[Federal Register: August 20, 1998 (Volume 63, Number 161)]
[Rules and Regulations]
[Page 44685-44751]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr20au98-17]
[[Page 44685]]
_______________________________________________________________________
Part II
Federal Deposit Insurance Corporation
_______________________________________________________________________
12 CFR Part 303 et al.
Filing Procedures and Delegations of Authority; Unsafe and Unsound
Banking Practices; Registration of Transfer Agents; International
Banking; Management Official Interlocks; and Golden Parachutes and
Indemnification Payments; Final Rule
Applications for Deposit Insurance; Notice
Bank Merger Transactions; Notice
Liability of Commonly Controlled Depository Institutions; Notice
Applications to Establish a Domestic Branch (Includes Remote Service
Facilities); Rescission of Statement of Policy; Notice
Applications to Relocate Main Office or Branch (Includes Remote Service
Facilities); Rescission of Statement of Policy; Notice
[[Page 44686]]
FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 303, 333, 337, 341, 347, and 359
RIN 3064-AC02
Filing Procedures and Delegations of Authority; Unsafe and
Unsound Banking Practices; Registration of Transfer Agents;
International Banking; Management Official Interlocks; and Golden
Parachutes and Indemnification Payments
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final rule.
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SUMMARY: The FDIC is amending its regulations governing application,
notice and request procedures and delegations of authority by
streamlining, modernizing, and clarifying current policies and
practices. The final rule provides qualifying well-capitalized and
well-managed insured depository institutions and their holding
companies expedited processing procedures for several major types of
filings, including deposit insurance, branch, and merger applications.
The final rule also centralizes substantially all filing procedures
found throughout the FDIC's regulations within this rule for ease of
reference. It reorganizes the requirements of each major filing 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. In addition the rule
incorporates statutory changes to its application procedures made by
the Economic Growth and Regulatory Paperwork Reduction Act of 1996
(EGRPRA). Finally, technical changes are being made to related
regulations to conform to these changes.
This action is being taken in accordance with section 303(a) of the
Riegle Community Development and Regulatory Improvement Act of 1994
(CDRIA) which requires the federal banking agencies to review and
streamline their regulations and policies in order to improve
efficiency, reduce unnecessary regulatory burden, eliminate unwarranted
constraints on credit availability, and remove inconsistencies and
outmoded and duplicative requirements.
The final rule 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 final rule also strives to more
closely align the FDIC's application processing regulations with those
of the other banking agencies.
DATES: These revisions are effective October 1, 1998. It is not
considered practicable to permit early compliance with these revisions.
FOR FURTHER INFORMATION CONTACT: Division of Supervision: Christie A.
Sciacca, Associate Director, (202) 898-3671; Mark S. Schmidt, Associate
Director, (202) 898-6918; Jesse G. Snyder, Assistant Director, (202)
898-6915; John M. Lane, Assistant Director, (202) 898-6771; 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) 898-3728, and Philip P. Houle,
Counsel, Compliance and Enforcement Section (202) 898-3722. For
international banking: Christopher Spoth, Assistant Director, Division
of Supervision, (202) 898-6611, and Jamey G. Basham, Counsel,
Regulation and Legislation Section, Legal Division (202) 898-7265,
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 (collectively
``filings'') 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, the Executive Secretary, and, in some
cases, their designees to act on certain filings and enforcement
matters.
The final rule makes comprehensive changes to part 303 as part of
the FDIC's systematic review of its regulations and policy statements
undertaken in accordance with section 303(a) of the 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 of 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 and to work together to make uniform
regulations that implement common statutory or supervisory policies.
II. Discussion
The final rule accomplishes the goals of section 303(a) of the
CDRIA in several important ways.
<bullet> New expedited processing procedures have been introduced
for certain well-capitalized and well-managed banks. Expedited
procedures will reduce processing time for applications submitted by
qualifying institutions and will add more certainty to the timing of
regulatory action. They will also allow the FDIC to focus its resources
on applications that do not fall within the new expedited review
procedure and therefore are more likely to present safety and soundness
risks or raise CRA or compliance concerns.
<bullet> Some applications are processed as notices. For example,
applications to establish a branch or relocate a main office or a
branch processed under expedited procedures generally will be deemed
approved 21 days after receipt of a substantially complete application.
<bullet> Regulations and guidelines issued by the federal banking
agencies implementing common statutes have been made more uniform. This
is particularly true of filings regarding merger transactions, changes
in bank control, and change in directors or senior executive officers.
<bullet> Filing contents have been clarified and streamlined
wherever practical.
<bullet> The procedural requirements for virtually all applications
and notices have been centralized in part 303.
<bullet> Delegations of authority from the FDIC's Board of
Directors to the Directors of DOS and DCA, the General Counsel, and the
Executive Secretary to act on certain filings and enforcement matters
have been updated.
<bullet> Duplicative and outdated material has been removed from
existing part 303. An example is the elimination of the requirement for
an application to establish or relocate a remote service facility
because a remote service facility is not a branch pursuant to section
2204 of the Economic Growth and Regulatory
[[Page 44687]]
Paperwork Reduction Act of 1996 (12 U.S.C. 36).
Concurrently with the adoption of this final rule, the FDIC is also
publishing elsewhere in today's Federal Register three revised
statements of policy relating to filing procedures. These statements of
policy pertain to Applications for Deposit Insurance, Bank Merger
Transactions, and Liability of Commonly Controlled Institutions.
Additionally, notices of rescission of the statements of policy on
Applications to Establish a Domestic Branch (includes Remote Service
Facilities) and Applications to Relocate Main Office or Branch
(includes Remote Service Facilities) are published elsewhere in today's
Federal Register.
III. General Discussion of Comments
The FDIC published in the Federal Register a notice soliciting
comment on proposed part 303, 62 FR 52810, October 9, 1997. In response
to that request, the FDIC received fifteen comment letters. Eight
comment letters were received from community groups, five from bank
trade associations, one from a law firm, and one from a bank holding
company. Fourteen comment letters were received regarding five notices
to amend, revise or rescind related statements of policy. These notices
were published elsewhere in the Federal Register of October 9, 1997. In
addition, one of the comment letters on part 303 contained comments on
four of the related statements of policy. Final action on the five
related statements of policy is published elsewhere in today's Federal
Register.
The FDIC carefully considered each of the comment letters and made
a number of changes to the final regulation in response to such
comments and suggestions. Virtually all the comments received on the
proposed regulation directly or indirectly addressed the concept of
expedited processing for well-managed and well-capitalized depository
institutions. While numerous commenters expressed strong support for
expedited processing, others expressed a concern that expediting the
application process would have an adverse effect on the enforcement of
the Community Reinvestment Act of 1977 (12 U.S.C. 1811 et seq.) (CRA).
The agency wishes to stress that it is neither the intent nor
effect of expedited processing to weaken review of an applicant's
performance under the CRA. In response to concerns expressed, the FDIC
has increased the period of time during which the public may comment on
an application for federal deposit insurance from 15 days to 30 days.
In addition, the FDIC is committed to placing a listing of all
applications for deposit facilities subject to public comment on the
agency's home page on the World Wide Web. The issues raised regarding
expedited processing are addressed in more detail in the discussion of
comments related to subpart A.
Several commenters suggested that timelines be established for
filings not eligible for expedited processing. On May 6, 1996, the FDIC
issued a Financial Institutions Letter (FIL-26-96) to all FDIC-insured
institutions listing target time frames for each type of filing. The
FDIC intends to monitor processing of applications that do not qualify
for expedited processing in accordance with these internal guidelines.
These guidelines, however, generally do not apply to filings that raise
novel legal or policy issues, are the subject of a CRA protest, or
involve a historic site. It is the intent of the FDIC to act on all
filings as promptly as resources and prudence permit.
The following subpart by subpart discussion identifies and
discusses comments and changes to the proposal that are being adopted.
A table summarizing the sections of chapter 12 that are changed by the
final rule is included at the end of this preamble.
IV. Final Rule
A. Subpart A--Rules of General Applicability
Subpart A of the proposal clarified and simplified the rules
generally applicable to the processing of filings required by
regulation or statute by reorganizing the general rules of procedure
into one subpart. Proposed subpart A explained the availability of
expedited processing by defining which depository institutions would be
eligible for such processing, setting forth the process itself, and the
criteria under which the FDIC might remove a filing from expedited
processing. Proposed subpart A also contained public notice
requirements, provisions for public access to filings, hearing
procedures, and appeals and nullification procedures. Additionally,
subpart A set forth general principles governing delegations of
authority from the Board of Directors to certain FDIC officials and
defined certain terms used throughout the proposed rule.
Definitions. Proposed Sec. 303.2 alphabetized the current
definitions and added several new definitions utilized elsewhere in the
proposal. With the exception of the comments discussed below regarding
the definition of ``eligible depository institution,'' no comments were
received on any of the definitions in proposed Sec. 303.2.
The proposal defined ``eligible depository institution'' to
establish criteria that institutions must meet to qualify for expedited
processing, as set forth in Sec. 303.11. Proposed Sec. 303.2(r) defined
the term ``eligible depository institution'' as a depository
institution that meets the following five criteria: (1) received an
FDIC-assigned composite rating of 1 or 2 under the Uniform Financial
Institutions Rating System (UFIRS) as a result of its most recent
federal or state examination;1 (2) received a satisfactory
or better CRA rating from its primary federal regulator at its most
recent examination; (3) received a compliance rating of 1 or 2 from its
primary federal regulator at its most recent examination; (4) is well-
capitalized as defined in the appropriate capital regulation and
guidance of the institution's primary federal regulator; and (5) is not
subject to a cease and desist order, consent order, prompt corrective
action directive, written agreement, memorandum of understanding, or
other administrative agreement with its primary federal regulator or
chartering authority. In the proposal the FDIC specifically sought
comment on whether the above eligibility standards 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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The FDIC received numerous comment letters on the definition of
``eligible depository institution.'' The commenters were divided in
their views as to the appropriateness of the eligibility criteria.
Commenters who supported the proposed definition and the concept of
expedited processing confirmed the FDIC's belief that the criteria for
eligibility are appropriate to ensure that only well-capitalized and
well-managed institutions that do not present any supervisory,
compliance or CRA concerns receive expedited processing.
A number of commenters expressed concern that by using CRA ratings
as one of the criteria for an eligible depository institution, the FDIC
was establishing a ``safe harbor'' against public challenge to an
applicant's CRA performance. The commenters were further concerned that
the FDIC's expedited processing of applications meeting the
definitional criteria would have an adverse impact on the CRA and its
enforcement. Two commenters opposing the use of CRA ratings as
eligibility criteria for expedited processing cited concerns that CRA
[[Page 44688]]
ratings are not a suitable criteria because the CRA evaluation
procedures are still being developed and are not yet uniformly
rigorous.
It is neither the purpose nor the effect of the eligible depository
institution concept to adversely affect enforcement of the CRA. In
fact, Sec. 303.11(c)(2) explicitly enables the FDIC to remove a filing
from expedited processing if, among other things, the FDIC receives a
CRA protest that warrants additional investigation or review, or the
appropriate regional director (DCA) determines that the filing presents
a significant CRA or compliance concern. Thus, as discussed in greater
detail below, Sec. 303.11(c)(2) provides that the FDIC will fully and
carefully consider all CRA protests and CRA or compliance concerns that
are determined to be significant.
The FDIC has taken a number of steps to promote consistent
application of the CRA, both internally and on an interagency basis.
Full implementation of the new CRA regulation was delayed for two years
in order to collect uniform lending data upon which to base the FDIC's
examination of large banks and thrifts. To familiarize examiners with
the new standards and to promote their consistent application, the
federal banking agencies conduct regular joint examiner training
sessions. In addition, the agencies have jointly developed written
guidance for examiners, financial institutions and the public. Further,
the agencies are currently initiating an interagency review of a sample
of each agency's CRA performance evaluations for large institutions and
the agencies will also examine a limited number of large institutions
using interagency teams of examiners.
Two other commenters expressed concern that the CRA rating is an
inappropriate criterion for determining the eligibility of a depository
institution for expedited processing for any filing that is not an
application for a deposit facility as defined by the CRA. The FDIC
reserves expedited processing for well-capitalized and well-managed
banks. An institution's performance under the CRA reflects on the
quality of its management. While an institution must have a
satisfactory or better CRA rating to be eligible for expedited
processing, regardless of the type of application being made, the FDIC
will not consider CRA performance in deciding upon the merits of an
application if such application is not for a deposit facility. Proposed
Sec. 303.5 sets forth those filings for which an institution's CRA
record will be taken into account in deciding upon the merits of the
application (deposit insurance, merger transactions, and establishment
or relocation of a branch or main office, including the relocation of
an insured branch of a foreign bank).
The FDIC recently published a final rule which revises and
consolidates its international banking regulations (12 CFR part 347)
and a proposed rule for comment that would revise its regulations
governing the activities and investments of insured state banks and
savings associations (12 CFR part 362). 63 FR 17056, April 8, 1998; 62
FR 47969, September 12, 1997. These rulemakings contain expedited
procedures and definitions of an ``eligible'' type of institution which
generally parallel proposed Sec. 303.2(r). One comment received on
proposed part 347 noted that although a bank must have a satisfactory
or better CRA rating in order to meet that part's definition of
eligibility, ``special purpose'' banks which are exempt from CRA are
not assigned CRA ratings. Under the FDIC's CRA regulations at 12 CFR
part 345, special purpose banks are not subject to examination under
the FDIC's CRA regulations (12 CFR 345.11(c)(3)). The FDIC does not
intend to apply the CRA element of the definition of an eligible
depository institution to a special purpose bank which is not subject
to examination under the FDIC's CRA regulations. Language to this
effect has been added to the definition of ``eligible depository
institution'' in Sec. 303.2 of the final rule.
In the final rule the FDIC includes the term ``organizer'' in the
proposed definition of ``insider,'' in Sec. 303.2(u) to make clear that
the FDIC considers organizers to be insiders, similar to incorporators.
This change is consistent with other provisions of part 303.
The FDIC adopts proposed Sec. 303.2 with the revisions to
Sec. 303.2 (r) and (u) indicated above.
General filing procedures. Proposed Sec. 303.3 set forth general
procedures for submitting filings under part 303, including where forms
may be obtained and to whom they should be sent. Procedures are also
designated for filing when no form is prescribed. Specific filing
requirements are set forth in the appropriate subparts of the rule.
No comments were received on this section. The FDIC adopts this
section as proposed with a minor stylistic change to make the meaning
of the section more clear.
Computation of time. Proposed Sec. 303.4 clarified 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).
No comments were received on this section. The FDIC adopts this
section as proposed.
Effect of CRA performance on filings. Proposed Sec. 303.5 stated
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
clarified that CRA applies to applications to relocate an insured
branch of a foreign bank. Although this information is currently
contained in 12 CFR 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.
The only specific comment received on proposed Sec. 303.5 found
that the information contained in proposal was useful information worth
highlighting in subpart A. The FDIC adopts this section as proposed.
Investigations and examinations. Proposed Sec. 303.6 made clear
that certain FDIC officials have general delegated authority to examine
or investigate and evaluate facts related to any filing under chapter
12. This provides needed flexibility to evaluate factual and legal
issues that arise during the course of a filing.
No comments were received on this section. The FDIC adopts this
section as proposed.
Public notice requirements. Proposed Sec. 303.7 set forth the
general requirements for providing notice of a filing to the public.
The proposal required an applicant to provide prior notice of, and the
opportunity to comment on, a filing to establish a domestic branch,
relocate a domestic branch or the main office, relocate an insured
branch of a foreign bank, engage in a merger transaction or other
business combination, initiate a change of control transaction, or
request deposit insurance. Where applicable, specific publication
requirements appear in the appropriate paragraphs of part 303.
No comments were received on proposed paragraphs (a), (b), (d) or
(e). The FDIC adopts these paragraphs as proposed with minor stylistic
changes to make the meaning of the paragraphs clearer. In particular,
Sec. 303.7(b) has been refined in the final rule to make clear that
where the notice of filing has been published prior to submission of
the filing to the FDIC, the applicant should include confirmation of
such publication with the filing. This will
[[Page 44689]]
further ensure that possible delays due to defective notices are
avoided.
Proposed Sec. 303.7(c) provided applicants with the choice of
giving public notice by using a sample notice or drafting a notice that
incorporates certain specified information and is tailored to the needs
of the institution. This choice was designed to reduce burden on the
banking industry by providing more flexibility in the required form of
notice while, at the same time, requiring all applicants to provide the
public with the same basic information.
Two comments were received on this paragraph, both of which were
generally favorable. Both commenters supported the flexibility that the
FDIC proposed to offer to banks to meet their notification
requirements. One of the commenters urged the FDIC to monitor the
notices being used to ensure that all parties operate on the same basis
and so there is no confusion about the content of the notice. The FDIC
seeks to ensure that applicants comply consistently with public notice
requirements by requiring each applicant to submit a copy of the public
notice for content verification.
The FDIC has made minor modifications to Sec. 303.7(c). The
language of the final rule clarifies that applications to relocate a
main office are included within the notice requirement. The language
has been further modified to make clear that the public notice must
state that photocopies of nonconfidential portions of an application
will be provided by the appropriate regional office upon request. This
requirement is included in current Sec. 303.6(f)(4).
The FDIC adopts proposed Sec. 303.7(c) with the revisions discussed
above.
The final rule includes a provision at Sec. 303.7(f) that was not
included in the proposal. Section 303.7(f) provides that where public
notice is required, the FDIC may determine on a case by case basis that
unusual circumstances surrounding a particular filing warrant
modification of publication requirements. This new provision was added
in response to a comment on subpart D, pertaining to merger
transactions. The comment suggested that the FDIC require notices
regarding merger transactions to be published in languages other than
English in communities with significant non-English speaking
populations.
The FDIC appreciates the concern reflected in this comment. Rather
than limit applicability to situations involving merger applications
and non-English publication, however, the FDIC has instead added a more
broadly-focused provision. Under the new Sec. 307.7(f) the FDIC may
determine on a case-by-case basis that unusual circumstances
surrounding a particular filing warrant modification of the publication
requirements. It is intended that this provision will be applied
sparingly and with the purpose of making publication more meaningful,
not as a means of altering the publication requirements to suit the
convenience of the parties or as a means of curing defective
publications.
Public Access to Filings. Proposed Sec. 303.8 set forth the
procedures by which the FDIC makes the non-confidential portions of
filings that are subject to a public notice requirement available to
the public. Under the proposed rule, the FDIC makes such portions
available for inspection upon request, not more than one business day
after the regional office receives such request.
A number of the commenters made specific suggestions as to how the
FDIC might make applications and filings more accessible to the public.
These suggestions included making a list of pending applications
available on the FDIC's World Wide Web page; providing copies of
filings within three days of receiving a request for filings; and
mailing notices of all pending applications to all individuals and
groups who request to be included on a mailing list.
The FDIC has adopted various of the commenters' suggestions for
expediting the public's receipt of information related to the filing of
applications. The FDIC currently has a World Wide Web site with
significant information of interest to the public. The FDIC will
include at its World Wide Web site a page that will provide the public
with prompt notice of all applications filed for deposit facilities
that are subject to public comment. This page will be available when
the final rule becomes effective and may be found at www.fdic.gov. In
addition, the FDIC is committed to mailing the public portions of an
application file to a requester within three business days of the
appropriate regional office's receipt of the request to view the file.
In some instances this may result in a filing becoming public prior to
the publication of notice required by Sec. 303.7.
The FDIC also will continue existing practices designed to provide
information to the public on applications that are subject to the CRA.
The FDIC will continue to provide updated lists of pending applications
on a regular basis to all individuals or groups who have submitted a
request to the appropriate regional director (DOS) to be included on
this mailing list. In addition, it will continue to be the policy of
the FDIC to provide the non-confidential portions of application files
for public inspection at the appropriate regional office. The final
rule adds language to clarify this latter policy. The FDIC believes
that these practices will facilitate the public's ability to provide
meaningful comments.
In addition, the final rule adds a reference to part 309 of the
FDIC rules and regulations. This regulation sets forth the FDIC's
procedures for processing requests for information pursuant to the
Freedom of Information Act (FOIA) (5 U.S.C. 552). Part 309 of the FDIC
rules and regulations was recently revised to reflect changes to the
FOIA as a result of the Electronic Freedom of Information Act
Amendments of 1996 (63 FR 29, January 2, 1998).
The FDIC believes that these changes to its procedures and
continued commitment to existing practices will greatly facilitate the
public's access to filings made to the FDIC and the public's ability to
consider and comment upon such filings.
Public comments. Currently, interested parties may comment on a
pending filing until the date of final disposition. Proposed
Sec. 303.9(a) provided 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. The FDIC believes that 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 being transmitted to the FDIC.
Currently, the only basis for extension of the comment period is
for ``good cause.'' In order to provide the public with adequate time
to submit meaningful comments, proposed Sec. 303.9(b)(2) granted the
appropriate regional director (DOS) three bases upon which to extend or
reopen the public comment period: (1) if the applicant failed to file
all required information on a timely basis to permit review by the
public or made a request for confidential treatment not granted by the
FDIC that delayed the public availability of that information; (2) if
any person requesting an extension of time satisfactorily demonstrated
to the FDIC that additional time was necessary to develop factual
information that might materially affect the application; or (3) for
good cause.
Further, proposed Sec. 303.9(b)(4) clarified that the FDIC will
provide copies of all comments to the applicant
[[Page 44690]]
and that the applicant will be given an opportunity to respond.
Several of the commenters fully supported the proposed defined
comment period because it will reduce the current level of uncertainty
that applicants face in making applications to the FDIC. Two of these
commenters suggested that the defined comment period in the proposal
would create a desirable shift of focus from enforcing CRA through the
applications process to enforcing CRA through the examination process.
One of these commenters believed that the ``good cause'' basis for an
extension of the comment period is unnecessary because the other
conditions for an extension are sufficiently comprehensive. Another
commenter recommended that the FDIC take all possible regulatory action
necessary to ensure that public notice is made so as to ensure that
public commenters cannot seek delay based upon allegations of
inadequate notice.
Other commenters were strongly opposed to the proposed defined
periods of time for comment. These commenters stated that the current
flexibility in comment periods has been important in allowing the
public to comment on applications covered by CRA. These commenters were
concerned that the streamlined process will not provide enough time and
opportunity to discover the filing of an application, conduct the
necessary analysis and research and to write and submit any comments to
the FDIC. They also question whether the FDIC's current decision making
process has been delayed because of open public comment periods. Some
of these commenters focused on the role that the applications process
plays in enforcing CRA and were concerned that the proposal would
weaken an enforcement tool that has been important to community groups.
The commenters were also divided on their beliefs as to whether the
actual periods of time permitted for public comment in the specific
subparts were adequate. The commenters who supported the proposed
revision generally believed that the comment periods provided for in
the various subparts were sufficient. The commenters who opposed
proposed Sec. 303.9 generally believed that the specific time periods
were too short.
The FDIC believes that proposed Sec. 303.9 strikes an appropriate
balance between providing more certainty and expediency in the
applications process and giving the public an opportunity to comment on
an institution's CRA performance. The public comment period prompted by
an application is not intended to be the exclusive opportunity for the
public to inform the FDIC of concerns. Comments may be submitted to the
FDIC at any time if an individual or a group has a concern about an
institution's CRA program. It is not necessary to wait for an
application to be filed. All CRA comments will be considered by DCA. By
closing the comment period, the FDIC will eliminate delaying final
action because of late comments. In addition, the DOS regional director
or deputy director may extend or reopen the comment period as discussed
above. The FDIC believes that this flexibility will enable it to
consider all relevant information as part of the decision making
process and to complete that process in a timely manner.
As discussed previously, the FDIC has adopted certain suggestions
of commenters to make filings and applications more accessible to the
public in a more expeditious manner. Listing applications on the FDIC's
World Wide Web site, providing access to public files within one day of
receipt of a request, and mailing copies of public files within three
days of receiving a request are all designed to make it easier for the
public to provide timely comments. The FDIC believes these measures
will help offset any adverse effect of defined comment periods.
The FDIC adopts this section as proposed with a minor stylistic
change to make the intent clear.
Hearings and other meetings. Proposed Sec. 303.10 simplified the
current rules concerning hearing procedures contained in Sec. 303.6
(h), (i), and (j) and updated those provisions to reflect current FDIC
practices. Proposed Sec. 303.10 (c) and (d) provided that the
appropriate regional director (DOS) may grant or deny a request for a
hearing and that the regional director's denial of such a request is a
final agency determination that is not appealable to the FDIC Board of
Directors.
One commenter endorsed the proposal to allow community groups to
request public hearings on pending applications because they afford
opportunities for public housing residents, persons with limited
literacy skills, and other citizens unlikely to submit written comments
to offer their views. This and another commenter suggested that FDIC
adopt a mandatory hearing procedure like that of the Office of Thrift
Supervision (OTS).
A third commenter appreciated the publication of procedures in
proposed Sec. 303.10 as a source of clarity for community groups and
other commenters. This commenter recognized that informal meeting
procedures might prove helpful in providing additional avenues for
commenters to pursue and hoped that the informal meetings would not
preclude the use of hearings. This commenter sought assurance that
hearings will serve the purpose of providing additional opportunity for
commenters to develop the record and insure that such venue is readily
accessible. This commenter opposed the preclusion of appeals of
decisions denying hearing requests, believing that the Board of
Directors is better suited to weigh competing issues, consider overall
public interest, and ensure that the standards for judging hearing
requests are consistently and fairly applied.
The FDIC believes that proposed Sec. 303.10 represents an equitable
and balanced approach because it continues to provide a basis for an
individual to request a hearing, but provides more clarity with respect
to the circumstances under which the FDIC will grant such a request.
Delegation of authority to the regional director (DOS) places the
authority to make decisions closer to the specific situation. The
regional director is the most senior-level regional official and will
have direct knowledge of the record of the institution or institutions
and communities involved. The FDIC believes the regional director (DOS)
is thus well suited to decide whether additional submissions would
benefit the decision making process. The OTS hearing procedure
emphasizes informal meetings as prerequisites to formal hearings. If
the issues are not resolved at such meetings OTS will conduct formal
meetings. The FDIC's procedure also provides for informal meetings. The
FDIC generally will grant a request for a hearing only if the FDIC
determines that written submissions would be insufficient or that a
hearing otherwise would be in the public interest.
Proposed Sec. 303.10 has been revised to specifically include
hearings and other proceedings in connection with nullification,
revocation, amendment, withdrawal, and suspension of decisions on
filings discussed below and in Sec. 303.11(g). Additionally, the final
rule makes clear that Legal Division consultation is required prior to
taking action on a hearing request pursuant to Sec. 303.10(c) or
denying a hearing request pursuant to Sec. 303.10(d). In addition,
Sec. 303.10(e)(2) has been modified slightly to clarify that the
presiding officer in a hearing under this section shall be the regional
director (DOS or DCA) or his or her designee or such other person as
may be named by the FDIC Board of Directors or the
[[Page 44691]]
Director (DOS or DCA). This restates the FDIC's current practice as set
forth in current part 303.
The FDIC adopts Sec. 303.10 as proposed with the revisions
discussed above and other minor stylistic changes to make the intent
clear.
Decisions on filings. Proposed Sec. 303.11 contained general
provisions governing the process of deciding upon filings made under
part 303, including the general procedures related to the decision
making process; the authority of the FDIC Board of Directors to modify
any of the procedures contained in part 303; and new provisions
concerning multiple transactions, abandonment of filings, and
nullification of decisions.
No comments were received on proposed Sec. 303.11 (a), (b), (d),
(e), (g). The FDIC adopts these paragraphs as proposed.
Proposed Sec. 303.11(c) set forth the general provisions pertaining
to expedited processing. Under the proposal, expedited processing is
automatically given to institutions meeting the definition of an
``eligible depository institution'' (with a few exceptions where other
conditions apply) unless the appropriate regional director or deputy
regional director (DOS) removes the filing from expedited processing.
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. Under the
proposal, if a filing is removed from expedited processing, the
applicant will be promptly informed in writing of the reason. With the
exception of filings made under subpart J (International Banking),
proposed Sec. 303.11(c)(1) provided that for filings where the
appropriate regional director has not been delegated approval
authority, the filing will generally be removed from expedited
processing.
As discussed above, the general concept of expedited processing
generated numerous comments both in support of the proposal and opposed
to it. The final rule is designed to balance the concerns of removing
undue delays from the application process with the need to assess
legitimate CRA concerns fairly.
One commenter recommended that the mandatory removal from expedited
processing of any application that is subject to a substantial CRA
protest or otherwise meets the standards of Sec. 303.11(c)(2). This
commenter also believed that the FDIC's clarification of ``significant
CRA protest'' in Sec. 303.11(c)(3) of the proposed rule established a
dual standard for distinguishing between areas in which the institution
seeks to expand and areas where it currently has a presence but is not
expanding. This commenter believed that if an institution's CRA
performance is less than satisfactory in any geographic area, that fact
alone should be grounds for its application to be removed from
expedited processing, not whether the application is for expansion in
that area or some other area.
It is the policy and practice of the FDIC to investigate all CRA
protests to the extent considered necessary. As a practical matter this
will require the majority of protested applications to be removed from
expedited processing. It may be possible to resolve some protests
during the expedited processing period. This is especially true of
applications for deposit insurance which have an expedited processing
period of sixty days. The FDIC provided guidance on what will
constitute a ``significant CRA concern'' under Sec. 303.11(c)(2) by way
of example. In that paragraph the FDIC recognized that an applicant's
overall CRA rating could be satisfactory, but the applicant could also
have a less than satisfactory rating or performance in the particular
geographic area to be affected by the filing. In such a circumstance
the FDIC might require additional time to fully and fairly evaluate the
filing and, if necessary, would remove the filing from expedited
processing. The FDIC believes that the proposal provided the
flexibility to fully evaluate local CRA concerns without undermining
the intent of expedited processing.
Two commenters recommended the proposed rule be revised to include
a requirement for an abbreviated CRA examination in the case of a CRA
protest.
The FDIC believes that the proposed regulation and FDIC practice
provides the FDIC with the flexibility to conduct a targeted CRA
examination if such is necessary or appropriate under the
circumstances. DCA's standard review of an applicant's record will
include a review of current and previous CRA examination reports, the
applicant's correspondence file, any complaints filed against the
applicant, and any other pertinent information available. In addition,
Sec. 303.6 allows the Board of Directors, the Director, Deputy
Director, associate directors, appropriate regional directors and
deputy regional directors (DOS and DCA) to examine or investigate and
evaluate facts related to any filings under this chapter to the extent
necessary to reach an informed decision.
The same two commenters that suggested an abbreviated CRA
examination also requested that the FDIC provide a detailed written
statement of the basis for acting on protested applications.
The FDIC included in the proposed rule several opportunities for
the applicant and the public to obtain written information regarding
disposition of a filing. Proposed Sec. 303.11(a) provided that the FDIC
will notify both the applicant and any person who makes a written
request of the final disposition of a filing. When the FDIC denies a
filing, proposed Sec. 303.11(a) provides that the FDIC will immediately
notify the applicant in writing of the reasons for the denial. This
written notification is placed in the public file and remains available
at the appropriate regional office for 180 days after the final
decision. For any filing covered by the hearing procedures of
Sec. 303.10, Sec. 303.10(k) requires the FDIC to notify the applicant
and all participants of the final disposition of a filing and provide a
statement of the reasons for the final disposition. By adopting these
provisions in the final rule, the FDIC believes it has appropriately
balanced the interests of those seeking information on filing
disposition with those who seek a streamlined process. Additionally, it
has been the FDIC's recent practice and will continue to be the
agency's practice to prepare an Order and Statement in conjunction with
the approval or denial of any application subject to an unresolved CRA
protest. Orders and Statements are available to the public as part of
the public file of an application and are available in the FDIC's
public reading room.
The FDIC adopts Sec. 303.11(c) as proposed with minor technical
changes to Sec. 303.11(c)(1) and (3) to clarify the intended meaning of
those paragraphs.
Appeals and requests for reconsideration. Proposed Sec. 303.11(f)
contained the FDIC's procedures governing petitions for reconsideration
of a denied filing. The proposal clarified
[[Page 44692]]
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. No comments were received on proposed
Sec. 303.11(f).
The proposal modified the FDIC's appeals process. Under the
proposal, a regional director or deputy regional director (DOS or DCA)
could approve, but not deny, a petition for reconsideration. However,
the Director or Deputy Director (DOS or DCA) could approve or deny a
petition. If the petition were granted, the filing would 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) could reconsider the filing if the filing was
originally denied by a regional director or deputy regional director.
All decisions on requests for reconsideration and all reconsideration
of denied filings require consultation with or the concurrence of the
Legal Division. Proposed Sec. 303.11(f) also clarified 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 final rule changes the proposal regarding the FDIC officials
who will act upon requests for reconsideration that are granted.
Section 303.11(f)(5)(i) of the proposed rule provided that where
reconsideration was granted for a filing within the scope of
Sec. 303.11(f) that was originally denied by the Director, Deputy
Director or associate director (DOS or DCA), the appeal of the denial
would be decided by the Board of Directors. Section 303.11(f)(5)(ii) of
the final rule provides that such appeals will be decided by the FDIC's
Supervisory Appeals Review Committee (SARC). The SARC is an existing
committee established by the Board of Directors with delegated
authority to consider appeals of material supervisory determinations
such as examination ratings, material disputed asset classifications,
determinations regarding violations of laws and regulations, as set
forth in the Federal Register on March 25, 1995, 60 FR 15923. These
existing functions of the SARC continue unchanged by the revision to
Sec. 303.11(f).
The FDIC believes that the SARC is an appropriate body to
reconsider the original denial of a filing made by the Director, Deputy
Director or associate director (DOS or DCA). The SARC includes the
FDIC's most senior managers with expertise in the areas necessary to a
comprehensive understanding of the issues presented by the
reconsideration of denied filings. The SARC is comprised of the
following FDIC officials: Vice Chairperson of the Board of Directors,
the General Counsel, the Director of DOS, the Director of DCA, the
Director of the Division of Insurance, and the Ombudsman.
The proposed rule did not contain time frames within which the FDIC
should act on requests for reconsideration. Although no comments were
received that specifically raised this issue, the final rule includes
such time frames to assist applicants. Newly added Sec. 303.11(f)(6)
provides that the appropriate regional director (DOS or DCA) will
notify an applicant of the FDIC's decision to grant or deny a request
for reconsideration within 15 days of receipt of the request for
reconsideration. If the FDIC grants a request for reconsideration, it
will notify the applicant of its final decision within 60 days of the
receipt of the request for reconsideration.
The FDIC adopts Sec. 303.11(f) with revisions discussed above and
certain minor stylistic changes to the language to make the intent
clear.
Nullification, withdrawal, revocation, amendment, and suspensions
of decisions on filings. The FDIC received no comments on proposed
Sec. 303.11(g). The final rule has been modified to clarify the FDIC's
authority and procedures regarding nullification of decisions on
filings and related actions. These changes are a logical extension from
the proposed rule. The final rule clarifies the scope of the FDIC's
nullification authority to include the authority to withdraw, revoke,
amend, and suspend decisions on filings (collectively
``nullification'').
As proposed, Sec. 303.11(g) would have authorized the FDIC to
nullify a decision on a filing whenever: (a) the FDIC became aware of
any material misrepresentation or omission by an applicant after the
FDIC rendered a decision on a filing, (b) an applicant failed to inform
the FDIC of a material change in circumstances which arose after the
filing had been submitted to the FDIC and before the FDIC's decision on
it, or (c) a decision on a filing was contrary to law, regulation, or
FDIC policy, or was granted due to clerical or administrative error, or
to a material mistake of law or fact.
The final rule refines the substantive criteria necessary for the
FDIC to take one of these actions and states in more detail the
procedures to be followed. The substantive grounds have been refined by
eliminating matters contrary to ``FDIC policy'' and ``material mistakes
of law or fact'' from the final rule. The FDIC has determined that a
nullification should continue to extend to decisions on filings that
are contrary to law or regulation and that the latter is inclusive of
``material mistakes of law and fact.'' The FDIC has also clarified one
of the grounds for action contained in Sec. 303.11(g). The proposed
rule would have given the FDIC authority to issue a nullification on a
filing if the applicant failed to inform the FDIC of a material change
in circumstance which arose after the filing was submitted to the FDIC
and before the FDIC's decision on it. Under the final rule, the FDIC
may issue a nullification on a filing if at anytime the FDIC becomes
aware of any material misrepresentation or omission relating to the
filing, or of material change in circumstance that occurred prior to
the consummation of the transaction or commencement of the activity
authorized by the decision on the filing, or if the decision on the
filing is contrary to law or regulation or was granted due to clerical
or administrative error. The grounds for nullification are contained in
revised Sec. 303.11(g)(1).
The FDIC has added procedures for use in nullification actions in
Sec. 303.11(g)(2) and (3) to insure that the rights of the applicant
are protected in that the applicant will receive notice of the FDIC's
intent to nullify a decision on a filing and will have an opportunity
to respond to the notice. The final rule also details the manner in
which the FDIC would provide written notification of the proposed
action and the reason therefor to the applicant. Final
Sec. 303.11(g)(2) also provides that the FDIC may in certain cases
issue temporary orders without issuing a prior notice of intent to an
applicant. In such cases, the applicant is still provided an
opportunity to respond after issuance of the order.
Final Sec. 303.11(g)(3) has been redesignated ``Response to notice
of intent or temporary order.'' This section provides that an applicant
may file a written response to a notice of intent within 15 days of
service of the notice. A written response should include: (a) an
explanation as to why the proposed action is not warranted and (b) any
other relevant information, mitigating circumstances, documentation, or
other evidence. As a general rule, it is expected that these matters
will be resolved on written submissions. An applicant may request a
hearing with oral arguments and testimony under Sec. 303.10, although
such hearings will not usually be granted unless resolution on the
basis of written submissions is inadequate. Final Sec. 303.11(g)(3)
also
[[Page 44693]]
provides that an applicant's failure to file a written response within
the 15-day period constitutes a waiver of the opportunity to respond
and consent to the nullification, whether or not a temporary order had
been issued.
Final Sec. 303.11(g) did not discuss whether authority was to be
delegated in connection with the exercise of the authority to nullify
decisions on filings. In final Sec. 303.11(g)(5), the FDIC Board of
Directors retains the authority to issue a notice of intent to nullify
if the decision on the filing was originally made by the Board. For
decisions on filings under this Sec. 303.11(g) that were not originally
acted on by the Board, authority is delegated to the Director and
Deputy Director (DOS and DCA) and, where confirmed in writing by the
appropriate Director, to an associate director, to issue notices of
intent and temporary and final orders, after consultation with the
Legal Division. The appropriate Director may also designate regional
directors and deputy regional directors to issue notices of intent and
final orders. Delegated authority is to be exercised by the official
who acted on the original filing or by an official or equivalent or
higher authority.
General delegations of authority. Proposed Sec. 303.12 consolidated
the general principles governing delegations of authority from the
Board of Directors to FDIC officials. Specific delegations of authority
are contained in appropriate subparts.
No comments were received on this section. Changes were made to
proposed Sec. 303.12(a), (c), (e) to limit the application of
Sec. 303.12 to part 303 rather than to the entire chapter as proposed.
Section 303.12(e) of the proposal has been further modified slightly in
the final rule to make clear that actions taken by FDIC officials may
be relied upon by the public as actions authorized by the FDIC. The
FDIC adopts the remainder of the section as proposed.
Delegations of authority to DOS and DCA officials. Proposed
Sec. 303.13 contained delegations of authority to DOS and DCA officials
to enable them to carry out the FDIC's applications function in the
following areas: CRA protests, adequacy of filings, and the National
Historic Preservation Act of 1966, (16 U.S.C. 470 et seq.) (NHPA).
Where a CRA protest is filed and remains unresolved, proposed
Sec. 303.13(a) delegated 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
any CRA protest caused a filing to be forwarded to DCA in Washington
for review. For purposes of determining when to commence processing of
a filing, proposed Sec. 303.13(b) delegated authority to DOS officials
to determine whether a filing is substantially complete. This provision
also clarified that the standard to initiate the processing period is
the receipt of a substantially complete filing.
Several commenters opposed the delegation of authority contained in
proposed Sec. 303.13(a) to make decisions and to act on CRA protested
applications. These commenters objected to the removal of such
authority from the presidentially appointed and accountable Board of
Directors who they believed are in a better position to weigh the
issues involved. These commenters were concerned that the CRA might not
be applied consistently by various FDIC offices and that the increasing
consolidation of the banking industry accompanied by interstate
expansion would result in decisions being made by regional directors
without complete understanding of a particular institution and its CRA
record.
The FDIC is committed to careful and conscientious fulfillment of
its CRA obligations. The FDIC believes there are adequate safeguards
and checks in place to ensure that it is deliberate and fair in its
actions involving consideration of CRA performance in the application
process and to ensure consistency among regional offices. Internal
procedures require regional offices to notify DCA in Washington of the
receipt of a protest within specific time frames. In addition, as
discussed below in the appropriate paragraphs, the FDIC has revised the
delegation of authority where a CRA protest is unresolved. Proposed
Secs. 303.26, 303.46 and 303.184 provided that where a CRA protest was
unresolved at the regional level, the Director or Deputy Director (DOS)
could approve the protested filing. The final rule makes clear that the
Director or Deputy Director (DOS) may approve such a filing only with
the concurrence of the Director or Deputy Director (DCA). This
clarification will ensure that those FDIC officials with relevant
expertise will act together to approve any application under this part
that is subject to an unresolved CRA protest. Moreover, under
Sec. 303.12(b)(1), the Board of Directors has not delegated the
authority to act upon filings involving significant policy concerns,
unique legal issues or other areas meriting special attention. Any
filings involving these concerns would have to be decided by the FDIC
Board of Directors.
Proposed Sec. 303.13(c) contained a delegation of authority
permitting DOS officials to enter into certain memoranda of agreement
to facilitate the FDIC's ability to comply with the National Historic
Preservation Act. No comments were received on this paragraph.
The final rule adds Sec. 303.13(d) to delegate the authority
necessary to modify publication requirements as set forth in
Sec. 303.7(f).
The FDIC adopts Sec. 303.13 as proposed with the addition of
Sec. 303.13(d).
B. Subpart B--Deposit Insurance
Subpart B of the proposal reorganized and clarified 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. Proposed subpart B
updated the regulation to reflect current statutory requirements and
current FDIC policy for processing such applications. Finally, subpart
B of the proposal set forth the delegations of authority and criteria
under which DOS may approve such applications. The final rule should be
read in conjunction with the FDIC's revised statement of policy on
Applications for Deposit Insurance found elsewhere in today's Federal
Register.
Four commenters submitted comments in response to subpart B of the
proposed rule. The FDIC has carefully considered these comments. The
comments are summarized below in the following discussion of
substantive changes to the regulatory text.
Filing procedures. Proposed Sec. 303.21 set forth general
procedures for filing applications for deposit insurance. No comments
were received on this section. The FDIC adopts this section as proposed
with minor changes to Sec. 303.21(b) to make clear that deposit
insurance applications for interim institutions are subject to the
provisions of subpart B and Sec. 303.62(b)(2), and to refine the
intended definition of ``interim institution.'' This change is
described more fully below and at Sec. 303.24.
Processing. Proposed Sec. 303.22(a) provided for the expedited
processing of applications for deposit insurance for proposed
depository institutions which will be subsidiaries of an ``eligible
depository institution'' or an ``eligible holding company.'' Proposed
Sec. 303.22(b) provided for standard processing for those applications
not
[[Page 44694]]
processed pursuant to expedited processing. Under expedited processing,
applications would be processed within 60 days of receipt of a
substantially complete application or 5 days after the expiration of
the comment period, whichever is later. Heretofore, the time period for
processing deposit insurance applications has generally been within 120
days. The proposal provided that final action may be withheld until the
FDIC has assurance that permission to reorganize the proposed
depository institution will be granted by the chartering authority. An
eligible depository institution is defined in Sec. 303.2(r) of the
proposal. An eligible holding company is defined in Sec. 303.22(a) of
the proposal 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. The proposal
further provided that if the FDIC did not act within the expedited
processing period, such inaction would not constitute an automatic or
default approval.
Three commenters questioned the definition of an ``eligible holding
company.'' One commenter suggested that only the composite rating be
considered. Another commenter suggested that the size criteria be
lowered to $100 million. The FDIC intends to achieve the expedited
processing time frame for acting on applications for deposit insurance
by eligible holding companies by performing a more limited
investigation of the application than for those subject to standard
processing. In order to provide such treatment, the FDIC must be
confident that the sponsoring organization has sufficient financial and
management resources to justify streamlined processing. The composite
rating and size criteria as proposed are meant to be indicators of such
strength. Therefore, the final rule does not change this aspect of the
proposal. In addition, it should be noted that some applications that
appear to meet the expedited criteria as a matter of first impression
may be removed from expedited processing if sufficient management and
capital resources are not present to give the FDIC sufficient comfort
in utilizing expedited procedures. Likewise, the FDIC has the option of
processing an application within the expedited time frame, even if the
sponsor does not technically meet the eligibility definition. The FDIC
intends to process all applications as expeditiously as prudence and
its resources permit.
One commenter observed that it would be possible for an eligible
holding company to receive expedited treatment even if some of its
subsidiary institutions have less than satisfactory ratings. This is
correct; however, if the condition of any of the subsidiary banks
raises a safety or soundness, compliance or CRA concern, the regional
director has the option of removing the application from expedited
processing in accordance with the provisions of Sec. 303.11(c)(2).
One commenter pointed out that a company which does not already
control an insured depository institution cannot receive expedited
treatment. The FDIC does not believe it appropriate to grant expedited
treatment to applicants which do not have an established record of
successfully managing an insured depository institution.
One commenter suggested an expedited processing time of 120 days,
which has been the FDIC's internal time line for all deposit insurance
applications. The FDIC believes it is practical to process an
application from an eligible depository institution or eligible holding
company in 60 days. However, applications for deposit insurance are not
treated as notices, so they are not deemed to be approved by the
passage of time. As set forth in Sec. 303.11(c)(2) the FDIC can remove
an application from expedited processing for a variety of reasons,
including good cause. Removal of an application from expedited
processing enables the FDIC to take additional time to consider a
particular application that might present unique issues.
The FDIC adopts this section as proposed with a technical change to
conform to the longer comment period described below and at
Sec. 303.23.
Public notice and comment period. Proposed Sec. 303.23(a) provided
that notice shall be published as close as practicable to the filing
date but not more than five days before the filing date. This provided
assurance that the public portion of the application file will be
available for inspection during the comment period.
Under the proposal Sec. 303.23(a) would have required interested
parties to file comments with the appropriate regional director (DOS)
on or before the 15th day following the date of publication. Two of the
commenters believed that the proposed 15-day comment period was too
short. In response to this concern, the proposed comment period under
Sec. 303.23(a) has been increased to 30 days in the final rule.
Interested parties are required to file comments with the regional
director on or before the 30th day following the date of publication.
Also, the appropriate regional director (DOS) may extend or reopen the
comment period for good cause.
The FDIC adopts this section with the longer public comment period
discussed above.
Application for deposit insurance for an interim depository
institution. Proposed Sec. 303.24 defined an interim depository
institution as an institution formed or organized solely to facilitate
a merger transaction that would be reviewed by one of the four federal
banking agencies and that would not open for business. The proposal
described the requirements for a filing for deposit insurance for an
interim depository institution and indicated the intent of the FDIC to
take final action on such an application within 21 days after receipt
of a substantially complete application unless the applicant was
advised to the contrary.
No comments were received on this section.
Sections 303.21(b) and 303.24 have been revised in the final rule
to cross-reference appropriate provisions of subpart D (Merger
Transactions) of this part, Sec. 303.60 et. seq. An interim institution
is defined in Sec. 303.21(b) of the final rule as a state or federally
chartered depository institution that does not operate independently
but exists solely as a vehicle to accomplish a merger transaction. A
separate application for deposit insurance for an interim institution
is not required in connection with merger transactions that require
FDIC approval under subpart D. However, subject to the provisions of
Sec. 303.62(b)(2), a separate deposit insurance application is required
for a state chartered interim institution if the related merger
transaction is subject to approval by a federal banking agency other
than the FDIC. Federally chartered interim depository institutions are
deemed to be insured upon the issuance of a charter by the appropriate
federal banking agency and an application for deposit insurance with
the FDIC is not required. The FDIC believes that the changes to these
two sections will ensure consistency among subparts B and D.
The filing required by Sec. 303.24(b) of the final rule consists of
a brief letter application and a copy of the related merger
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
[[Page 44695]]
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. Proposed Sec. 303.25 set forth the
application procedure for the continuation of a state bank's deposit
insurance upon its withdrawal from membership in the Federal Reserve
System. No comments were received on this section. The FDIC adopts this
section as proposed with minor technical revisions to clarify that the
correspondence referred to in Sec. 303.25(a)(1), (2) is with the
appropriate Federal Reserve Bank.
Delegation of authority. Proposed Sec. 303.26 sets forth the
delegations of authority relevant to applications for deposit
insurance. The specific criteria that must be met before delegated
authority can be exercised, such as initial capitalization,
reasonableness of legal fees and other expenses, projected
profitability, investment in fixed assets and financial arrangements
involving insiders, including stock financing arrangements, were
updated to reflect current policy, and are discussed in the revised
statement of policy on Applications for Deposit Insurance published
elsewhere in today's Federal Register. The revised statement of policy
is cross-referenced in the final rule to avoid duplication.
Proposed Sec. 303.26(a)(1) delegated authority to the Director and
the Deputy Director (DOS), and where confirmed in writing, to an
associate director, and the appropriate regional director and deputy
regional director (DOS) to approve applications for deposit insurance
for proposed depository institutions subject to specified criteria. The
criteria set forth in paragraph (v) provided that an application could
be approved by the regional director or deputy regional director (DOS)
only where no CRA protest, as defined in Sec. 303.2(l), had been filed
which remained unresolved, or where such protest remained unresolved,
the appropriate DCA official concurred that approval would be
consistent with purposes of the CRA, and the applicant agreed in
writing to any conditions imposed regarding the CRA. Under the
proposal, where a protested application remained unresolved the
Director, Deputy Director or associate director (DOS) could approve the
application without DCA concurrence. While no commenters specifically
addressed this provision, several commenters raised general concerns
regarding the FDIC's delegation of authority to act upon CRA protested
applications. As discussed above, the FDIC believes that it is
desirable to vest authority to act on protested applications in
officials most likely to be personally familiar with the institution or
institutions and communities involved. Section 303.26(a)(1) has been
revised in the final rule to restrict the authority of the Director,
Deputy Director and associate director (DOS) to act upon CRA protested
applications by requiring them to obtain DCA concurrence before
approving such applications. The FDIC believes that this revision will
ensure that those FDIC officials with relevant expertise will act
together to approve any application under this section that is subject
to an unresolved CRA protest.
The FDIC adopts this section with the revisions discussed above.
Proposed Sec. 303.27 set forth authority retained by the Board of
Directors. No comments were received on this section. The FDIC adopts
this section as proposed.
C. Subpart C--Establishment and Relocation of Domestic Branches and
Offices
The proposal significantly revised the portion of part 303 that
implements section 18(d) of the FDI Act (12 U.S.C. 1828(d)) 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 major changes in the
proposal provided for expedited processing for eligible depository
institutions and new definitions for ``messenger service,'' ``mobile,''
``temporary,'' and ``seasonal'' branches. The proposal excluded remote
service units including automated teller machines and automated loan
machines from the definition of a branch. Requirements related to
interstate branching were also addressed in the proposal. Because of
the comprehensive treatment of branches, the proposal also recommended
rescinding the Statements of Policy regarding Applications to Relocate
a Main Office or Branch and Applications to Establish a Domestic
Branch. Both statements were considered obsolete and unnecessary
considering the revisions to subpart C and are rescinded elsewhere in
today's Federal Register.
The FDIC received three comments specifically on this subpart and
numerous comments addressing expedited processing, the public comment
period and the delegations of authority regarding CRA protested
applications. The FDIC carefully considered all the comments, and the
final rule reflects changes made in response to those comments as well
as technical changes to the proposal.
Definitions. Proposed Sec. 303.41(a) clarified that remote service
units, including automated loan machines, are not branches. These
exclusions are a result of statutory changes contained in section 2204
of EGRPRA (12 U.S.C. 36). Two commenters supported this change in the
definition.
With regard to the definition of ``branch relocation,'' two
commenters suggested that the FDIC explicitly make reference to the
Policy Statement Concerning Branch Closing Notices and Policies (2 FDIC
Law, Regulations and Related Acts 5391 (August 10,1993)) within the
definition of ``branch relocation'' in order to ensure that the new
definition is read as incorporating all of the guidance in the policy
statement. The FDIC agrees that it would be useful to make reference to
the policy statement and has provided the reference in the definition
of a branch relocation.
Filing procedures. The proposed regulation at Sec. 303.42(b)(2)
provided filing procedures for messenger services and mobile branches.
Specifically, the FDIC proposed that the geographic location for a
mobile branch be designated as to which community or communities are to
be served. The FDIC sought comment on whether such a designation is
appropriate but received no specific response. The FDIC is, however,
making a clarification in the final regulation to require that filings
specify the community or communities in which the vehicle will operate
and the manner in which it will be used.
One commenter recommended that applications for mobile branches be
subject to abbreviated FDIC review and public notice procedures because
of their unique characteristics and the substantial public convenience
offered by these facilities. The FDIC has carefully considered the
comment but believes that with the adoption of expedited processing for
eligible institutions that a special provision for a more limited
review is unnecessary.
In addition, proposed Sec. 303.42(b) has been modified to include
references to two FDIC statements of policy, one of which gives
guidance on the National Environmental Policy Act of 1969 (42 U.S.C
4321 et seq.) (NEPA) (2 FDIC Law, Regulations and Related Acts 5185,
March 31, 1980), and the other provides guidance on the NHPA (2 FDIC
Law, Regulations and Related Acts 5175 (March 31, 1980). The language
in Sec. 303.42(b)(5) has been modified to simply require a statement as
to whether or not the particular site for a branch or branch relocation
is included, or is eligible for inclusion, in the National Register of
Historic Places, including
[[Page 44696]]
documentation of consultation with the State Historic Preservation
Officer, as appropriate. The proposed regulation required a statement
as to whether or not the particular site is included in or is eligible
for inclusion in the National Register as well as a statement that
clearance has been or will be obtained from the State Historic
Preservation Officer. This change has been made in anticipation of a
programmatic agreement with the Advisory Council on Historic
Preservation and subsequent change in the FDIC's Statement of Policy on
NHPA to reflect exclusions of certain categories of properties from the
NHPA.
With regard to the establishment of certain interstate de novo
branches, the proposal at Sec. 303.42(b)(8) required the applicant to
provide a statement that the applicant has requested that the host
state provide to the appropriate regional director (DOS) written
confirmation that the applicant has complied with the state's filing
requirements and that the applicant has also submitted to the host
state bank supervisor a copy of the filing with the FDIC to establish
and operate a de novo branch. This requirement has been deleted in the
final regulation and the FDIC will make direct requests to the state
supervisor in those limited cases where such confirmation is required.
As a result of this deletion, the remainder of the section has been
renumbered.
Processing. The proposal at Sec. 303.43(a), provided expedited
processing for applications for the establishment and relocation of
domestic branches and offices for eligible depository institutions. The
expedited processing procedures were contained in Sec. 303.11(c), and
provided that an application submitted by an eligible depository
institution as defined in Sec. 303.2(r) will be acknowledged in writing
by the FDIC and 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) provided that the FDIC
may remove an application from expedited processing at any time before
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, 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 to the host state bank supervisor of the application filed with
the FDIC. One commenter objected to the expedited processing
provisions, arguing that they treat such filings as notices and would
subvert the spirit of the CRA. The FDIC believes such concerns are
unwarranted since the FDIC intends to carefully review all applications
for CRA and other safety and soundness and compliance concerns
regardless of the expedited processing time frames. The FDIC has also
provided for provisions for removal from expedited processing in
certain circumstances as enumerated in Sec. 303.11(c)(2).
Public notice requirements. The public notice requirements of the
proposal required that to relocate a main office the applicant publish
notice in the community in which the main office is currently located
and in the community to which the main office proposes to relocate, and
that such notice be published at least once each week on the same day
for two consecutive weeks. The proposal provided that for the
relocation of branches, a notice shall be published once in a newspaper
in the community in which the branch is located. One commenter objected
to this provision and recommended that two newspaper publications be
required to conform with the requirement for main office relocation.
The FDIC believes that since a branch relocation can only occur in the
same immediate neighborhood, that only one publication in that
community is necessary. Furthermore, a single publication is consistent
with the requirements of the other federal banking agencies.
In order to eliminate the uncertainty regarding the close of the
comment period, proposed Sec. 303.44 provided that comments must be
received by the appropriate Regional Director (DOS) within 15 days
after the date of the last newspaper publication and proposed
Sec. 303.9 provided for extension or reopening of the comment period in
certain situations. The FDIC received numerous comments on the length
of the comment period. Several comments supported the comment period,
however, a number of commenters objected to the 15-day comment period.
Several commenters suggested that a public comment period of 30 days
after the last publication while one commenter suggested the FDIC adopt
a processing time frame of 45 days as provided in part 5 of the Office
of the Comptroller of the Currency's regulations. One commenter
suggested that the comment period should not commence until the FDIC
has received a complete application. One commenter thought that the
application and notice provisions were generally reasonable, but
suggested that the application review deadline be changed to 15 days
after receipt of a substantially complete application or five days
after the public comment period expires, whichever is later. The
commenter argued that branch applications and relocations are
relatively simple activities and should, therefore, be processed
quickly. On balance, the FDIC believes a 15-day comment period provides
adequate time for the public to comment on the establishment or
relocation of a branch. The regulation provides for two publications
and a 21-day comment period for a main office relocation. The FDIC also
commits to place all applications subject to the CRA on its World Wide
Web site within three days of receipt in order to provide prompt
notification of all filings. The FDIC has also given its regional
directors wide discretion to extend the comment periods in order to
provide the public with an adequate amount of time to submit a
meaningful analysis. With regard to the processing or review deadline
being changed to 15 days after receipt of a substantially complete
application, the FDIC believes the 21 day processing period is
responsive to the industry and that it is not feasible to commit to a
shorter time frame. For these reasons, the FDIC is adopting the
timeframes as proposed.
Special provisions. Section 303.45 of the proposed regulation added
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) clarified procedures for
establishing temporary branches in emergency or disaster situations.
The proposal provided 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. However, the final regulation
[[Page 44697]]
does require that, within 10 days of a such a temporary relocation, the
bank submit a written application to the appropriate regional director
(DOS). The FDIC received one comment specifically supporting the
inclusion of such temporary facilities since it will make it easier for
institutions to relocate a branch or main office in the event of an
emergency.
Proposed Sec. 303.45(b) regarding relocation of a main office and
simultaneous redesignation of an existing office as the main office has
been modified to make clear that in such circumstances only a single
application is required.
Proposed Sec. 303.45(c) provided 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. One commenter
supported the expiration of the approval but suggested an extension
should be possible where extenuating circumstances warrant. The FDIC
has provided for such extension of time in subpart M of the final
regulation.
Delegation of Authority. Proposed Sec. 303.46 delegated authority
to the Director and Deputy Director, and where confirmed in writing, to
an associate director, and the appropriate regional director and deputy
regional director (DOS) to approve applications listed in this subpart
subject to specific criteria. The criteria set forth in paragraph
(c)(5) provided that an application could be approved by the regional
director or deputy regional director (DOS) only where no CRA protest as
defined in Sec. 303.2(l) had been filed which remained unresolved, or
where such protest remained unresolved, the appropriate DCA official
concurred that approval would be consistent with the purposes of the
CRA and the applicant agreed in writing to any conditions imposed
regarding the CRA. Under the proposal, where a protested application
remained unresolved the Director, Deputy Director or associate director
(DOS) could approve the application without DCA concurrence. While no
commenters specifically addressed this provision, several commenters
raised general concerns regarding the FDIC's delegation of authority to
act upon CRA protested applications. As discussed above, the FDIC
believes that it is desirable to vest authority to act on protested
applications in officials most likely to be personally familiar with
the institution or institutions and communities involved. Section
303.46(c)(5) has been revised in the final rule to restrict the
authority of the Director, Deputy Director and associate director (DOS)
to act upon CRA protested applications by requiring them to obtain DCA
concurrence before approving such an application. The FDIC believes
that this revision will ensure that those FDIC officials with relevant
expertise will act together to approve any application under this
subpart that is subject to an unresolved CRA protest.
Modification has been made to Sec. 303.46(c)(7) to reflect the
deletion of proposed Sec. 303.42(b)(8) which had required applicants to
request and provide a statement from the host state which provided
certain confirmations. As noted above, the FDIC will make such
inquiries.
After consideration of the comments, the FDIC adopts subpart C with
the above-noted modifications.
D. Subpart D--Merger Transactions
Proposed subpart D consolidated and reorganized the various
provisions of part 303 governing transactions subject to FDIC approval
under section 18(c) of the FDI Act (12 U.S.C. 1828(c)) (Bank Merger
Act). The primary changes reflected in the proposal were the addition
of an expedited processing procedure, the addition of various
definitions applicable to merger transactions, and the addition of
references to other statutory or regulatory provisions often applicable
to merger transactions.
The FDIC received three comments specifically addressing proposed
subpart D and numerous comments addressing expedited processing and the
delegations of authority regarding CRA protested applications. The FDIC
has carefully considered these comments. The comments are summarized
below in the following discussion of the regulatory text.
First, however, the FDIC notes that the title of this subpart has
been changed from ``Mergers'' to ``Merger Transactions.'' The use of
the term ``merger transaction'' is meant to be inclusive of all types
of transactions (including mergers, consolidations, and transfers of
deposit liabilities) covered by the Bank Merger Act. When the term
``merger'' is used in the regulation, it is used to reference only a
true merger.
Scope. Proposed Sec. 303.60 set forth the scope of the subpart. One
commenter suggested that a cross reference to the FDIC's Statement of
Policy on Bank Merger Transactions be added to the proposal. Section
303.60 of the final rule includes such a reference to the Statement of
Policy which is also published in today's issue of the Federal
Register. The FDIC adopts this section with the suggested reference.
Definitions. Proposed Sec. 303.61 added definitions regarding
merger transactions. No comments were received regarding the
definitions. The FDIC adopts this section as proposed, with minor,
nonsubstantive editorial changes.
Transactions requiring prior approval. Proposed Sec. 303.62
detailed the types of transactions requiring the prior written approval
of the FDIC under subpart D. No comments were received regarding the
transactions covered. The FDIC adopts this section as proposed with
minor editorial changes.
Filing procedures. Proposed Sec. 303.63 provided guidance regarding
the filing procedures for applications required under the subpart. No
comments were received on the filing procedures. The FDIC adopts this
section as proposed, with minor, nonsubstantive editorial changes.
Processing. Proposed Sec. 303.64 included the addition of an
expedited processing procedure. This procedure would be available when
all parties to a merger transaction are eligible depository
institutions (as defined in Sec. 303.2(r)), and the resulting
institution would be well-capitalized immediately after the merger
transaction.
One commenter suggested that the expedited processing period of 45
days be reduced to 30 days for smaller, less complex transactions where
the total assets of the resultant institution would be less than $500
million. Another commenter recommended that the expedited processing
period be increased to 60 days. The final rule retains the 45 day
processing time line. The FDIC believes that this provides sufficient
time to act on applications that do not raise unique issues or are not
subject to CRA protests. Protested applications or applications which
raise unique issues generally would be removed from expedited
processing. While it might be possible to resolve all relevant safety
and soundness issues arising in the context of smaller merger
transactions in less than 45 days, the statutory requirement of a 30
day publication period and the requirement to consult with the Attorney
General and other bank regulatory agencies regarding the competitive
factors does not make it feasible to establish a shorter time frame for
action.
One commenter generally supported the expedited processing proposal
but suggested that the eligibility criteria be expanded to include
otherwise eligible proposals where an ineligible target institution has
core deposits equal to 10 percent or less of the acquiror's core
deposits. In response to this comment, a provision has been added in
the final
[[Page 44698]]
rule that permits expedited processing for transactions involving an
eligible acquiror and an ineligible seller if the amount of total
assets to be transferred to the acquiror is no more than 10 percent of
the acquiror's total assets. The FDIC believes that, absent other
issues, such a transaction would be less likely than larger
acquisitions to raise safety and soundness concerns.
The FDIC adopts this section with the changes noted above, along
with limited minor changes.
Public notice requirements. Section 303.65 of the proposal set
forth the requirements for providing public notice of merger
transactions, the required content of such notices, and a predictable
period of 35 days during which the public may submit comments on
proposed non-emergency merger transactions. In addition, the proposal
permitted the initial public notice of a proposed transaction to be
published up to 5 days before the merger application is filed with the
FDIC. Under the existing regulations, the notice could not be published
until the application had been filed with the FDIC.
One commenter opposed the proposal to permit merger applicants to
publish notice of a proposed transaction before a completed application
has been filed with the FDIC. Another commenter generally supported the
proposal but objected to the 35 day comment period. One commenter also
suggested a shorter comment period for smaller and less complex
transactions, such as those resulting in an institution with less than
$500 million in combined assets. In contrast, another commenter urged a
longer comment period than that proposed. This commenter suggested that
the public comment period should extend through the fifth day prior to
FDIC action on the application (specifically, 5 days before the end of
the 60-day minimum processing period urged by the commenter).
The final rule continues to provide for a fixed comment period. The
FDIC believes this will provide prospective commenters the assurance
that they will have a definite number of days for submitting comments
after publication of the last notice of a proposed transaction. The
final regulation revises the length of the public comment period to a
30-day public comment period rather than the 35-day period proposed.
Upon reflection, the FDIC does not believe it is necessary to provide
for a longer comment period than required by the Bank Merger Act. The
final rule moves the last publication date for public notice of the
transaction from the 30th day after initial publication to the 25th
day. This ensures that prospective commenters will typically have 5
days after the last publication to express their views on a proposed
merger transaction. The FDIC notes that the final rule provides
flexibility for the FDIC to extend or reopen a comment period for
reasons specified in subpart A of the final rule.
Regarding the suggestion that the comment period be extended to 5
days before the end of the processing period, the FDIC notes that the
expedited processing period in Sec. 303.64(a) is a maximum period, not
a minimum. Thus, simple transactions requiring only the most cursory
review, for example, might be approved sooner than 45 days after the
date of the application. Because the processing time required for any
given application cannot be predicted in advance, the closing date for
comments on the application cannot both be predictable and end a
certain number of days before the FDIC makes a decision on the
application.
Proposed Sec. 303.65(a) provided generally that an applicant for a
merger transaction must publish notice of the proposed transaction on
at least three occasions at approximately two-week intervals. No
comments were received on this provision. The final rule revises this
requirement to provide that such notice must be published on at least
three occasions at approximately equal intervals. The FDIC makes this
change to conform with changing the date of the last publication to the
25th day after the initial publication, as discussed above.
Proposed Sec. 303.65(b)(1) set forth an exception to the
publication requirements where the FDIC determines that an emergency
requires expeditious action. This exception tracks a statutory
exception. Under this provision of the proposal, notice shall be
published twice, with the second of the two notices to be published on
the 10th day after the first publication. The final rule requires the
second notice to be published on the 7th day after the first
publication. Based upon the statutory 10-day processing period, this
change allows the public 3 days to comment after the second
publication.
One commenter suggested that the FDIC require notices regarding
merger transactions to be published in languages other than English in
communities with significant non-English speaking populations. Rather
than limit applicability to situations involving merger applications
and non-English publication, however, the FDIC has instead added a more
broadly-focused provision in subpart A. Specifically, under the new
Sec. 303.7(f) the FDIC may determine on a case-by-case basis that
unusual circumstances surrounding a particular filing warrant
modification of the publication requirements. It is intended that this
provision will be applied sparingly and with the purpose of making
publication more meaningful, not as a means of altering the publication
requirements to suit the convenience of the parties or as a means of
curing defective publications.
The FDIC adopts Sec. 303.65 with the modifications discussed above
and minor, non-substantive, editorial changes.
Delegations of authority. Proposed Sec. 303.66 set forth the
delegations of authority to designated FDIC officials to approve under
the Bank Merger Act any application filed under this subpart for
approval of a merger transaction for which the specified criteria are
satisfied. The specific criteria that must be met before delegated
authority can be exercised, such as capital requirements, competitive
effects and geographic markets were updated to reflect current FDIC
policy.
Proposed Sec. 303.66(b) delegated authority to the Director and
Deputy Director, and where confirmed in writing, to an associate
director, and the appropriate regional director and deputy regional
director (DOS) to approve merger applications, subject to specific
criteria. The criteria set forth in Sec. 303.66(b)(5) provided that an
application could be approved by the regional director or deputy
regional director (DOS) only where no CRA protest as defined in
Sec. 303.2(l) had been filed which remained unresolved, or where such
protest remained unresolved, the appropriate DCA official concurred
that approval would be consistent with the purposes of the CRA, and the
applicant agreed in writing to any conditions imposed regarding the
CRA. Under the proposal, where a CRA protest remained unresolved the
Director, Deputy Director or associate director (DOS) could approve the
application without DCA concurrence. While no commenters specifically
addressed this provision, several commenters raised general concerns
regarding the FDIC's delegation of authority to act upon CRA protested
applications. As discussed above, the FDIC believes that it is
desirable to vest authority to act on protested applications in
officials most likely to be personally familiar with the institution or
institutions and communities involved. Sections 303.66(c) and (d) have
been revised in the final rule to restrict the authority of the
Director, Deputy Director and associate director (DOS) to act upon CRA
protested applications by requiring
[[Page 44699]]
them to obtain DCA concurrence before approving such an application.
The FDIC believes that this revision will ensure that those FDIC
officials with relevant expertise will act together in deciding whether
to approve a merger application that is subject to an unresolved CRA
protest.
Regarding competitive effects which are considered under proposed
Secs. 303.66(f) and (g), one commenter urged that the regulation
provide guidance as to the composition of relevant geographic markets
to be used in analyzing competitive effects. The Statement of Policy on
Bank Merger Transactions (published elsewhere in today's Federal
Register), to which a cross reference has been added in new
Sec. 303.60, includes a discussion on relevant geographic markets.
Relevant geographic markets are best defined on a case-by-case basis,
considering such factors as the location of the offices of the
particular merging parties. Beyond the factors referred to in the
Statement of Policy, the FDIC does not believe that any more specific
factors can be identified that could be applied for all merger
transactions, successfully, accurately, and without undue burden. This
same commenter expressed concern that the benefits of expedited
processing might be undermined if the FDIC waited for the Attorney
General's competitive-factors reports before acting on a merger
application. In response, we note that the Bank Merger Act allows the
Attorney General 30 calendar days to provide a competitive factors
report. The report is commonly provided within or near this period
unless competition issues are raised that the Department of Justice
believes merit more extensive examination. If there are such issues, it
is likely that the application would be removed from expedited
processing.
One commenter further suggested that language be added to the final
rule that would preclude FDIC consideration of any factor unless that
factor is specifically referred to in the regulation. The FDIC believes
such a provision would be ill advised and not in the public interest.
General categories of considerations specified in the Bank Merger Act
and other relevant statutes are identified in the Statement of Policy
on Bank Merger Transactions (published elsewhere in today's Federal
Register). The necessity of expressly enumerating each and every factor
to be considered within these categories would result in a regulation
of unwieldy length.
Proposed Sec. 303.66(f) provided that if the Attorney General does
not provide a competitive factors report and certain delegation
criterion are satisfied, the appropriate regional director (DOS) may
request a written opinion from the FDIC's General Counsel or designee
as to whether the proposed merger might have a significantly adverse
effect on competition. Since the request for a written opinion was
permissive, the language has been deleted from the final rule. The FDIC
notes that nothing would prohibit a regional director from requesting
such an opinion.
The FDIC adopts this section with the revisions discussed above.
Authority retained by the FDIC Board of Directors. Proposed
Sec. 303.27 set forth authority retained by the Board of Directors. No
comments were received on this section. The FDIC adopts this section as
proposed.
E. Subpart E--Change in Bank Control
The proposal substantially reorganized, clarified, and simplified
the FDIC's regulation implementing the Change in Bank Control Act of
1978. The changes, developed in consultation with the other federal
banking agencies, harmonize the scope and procedural requirements of
the FDIC's regulation with those of the other federal banking agencies
and reduce unnecessary burden. In addition, a common form which may be
used to satisfy the notice requirements of the Change in Control Act
has been adopted by the four federal banking agencies and is available
from any FDIC regional office.
The proposal defined the previously undefined term ``acting in
concert'' to clarify the scope of the regulation. It also incorporated
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 lengthened 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 added 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 reduced 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
permits 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 proposal provided 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 proposal
removed the requirement that the notificant have confirmation that the
FDIC has accepted the notice before publishing the announcement.
The proposal deleted 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 received two comments regarding the proposal. One
commenter supported the proposed changes to the regulation and the
other did not object to the changes proposed. The FDIC adopts this
section as proposed.
F. Subpart F--Change of Director or Senior Executive Officer
The proposed rule implemented the amendments to section 32 of the
FDI Act and set forth the circumstances under which an insured state
nonmember bank must give the FDIC prior notice of a change in any
member of its board of directors or any senior executive officer and
the procedures for filing such notice, as well as applicable
delegations of authority. The proposed rule also strived 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. In addition, a common application form providing the notice
requirements of section 32 has been adopted by the federal banking
agencies and is available from any FDIC regional office.
Section 2208 of EGRPRA (12 U.S.C. 1843) 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
[[Page 44700]]
are otherwise in ``troubled condition'' remain subject to the prior
notice requirement. In addition, EGRPRA provided 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 provided the
agencies with more latitude to determine the prior notice period and
allowed the agencies up to 90 days to issue a notice of disapproval.
Although the EGRPRA amendments provided the agencies with authority to
increase the prior notice period to 90 days, the proposed subpart F
retained the 30-day prior notice currently required but allowed the
agency to extend the time to act on a notice by up to an additional 60
days. The FDIC specifically sought public comment on the 30-day time
frame.
Two comments were received on the proposal. One commenter generally
supported the changes in the proposal. Another commenter suggested that
any extension of the 30 day processing period be limited to an
additional 30 days rather than 60 days.
The final rule retains the FDIC's ability to extend the 30 day
notice for up to an additional 60 days. The FDIC expects to act on the
vast majority of these cases within 30 days. 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.
The final rule adopts subpart F as proposed, with minor technical
changes.
G. Subpart G--Activities and Investments of Insured State Banks
The part 303 proposal reserved subpart G for filing procedures
related to activities and equity investments of insured state banks
which are currently contained in part 362 (12 CFR 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 has an outstanding notice of proposed rulemaking to make
comprehensive revisions to part 362. 62 FR 47969, September 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. At the time the FDIC issued its part 303 proposal, the FDIC
could not determine whether its 362 proposal or its part 303 proposal
would be finalized first. In order to deal with this problem, the
application procedures which implement the proposed revisions to part
362 concerning state bank activities were issued in subpart E of the
part 362 proposal. The part 303 proposal advised members of the public
taking an interest in the FDIC's application procedures for the
activities of insured state banks under part 362 to review the part 362
proposal for the specifics of such application procedures. Both
proposals also advised the public that 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.
One commenter responding to the part 303 proposal addressed certain
substantive aspects of the part 362 proposal. The FDIC will take this
comment into consideration when the FDIC finalizes part 362.
The final rule for part 303 will continue to reserve subpart G.
When the FDIC issues the final rule for part 362, the final version of
the application procedures proposed in subpart E of the part 362
proposal will be issued as final rule amendments to subpart G of part
303. In the interim, 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 become effective.
H. Subpart H--Filings by Savings Associations
Subpart H of the proposal was reserved for filing procedures
related to activities of insured savings associations and subsidiaries
of insured savings associations that were, at the time of the proposal,
contained in Sec. 303.13 of part 303 (12 CFR 303.13). Section 303.13
implemented sections 28 and 18(m) of the FDI Act (12 U.S.C. 1831e and |
