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FDIC Federal Register Citations
[Federal Register: April 18, 2007 (Volume 72, Number 74)]
[Rules and Regulations]              
[Page 19375-19380]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18ap07-1]                        

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FEDERAL DEPOSIT INSURANCE CORPORATION

5 CFR Part 3201

RIN 3209-AA15

Supplemental Standards of Ethical Conduct for FDIC Employees

AGENCY: Federal Deposit Insurance Corporation (FDIC).

ACTION: Final rule.

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SUMMARY: The FDIC is finalizing the proposed rule to amend existing
FDIC ethics regulations involving extensions of credit, ownership of
stock, and definitions. It implements the Preserving Independence of
Financial Institution Examinations Act of 2003, which amended sections
212 and 213 of title 18 of the United States Code. These sections
continue generally to impose criminal penalties on examiners' borrowing
from banks they have examined, and financial institutions' extending a
loan to anyone who examines or has authority to examine that
institution. The statutory amendment, however, decriminalizes
extensions of credit to examiners for credit cards and for primary
residential home loans from institutions that they examine or have
authority to examine if these loans are made on the same terms and
conditions as are available to other cardholders and borrowers and
satisfy other criteria contained in the statute as amended.
Additionally, the final rule clarifies and makes minor revisions to
definitions and restrictions for FDIC employees' acquisition,
ownership, or control of securities of FDIC-insured depository
institutions and certain holding companies.

DATES: The final rule is effective May 18, 2007.

FOR FURTHER INFORMATION CONTACT: FDIC: Robert J. Fagan, Ethics Program
Manager, Legal Division, (202) 898-6808; and Michelle Borzillo,
Counsel, Legal Division, (202) 898-7400.

SUPPLEMENTARY INFORMATION:

I. Background

    On December 4, 2006, the FDIC published a notice of proposed
rulemaking to amend 5 CFR part 3201, entitled ``Supplemental Standards
of Ethical Conduct for FDIC Employees.'' The FDIC is adopting the
proposed rule as final. It addresses issues involving extensions of
credit to all FDIC employees, including FDIC employees covered by the
amended criminal statutes pertaining to examiners, members of the FDIC
Board of Directors, Division and Office Directors, and their direct
subordinates, as well as employees in the Corporate Employee Program
who perform examiner functions (``covered employees''). This final rule
also clarifies and makes minor revisions to the provisions governing
employee ownership of stock and the definitions used in the regulation.
    On December 19, 2003, the President signed Public Law 108-198, the
Preserving Independence of Financial Institution Examinations Act of
2003. The bill amended sections 212 and 213 of title 18 of the United
States Code. These sections continue generally to impose criminal
penalties on examiners' borrowing from banks they examine, and
financial institutions' extending a loan to anyone who examines or has
authority to examine that institution. The amendment, however,
decriminalizes extensions of credit to examiners for credit cards and
for primary residential home loans from institutions that they examine
or have authority to examine if these loans are made on the same terms
and conditions as are available to other cardholders and borrowers.
    The amended statute at 18 U.S.C. 212 provides that, subject to the
exception noted above, any officer, director, or employee of a
financial institution, who makes or grants any loan or gratuity, to any
examiner or assistant examiner who examines or has authority to examine
such bank, branch, agency, organization, corporation, association, or
institution is subject to criminal penalties.
    Under 18 U.S.C. 213, as amended, any examiner or assistant examiner
who accepts a loan or gratuity, except for primary residential loans or
credit cards described in this final rule, from any bank, branch,
agency, organization, corporation, association, or institution examined
by the examiner or from any person connected with it, is subject to
criminal penalties and will be disqualified from holding office as an
examiner.
    On April 7, 2004, based on the statutory amendments, FDIC's Board
of Directors adopted the Interim Policy on Credit Cards and Home
Mortgages (``Interim Policy'') pending revisions to the FDIC's existing
regulation on extensions of credit. The Interim Policy permits
extensions of credit in the form of home mortgages for primary
residences and credit cards under certain conditions. This final rule
replaces the Interim Policy and supersedes the current version of 5 CFR
3201.102.\1\
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    \1\ Under the regulation, before being modified by the Interim
Policy adopted by the FDIC Board of Directors in April 2004, the
staff responsible for examination of FDIC-insured depository
institutions were prohibited from obtaining credit from an FDIC-
insured State nonmember bank, any subsidiary of such bank, or any
person associated with such bank. No exceptions were made for home
mortgages. An exception was made for credit cards issued outside the
region or field office of assignment. Corporation officials in top
management positions were prohibited under the regulation from
entering into financial obligations with an institution over which
the Corporation had primary Federal supervisory authority and its
subsidiaries. An employee in the Division of Finance, Division of
Insurance and Research, Division of Resolutions and Receiverships,
the Legal Division, or who was a member of a standing committee of
the Board of Directors, was prohibited from obtaining credit from an
FDIC-insured depository institution or its subsidiary for a period
of two years after the employee had participated personally and
substantially in certain matters affecting the institution, its
predecessor, successor, or affiliate. An exception was made for
ordinary credit cards.
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    Additionally, the final rule clarifies and makes revisions to 5 CFR
3201.103, which restricts FDIC employees' acquisition, ownership, or
control of securities of FDIC-insured depository institutions and
certain holding companies. Finally, the final rule makes appropriate
revisions to the definitions in 5 CFR 3201.101.
    In making these regulatory revisions in part pursuant to its
rulemaking authority under 18 U.S.C. 212(b), the FDIC has consulted
with the other Federal financial institution regulatory agencies. In
addition, the FDIC has determined, with Office of Government Ethics
(OGE) concurrence, that, under 5 CFR 2635.403(a) of the executive
branch standards of ethical conduct, these

[[Page 19376]]

revised provisions as to FDIC employees, their spouses and minor
children, are needed so that a reasonable person would not question the
impartiality and objectivity with which agency programs are
administered. Further, with respect to the revised restrictions and
prohibitions on the holding of financial interests (including
indebtedness, i.e., certain extensions of credit and loans) by the
spouses and minor children of FDIC employees and covered FDIC
employees, the FDIC has determined that there is a direct and
appropriate nexus between such restrictions and prohibitions as applied
to spouses and minor children and the efficiency of the service.

II. Comments on the Proposed Rule

    The FDIC received one comment on the proposed rule. The commenter
addressed only the use of plain language and did not comment on the
substance of the rule. The commenter offered several plain language
suggestions which the commenter believes would make the rule easier to
read and understand.
    The FDIC has considered these comments and opted to finalize the
rule as proposed without change for the following reasons. The rule
restates and codifies the FDIC's longstanding interim policy that was
well-known and understood by FDIC employees and the FDIC's ethics
officials. The rule applies only to FDIC employees--it does not apply
to non-FDIC  employees and therefore has no impact on the public.
Additionally, OGE concurred in the proposed rule prior to its
publication as required by 5 CFR 2635.105 entitled ``Supplemental
Agency Regulations'', and is also concurring in the final rule.
    The commenter found it confusing that the proposed rule used two
different terms to refer to FDIC employees: ``covered employees'' and
``FDIC employees.'' This use of two different terms is intentional. The
term ``covered employee'' is defined in Sec.  3201.101(d)(3) and
includes employees occupying certain identified positions within the
FDIC, while other provisions of the rule apply to all ``FDIC
employees.'' The regulation uses the different terms to distinguish
between the provisions that apply only to ``covered employees'' from
the provisions that apply to all ``FDIC employees.''
    For example, the final rule restates the general rule that all
``FDIC employees'' are prohibited from participating in an examination,
audit, visitation, review, or investigation, or any other particular
matter involving an FDIC-insured institution, subsidiary or other
person with whom that employee has an outstanding extension of credit.
``Covered employees'' under the final rule may obtain a waiver from
that general prohibition under the conditions and circumstances
specified in the final rule. ``Covered employees'' are more restricted
than all ``FDIC employees.''

III. The Final Rule

Section 3201.102--Extensions of Credit and Loans From FDIC-Insured
Institutions

    The revision to 5 CFR 3201.102 retains the existing general
prohibitions on borrowings and disqualification provisions for FDIC
employees and members of the FDIC Board of Directors. Likewise, a
current or contingent financial obligation of an employee's spouse or
minor child is considered to be an obligation of the employee. However,
the final rule in a new paragraph (e) authorizes the FDIC Ethics
Counselor to waive any disqualification under this section based on a
determination with the advice of the Legal Division that the waiver is
not inconsistent with the standards of ethical conduct for employees of
the executive branch as set forth in 5 CFR part 2635 or otherwise
prohibited by law and that, under the particular circumstances,
application of the prohibition is not necessary to avoid the appearance
of misuse of position or loss of impartiality and objectivity with
which the FDIC programs are administered.
    The final rule, in keeping with the amended statutes at 18 U.S.C.
212 and 213, eliminates the current regulatory disqualification for
FDIC examiners, FDIC Board members, Division and Office Directors, and
their immediate subordinates, and employees in the Corporate Employee
Program performing examiner duties (defined as ``covered employees'' in
Sec.  3201.101(d)(3) of the rule), who obtain credit cards on terms and
conditions no more favorable than generally available to other
borrowers. See new paragraphs (c)(1) and (c)(2) of Sec.  3201.102.
Covered employees assigned to a bank from which they hold a credit card
must inform their supervisor and ethics official prior to the
examination or other participation in a matter involving the bank if
any issue exists such as non-current payments, a billing dispute, or if
negotiating with the bank concerning the debt. In certain cases, a
disqualification will be required. Under paragraph (d)(4) of Sec. 
3201.102, covered employees and their spouses and minor children are
prohibited from applying for or receiving a credit card from an
institution if the covered employee is assigned or about to be assigned
to an examination of that institution.
    Under Sec.  3201.102(c)(3)(ii), disqualification will continue to
be generally required for residential real property loans on a primary
residence. However, such loans are permitted in accordance with
paragraph (c)(2)(ii) of Sec.  3201.102, if the terms and conditions are
no more favorable than the terms and conditions of loans generally
available to other similarly situated creditworthy borrowers. Thus,
covered FDICe mployees can obtain such permitted loans, but will need
to be recused from official participation in any particular matters
involving the lending institution or person. The final rule also covers
limitations, restrictions, and the mechanism for waiver of the
disqualification from participation in an examination or other matter
in appropriate circumstances, under paragraphs (c)(4), (c)(5), (d) and
(e) of Sec.  3201.102, as amended.
    As previously noted above, a new general waiver will be available
under the final rule in certain circumstances. Specifically, paragraph
(e) of Sec.  3201.102 authorizes the Ethics Counselor to waive any
provision based on a determination with the advice of the Legal
Division that the waiver is not inconsistent with the standards of
ethical conduct for employees of the executive branch as set forth in 5
CFR part 2635 or otherwise prohibited by law and that, under the
particular circumstances, application of the prohibition is not
necessary to avoid the appearance of misuse of position or loss of
impartiality and objectivity with which the FDIC programs are
administered. A waiver under paragraph (e) of Sec.  3201.102 could
impose appropriate conditions, such as requiring the execution of a
written disqualification.
    Under paragraph (c)(5)(i) of Sec.  3201.102, a covered FDIC
employee is not prohibited from retaining a loan or extension of credit
from a State nonmember bank or its subsidiary on its original terms if
it was obtained prior to FDIC employment or reassignment to a covered
employee position, or a result of the sale, or transfer of the loan or
credit extension to, or the conversion or merger of the lender into,
such a bank (or subsidiary). However, any renewal or renegotiation of
such a pre-existing loan or credit extension is subject to the
prohibitions in paragraphs (c)(3) and (c)(4) of Sec.  3201.102, subject
to an exception noted in the following sentence. Under paragraph
(c)(5)(ii) of

[[Page 19377]]

Sec.  3201.102, a covered employee who experiences financial or other
hardship unless allowed to renegotiate credit incurred prior to FDIC
employment or reassignment of duties could submit a request for a
waiver to his or her supervisor and the Ethics Counselor setting forth
the reasons for the desired renegotiation and other details. After
consideration, the employee's supervisor and the Ethics Counselor could
jointly grant a written waiver of the prohibition based on a finding
that the renegotiation would not be prohibited by law and that the
waiver would not result in a loss of impartiality or objectivity or
misuse of the employee's position.
    Paragraph (d) of Sec.  3201.102 of the final rule also prohibits an
FDIC employee (other than examiners who are covered by the statutory
prohibition under 18 U.S.C. 212 and 213) from directly or indirectly
accepting or becoming obligated on any extension of credit from an
FDIC-insured depository institution or its subsidiary for a period of
two years from the date of the employee's last personal and substantial
participation in an audit, resolution, liquidation, assistance
transaction, supervisory proceeding, or internal agency deliberation
affecting that particular institution, its predecessor or successor, or
any subsidiary of such institution. This prohibition does not apply to
credit obtained through the use of a credit card or a residential real
property loan secured by the principal residence of the employee,
subject to the same conditions, limitations, disqualification, and
waiver procedures applicable to covered employees under paragraphs (c)
and (e) of Sec.  3201.102.

Section 3201.103--Prohibition on Acquisition, Ownership or Control of
Securities of FDIC-Insured Depository Institutions and Certain Holding
Companies

    In addition, this final rule amends 5 CFR 3201.103, which generally
provides in paragraph (a), with certain exceptions set forth in
paragraph (b), that no FDIC employee, spouse of an employee, or minor
child of an employee may acquire, own, or control, directly or
indirectly, a security of an FDIC-insured depository institution or its
affiliate. The existing regulation at 5 CFR 3201.103(b) provides six
exceptions to that general prohibition: (1) Acquiring, owning, or
controlling securities of certain bank holding companies or their
nonbank subsidiaries that are publicly traded, not primarily engaged in
banking, and exempt from the Bank Holding Company Act; (2) acquiring,
owning, or controlling securities of certain nonfinancial savings
association holding companies; (3) retaining securities of an FDIC-
insured depository institution or affiliate if retention was permitted
under 12 CFR part 336 prior to a certain date, prior to employment with
the FDIC, or when the securities were acquired by a spouse prior to his
or her marriage to the employee; (4) acquiring, owning, or controlling
securities of an FDIC-insured depository institution or affiliate if
acquired by inheritance, gift, stock split, involuntary stock dividend,
merger, acquisition, or other change in corporate ownership, exercise
of preemptive right, or otherwise without specific intent to acquire
it, or if acquired by a spouse or minor child as part of a compensation
package from their employer, subject to certain disclosure and
disqualification requirements; (5) acquiring, owning, or controlling an
interest in certain publicly traded or publicly available investment
funds; and (6) using an FDIC-insured depository institution or
affiliate as a custodian or trustee of accounts containing tax-deferred
retirement funds. The final rule narrows the scope of these
prohibitions and generally clarifies the prohibitions of this section.
    Revised Sec.  3201.103(a) as revised narrows the scope of the
general prohibition concerning ownership and control of a security by
FDICemployees, spouses and their minor children by removing the
prohibitions on ownership of securities with respect to insured
depository institution affiliates, other than certain holding
companies. The reason for eliminating other affiliates from the
prohibition is that the potential for a conflict of interest is
generally only present when there is ownership or control of a company
that in turn has control of an insured depository institution.
Affiliates other than holding companies do not own, and generally do
not control, an insured depository institution that is their parent or
sister organization.
    Section 3201.103 as revised generally prohibits ownership of a
security of, in addition to an FDIC-insured bank or savings
association; a bank holding company that is subject to supervision by
the Federal Reserve Board (FRB); a savings and loan holding company
that is subject to supervision by the Office of Thrift Supervision
(OTS); a financial holding company that is subject to supervision by
the FRB; and a company that (i) owns or controls an FDIC-insured bank
or savings association, (ii) is not an FRB-supervised bank holding
company, an OTS-supervised savings and loan holding company, nor an
FRB-supervised financial holding company, and (iii) either is primarily
engaged in banking or is not publicly traded on a U.S. securities
exchange. These categories, in appropriate cases, cover companies that
control industrial banks.
    Section 3201.103 as revised also creates in paragraph (b)(1), a
specific exception for acquisition, ownership, or control of securities
of a unitary thrift holding company. In addition, the final rule
reorganizes the descriptions of the prohibited securities and
exceptions. The intent of the reorganization is to make this section
clearer and more useable. The final rule retains in revised paragraphs
(b) and (c) the other existing exceptions, limitations, and divestiture
requirements of Sec.  3201.103. Moreover, in a new paragraph (d) of
this section, the final rule adds a provision for written waiver in
appropriate circumstances by the Ethics Counselor, with Legal Division
advice and legal clearance, of any provision of the section that is
identical to the Sec.  3201.102(e) waiver provision discussed above.

Section 3201.101(d)--General Section; Definitions

    Finally, the definitional section at paragraph (d) of Sec. 
3201.101 is amended to add and revise certain useful definitions and
delete others (``assisted entity'' and ``assuming entity'') that are no
longer used.
    The term ``covered employees'' is expanded to include employees
whose duties and responsibilities include the examination of a
financial institution or participation in the examination of any
financial institution. The FDICis republishing all the definitions in
the paragraph, including those not being revised, for ease of
reference.

Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) requires that each Federal
agency either certify that a final rule would not have a significant
impact on a substantial number of small entities. See 5 U.S.C. 603,
605. The Small Business Administration (SBA) defines small banks as
those with less than $165 million in assets. The final rule implements
the statutory decriminalization under certain circumstances of
extensions of credit to FDIC examiners for credit cards and for primary
residential home loans from institutions that they examine and
clarifies certain restrictions on the acquisition, ownership, or
control of securities of FDIC-insured depository institutions and
certain holding companies on the part of FDIC employees. The final rule
does not impose any obligations or restrictions

[[Page 19378]]

on depository institutions, including small depository institutions. On
this basis, the FDIC certifies pursuant to 5 U.S.C. 605(b) that this
final rule will not have a significant impact on a substantial number
of small entities.

Paperwork Reduction Act

    The FDIC has determined that the final rule does not involve a
collection of information pursuant to the provisions of the Paperwork
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families

    The FDIC has determined that the final rule will not affect family
well-being within the meaning of section 654 of the Treasury and
General Government Appropriations Act, enacted as part of the Omnibus
Consolidated and Emergency Supplemental Appropriations Act of 1999
(Pub. L. 105-277, 112 Stat. 2681).

Small Business Regulatory Enforcement Fairness Act

    The final rule relates to agency management or personnel, and the
final rule is therefore not covered by the Small Business Regulatory
Enforcement Fairness Act of 1996 (``SBREFA'') (5 U.S.C. 801 et seq.). 5
U.S.C. 804(3)(B).

List of Subjects in 5 CFR Part 3201

    Conflict of interests, Ethical conduct, Extensions of credit and
loans from FDIC-insured depository institutions, Government employees,
Prohibitions on ownership of securities of FDIC-insured depository
institutions.

0
For the reasons set forth in the preamble, the Board of Directors of
the FDIC, with the concurrence of OGE, amends part 3201 of title 5 of
the Code of Federal Regulations as follows:

PART 3201--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES
OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

0
1. The authority citation for 5 CFR part 3201 is revised to read as
follows:

    Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government
Act of 1978); 12 U.S.C. 1819(a), 1822; 18 U.S.C. 212, 213; 26 U.S.C.
1043; E.O. 12674, 54 FR 15159, 3 CFR, 1989 Comp., p. 215, as
modified by E.O. 12731, 55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5
CFR 2635.105, 2635.403, 2635.502, 2635.803.


0
2. Paragraph (d) of Sec.  3201.101 is revised to read as follows:


Sec.  3201.101  General.

* * * * *
    (d) Definitions. For purposes of this part, the following
definitions apply:
    (1) Affiliate, as defined in 12 U.S.C. 1841(k), means any company
that controls, is controlled by, or is under common control with
another company.
    (2) Appropriate director means the head of a Washington office or
division or the highest ranking official assigned to a regional office
in each division or the Ethics Counselor.
    (3) Covered employee means:
    (i) Members of the FDIC Board of Directors and any employee
required to file a public or confidential financial disclosure under 5
CFR part 2634 who holds a position immediately subordinate to such
Board member;
    (ii) The director of any Washington division or office and the
director of any regional office, and any employee required to file a
public or confidential financial disclosure report under 5 CFR part
2634 who holds a position immediately subordinate to such director;
    (iii) An FDIC examiner;
    (iv) Any other FDIC employee whose duties and responsibilities
include the examination of or the participation in the examination of
any financial institution;
    (v) Any other FDIC employee whose duties and responsibilities, as
determined by the Chairman or Ethics Counselor after notice to the
employee, require application of the prohibition on borrowing contained
in Sec.  3201.102 to ensure public confidence that the FDIC's programs
are conducted impartially and objectively.
    (4) Employee means an officer or employee, other than a special
Government employee, of the Corporation, including a member of the
Board of Directors appointed under the authority of 12 U.S.C.
1812(a)(1)(C). For purposes of 5 CFR part 2635 and Sec. Sec.  3201.103
and 3201.104, employee includes any individual who, pursuant to a
contract or any other arrangement, performs functions or activities of
the Corporation, under the direct supervision of an officer or employee
of the Corporation.
    (5) Ethics Counselor means an officer or employee who is designated
by the head of the agency to coordinate and manage the agency's ethics
program, and includes the Corporation's Alternate Ethics Counselor.
    (6) Security includes an interest in debt or equity instruments.
The term includes, without limitation, a secured or unsecured bond,
debenture, note, securitized assets, commercial paper, and all types of
preferred and common stock. The term includes an interest or right in a
security, whether current or contingent, a beneficial or legal interest
derived from a trust, the right to acquire or dispose of any long or
short position, an interest convertible into a security, and an option,
right, warrant, put, or call with respect to a security. The term
security does not include a deposit account.
    (7) State nonmember bank means any State bank as defined in 12
U.S.C. 1813(e) that is not a member of the Federal Reserve System.
    (8) Subsidiary, as defined in 12 U.S.C. 1813(w), means any company
that is owned or controlled directly or indirectly by another company.

0
3. Section 3201.102 is revised to read as follows:


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

    (a) Credit subject to this section. The prohibition,
disqualification, and retention provisions of this section apply to a
current or contingent financial obligation of the employee. For
purposes of this section, a current or contingent financial obligation
of an employee's spouse or minor child is considered to be an
obligation of the employee.
    (b) Disqualification applicable to FDIC employees generally. Except
as provided in this section:
    (1) No FDIC employee may participate in an examination, audit,
visitation, review, or investigation, or any other particular matter
involving an FDIC-insured institution, subsidiary or other person with
whom the employee has an outstanding extension of credit.
    (2) For employees, other than covered employees as defined in Sec. 
3201.101(d)(3), disqualification is not required if the credit was
extended through the use of a credit card on the same terms and
conditions as are offered to the general public.
    (3) The Comptroller of the Currency and the Director of the Office
of Thrift Supervision shall be disqualified from any matter pending
before the FDIC Board of Directors to the same extent as an FDIC
employee subject to paragraph (c) of this section.
    (c) Prohibited borrowing by covered employees. (1) Prohibition on
covered employee borrowing--Except as provided below, no covered
employee shall, directly or indirectly, accept or become obligated on a
loan or extension of credit, whether current or contingent, from any
FDIC-insured State nonmember bank or its subsidiary or from an officer,
director, or employee, of any FDIC-insured State nonmember bank or its
subsidiary.

[[Page 19379]]

    (2) Exceptions: (i) Credit Cards. A covered employee (or spouse or
minor child of a covered employee) may obtain and hold a credit card
account established under an open end consumer credit plan and issued
by an FDIC-insured State nonmember bank or its subsidiary subject to
the following conditions:
    (A) The cardholder must satisfy all financial requirements for the
credit card account that are generally applicable to all applicants for
the same type of credit card account; and
    (B) The terms and conditions applicable with respect to the account
and any credit extended to the cardholder under the account are no more
favorable generally to the cardholder than the terms and conditions
that are generally applicable to credit card accounts offered by the
same bank (or the same subsidiary) to other cardholders in comparable
circumstances under open end consumer credit plans.
    (ii) Loans secured primarily by principal residence. A covered
employee (or a spouse or minor child of a covered employee) may obtain
and hold a loan from an FDIC-insured State nonmember bank or its
subsidiary subject to the following conditions:
    (A) The loan is secured by residential real property that is the
principal residence of the borrower. The borrower may retain the loan
if the residential real property ceases to be the principal residence.
However, any subsequent renewal or renegotiation of the original terms
of such a loan must meet the requirements of this paragraph;
    (B) The borrower may not apply for the loan while the covered
employee participates in any examination, the review of any
application, or any other supervisory or regulatory or other particular
matter directly affecting the State nonmember bank or its subsidiaries;
    (C) The borrower must satisfy all financial requirements for the
loan that are generally applicable to all applicants for the same type
of residential real property loan; and
    (D) The terms and conditions applicable with respect to the loan
and any credit extended to the borrower under the loan are no more
favorable generally to the borrower than the terms and conditions that
are generally applicable to residential real property loans offered by
the same State nonmember bank or the same subsidiary to other borrowers
in comparable circumstances for residential real property loans.
    (3) Disqualification of covered employees. A covered employee shall
not participate in an examination, audit, visitation, review, or
investigation, or other particular matter involving an FDIC-insured
depository institution or other person with whom the covered employee
has an outstanding extension of credit, or with whom the covered
employee is negotiating an extension of credit.
    (i) Payment dispute, delinquency, or other significant matter
concerning credit card debt. Disqualification is not required if the
credit is extended through the use of a credit card. However,
disqualification will be required when a covered employee is delinquent
on payments, has a billing dispute, is negotiating with the
institution, or has any other significant issue regarding the credit
card debt. The covered employee must notify his or her supervisor and
deputy ethics counselor of a dispute in writing.
    (ii) Primary residence mortgage loan. Disqualification will be
required if the covered employee is negotiating for, has an application
pending for, or enters into a primary residence mortgage loan. This
disqualification will cease when the loan is sold, even if the loan
originator retains the loan servicing.
    (4) Other limitations on covered employees. (i) A covered employee
shall not accept or become obligated on an otherwise permissible loan
if the disqualification arising from the credit relationship would
materially impair the covered employee's ability to participate in
matters that are central to the performance of the covered employee's
official duties, or if the covered employee has been advised of an
assignment to handle a matter involving that institution. (ii) Covered
employees to whom the prohibitions in this section apply may not apply
for a credit card or primary residence mortgage loan from a State
nonmember bank or subsidiary that the covered employee is assigned to
examine or participate in a matter involving that institution, or if
such an assignment is imminent.
    (5) Pre-existing credit. (i) This section does not prohibit a
covered employee, or any FDIC employee who becomes a covered employee
as a result of any reassignment of duties or position, from retaining a
loan or extension of credit from a State nonmember bank or its
subsidiary on its original terms if the loan or extension of credit was
incurred prior to employment by the FDIC or as a result of the sale or
transfer of a loan or credit to a State nonmember bank or its
subsidiary or the conversion or merger of the lender into a State
nonmember bank or its subsidiary. Any renewal or renegotiation of a
pre-existing loan or extension of credit will be treated as a new loan
or extension of credit subject to the prohibitions at paragraphs (c)(3)
and (c)(4) of this section.
    (ii) A covered employee may request that an exception be made to
the prohibitions to permit renegotiation of a pre-existing loan or
extension of credit. If a covered employee would experience financial
or other hardship unless allowed to renegotiate a pre-existing loan or
extension of credit, the covered employee may submit a written request
to his or her supervisor and to the Ethics Counselor, describing the
reasons for renegotiation, the original and the proposed terms and
conditions, including whether the financial institution makes such
terms generally available to the public, and any attempts by the
covered employee to move the loan to a non-prohibited source. After
consideration of the request, the covered employee's supervisor and the
Ethics Counselor jointly may grant the waiver upon a finding that
renegotiation is not prohibited by law, and that the waiver does not
result in a loss of impartiality or objectivity or in misuse of the
employee's position. To be effective, the waiver must be in writing.
    (d) Two-year prohibition on acceptance of credit from an FDIC-
insured depository institution. An FDIC employee shall not, directly or
indirectly, accept or become obligated on any extension of credit from
an FDIC-insured depository institution or its subsidiary for a period
of two years from the date of the employee's last personal and
substantial participation in an audit, resolution, liquidation,
assistance transactions, supervisory proceeding, or internal agency
deliberation affecting that particular institution, its predecessor or
successor, or any subsidiary of such institution. This prohibition does
not apply to credit obtained through the use of a credit card or a
residential real property loan secured by the principal residence of
the employee, subject to the same conditions, limitations,
disqualification, and waiver procedures applicable to covered employees
under paragraphs (c) and (e) of this section.
    (e) Waiver. The Ethics Counselor may grant a written waiver from
any provision of this section based on a determination made with the
advice and legal clearance of the Legal Division that the waiver is not
inconsistent with part 2635 of this title or otherwise prohibited by
law, and that, under the particular circumstances, application of the
prohibition is not necessary to avoid the appearance of misuse of
position or loss of impartiality, or otherwise to ensure

[[Page 19380]]

confidence in the impartiality and objectivity with which the FDIC's
programs are administered. A waiver under this paragraph may impose
appropriate conditions, such as requiring execution of a written
disqualification.

0
4. Section 3201.103 is revised to read as follows:


Sec.  3201.103  Prohibition on acquisition, ownership, or control of
securities of FDIC-insured depository institutions and certain holding
companies.

    (a) Prohibition on acquisition, ownership, or control. Except as
provided in paragraph (b) of this section, no employee, spouse of an
employee, or minor child of an employee may acquire, own, or control,
directly or indirectly, a security of any of the following:
    (1) A bank or savings association that is insured by the Federal
Deposit Insurance Corporation (FDIC);
    (2) A bank holding company that is subject to supervision by the
Federal Reserve Board (FRB);
    (3) A savings and loan holding company that is subject to
supervision by the Office of Thrift Supervision (OTS);
    (4) A financial holding company that is subject to FRB supervision;
or
    (5) A company that:
    (i) Owns or controls an FDIC-insured bank or savings association;
    (ii) Is neither an FRB-supervised bank holding company, an OTS-
supervised savings and loan holding company, nor an FRB-supervised
financial holding company; and
    (iii) Is either primarily engaged in banking or not publicly traded
on a U.S. securities exchange.
    (b) Exceptions. Notwithstanding the prohibitions of paragraph (a)
of this section, but subject to the limitations of paragraph (c) of
this section, an employee, or the spouse or minor child of an employee,
may do any or all of the following:
    (1) Acquire, own, or control the securities of a unitary thrift
holding company (i.e., a savings and loan holding company that is
subject to OTS supervision but whose principal business is neither
banking nor activities closely related to banking);
    (2) Own or control a security of an entity described in paragraph
(a) of this section if the security was permitted to be retained by the
employee under 12 CFR part 336 prior to May 25, 1995, was obtained
prior to commencement of employment with the Corporation, or was
acquired by a spouse prior to marriage to the employee;
    (3) Own, or control a security of an entity described in paragraph
(a) of this section if:
    (i) The security was acquired by inheritance, gift, stock-split,
involuntary stock dividend, merger, acquisition, or other change in
corporate ownership, exercise of preemptive right, or otherwise without
specific intent to acquire the security, or, by an employee's spouse or
minor child as part of a compensation package in connection with his or
her employment;
    (ii) The employee makes full, written disclosure on FDIC form 2410/
07 to the Ethics Counselor within 30 days of the commencement of
employment or the acquisition of the interest; and
    (iii) The employee is disqualified in accordance with 5 CFR part
2635, subpart D, from participating in any particular matter that
affects his or her financial interests, or that of his or her spouse or
minor child;
    (4) Acquire, own, or control an interest in a publicly traded or
publicly available investment fund provided that, upon initial or
subsequent investment by the employee (excluding ordinary dividend
reinvestment), the fund does not have invested, or indicate in its
prospectus the intent to invest, more than 30 percent of its assets in
the securities of one or more entities described in paragraph (a) of
this section and the employee neither exercises control nor has the
ability to exercise control over the financial interests held in the
fund; and
    (5) Use an FDIC-insured depository institution or an affiliate of
an FDIC-insured depository institution as custodian or trustee of
accounts containing tax-deferred retirement funds.
    (c) Divestiture. Based upon a determination of substantial conflict
under 5 CFR 2635.403(b), the Ethics Counselor may require an employee,
or the spouse or minor child of an employee, to divest a security he or
she is otherwise authorized to acquire, own, control, or use under
paragraph (b) of this section.
    (d) Waiver. The Ethics Counselor may grant a written waiver from
any provision of this section based on a determination made with the
advice and legal clearance of the Legal Division that the waiver is not
inconsistent with part 2635 of this title or otherwise prohibited by
law, and that, under the particular circumstances, application of the
prohibition is not necessary to avoid the appearance of misuse of
position or loss of impartiality, or otherwise to ensure confidence in
the impartiality and objectivity with which the FDIC's programs are
administered. A waiver under this paragraph may impose appropriate
conditions, such as requiring execution of a written disqualification.

    By order of the Board of Directors.

    Dated at Washington, DC, this 20th day of March, 2007.

Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
    Approved: April 10, 2007.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. E7-7377 Filed 4-17-07; 8:45 am]
BILLING CODE 6714-01-P




    

Last Updated 04/18/2007 Regs@fdic.gov