SUMMARY: As part of the FDIC's systematic review of its regulations and
written policies under section 303(a) of the Riegle Community
Development and Regulatory Improvement Act of 1994 (CDRIA) the FDIC is
making technical amendments to its receivership regulations. The
amendments address least-cost resolutions and the security interests of
Federal Home Loan Banks in FDIC-administered receiverships.
EFFECTIVE DATE: August 13, 1998.
FOR FURTHER INFORMATION CONTACT: Mitchell Glassman, Deputy Director,
Division of Resolutions and Receiverships, (202) 898-6525; Rodney D.
Ray, Counsel, Legal Division, (202) 898-3556; Catherine A. Ribnick,
Counsel, Legal Division, (202) 736-0117, Federal Deposit Insurance
Corporation, 550 17th Street, N.W., Washington, D.C. 20429.
I. Sections 360.1 and 360.2
Section 13(c)(4)(E)(i) of the Federal Deposit Insurance Act (FDI
Act) (12 U.S.C. 1823(c)(4)(E)(i)) generally prohibits the FDIC from
taking any action after August 31, 1994 with respect to a depository
institution which would, directly or indirectly, have the effect of
increasing losses to any deposit insurance fund by protecting the
institution's uninsured depositors or other creditors. Section 360.1
was promulgated in compliance with a statutory mandate, contained in
section 13(c)(4)(E)(ii) of the FDI Act (12 U.S.C. 1823(c)(4)(E)(ii)),
that the FDIC issue regulations implementing clause (i) not later than
January 1, 1994.
Section 360.2 was originally promulgated by the Federal Home Loan
Bank Board (FHLBB) to, among other reasons, set forth expressly the
rights of Federal Home Loan Banks (Bank or Banks) regarding collateral
securing Bank advances in liquidating receivership estates. The
regulation was subsequently transferred to the FDIC, pursuant to
section 402(a) of the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA) Pub. L. 101-73, 103 Stat. 183, 357-58
(1989), when the FHLBB and FSLIC were abolished and has remained
substantively unchanged since its transfer to the FDIC.
II. The Proposed Rule
As part of the FDIC's review of its regulations pursuant to section
303(a) of CDRIA, the FDIC previously issued a notice of proposed
rulemaking regarding Secs. 360.1 and 360.2, 62 FR 7725 (February 20,
1997). The proposal consisted of two parts. The first part proposed a
revision to Sec. 360.1, a rule promulgated pursuant to a statutory
directive regarding least-cost resolutions. The second part proposed
removing Sec. 360.2, addressing secured claims of Banks in FDIC-
administered receiverships. The proposed action regarding Sec. 360.2
was premised upon the limited applicability of the regulation to the
security interests of a discrete class of creditors, i.e., the Banks,
in liquidating receivership estates; the statutory protections enjoyed
by the Banks under section 306(d) of the Competitive Equality Banking
Act of 1987 (CEBA), Pub. L. 100-86, 101 Stat. 552, 601-02 (12 U.S.C.
1430(e), footnote 1) and other subsequently enacted federal statutes;
the significant decline in the number of institutions being placed in
liquidating receiverships in recent years; and the FDIC's belief that
matters addressed therein could be addressed, in the future, on a case
by case basis. The FDIC provided a comment period of 60 days from
publication of the notice of proposed rulemaking in the Federal
Twelve comments were received within the comment period, all of
which addressed the proposed removal of Sec. 360.2. After the receipt
of the comments, additional information was requested and received by
the FDIC from the commenters.
III. Comments on the Proposed Rule
The FDIC received no comments on the proposed amendment to
Sec. 360.1, but all of the commenters favored retention of Sec. 360.2.
Although the commenters' reasons for retaining the regulation varied,
they expressed support for the clarity and certainty the regulation
provides in addressing the security interests of Banks when an insured
depository institution fails and is placed in receivership. They also
expressed concerns that additional measures that the Banks may take to
protect their security interests against the risk of a borrower being
placed in receivership, absent the regulation, may affect the cost or
availability of certain types of credit to borrowers from the Banks.
IV. Retention of Sec. 360.2 and Amendments to Secs. 360.1 and 360.2
Based upon a review of the comments received, the Board of
Directors has decided to retain Sec. 360.2. This decision is based
upon: (1) The concerns over removal of the regulation that have been
expressed by the commenters; (2) the fact that the FDIC has, in the
past, normally satisfied obligations owed to the Banks shortly after
the failure of an institution to obtain a release of the failed
institution's collateral; (3) the regulation is currently in place,
therefore, retaining it maintains the existing status quo; and (4)
there may be operational benefits to retaining the regulation.
As indicated in the FDIC's notice of proposed rulemaking,
Sec. 360.1 is being amended to correct an erroneous statutory reference
in paragraph (b) from ``12 U.S.C. 13(c)(4)(A)'' to ``12 U.S.C.
1823(c)(4)(A)''. In addition, Sec. 360.2 is being amended to add ``the
claim is'' to paragraph (e)(1) to achieve parallel construction with
paragraph (e)(2). Paragraph (e)(2) also is being amended to correct a
typographical error by replacing the word ``by'' with the word ``but'',
as well as to revise the reference to section 306(d) of CEBA to replace
the Public Laws reference with the appropriate United States Code
citation for the paragraph.
Paperwork Reduction Act
No collections of information pursuant to section 3504(h) of the
Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are required by this
notice. Consequently, no information has been submitted to the Office
of Management and Budget for review.
Small Business Regulatory Enforcement Fairness Act
The Office of Management and Budget has determined that the final
rule is not a ``major rule'', as defined in the Small Business
Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 et
seq.). SBREFA generally requires an agency to report rules to Congress
and the Comptroller General for review. The reporting requirement is
imposed when the agency issues a final rule. Accordingly, the FDIC will
file the appropriate reports.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act (5
U.S.C. 605) the Board of Directors certifies that this rule will not
have a significant economic impact on a substantial number of small
entities. Although the final action differs from the initial proposal,
which was previously
certified by the Board of Directors, because the FDIC is retaining a
regulation which it had proposed to remove, the final action merely
maintains the existing status quo and makes only non-substantive
technical revisions to the existing sections.
List of Subjects in 12 CFR Part 360
For the reasons set out in the preamble, part 360 of chapter III of
title 12 of the Code of Federal Regulations is amended as follows:
PART 360--RESOLUTION AND RECEIVERSHIP RULES
1. The authority citation for part 360 continues to read as
Authority: 12 U.S.C. 1821(d)(11), 1821 (e)(8)(D)(i), 1823(c)(4);
Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.
2 Paragraph (b) of Sec. 360.1 is revised to read as follows:
Sec. 360.1 Least-cost resolution.
* * * * *
(b) Purchase and assumption transactions. Subject to the
requirement of section 13(c)(4)(A) of the FDI Act (12 U.S.C.
1823(c)(4)(A)), paragraph (a) of this section shall not be construed as
prohibiting the FDIC from allowing any person who acquires any assets
or assumes any liabilities of any insured depository institution, for
which the FDIC has been appointed conservator or receiver, to acquire
uninsured deposit liabilities of such institution as long as the
applicable insurance fund does not incur any loss with respect to such
uninsured deposit liabilities in an amount greater than the loss which
would have been incurred with respect to such liabilities if the
institution had been liquidated.
3. Paragraph (e) of Sec. 360.2 is revised to read as follows:
Sec. 360.2 Federal Home Loan banks as secured creditors.
* * * * *
(e) The receiver for a borrower from a Federal Home Loan Bank shall
allow a claim for a prepayment fee by the Bank if, and only if:
(1) The claim is made pursuant to a written contract that provides
for a prepayment fee, provided, however, that such prepayment fee
allowed by the receiver shall not exceed the present value of the loss
attributable to the difference between the contract rate of the secured
borrowing and the reinvestment rate then available to the Bank; and
(2) The indebtedness owed to the Bank by such borrower is secured
by sufficient collateral in which a perfected security interest in
favor of the Bank exists or as to which the Bank's security interest is
entitled to priority under section 306(d) of the Competitive Equality
Banking Act of 1987 (CEBA) (12 U.S.C. 1430(e), footnote (1), or
otherwise so that the aggregate of the outstanding principal on the
advances secured by such collateral, the accrued but unpaid interest
thereon and the prepayment fee applicable to such advances can be paid
in full from the amounts realized from such collateral. For purposes of
this paragraph (e)(2), the adequacy of such collateral shall be
determined as of the date such prepayment fees shall be due and payable
under the terms of the written contract providing therefor.
By order of the Board of Directors.
Dated at Washington, DC, this 7th day of July 1998.
Federal Deposit Insurance Corporation.
Deputy Executive Secretary.
[FR Doc. 98-18620 Filed 7-13-98; 8:45 am]
BILLING CODE 6714-01-P