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FDIC Federal Register Citations

[Federal Register: June 29, 1999 (Volume 64, Number 124)]
[Notices]               
[Page 34844-34847]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29jn99-130]                         
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket No. 99-06]
FEDERAL RESERVE SYSTEM
[Docket No. R-1036]
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
[Docket No. 99-33]
 
Branch Closings
AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury; 
Board of Governors of the Federal Reserve System (Board); Federal 
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision 
(OTS), Treasury.
ACTION: Joint policy statement.
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SUMMARY: The OCC, the Board, the FDIC, and the OTS (the agencies) are 
revising their joint policy statement regarding branch closings by 
insured depository institutions. This action is needed to incorporate 
changes in the underlying statute made by section 106 of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 and 
section 2213 of the Economic Growth and Regulatory Paperwork Reduction 
Act of 1996. The action is intended to clarify the additional steps 
regarding notice and consultation for proposed branch closings by 
interstate banks in low- or moderate-income areas, and to clarify the 
status of automated teller machines, relocations and consolidations, 
and branch closings in connection with emergency acquisitions or 
assistance by the FDIC.
EFFECTIVE DATE: June 29, 1999.
FOR FURTHER INFORMATION CONTACT:
    OCC: Crystal Maddox, National Bank Examiner, Licensing Policy and 
Systems Analyst, Bank Organization and Structure Division (202/874-
5060); Sue Auerbach, Senior Attorney, Bank Activities and Structure 
Division (202/874-5300); Beth Knickerbocker, Senior Attorney, Community 
and Consumer Law Division (202/874-5750); Office of the Comptroller of 
the Currency, 250 E Street, SW., Washington DC 20219.
    Board: Rick Heyke, Senior Attorney, Legal Division (202/452-3688), 
Board of Governors of the Federal Reserve System, 20th and C Streets, 
NW., Washington, DC 20551. For the hearing impaired only, 
Telecommunications Device for the Deaf (TDD), Diane Jenkins (202/452-
3544).
    FDIC: Curtis Vaughn, Examination Specialist, Division of 
Supervision (202/898-6759); Gladys C. Gallagher, Counsel, Legal 
Division (202/898-3833); Federal Deposit Insurance Corporation, 550 
17th Street, NW., Washington, DC 20429.
    OTS: Larry Clark, Director of Trust Programs, Compliance Policy and 
Specialty Examinations (202/906-5628); Lucrecia R. Moore, Attorney 
(202/906-6161); Office of Thrift Supervision, 1700 G Street, NW., 
Washington DC 20552.
SUPPLEMENTARY INFORMATION:
Background Information
    Section 42 of the Federal Deposit Insurance Act (12 U.S.C. 1831r-1) 
(FDI Act) requires an insured depository institution to give 90 days 
prior written notice of any branch closing to its primary Federal 
regulator and to branch customers, to post a notice at the branch site 
at least 30 days prior to closing, and to develop a policy with respect 
to branch closings. The notice to the regulator must include a detailed 
statement of the reasons for the decision to close the branch and 
information in support of those reasons.
    On September 21, 1993 (58 FR 49083), the agencies issued a joint 
policy statement to provide guidance to institutions in complying with 
section 42 of the FDI Act. The 1993 joint policy statement defines a 
branch for purposes of section 42, clarifies what constitutes a branch 
closing, and provides guidance to institutions in identifying customers 
to be notified in the event of a branch closing.
    On September 29, 1994, section 42 of the FDI Act was amended by 
section 106 of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338) (Interstate 
Act). The Interstate Act changed section 42 of the FDI Act in two ways, 
both relating to proposed closings by interstate banks (banks which 
maintain branches in more than one state) of branches in low- or 
moderate-income areas: First, by providing a new notice procedure; and 
second, by requiring the appropriate Federal banking agency to convene 
a meeting of community leaders and other
[[Page 34845]]
persons to discuss the feasibility of obtaining adequate alternative 
facilities and services if a person from the affected area requests 
such a meeting and other prescribed requirements are satisfied.
    On September 30, 1996, section 42 of the FDI Act was amended by 
section 2213 of the Economic Growth and Regulatory Paperwork Reduction 
Act of 1996 (Pub. L. 104-208, 110 Stat. 3009) (Regulatory Relief Act). 
The Regulatory Relief Act amended section 42 of the FDI Act to clarify 
that section 42 does not apply to: (1) An automated teller machine; (2) 
the relocation of a branch or consolidation of one or more branches 
into another branch, if the relocation or consolidation occurs within 
the immediate neighborhood and does not substantially affect the nature 
of the business or customers served; and (3) a branch that is closed in 
connection with an emergency acquisition under sections 11(n), 13(f), 
or 13(k) of the FDI Act, or any assistance provided by the FDIC under 
section 13(c) of the FDI Act. (12 U.S.C. 1821(n), 1823(f) and (k), and 
1823(c)).
    The agencies are revising the 1993 joint policy statement to 
reflect the changes to section 42 of the FDI Act made by the Interstate 
Act and the Regulatory Relief Act. The revised policy statement 
incorporates the new procedure and provides for banks to inform 
customers in affected areas of their ability to comment on a particular 
branch closing. The agencies are also clarifying that main offices, 
remote service facilities, loan production offices, and insured 
branches of foreign banks are not branches for purposes of section 42. 
A reference to the Resolution Trust Corporation (RTC) is being 
eliminated since the agency ceased to exist on December 31, 1995. The 
agencies are also clarifying the section on allocation of customers to 
branches.
    The text of the revised joint policy statement follows:
Policy Statement of Office of the Comptroller of the Currency, 
Board of Governors of the Federal Reserve System, Federal Deposit 
Insurance Corporation, and Office of Thrift Supervision Concerning 
Branch Closing Notices and Policies
Purpose
    This policy statement provides guidance to each insured depository 
institution concerning requirements that an institution provide prior 
notice of any branch closing and establish internal policies for branch 
closings.1
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    \1\ An ``insured depository institution'' means any bank or 
savings association, as defined in Section 3 of the FDI Act (12 
U.S.C. 1813), the deposits of which are insured by the FDIC.
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Background
    The Federal Deposit Insurance Corporation Improvement Act of 1991 
(Pub. L. 102-242, 105 Stat. 2236) (FDICIA) was enacted on December 19, 
1991. Section 228 of the FDICIA added a new section 42 to the Federal 
Deposit Insurance Act (12 U.S.C. 1831r-1) (FDI Act) that imposes notice 
requirements on insured depository institutions that intend to close 
branches. The provision became effective on December 19, 1991. Section 
42 was amended on September 29, 1994, by section 106 of the Riegle-Neal 
Interstate Banking and Branching Efficiency Act of 1994 (Pub. L. 103-
328, 108 Stat. 2338), and on September 30, 1996, by the Economic Growth 
and Regulatory Paperwork Reduction Act of 1996 (Pub. L. 104-208, 110 
Stat. 3009).
    The law requires an insured depository institution to submit a 
notice of any proposed branch closing to the appropriate Federal 
banking agency no later than 90 days prior to the date of the proposed 
branch closing. The required notice must include a detailed statement 
of the reasons for the decision to close the branch and statistical or 
other information in support of such reasons.
    The law also requires an insured depository institution to notify 
its customers of the proposed closing. The institution must mail the 
notice to the customers of the branch proposed to be closed at least 90 
days prior to the proposed closing. The institution also must post a 
notice to customers in a conspicuous manner on the premises of the 
branch proposed to be closed at least 30 days prior to the proposed 
closing.
    An interstate bank (defined in section 42 as a bank that maintains 
branches in more than one state) proposing to close a branch located in 
a low- or moderate-income area is required to include in its notice to 
customers the mailing address of the appropriate Federal banking agency 
and a statement that comments on the closing may be mailed to the 
agency.2 In those cases, a person from the affected area may 
submit a written request relating to the proposed closing to the 
agency, stating specific reasons for the request and including a 
discussion of the adverse effect the closing may have on the 
availability of banking services in the affected area. If the agency 
determines that the request is nonfrivolous, then the agency shall 
convene a meeting of appropriate individuals, organizations, depository 
institutions, and agency representatives, as determined by the agency 
in its discretion, to explore the feasibility of obtaining adequate 
alternative facilities and services for the affected area following the 
closing of the branch.
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    \2\ Under section 42, this requirement does not apply when a 
savings association closes a branch.
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    Finally, the law requires each institution to adopt policies 
regarding closings of branches of the institution.
Applicability
    Section 42 of the FDI Act applies to the closing of a ``branch'' by 
an insured depository institution.3 The agencies consider a 
``branch'' for purposes of section 42 to be a traditional brick-and-
mortar branch, or any similar banking facility other than a main 
office, at which deposits are received or checks paid or money lent. 
Notice pursuant to section 42 would not be required for the closing of 
non-branch facilities, such as an ATM, remote service facility, or loan 
production office, or of a temporary branch.4 The law also 
does not apply to mergers, consolidations, or other acquisitions, 
including branch sales, that do not result in any branch closings. 
Institutions that are in doubt about the coverage of a particular 
closing should consult the appropriate Federal banking agency.
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    \3\ Insured branches of foreign banks are not considered 
``branches'' for purposes of section 42 because they are subject to 
separate liquidation procedures as specified in 12 CFR 28.22 
(Federal branches of foreign banks) and 12 CFR 211.25(f) (state 
branches of foreign banks).
    \4\ Consistent with the agencies' original interpretation, the 
1996 amendment expressly stated that section 42 of the FDI Act 
``shall not apply with respect to automated teller machines.'' (Pub. 
L. 104-208, 110 Stat. 3009.)
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Mergers
    An institution must file a branch closing notice whenever it closes 
a branch, including when the closing occurs in the context of a merger, 
consolidation or other form of acquisition.5 Branch closings 
that occur in the context of transactions subject to the Bank Merger 
Act (12 U.S.C. 1828) require a branch closing notice, even if the 
transaction received expedited treatment under that Act. The 
responsibility for filing the notice lies with the acquiring or 
resulting institution, but either party to such a transaction may give 
the notice. Thus, for example, the purchaser may give the notice prior 
to consummation of the transaction where the purchaser intends to close 
a branch following consummation, or the seller may give the notice 
because it intends to close a branch at or prior to consummation. In 
the latter example, if the transaction
[[Page 34846]]
were to close ahead of schedule, the purchaser, if authorized by the 
appropriate Federal banking agency, could operate the branch to 
complete compliance with the 90-day requirement without the need for an 
additional notice.
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    \5\ See ``Other'' below for certain branches closed in 
connection with emergency acquisitions or FDIC assistance or 
subsequently transferred back to the FDIC.
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Relocations and Consolidations
    The law does not apply when a branch is relocated or consolidated 
with one or more other branches if the relocation or consolidation 
occurs within the immediate neighborhood and does not substantially 
affect the nature of the business or customers served. For purposes of 
this policy statement, a branch relocation is a movement within the 
same immediate neighborhood that does not substantially affect the 
nature of the business or customers served. Generally, relocations will 
be found to have occurred only when short distances are involved: For 
example, moves across the street, around the corner, or a block or two 
away. Moves of less than 1,000 feet will generally be considered to be 
relocations. In less densely populated areas or where neighborhoods 
extend farther, and a long move would not significantly affect the 
nature of the business or the customers served by the branch, a 
relocation may occur over substantially longer distances.6 
Institutions that are in doubt about whether a relocation or a closing 
has occurred should consult the appropriate Federal banking agency.
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    \6\ OCC and OTS regulations specify distances considered short-
distance relocations. See 12 CFR 5.3(l) (national banks) and 12 CFR 
545.95(c) (thrifts).
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    Consolidations of branches are considered relocations for purposes 
of this policy statement if the branches are located within the same 
neighborhood and the nature of the business or customers served is not 
affected. Thus, for example, a consolidation of two branches on the 
same block following a merger would not constitute a branch closing. 
The same guidelines apply to consolidations as to relocations.
Other
    Changes of services at a branch are not considered a branch 
closing, provided that the remaining facility constitutes a branch (as 
defined herein).7
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    \7\ The agencies note that where, after a reduction in services, 
the resulting facility no longer qualifies as a branch, section 42 
would apply. Thus, notices of branch closing would be required if an 
institution were to replace a traditional brick-and-mortar branch 
with an ATM.
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    Section 42 also does not apply when a branch ceases operation but 
is not closed by an institution. Thus, the law does not apply to:
    <bullet> A temporary interruption of service caused by an event 
beyond the institution's control (e.g., a natural catastrophe), if the 
insured depository institution plans to restore branching services at 
the site in a timely manner; 8
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    \8\ Section 42 would apply, however, if the institution did not 
reopen the branch following the incident. Although prior notice 
would not be possible in such a case, the institution should notify 
the customers of the branch and the appropriate Federal banking 
agency in the manner specified by section 42 to the extent possible 
and as soon as possible after the decision to close the branch has 
been made.
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    <bullet> Transferring back to the FDIC, pursuant to the terms of an 
acquisition agreement, a branch of a failed bank or savings association 
operated on an interim basis in connection with the acquisition of all 
or part of a failed bank or savings association, so long as the 
transfer occurs within the option period or within an occupancy period, 
not to exceed 180 days, provided in the agreement.
    <bullet> A branch that is closed in connection with an emergency 
acquisition under sections 11(n), 13(f), or 13(k) of the FDI Act, or 
any assistance provided by the FDIC under section 13(c) of the FDI Act. 
(12 U.S.C. 1821(n), 1823(f) and (k), and 1823(c)).
Notice of Branch Closing to the Agency
    The law requires an insured depository institution to give notice 
of any proposed branch closing to the appropriate Federal banking 
agency no later than 90 days prior to the date of the proposed branch 
closing. The required notice must include the following:
    <bullet> Identification of the branch to be closed;
    <bullet> The proposed date of closing;
    <bullet> A detailed statement of the reasons for the decision to 
close the branch; and
    <bullet> Statistical or other information in support of such 
reasons consistent with the institution's written policy for branch 
closings.
    If an institution believes certain information included in the 
notice is confidential in nature, the institution should prepare such 
information separately and request confidential treatment. The agency 
will decide whether to treat such information confidentially under the 
Freedom of Information Act (5 U.S.C. 552).
    If a notice provided to a state supervisory agency pursuant to 
state law contains the information outlined above, then the institution 
may provide a copy of that notice to the appropriate Federal banking 
agency in satisfaction of section 42, provided that the notice is filed 
at least 90 days prior to the date of the branch closing.
Notice of Branch Closing to Customers
Customer Allocation
    The law requires an insured depository institution that proposes to 
close a branch to provide notice of the proposed closing to the 
customers of the branch. A customer of a branch is a patron of an 
institution who has been identified with a particular branch by such 
institution through use, in good faith, of a reasonable method for 
allocating customers to specific branches. An institution that 
allocates customers based on where a customer opened his or her deposit 
or loan account will be presumed to have reasonably identified each 
customer of a branch. The agencies recognize that use of this means of 
allocation, and perhaps others, may result in certain facilities which 
technically constitute branches not being assigned any customers, but 
believe that this result is permissible so long as the means of 
allocation is reasonable; if such a branch is closed, then notification 
to the appropriate agency and posting of a notice on the branch 
premises will suffice. Finally, an institution need not change its 
recordkeeping system in order to make a reasonable determination of who 
is a customer of a branch.
Timing
    Under section 42, an institution must include a customer notice at 
least 90 days in advance of the proposed closing in at least one of the 
regular account statements mailed to customers, or in a separate 
mailing. If the branch closing occurs after the proposed date of 
closing, no additional notice is required to be mailed to customers (or 
provided to the appropriate Federal banking agency) if the institution 
acted in good faith in projecting the date for closing and in 
subsequently delaying the closing.
Content
    The mailed customer notice should state the location of the branch 
to be closed and the proposed date of closing, and either identify 
where customers may obtain service following the closing date or 
provide a telephone number for customers to call to determine such 
alternative sites. If a notice of branch closing provided to customers 
pursuant to state law contains this information, then a separate notice 
need not be sent, provided that the notice is sent at least 90 days 
prior to the closing.
Low- or Moderate-Income Areas Served by Interstate Banks
    If the institution is a bank that maintains branches in more than 
one
[[Page 34847]]
state and the branch to be closed is located in a low-or moderate-
income area,9 the notice shall contain the mailing address 
of the appropriate Federal banking agency and a statement that comments 
on the proposed branch closing may be mailed to that agency. The notice 
should also state that the agency does not have the authority to 
approve or prevent the branch closing. If the agency receives a written 
request by a person from the area in which the branch is located, 
relating to the proposed closing and stating specific reasons for the 
request, including a discussion of the adverse effect of such closing 
on the availability of banking services in the affected area, and if 
the agency concludes that the request is nonfrivolous, then the agency 
shall convene a meeting of agency representatives, other interested 
depository institution regulatory agencies, community leaders, and 
other appropriate individuals, organizations, and depository 
institutions, as determined by the agency in its discretion. The 
purpose of the meeting shall be to explore the feasibility of obtaining 
adequate alternative facilities and services for the affected area, 
including the establishment of a new branch by another depository 
institution, the chartering of a new depository institution, or the 
establishment of a community development credit union, following the 
closing of the branch. In the case of an institution which will become 
an interstate bank prior to the closure of a branch in a low-or 
moderate-income area, such information must be included in the notice 
unless the closure will occur immediately upon consummation of the 
transaction that causes the institution to become interstate. No action 
by the appropriate Federal banking agency under this provision shall 
affect the authority of an interstate bank to close a branch (including 
the timing of such closing) if the requirements of sections 42(a) and 
42(b) of the FDI Act (regarding notice to the appropriate Federal 
banking agency and notice to the institution's customers) have been met 
by such bank with respect to the branch being closed.
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    \9\ The term ``low-or moderate-income area'' means a census 
tract for which the median family income is: (1) Less than 80 
percent of the median family income for the metropolitan statistical 
area (as designated by the Director of the Office of Management and 
Budget) in which the census tract is located; or (2) in the case of 
a census tract that is not located in a metropolitan statistical 
area, less than 80 percent of the median family income for the State 
in which the census tract is located, as determined without taking 
into account family income in metropolitan statistical areas in such 
State. (12 U.S.C. 1831r-l(d)(4)).
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On-Site Notice
    Under section 42, an institution also must post notice to branch 
customers in a conspicuous manner on the branch premises at least 30 
days prior to the proposed closing. This notice should state the 
proposed date of closing and identify where customers may obtain 
service following that date or provide a telephone number for customers 
to call to determine such alternative sites. An institution may revise 
the notice to extend the projected date of closing without triggering a 
new 30-day notice period.
Contingent Notices
    In some situations, an institution, in its discretion and to 
expedite transactions, may mail and post notices to customers of a 
proposed branch closing that is contingent upon an event. For example, 
in the case of a proposed merger or acquisition, an institution may 
notify customers of its intent to close a branch upon approval by the 
appropriate Federal banking agency of the proposed merger or 
acquisition.
Policies for Branch Closings
    The law requires all insured depository institutions to adopt 
policies for branch closings. Each institution with one or more 
branches must adopt such a policy. If an institution currently has no 
branches, it must adopt a policy for branch closing when it establishes 
its first branch. The policy should be in writing and meet the size and 
needs of the institution.
    Each branch closing policy adopted pursuant to section 42 should 
include factors for determining which branch to close and which 
customers to notify, and procedures for providing the notices required 
by the statute.
Compliance
    The Federal banking agencies will examine for compliance with 
section 42 of the FDI Act in accordance with each agency's compliance 
examination procedures, to determine whether the institution has 
adopted a branch closing policy and whether the institution provided 
the required notices when it closed a branch. If an institution fails 
to comply with section 42, the appropriate Federal banking agency may 
make adverse findings in the compliance evaluation or take appropriate 
enforcement action.
    Dated: May 19, 1999.
John D. Hawke, Jr.,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, June 22, 1999.
Jennifer J. Johnson,
Secretary of the Board.
    Dated: June 3, 1999.
Robert E. Feldman,
Executive Secretary, Federal Deposit Insurance Corporation.
    Dated: June 18, 1999.
Ellen Seidman,
Director, Office of Thrift Supervision.
[FR Doc. 99-16471 Filed 6-28-99; 8:45 am]
BILLING CODE Board of Governors: 6210-01-P (25%) OCC: 4810-33-P (25%) 
FDIC: 6714-01-P (25%) OTS: 6720-01-P (25%)

Last Updated 06/29/1999 regs@fdic.gov