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[Federal Register: December 27, 2002 (Volume 67, Number 249)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
FEDERAL DEPOSIT INSURANCE CORPORATION
Applications for Deposit Insurance
AGENCY: Federal Deposit Insurance Corporation (FDIC).
ACTION: Final agency policy statement; amendment.
SUMMARY: The FDIC is amending its Statement of Policy on Applications
for Deposit Insurance to reflect changes resulting from an internal
reorganization. The reorganization merged the Division of Supervision
and the Division of Compliance and Consumer Affairs. Additional changes
were made to reflect recent statutory requirements. The amended
statement of policy is intended to be read in conjunction with the
deposit insurance provisions of the FDIC's revised regulations
governing applications filed with the FDIC, which appears elsewhere in
this issue of the Federal Register.
EFFECTIVE DATE: December 27, 2002.
FOR FURTHER INFORMATION CONTACT: Division of Supervision and Consumer
Protection: Mindy West, Examination Specialist, (202/898-7221); or
Legal Division: Supervision and Legislation Branch, Robert C. Fick,
Counsel, Legal Division, (202/898-8962), FDIC, 550 17th Street, NW,
Washington, DC, 20429.
SUPPLEMENTARY INFORMATION: On June 30, 2002, the FDIC implemented an
internal reorganization. See: 67 FR 44351, July 2, 2002. The primary
purpose of the reorganization was to streamline the management and
decision making process. As part of the reorganization, several
divisions were merged. In particular, the Division of Supervision was
merged with the Division of Compliance and Consumer Affairs to create
the Division of Supervision and Consumer Protection. The reorganization
has necessitated changes to the Statement of Policy on Applications for
Deposit Insurance (Statement of Policy) to reflect the new structure,
since there are references to the former divisions and management
structure in the prior Statement of Policy.
In conjunction with the revisions to the Statement of Policy, the
FDIC is also amending 12 CFR part 303 (part 303) of the FDIC's
regulations governing application, notice and request procedures. The
amendments to part 303 reflect the FDIC's new organizational structure.
The FDIC is also removing and updating the delegations of authority
previously found in part 303 to provide greater flexibility and
efficiency when making decisions throughout the application process. As
a result of these changes, the amended Statement of Policy is intended
to be read in conjunction with the revised deposit insurance provisions
of newly-amended part 303, notice of which is published elsewhere in
this issue of the Federal Register.
Section 307(c) of the Gramm-Leach-Bliley Act (GLBA) requires the
FDIC to consult with the appropriate state insurance regulator before
making any determination relating to the initial affiliation of, or the
continuing affiliation of, a depository institution with a company
engaged in insurance activities. On December 12, 2001, the Office of
the Comptroller of the Currency, the FDIC and the Office of Thrift
Supervision published a final notice in the Federal Register (66 FR
64341) revising the Interagency Charter and Federal Deposit Insurance
Application (Application) to, in part, add an item to the form to
collect information required by GLBA. The FDIC is now amending the
Statement of Policy to conform to the recently updated Application to
include the specified information required therein. The information
that is required is the name of the affiliated insurance company, a
description of its insurance activities, a list of each state and the
lines of business in that state in which the company holds, or will
hold, an insurance license. The applicant must also indicate the state
where the company holds a resident license or charter, as applicable.
The Statement of Policy published August 20, 1998 (63 FR 44756) is
hereby amended as follows:
FDIC Statement of Policy on Applications for Deposit Insurance
* * * * *
Forms and instructions for applying for deposit insurance may be
obtained from any FDIC regional director. Completed applications should
be filed with the appropriate FDIC office. Organizers and incorporators
(collectively, ``incorporators'') of proposed new depository
institutions should file their applications with the FDIC and the
appropriate chartering authority at the same time. Information provided
to the chartering authority that is also needed as part of the deposit
insurance application may be provided to the FDIC by appending a copy
of the information to the FDIC application. Use of the FDIC application
form is optional; however, the material submitted to the FDIC must
contain all information requested in the FDIC application form, unless
the FDIC otherwise indicates. In addition, all incorporators must sign
and submit the signature page of the FDIC's deposit insurance
application form, even if the application itself is not being used. It
is strongly recommended that a representative(s) of the organizing
group meet with the chartering authority and the FDIC prior to filing
an application to reach an understanding of the information
requirements of each agency. This practice typically facilitates
processing and eliminates unnecessary delays. Information requirements
may not be as extensive for applications sponsored by existing holding
companies or other well-established banking groups. The FDIC may take
final action prior to final action by other regulatory authorities in
cases in which the FDIC has determined that there is no material
disagreement on the action to be taken.
* * * * *
FDIC to consult with the appropriate State insurance regulator before
engaged in insurance activities. As a result of this requirement,
applicants that are, or will be, affiliated with a company engaged in
insurance activities that is subject to supervision by a state
insurance regulator must submit the following information as part of
its application: (1) The name of the insurance company; (2) a
description of the insurance activities that the company is engaged in
and has plans to conduct; and (3) a list of each state and the lines of
business in that state which the company holds, or will hold, an
insurance license. Applicants must also indicate the state where the
company holds a resident license or charter, as applicable.
Proposed Depository Institutions
Where the proposed depository institution will be a subsidiary of
an existing bank or thrift holding company, the FDIC will consider the
financial and managerial resources of the parent organization in
assessing the overall proposal and in evaluating the statutory factors
prescribed in section 6 of the Act. In such circumstances, the
application for deposit insurance should contain a copy of any
information submitted to the holding company's primary federal
regulator. Subpart B of part 303 of the FDIC's regulations (12
CFR 303.20-.25) discusses certain expedited procedures that may be
available to eligible depository institutions or eligible holding
companies (as those terms are defined in the regulation).
The FDIC may conduct examinations and/or investigations to develop
essential information with respect to deposit insurance applications.
The FDIC will determine the need to conduct an investigation and its
scope. Every effort will be made to coordinate any FDIC investigation
with any investigations conducted by other regulators.
2. Adequacy of the Capital Structure
(b) Wholly owned subsidiary of a holding company--If the applicant
is being established as a wholly owned subsidiary of an eligible
holding company (as defined in part 303, subpart B), the FDIC will
consider the financial resources of the parent organization as a factor
in assessing the adequacy of the proposed initial capital injection. In
such cases, the FDIC may find favorably with respect to the adequacy of
capital factor, when the initial capital injection is sufficient to
provide for a Tier 1 leverage capital ratio of at least 8% at the end
of the first year of operation, based on a realistic business plan, or
the initial capital injection meets the $2 million minimum capital
standard set forth in this Statement of Policy, or any minimum
standards established by the chartering authority, whichever is
greater. The holding company shall also provide a written commitment to
maintain the proposed institution's Tier 1 leverage capital ratio at no
less than 8 % throughout the first three years of operation.
(c) Operating insured offices--If the proposal involves the
acquisition of an insured operating office or offices, the applicant
may request that the benchmark for evaluating the adequacy of capital
be an amount necessary for the newly chartered institution to be
classified as well capitalized, as defined by its primary federal
regulator. In such cases, the FDIC may find favorably with respect to
the capital factor based on a favorable finding with respect to the
4. General Character and Fitness of the Management
All proposed depository institutions shall provide at least a five
member board of directors. The identity and qualifications of the
proposed full-time chief executive officer should be made known to the
FDIC as soon as possible, preferably when the application is filed with
the appropriate FDIC office. Prior to the opening of the institution,
proponents must advise the FDIC in writing of any change in the
directorate, senior active management, or a change in the ownership of
stock which would result in a shareholder owning 10% or more of the
total shares of either the depository institution or its holding
(b) Stock benefit plans--Stock benefit plans, including stock
options, stock warrants, and other similar stock based compensation
plans will be reviewed by the FDIC and must be fully disclosed to all
potential subscribers. Participants in stock benefit plans may include
incorporators, directors, and officers. A description of any such plans
proposed must be included in the application submitted to the
appropriate FDIC office. The structure of stock benefit plans should
encourage the continued involvement of the participants and serve as an
incentive for the successful operation of the institution. Stock
benefit plans should contain no feature that would encourage
speculative or high risk activities or serve as an obstacle to or
otherwise impede the sale of additional stock to the general public.
(c) Background and biographical information--Proposed directors,
officers, and 10% shareholders must file financial and biographical
information in connection with the deposit insurance application. The
FDIC may request a report from the Federal Bureau of Investigation or
other investigatory agencies on these individuals. Fingerprinting of
individuals may be required. Background checks and fingerprinting may
be waived by the FDIC for individuals who are currently associated
with, or have had a recent past association with, an insured depository
institution. When the proposed depository institution is being
established as a wholly owned subsidiary of an eligible holding
company, the FDIC may waive financial information for those persons who
are being proposed as directors or officers of the applicant.
Background checks conducted by other federal financial institution
regulators in connection with charter applications are generally
adequate for the FDIC if the other regulators agree to notify the FDIC
of instances in which further investigation is warranted.
In the event any present or prospective director, officer,
employee, controlling stockholder, or agent of the applicant has been
convicted of any criminal offense involving dishonesty, breach of
trust, or money laundering, or has agreed to enter into a pretrial
diversion or similar program in connection with a prosecution of such
offense, the applicant must obtain the FDIC's written consent under
section 19 of the Act (12 U.S.C. 1829), before any such person may
serve in one or more of those capacities. Guidelines regarding section
19 applications may be obtained from the appropriate FDIC office.
5. Risk Presented to the Bank Insurance Fund or Savings Association
In order to resolve this factor favorably, the FDIC must be assured
that the proposed institution does not present an undue risk to the
Bank Insurance Fund or the Savings Association Insurance Fund. As a
general matter, the FDIC interprets this factor very broadly. In making
its determination, the FDIC will rely on any information available to
it, including, but not limited to the applicant's business plan. The
FDIC expects that an applicant will submit a business plan commensurate
with the capabilities of its management and the financial commitment of
the incorporators. Any significant deviation from the business plan
within the first three years of operation must be reported by the
insured depository institution to the primary federal regulator before
consummation of the change. Submission of an unsound business plan will
unfavorably impact the finding concerning this factor. An applicant's
business plan should demonstrate the following:
Proposed Depository Institutions Formed for the Sole Purpose of
Acquiring Assets and Assuming Liabilities of an Insured Institution in
Proponents should contact the appropriate FDIC office as soon as
possible if they are interested in acquiring assets and/or assuming
liabilities of an institution in default. Due to the time constraints
involved with this type of transaction, information submissions and
applications will be abbreviated. Generally, a letter request
accompanied by copies of applications filed with
other federal or state regulatory authorities will be sufficient. Other
information will be requested only as needed by the FDIC.
By order of the Board of Directors.
Dated at Washington, DC, this 3rd day of December, 2002.
Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. 02-31920 Filed 12-26-02; 8:45 am]
BILLING CODE 6714-01-P