[Federal Register: December 4, 2006 (Volume 71, Number 232)]
[Proposed Rules]
[Page 70325-70330]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04de06-19]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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[[Page 70325]]
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: Notice of proposed rulemaking.
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SUMMARY: This proposal would amend existing FDIC ethics regulations
involving extensions of credit, ownership of stock, and definitions.
This proposal would implement 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 proposed regulation would
clarify and make 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: Comments are invited and must be received on or before January
3, 2007.
ADDRESSES: You may submit comments, identified by RIN number by any of
the following methods:
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
Agency Web site: http://www.fdic.gov/regulations/[fxsp0
]laws/federal/propose.html. Follow instructions for submitting
comments on the Agency Web site.
E-mail: Comments@FDIC.gov. Include the RIN number in the
subject line of the message.
Mail: Robert E. Feldman, Executive Secretary, Attention:
Comments, Federal Deposit Insurance Corporation, 550 17th Street, NW,
Washington, DC 20429.
Hand Delivery/Courier: Guard station at the rear of the
550 17th Street Building (located on F Street) on business days between
7 a.m. and 5 p.m.
Instructions: All submissions received must include the
agency name and RIN for this rulemaking. All comments received will be
posted without change to http://www.fdic.gov/regulations/[fxsp0]laws/
federal/propose.html including any personal information provided.
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
This proposed revised regulation 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 proposal would also clarify and make 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 proposed 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 proposed
amended rule, once finalized, would replace the Interim Policy and
supersede 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 existing 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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[[Page 70326]]
Additionally, the proposed regulation would clarify and make
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
proposed regulation would make appropriate revisions to the definitions
in 5 CFR 3201.101.
In proposing to make 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 the Office of Government
Ethics' (OGE) concurrence, that, under 5 CFR 2635.403(a) of the
executive branch standards of ethical conduct, these proposed 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 proposed 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. Description of Proposed Amended Sections of the FDIC Ethics
Regulations
Proposed Amended Section 3201.102--Extensions of Credit and Loans From
FDIC-Insured Institutions
The proposed revision to 5 CFR 3201.102 would retain the existing
general prohibitions on borrowings and disqualification provisions for
FDIC employees and members of the FDIC Board of Directors. Likewise,
under the proposed revision, as with the existing version of this
section a current or contingent financial obligation of an employee's
spouse or minor child would be considered to be an obligation of the
employee. However, the proposed rule in a new paragraph (e) would
authorize the FDIC Ethics Counselor to waive any disqualification under
this proposed revised 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 proposed rule, in keeping with the amended statutes at 18
U.S.C. 212 and 213, would eliminate the current regulatory
disqualification for FDIC examiners, FDIC Board members, Division and
Office Directors, and employees in the Corporate Employee Program
performing examiner duties (defined as ``covered employees'' in Sec.
3201.101(d)(3) of the proposed rule), who obtain credit cards on terms
and conditions no more favorable than generally available to other
borrowers. See new proposed paragraphs (c)(1) and (c)(2) of Sec.
3201.102. Covered employees assigned to a bank from which they hold a
credit card would have to 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 would be required. Under proposed
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 the proposed rule in Sec. 3201.102(c)(3)(ii),
disqualification would continue to be generally required for
residential real property loans on a primary residence. However, such
loans would be permitted in accordance with proposed paragraph
(c)(2)(ii) of Sec. 3201.102, if the terms and conditions were no more
favorable than the terms and conditions of loans generally available to
other similarly situated creditworthy borrowers. Thus, covered FDIC
employees could obtain such permitted loans, but would need to be
recused from official participation in any particular matters involving
the lending institution or person. The proposed rule would also cover
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 proposed for amendment.
As previously noted above, a new general waiver would be available
under the proposed rule in certain circumstances. Specifically, the
proposed rule in paragraph (e) of Sec. 3201.102 would authorize the
Ethics Counselor to waive any disqualification 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 proposed
paragraph (e) of Sec. 3201.102 could impose appropriate conditions,
such as requiring the execution of a written disqualification.
Under proposed paragraph (c)(5)(i) of Sec. 3201.102, a covered
FDIC employee would not be 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 would be subject to the prohibitions in paragraphs (c)(3) and
(c)(4) of Sec. 3201.102 as proposed, subject to an exception noted in
the following sentence. Under proposed paragraph (c)(5)(ii) of 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 proposed rule would also
prohibit an FDIC employee from directly or indirectly accepting or
becoming obligated on any extension of credit from an FDIC-insured
depository
[[Page 70327]]
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 as proposed would 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 proposed
paragraphs (c) and (e) of Sec. 3201.102.
Proposed Amended Section 3201.103--Prohibition on Acquisition,
Ownership or Control of Securities of FDIC-Insured Depository
Institutions and Certain Holding Companies
In addition, this proposed rule would amend 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 proposed amendment would narrow the scope of
these prohibitions and generally clarify the prohibitions of this
section.
The proposed amendment at Sec. 3201.103(a) would narrow the scope
of the general prohibition concerning ownership and control of a
security by FDIC employees, 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 proposing to eliminate 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.
The proposed amendment to Sec. 3201.103 would generally prohibit
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.
The proposed amendment of Sec. 3201.103 would also create in
paragraph (b)(1), a specific exception for acquisition, ownership, or
control of securities of a unitary thrift holding company. In addition,
the proposed amendment of the section would reorganize the descriptions
of the prohibited securities and exceptions. The intent of the
reorganization proposed is to make this section clearer and more
useable. The proposed amendment would retain 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 proposed rule would add 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 proposed Sec. 3201.102(e) waiver provision
discussed above.
Proposed Amended Section 3201.101(d)--General Section; Definitions
Finally, the definitional section at paragraph (d) of Sec.
3201.101 would be amended to add and revise certain useful definitions
and delete others (``assisted entity'' and ``assuming entity'') that
would no longer be used.
The term ``covered employees'' would be 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 FDIC is republishing all the definitions in
the paragraph, including those not proposed for revision, for ease of
reference.
Request for Comments
The FDIC welcomes comments on all aspects of this proposal.
Regulatory Flexibility Act Analysis
The Regulatory Flexibility Act (RFA) requires that each Federal
agency either certify that a proposed rule would not, if adopted in
final form, have a significant impact on a substantial number of small
entities or prepare an initial regulatory flexibility analysis (IRFA)
of the proposal and publish the analysis for comment. 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 proposed rule
decriminalizes under certain circumstances 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 proposed rule does not impose any obligations or
restrictions on depository institutions, including small depository
institutions. On this basis, the FDIC certifies pursuant to 5 U.S.C.
605(b) that this proposed rule, if it is adopted in final form, will
not have a significant impact on a substantial number of small
entities. Commenters are nevertheless invited to provide the FDIC with
any information they may have about the likely quantitative effects of
the proposal.
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Paperwork Reduction Act
The FDIC has determined that this proposed 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.).
Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act, Pub. L. 106-102, sec.
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the FDIC to use
plain language in all proposed and final rules published after January
1, 2000. Therefore, the FDIC specifically invites your comments on how
to make this proposal easier to understand. For example:
Have we organized the material to suit your needs? If not,
how could this material be better organized?
Are the requirements in the proposed guidelines and
regulations clearly stated? If not, how could the guidelines and
regulations be more clearly stated?
Do the proposed guidelines and regulations contain
language or jargon that is not clear? If so, which language requires
clarification?
Would a different format (grouping and order of sections,
use of headings, paragraphing) make the guidelines and regulations
easier to understand? If so, what changes to the format would make them
easier to understand?
What else could we do to make the guidelines and
regulations easier to understand?
The Treasury and General Government Appropriations Act, 1999--
Assessment of Federal Regulations and Policies on Families
The FDIC has determined that the proposed 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).
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.
For the reasons set forth in the preamble, the Board of Directors
of the FDIC, with the concurrence of OGE, proposes to amend 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
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.
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.
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.
[[Page 70329]]
(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.
(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
[[Page 70330]]
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 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.
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 6th day of October, 2005.
Federal Deposit Insurance Corporation.
Robert E. Feldman,
Executive Secretary.
Approved: November 27th, 2006.
Robert I. Cusick,
Director, Office of Government Ethics.
[FR Doc. E6-20400 Filed 11-28-06; 4:06 pm]
BILLING CODE 6714-01-P