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4000 - Advisory Opinions

An "Oakar" Transaction Is Not a Conversion Transaction and an "Oakar" Bank Need Not Undertake a Conversion Transaction Following the Expiration of the Conversion Moratorium

FDIC 91-25 April 4, 1991 Douglas H. Jones, Deputy General Counsel

You have requested our opinion whether the merger of an affiliated bank and savings association under the provisions of section 5(d)(3) of the Federal Deposit Insurance Act (12 U.S.C. 1815(d)(3), an "Oakar" transaction) is a conversion transaction under the Federal Deposit Insurance Act and, if not, whether at the conclusion of the general prohibition on conversions the resulting institution must undertake a conversion transaction.

We agree with your conclusion that an Oakar transaction is not a conversion transaction, as defined under section 5(d)(2) of the Federal Deposit Insurance Act. (12 U.S.C. 1815(d)(2)). Further, we concur with your opinion that if an Oakar bank is established with deposits attributed, for deposit insurance assessment purposes, to both the Bank Insurance Fund and the Savings Association Insurance Fund there is no requirement under existing law that the bank ever participate in a conversion transaction. Under existing law, at the conclusion of the restrictive period for conversions (12 U.S.C. 1815(d)(2)(A)(ii)), an Oakar bank may elect to convert to full Bank Insurance Fund status, but that election is not required.

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