[Federal Register Volume 71, Number 237 (Monday, December 11, 2006)]
[Rules and Regulations]
[Pages 71472-71475]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-20956]
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FEDERAL RESERVE SYSTEM
12 CFR Part 215
[Regulation O; Docket No. R-1271]
Loans to Executive Officers, Directors, and Principal
Shareholders of Member Banks
AGENCY: Board of Governors of the Federal Reserve System (``Board'').
ACTION: Interim rule with request for public comments.
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SUMMARY: The Board is adopting, on an interim basis, and soliciting
comment on amendments to the Board's Regulation O to eliminate certain
reporting requirements. These amendments implement section 601 of the
Financial Services Regulatory Relief Act of 2006. The Board proposed
and supported eliminating these statutory reporting provisions because
the Board had found that they did not contribute significantly to the
effective monitoring of insider lending or the prevention of insider
abuse.
DATES: This interim rule is effective on December 11, 2006. Comments
must be received by January 10, 2007.
ADDRESSES: You may submit comments, identified by Docket No. R-1271, by
any of the following methods:
Agency Web site: http://www.federalreserve.gov. Follow the
instructions for submitting comments at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected].
[[Page 71473]]
Include docket number in the subject line of the message.
FAX: 202/452-3819 or 202/452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551.
All public comments are available from the Board's Web site at
http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical
reasons. Accordingly, your comments will not be edited to remove any
identifying or contact information. Public comments may also be viewed
electronically or in paper in Room MP-500 of the Board's Martin
Building (20th and C Streets, NW.) between 9 a.m. and 5 p.m. on
weekdays.
FOR FURTHER INFORMATION CONTACT: Mark E. Van Der Weide, Senior Counsel
(202/452-2263), or Amanda K. Allexon, Attorney (202-452-3818), Legal
Division. Users of Telecommunication Device for the Deaf (TTD) only,
contact (202) 263-4869.
SUPPLEMENTARY INFORMATION:
Background and Description of Interim Rule
Section 22(h) of the Federal Reserve Act (``FRA'') restricts the
ability of member banks to extend credit to their executive officers,
directors, principal shareholders, and to related interests of such
persons.\1\ Section 22(g) of the FRA imposes some additional
limitations on extensions of credit made by member banks to their
executive officers.\2\ Section 106(b)(2) of the Bank Holding Company
Act Amendments of 1970 (``BHC Act Amendments'') adds further
restrictions on extensions of credit to an executive officer, director,
or principal shareholder of a bank from a correspondent bank.\3\ The
Board's Regulation O implements sections 22(g) and 22(h) of the FRA, as
well as section 106(b)(2) of the BHC Act Amendments.\4\ Sections 22(g)
and 22(h) and Regulation O apply, by their terms, to all banks that are
members of the Federal Reserve System.\5\ Other Federal law subjects
federally insured state non-member banks and insured savings
associations to sections 22(g) and 22(h) and Regulation O in the same
manner and to the same extent as if they were member banks.\6\
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\1\ 12 U.S.C. 375b.
\2\ 12 U.S.C. 375a.
\3\ 12 U.S.C. 1972(2).
\4\ 12 CFR part 215.
\5\ Section 106(b)(2) of the BHC Act Amendments applies by its
terms to insured banks, mutual savings banks, savings banks, and
savings associations.
\6\ 12 U.S.C. 1828(j), 1468(b); 12 CFR 563.43.
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Section 601 of the Financial Services Regulatory Relief Act of 2006
(``Act'') (Pub. L. 109-351) removed several statutory reporting
requirements relating to insider lending by member banks. These
amendments, which became effective on October 13, 2006, eliminated the
statutory provisions that:
Require a member bank to include a separate report with
its quarterly Reports of Condition and Income (``Call Report'') on any
extensions of credit the bank has made to its executive officers since
its last Call Report (12 U.S.C. 375a(9));
Require an executive officer of a member bank to file a
report with the member bank's board of directors whenever the executive
officer obtains an extension of credit from another bank in an amount
that exceeds the amount the executive officer could obtain from the
member bank (12 U.S.C. 375a(6));
Require an executive officer or principal shareholder of a
depository institution to file an annual report with the institution's
board of directors during any year in which the officer or shareholder
has an outstanding extension of credit from a correspondent bank of the
institution (12 U.S.C. 1972(2)(G)(i)); and
Authorize the Federal banking agencies to issue
regulations that require the reporting and public disclosure of
information related to extensions of credit received by an executive
officer or principal shareholder of a depository institution from a
correspondent bank of the institution (12 U.S.C. 1972(2)(G)(ii)).
The Board proposed and supported eliminating these statutory
reporting provisions because the Board had found that they did not
contribute significantly to the effective monitoring of insider lending
or the prevention of insider abuse.
The Board is adopting, and inviting public comment on, this interim
rule to implement the changes made by section 601 of the Act. In
particular, the interim rule eliminates:
Section 215.9 of Regulation O, which requires an executive
officer of a member bank to file a report with the member bank's board
of directors whenever the executive officer obtains certain extensions
of credit from another bank;
Section 215.10 of Regulation O, which requires a member
bank to include a separate report with its quarterly Call Report on any
extensions of credit the bank has made to its executive officers since
its last Call Report; and
Subpart B of Regulation O, which requires the reporting
and public disclosure of extensions of credit to an executive officer
or principal shareholder of a member bank by a correspondent bank of
the member bank.
The interim rule also makes minor conforming changes to Regulation O to
reflect the removal of these provisions. The Board invites comment on
all aspects of the interim rule.
The Board notes that the changes made by section 601 and this
interim rule do not alter the substantive restrictions on loans by
depository institutions to their executive officers and principal
shareholders found in Regulation O. Section 601 and this interim rule
also do not alter the substantive restrictions on loans made to
executive officers and principal shareholders of depository
institutions by their correspondent banks found at 12 U.S.C. 1972(2).
Moreover, elimination of these reporting requirements does not limit
the authority of the appropriate Federal banking agency to take
enforcement action against a depository institution or its insiders for
violation of these insider lending restrictions. In addition, the Board
notes that Regulation O would continue to require that a depository
institution and its insiders maintain sufficient information to enable
examiners to monitor the institution's compliance with the
regulation,\7\ and the Federal banking agencies would retain authority
under other provisions of law to collect information regarding insider
lending by depository institutions.
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\7\ 12 CFR 215.8.
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Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Board certifies that the interim rule would not have a significant
economic impact on a substantial number of small entities within the
meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).
Although the interim rule would apply to all member banks regardless of
their size, the interim rule would reduce the regulatory burden on
member banks, including small member banks, by removing requirements to
report certain types of extensions of credit to insiders and to
insiders of correspondent banks. Accordingly, a regulatory flexibility
analysis is not required.
[[Page 71474]]
Administrative Procedure Act
The provisions of the rule are effective on December 11, 2006.
Pursuant to 5 U.S.C. 553, the Board finds that there is good cause to
make the interim rule effective on Decermber 11, 2006. As noted above,
the rule implements statutory changes that became effective on October
13, 2006, and also reduces burden. The Board is interested in public
comment on all aspects of the interim rule and will revise the interim
rule as appropriate after reviewing public comment.
Paperwork Reduction Act
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C.
Ch. 3506; 5 CFR 1320 Appendix A.1), the Board reviewed the interim
final rule under the authority delegated to the Board by the Office of
Management and Budget.
The collections of information that are proposed to be revised by
this rulemaking are found in 12 CFR 215.9 and 215.10, and 12 CFR part
215, subpart B. This information previously was required to evidence
compliance with the requirements of the Federal Reserve Act (12 U.S.C.
375a and 375b) and 12 U.S.C. 1972. The respondents/recordkeepers are
for-profit financial institutions, including small businesses, and
individuals.
The Federal Reserve may not conduct or sponsor, and an organization
is not required to respond to, this information collection unless it
displays a currently valid OMB control number. The OMB control number
associated with 12 CFR 215.9 and 12 CFR part 215, subpart B is 7100-
0034 (FFIEC 004). The OMB control number associated with 12 CFR 215.10
is 7100-0036 (FFIEC 031 and 041). The FFIEC 004 would be discontinued
as a result of this rule. The estimated burden per response for each of
the paperwork requirements associated with the FFIEC 004 information
collection varies between nine minutes and one hour. It is estimated
that there are 4,760 respondents and recordkeepers and an average
frequency of one response per respondent each year. The total amount of
annual burden that would be saved as a result of this rule is estimated
to be 5,331 hours. The estimated annual cost savings would be $239,895.
In addition, the last page of the FFIEC 031 and 041 reporting forms
(loans to executive officers), which is associated with 12 CFR 215.10,
would be eliminated as a result of this rule. The estimated burden per
response for this portion of the reporting forms is fifteen minutes. It
is estimated that there are 919 respondents and an average frequency of
four responses per respondent each year. Therefore the total amount of
annual burden that would be eliminated is estimated to be 919 hours and
there is estimated to be minimal cost savings.
For the FFIEC 004, individual respondent financial information is
regarded as confidential under the Freedom of Information Act (5 U.S.C.
552(b)(4), (6) and (8)). However, until the passage of the Act and the
issuance of this interim rule, upon request from the public the member
bank has been required to disclose the name of each executive officer
and principal shareholder who, together with related interests, has
loans from correspondent banks equal to a minimum of 5 percent of the
member bank's capital and surplus, or $500,000, whichever is less. For
the FFIEC 031 and 041, the data are not considered confidential.
The Federal Reserve has a continuing interest in the public's
opinions of our collections of information. At any time, comments
regarding the burden estimate, or any other aspect of this collection
of information, including suggestions for reducing the burden, may be
sent to: Secretary, Board of Governors of the Federal Reserve System,
20th and C Streets, NW., Washington, DC 20551; and to the Office of
Management and Budget, Paperwork Reduction Project (7100-0034 or 7100-
0036), Washington, DC 20503.
Plain Language
Section 722 of the Gramm-Leach-Bliley Act (12 U.S.C. 4809) requires
the Board to use ``plain language'' in all rules published in the
Federal Register. The Board believes the interim rule is presented in a
simple and straightforward manner but invites comment on whether the
Board could take additional steps to make the rule easier to
understand.
List of Subjects in 12 CFR Part 215
Credit, Penalties, Reporting and recordkeeping requirements.
Authority and Issuance
0
For the reasons set out in the preamble, the Board amends 12 CFR part
215 to read as follows:
PART 215--LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL
SHAREHOLDERS OF MEMBER BANKS (REGULATION O)
0
1. The authority citation for part 215 is revised to read as follows:
Authority: 12 U.S.C. 248(a), 375a(10), 375b(9) and (10),
1817(k); and Pub. L. 102-242, 105 Stat. 2236 (1991).
0
2. Remove the heading Subpart A--Loans by Member Banks to Their
Executive Officers, Directors, and Principal Shareholders.
0
3. Section 215.1 is revised to read as follows:
Sec. 215.1 Authority, purpose, and scope.
(a) Authority. This part is issued pursuant to sections 11(a),
22(g), and 22(h) of the Federal Reserve Act (12 U.S.C. 248(a), 375a,
and 375b), 12 U.S.C. 1817(k), and section 306 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (Pub. L. 102-242, 105
Stat. 2236 (1991)).
(b) Purpose and scope--(1) This part governs any extension of
credit made by a member bank to an executive officer, director, or
principal shareholder of the member bank, of any company of which the
member bank is a subsidiary, and of any other subsidiary of that
company.
(2) This part also applies to any extension of credit made by a
member bank to a company controlled by such a person, or to a political
or campaign committee that benefits or is controlled by such a person.
(3) This part also implements the reporting requirements of 12
U.S.C. 1817(k) concerning extensions of credit by a member bank to its
executive officers or principal shareholders (or to the related
interests of such persons).
(4) Extensions of credit made to an executive officer, director, or
principal shareholder of a bank (or to a related interest of such
person) by a correspondent bank also are subject to restrictions set
forth in 12 U.S.C. 1972(2).
0
4. In Sec. 215.2, the introductory text is revised to read as follows:
Sec. 215.2 Definitions.
For purposes of this part, the following definitions apply unless
otherwise specified:
* * * * *
0
5. Remove Sec. Sec. 215.9 and 215.10 and redesignate Sec. Sec.
215.11, 215.12, and 215.13 as Sec. Sec. 215.9, 215.10, and 215.11,
respectively.
0
6. In newly designated Sec. 215.9:
0
a. In paragraph (a)(1), remove footnote 4.
0
b. Paragraph (a)(2)(ii) is revised to read as follows:
Sec. 215.9 Disclosure of credit from member banks to executive
officers and principal shareholders.
(a) * * *
(2) * * *
[[Page 71475]]
(ii) Any political or campaign committee the funds or services of
which will benefit a person or that is controlled by a person. For the
purpose of this section, a related interest does not include a bank or
a foreign bank (as defined in 12 U.S.C. 3101(7)).
* * * * *
0
7. Newly designated Sec. 215.11 is revised to read as follows:
Sec. 215.11 Civil penalties.
Any member bank, or any officer, director, employee, agent, or
other person participating in the conduct of the affairs of the bank,
that violates any provision of this part (other than Sec. 215.9) is
subject to civil penalties as specified in section 29 of the Federal
Reserve Act (12 U.S.C. 504).
0
8. The Appendix to Subpart A of Part 215 is redesignated as the
Appendix to Part 215.
0
9. Remove the heading Subpart B--Reports on Indebtedness of Executive
Officers and Principal Shareholders to Correspondent Banks.
0
10. Remove Sec. Sec. 215.20, 215.21, 215.22, and 215.23.
By order of the Board of Governors of the Federal Reserve
System, December 6, 2006.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. E6-20956 Filed 12-8-06; 8:45 am]
BILLING CODE 6210-01-P