S.C. 1831a), which was created by the Federal
Deposit Insurance Corporation Improvement Act of 1991 (Pub. L. 102-242,
105 Stat. 2236), and governs the circumstances in which insured state
banks may engage in activities which are not permissible for national
banks.
The FDIC recently issued a notice of proposed rulemaking to make
comprehensive revisions to part 362. 62 FR 47969, Sept. 12, 1997. In
connection with these revisions, the FDIC proposes to eliminate certain
application procedures which are outdated, and also to authorize
certain activities to be approved by the FDIC on an expedited basis.
The FDIC cannot determine at this time whether its 362 proposal or this
notice of proposed rulemaking to revise part 303 will be finalized
first, but it is the FDIC's intent to place the part 362 application
procedures relating to state bank activities in subpart G of part 303
at such time as both rules are final. In order to deal with this
problem, the application procedures which implement the proposed
revisions to part 362 concerning state bank activities are contained in
subpart E of the 362 proposal. If the 362 proposal is finalized before
this 303 proposal, insured state banks operating under the revised part
362 will look to subpart E of part 362 for application procedures until
such time as part 303 is finalized, at which point the FDIC will
transfer the application procedures from subpart E of part 362 to
subpart G of part 303. If the 303 proposal is finalized first, insured
state banks operating under the current version of part 362 will
continue to look to the current version of part 362 itself for
application procedures until the revisions to part 362 are finalized,
and the application procedures which are proposed as subpart E of part
362 will be finalized as subpart G of part 303. Members of the public
taking an interest in the FDIC's application procedures for the
activities of insured state banks under part 362 should review the part
362 proposal for the specifics of such application procedures.
H. Subpart H--Filings by Savings Associations
The FDIC is also reserving subpart H for filing procedures related
to activities of insured state savings associations and subsidiaries of
insured savings associations, which are currently contained in
Sec. 303.13 of part 303 (12 CFR 303.13). Section 303.13 implements
sections 28 and 18(m) of the FDI Act (12 U.S.C. 1831(e) and 12 U.S.C.
1828(m)), which were both created by the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989 (Pub. L. 101-73, 103 Stat. 484).
Section 303.13 governs the circumstances in which a state savings
association may engage in activities which are not permissible for a
federal savings association, and also requires all insured savings
associations to notify the FDIC prior to establishing a subsidiary or
engaging in new activities through a subsidiary.
As part of the FDIC's recently-issued notice of proposed rulemaking
to revise part 362, discussed above, the FDIC has proposed to address
the substantive issues covered by Sec. 303.13 as subparts C and D of a
revised part 362. The proposal harmonizes, to the extent possible given
the underlying statutes, the treatment of activities of insured state
banks and the activities of insured state savings associations. In
connection with these revisions, the FDIC proposes to eliminate certain
application procedures which are outdated, and also to authorize
certain activities to be approved by the FDIC on an expedited basis.
The FDIC cannot determine at this time whether its 362 proposal or this
notice of proposed rulemaking to revise part 303 will be finalized
first, but it is the FDIC's intent to place the part 362 application
procedures relating to savings associations in subpart H of part 303 at
such time as both rules are final. In order to deal with this problem,
the application procedures which implement the proposed revisions to
[[Page 52822]]
part 362 concerning savings associations are contained in subpart F of
the 362 proposal. If the 362 proposal is finalized before this 303
proposal, existing Sec. 303.13 will be rescinded in connection with
finalizing part 362. Savings associations operating under the revised
part 362 will look to subpart F of part 362 for application procedures
until such time as part 303 is finalized, at which point the FDIC will
transfer the application procedures from subpart F of part 362 to
subpart H of part 303. If the 303 proposal is finalized first, existing
Sec. 303.13 will be preserved without substantive change on an interim
basis in connection with finalizing part 303. Savings associations
operating under Sec. 303.13 will continue to look to Sec. 303.13 for
application procedures until the revisions to part 362 are finalized.
In connection with finalizing part 362, Sec. 303.13 will be rescinded,
and the application procedures which are proposed as subpart F of part
362 will be finalized as subpart H of part 303. Members of the public
taking an interest in the FDIC's application procedures for the
activities of insured savings associations and their subsidiaries
should review the part 362 proposal for the specifics of such
application procedures.
I. Subpart I--Mutual-to-Stock Conversions
The FDIC is proposing to move the notice requirements for mutually
owned state-chartered savings banks that propose to convert to stock
form from Sec. 303.15 to a separate subpart I. These notice
requirements were adopted in final form on January 1, 1995. The
intended effect of the rules is to ensure that mutual-to-stock
conversions of FDIC regulated institutions do not raise safety and
soundness concerns, breaches of fiduciary duty, or other violations of
law. The substantive regulation regarding mutual-to-stock conversions
would remain in Sec. 333.4 of this chapter.
The FDIC also is proposing to provide for delegated authority in
its mutual-to-stock conversion regulations. Some members of the
industry have commented that the FDIC takes longer than necessary to
act on conversion transactions. At the present time, all conversion
notices are reviewed by the FDIC Board of Directors. The FDIC has
gained considerable experience in reviewing notices to convert and the
Board believes it is now appropriate to delegate authority to the
Director and the Deputy Director (DOS) to issue notices of intent not
to object. Such a delegation would apply only when the proposed
conversion is determined not to pose a risk to the converting
institution's safety and soundness, violate any law or regulation,
present a breach of fiduciary duty, or raise any unique legal or policy
issues. The Board believes that this delegation will allow the FDIC to
act more promptly on routine notices and ease regulatory burden.
No other changes in procedures are being proposed. The public is
invited to comment on any changes the FDIC could make to ease
regulatory burden while ensuring that conversions do not raise
supervisory concerns.
J. Subpart J--Foreign Bank Activities
Proposed subpart J addresses application requirements relating to
the foreign activities of insured state nonmember banks and the U.S.
activities of insured branches of foreign banks. The FDIC is proposing
to make these application requirements easier to use and more
streamlined by centralizing them in subpart J. Under the FDIC's current
rules, these application requirements are located in various
subsections of three different regulations: 12 CFR part 303, 12 CFR
part 346, and 12 CFR part 347. The FDIC also is proposing to further
streamline processing for several of these application requirements.
On July 15, 1997, the FDIC published a Notice of Proposed
Rulemaking (part 347 NPR) which requests public comment on an FDIC
proposal to revise the FDIC's rules on the foreign activities of
insured state nonmember banks and the U.S. activities of insured
branches of foreign banks. 62 FR 37748. Subpart D of the part 347 NPR
includes four proposed application procedures designed to work with the
substantive revisions made to the FDIC's international banking
regulations under the part 347 NPR.3 The FDIC cannot
determine at this time whether the part 347 NPR or this notice of
proposed rulemaking to revise part 303 (part 303 NPR) will be finalized
first. To deal with the possibility that the part 303 NPR may be
finalized before the part 347 NPR is finalized, this part 303 NPR
contains interim versions of the same application procedures contained
in subpart D of the part 347 NPR. The interim versions proposed here
are designed to work with the existing versions of the FDIC's
international banking regulations, and are different in several
respects from the application procedures contained in subpart D of the
part 347 NPR. Therefore, members of the public taking an interest in
the FDIC's application procedures for international banking issues
should review the part 347 NPR as well as this part 303 NPR.
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\3\ These are the procedures for: (1) Establishing, moving, or
closing a foreign branch of a state nonmember bank; (2) investment
by state nonmember banks in foreign organizations; (3) exemptions
from the insurance requirement for a state branch of a foreign bank;
and (4) approval for an insured state branch of a foreign bank to
conduct activities not permissible for federal branches.
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If this part 303 NPR is finalized first, the four interim
application procedures will remain in effect only until the part 347
NPR is finalized. In connection with finalizing the part 347 NPR, the
FDIC will transfer the application procedures in subpart D of the part
347 NPR to subpart J of part 303 and rescind the interim procedures. If
the part 347 NPR is finalized first, the interim procedures in this
part 303 NPR will never be finalized, and the FDIC will make necessary
technical amendments to transfer the application procedures in subpart
D of the part 347 NPR to subpart J of part 303.
This part 303 NPR also contains two application procedures which
are not of an interim nature: the procedure for moving an insured
branch of a foreign bank, and the procedure for mergers involving an
insured branch of a foreign bank. These two procedures are not impacted
by the part 347 NPR.
Interim Application Procedures
Establishing, moving, or closing a foreign branch of a state
nonmember bank. Section 18(d)(2) of the FDI Act (12 U.S.C. 1828(d)(2))
and Sec. 347.3 require an insured state nonmember bank to obtain the
FDIC's prior written consent before establishing a branch located
outside the United States, its territories, Puerto Rico, Guam, American
Samoa, the Trust Territory of the Pacific Islands, or the Virgin
Islands. Applications for these foreign branches are currently treated
under the same process applicable for domestic branches under
Sec. 303.2. The FDIC proposes to treat foreign branches separately,
since foreign branch applications are not legally required to be
subjected to analysis under the CRA or factors under section 6 of the
FDI Act, as is the case for domestic branches.
Under Sec. 303.182 as proposed, the FDIC would give its general
consent for an eligible depository institution (as defined by
Sec. 303.2(r)) to establish additional foreign branches in any
jurisdiction in which the bank already operates a branch, or to move a
branch within the jurisdiction.4 Also, an
[[Page 52823]]
eligible depository institution that operates branches in two or more
foreign jurisdictions may establish additional branches conducting
approved activities in additional foreign jurisdictions under expedited
processing procedures permitting the eligible depository institution to
establish the branch 45 days after submitting its application to the
FDIC.
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\4\ An application to establish a foreign branch is not an
``application for a deposit facility'' covered by the CRA, and the
FDIC will therefore only take the insured state nonmember bank's CRA
rating into account for purposes of determining whether the
application receives expedited processing under the general consent
and expedited processing procedures.
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The FDIC is proposing these general consent and expedited
processing procedures because an insured state nonmember bank meeting
the requirements of the provisions ordinarily should have sufficient
familiarity with the implications of foreign branching, and be of
sufficiently sound overall condition, that extensive FDIC review is not
required. The FDIC retains the option to suspend these procedures as to
any institutions for which this is not the case. For applicants seeking
to establish a branch in an additional jurisdiction, the FDIC may also
remove an applicant from expedited processing for any of the grounds
specified in Sec. 303.11(c) follows: (1) If the FDIC determines the
filing presents a significant supervisory concern; (2) raises a
significant legal or policy issue; or (3) if the FDIC determines other
good cause exists for removal. The FDIC will promptly provide the
applicant with a written explanation if the FDIC decides to remove a
filing from expedited processing.
General consent and expedited processing are also inapplicable in
any case presenting either of two special circumstances. Since the FDIC
must have access to information about a foreign branch's activities in
order to effectively supervise the institution, general consent or
expedited processing do not apply if the law or practice of the foreign
jurisdiction would limit the FDIC's access to information for
supervisory purposes. In such cases, the FDIC must have an opportunity
to fully analyze the extent of the confidentiality conferred under
foreign law and whether it would, in light of all the circumstances,
impair the FDIC's ability to carry out its responsibilities as a bank
supervisor. In addition, if the proposed foreign branch has a direct
adverse impact on a site which is on the World Heritage List
5 or the foreign jurisdiction's equivalent of the National
Register of Historic Places (National Register), the FDIC may need an
opportunity to evaluate the proposal in light of section 402 of the
National Historic Preservation Act Amendments of 1989 (NHPA Amendments
Act) (16 U.S.C. 470a-2).
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\5\ The World Heritage List was established under the terms of
The Convention Concerning the Protection of World Culture and
Natural Heritage adopted in November, 1972 at a General Conference
of the United Nations Education, Scientific and Cultural
Organization. Current versions of the list are on the Internet at
http://www.unesco.org/whc/heritage.htm, or may be obtained from the
FDIC Public Information Center, Room 100, 801 17th Street, NW,
Washington, DC 20429.
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Proposed Sec. 303.182 also requires an insured state nonmember bank
which closes a foreign branch to notify the appropriate regional
director (DOS) that it has done so. This notice stems from the current
requirement for such notice under Sec. 347.3. The FDIC has previously
determined that Congress did not intend section 42 of the FDI Act on
branch closings to apply to foreign branches. Finally, proposed
Sec. 303.182 sets out the procedures for applications which are not
eligible for the general consent or expedited processing procedures.
Acquisition of stock of foreign banks or other financial entities
by an insured state nonmember bank. Section 18(l) of the FDI Act (12
U.S.C. 1828(l)) and Sec. 347.4 require an insured state nonmember bank
to obtain the FDIC's prior written consent before acquiring an
ownership interest in a foreign bank or other financial entity. The
current application procedures are set out in Sec. 303.5(d). Since the
current substantive provisions governing foreign investment at
Sec. 347.4 provide only relatively general guidance about the conduct
of such activities, it is not possible for the FDIC to implement
general consent and expedited processing procedures on an interim
basis, and proposed Sec. 303.183 contains no substantive changes from
the current procedures. However, in connection with the FDIC's
revisions of the foreign investment rules in the part 347 NPR, the FDIC
has proposed general consent and expedited processing procedures.
Exemptions from the insurance requirement for a state branch of a
foreign bank. Section 346.6 requires an uninsured state branch of a
foreign bank to obtain the FDIC's consent if the branch proposes to
accept initial deposits of less than $100,000 and such deposits are not
otherwise exempted from the definition of retail deposit taking
activity under Sec. 346.6(a). The current application procedures are
set out in Sec. 346.6(b). These procedures need no substantive revision
at this time, because the procedures were recently reviewed and amended
by the FDIC as a result of amendments to the International Banking Act
of 1978, Pub. L. 95-369, 92 Stat. 607 (12 U.S.C. 310l et seq.) made by
the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, Pub. L. 103-328, 108 Stat. 2338 (Interstate Act). 61 FR 5671
(Feb. 14, 1996).
Approval for an insured state branch of a foreign bank to conduct
activities not permissible for a federal branch. Section 346.101
requires an insured state branch of a foreign bank to obtain the FDIC's
permission to conduct any type of activity which is not permissible for
a federal branch of a foreign bank. The current application procedures
are set out in Sec. 346.101 itself, which was recently adopted. 59 FR
60703 (Nov. 28, 1994). Thus, proposed Sec. 303.187 does not make any
substantive changes from the current procedures on an interim basis.
Noninterim Application Procedures
Moving an insured branch of a foreign bank. Section 18(d)(1) of the
FDI Act requires any insured branch of a foreign bank which wishes to
move from one location to another to obtain the FDIC's prior written
consent. Applications for these insured branches currently are treated
under the same process applicable to domestic branches of insured state
nonmember banks under Sec. 303.2. Since the FDIC's consent to these
applications is legally subject to the same statutory considerations as
applications to establish or relocate a domestic branch or to relocate
the main office of an insured state nonmember bank, the FDIC is
proposing an application process in Sec. 303.184 which parallels
proposed subpart C. This includes expedited processing for an eligible
insured branch. Subpart J contains a proposed definition of ``eligible
insured branch'' which parallels the general Sec. 303.2(r) definition
of ``eligible depository institution,'' with appropriate changes to
take into account the different supervisory rating system and capital
requirements applicable to insured branches.
Mergers involving an insured branch of a foreign bank. An insured
branch of a foreign bank meets the definition of an insured depository
institution under section 3 of the FDI Act (12 U.S.C. 1813) and is
therefore subject to the Bank Merger Act. The FDIC's current rules and
regulations do not include a specific application process for approvals
of merger transactions involving an insured branch. In order to give
insured branches conducting merger transactions which are subject to
FDIC approval the benefit of the same streamlined application
processing proposed for domestic institutions in subpart D, proposed
Sec. 303.185 contains appropriate cross-references to subpart
[[Page 52824]]
D. Section 303.185 clarifies that an eligible insured branch as defined
in subpart J generally is eligible for the expedited processing
available to an eligible depository institution in subpart D.
Similarly, Sec. 303.185 clarifies that a transaction in which an
insured branch is merged with other branches, agencies, or subsidiaries
in the United States of the same foreign bank parent is eligible for
disposition under the enhanced delegations applicable to corporate
reorganizations.6
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\6\ If the foreign bank parent itself is not primarily engaged
in business in the United States, and is involved in some merger or
other combination outside the United States which does not result in
a corresponding merger transaction in the United States with respect
to an insured branch, section 18(c)(11) provides that no approval is
required, since no party to the transaction is primarily engaged in
business in the United States.
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Section 303.185 also incorporates a point explained in Advisory
Opinion FDIC-96-12 (May 13, 1996) concerning the treatment of an
insured branch under section 44 of the FDI Act (12 U.S.C. 1831u) as
added by section 102 of the Interstate Act. Section 44 permits the
responsible federal regulator to approve an interstate merger
transaction involving the acquisition of a branch of an insured bank
without the acquisition of the entire bank, but approval is possible
only if the state in which the branch is located expressly permits out-
of-state banks to acquire a branch of the bank without acquiring an
entire bank. In contrast, section 44 permits the responsible federal
regulator to approve an interstate merger transaction involving the
acquisition of an entire bank if the state in which the bank is located
has not adopted legislation to opt out of interstate mergers. Section
303.185 treats interstate mergers involving an insured branch under the
latter approach. Express state authority permitting out-of-state banks
to acquire a branch of the bank without acquiring the entire bank is
required only if a foreign bank has more than one insured branch in the
affected state and proposes to sell fewer than all of them to the same
acquiror. If such state authority does not exist, the FDIC requires the
foreign bank to sell all of its insured branches in that state to the
same affiliated or unaffiliated acquiror. As is explained in Advisory
Opinion FDIC-96-12, the statute and definitions used in section 44 do
not provide a conclusive answer to this issue, but the FDIC's approach
gives effect to all of the language and purposes of the Interstate Act.
K. Subpart K--Prompt Corrective Action
Section 38 of the FDI Act, which governs prompt corrective action,
restricts or prohibits certain activities based on an institution's
capital category, and requires an insured institution to submit a
capital restoration plan when it becomes undercapitalized. On September
15, 1992, the FDIC approved a final interagency |
