[Federal Register: January 14, 2008 (Volume 73, Number 9)]
[Rules and Regulations]
[Page 2143-2146]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ja08-2]
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FEDERAL DEPOSIT INSURANCE CORPORATION
12 CFR Parts 303, 308, and 309
RIN 3064-AD25
Deposit Insurance Requirements After Certain Conversions;
Definition of ``Corporate Reorganization;'' Optional Conversions
(``Oakar Transactions''); Additional Grounds for Disapproval of Changes
in Control; and Disclosure of Certain Supervisory Information
AGENCY: Federal Deposit Insurance Corporation (``FDIC'').
ACTION: Interim rule and request for comment.
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SUMMARY: The FDIC is amending certain regulations in order to conform
them to certain Federal statutes recently amended by the Financial
Services Regulatory Relief Act of 2006, the Federal Deposit Insurance
Reform Act of 2005, and the Federal Deposit Insurance Reform Conforming
Amendments Act of 2005. First, the FDIC is amending its deposit
insurance regulations to clarify that a deposit insurance application
is required for each new bank that results from the conversion of
certain Federal savings associations into multiple banks. Second, the
FDIC is amending its merger regulations to define the term ``corporate
reorganization'' to mean a merger that involves solely an insured
depository institution and one or more of its affiliates. Third, the
FDIC is amending its merger regulations to remove any reference to
``Optional Conversions'' (sometimes referred to as ``Oakar
Transactions''). Fourth, the FDIC is adding, as an additional grounds
for disapproval of a change in control notice, unfavorable future
prospects of the institution to be acquired. Finally, the FDIC is
authorizing the disclosure of examination reports and other
confidential supervisory information to certain additional agencies and
entities.
DATES: The interim rule is effective January 14, 2008. Comments on the
rule must be received by March 14, 2008.
ADDRESSES: You may submit comments on the interim rule, by any of the
following methods:
Agency Web Site: http://www.fdic.gov/regulations/laws/federal/propose.html.
Follow instructions for submitting comments on
the Agency Web Site.
E-mail: Comments@FDIC.gov. Include RIN 3064-AD25 on 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: Comments may be hand delivered to the 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 comments received will be posted generally
without change to http://www.fdic.gov/regulations/laws/federal/propose.html
, including any personal information provided. Comments may
be inspected at the FDIC Public Information Center, Room E-1022, 3502
North Fairfax Drive, Arlington, VA 22226, between 9 a.m. and 5 p.m. on
business days.
FOR FURTHER INFORMATION CONTACT: Brett A. McCallister, Review Examiner
(816) 234-8099 x4223, in the Division of Supervision and Consumer
Protection; or Julie E. Paris, Senior Attorney, (202) 898-3821, Richard
Bogue, Counsel, (202) 898-3726, or Robert C. Fick, Counsel, (202) 898-
8962, in the Legal Division.
SUPPLEMENTARY INFORMATION:
I. Background.
On October 13, 2006, the President signed into law the Financial
Services Regulatory Relief Act of 2006 (``FSRRA'').\1\ The stated
purpose of FSRRA is to reduce regulatory burden and improve
productivity for financial institutions. Several provisions of FSRRA
amend statutes that the FDIC has implemented through its Rules and
Regulations (``Rules'').\2\ As a result, the FDIC is revising certain
of its Rules to conform them to the statutes as
[[Page 2144]]
amended by FSRRA. In addition, Congress enacted the Federal Deposit
Insurance Reform Act of 2005 (``Reform Act'') \3\ and the Federal
Deposit Insurance Reform Conforming Amendments Act of 2005
(``Amendments Act'') \4\ which consolidated the two former deposit
insurance funds into a single deposit insurance fund. As a result, the
FDIC is revising its regulations to reflect this change.
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\1\ Public Law No. 109-351, 12 STAT. 1966 (Oct. 13, 2006).
\2\ Chapter III of Title 12 of the Code of Federal Regulations.
\3\ Pub. L. 109-171, 120 STAT. 9 (Feb. 8, 2006).
\4\ Pub. L. 109-173, 119 STAT. 3601 (Feb. 15, 2006).
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II. Regulatory Amendments
A. Deposit Insurance Requirements After Certain Conversions
Section 5(i)(5) of the Home Owners' Loan Act (``HOLA'') \5\
generally authorizes any Federal savings association that was chartered
and in operation before November 12, 1999 and that had branches in one
or more states, to convert into one or more national or state banks,
each of which may encompass one or more of the existing branches.
Section 608(a) of FSRRA amended section 5(i)(5) of the HOLA to
generally require that if such a conversion results in more than one
national or state bank, each resulting bank must obtain deposit
insurance from the FDIC pursuant to section 5(a) of the Federal Deposit
Insurance Act (``FDI Act'').\6\
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\5\ 12 U.S.C. 1464(i)(5).
\6\ 12 U.S.C. 1815(a).
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Subpart B of Part 303 of the FDIC's Rules sets forth the procedures
for applying for deposit insurance. Section 303.20 describes the scope
of this subpart to include applications for deposit insurance for,
among other institutions, proposed depository institutions. Since it is
not clear that this subpart applies to each bank that results from the
conversion of certain Federal savings associations into multiple banks
under section 5(i)(5) of the HOLA, the FDIC is amending section 303.20
to expressly confirm the applicability of subpart B of part 303 to such
resulting banks.
B. Definition of Corporate Reorganization
Section 606 made two changes to the Bank Merger Act \7\ with
respect to mergers that solely involve an insured depository
institution and one or more of its affiliates (``Affiliate Mergers'').
First, for Affiliate Mergers, section 606 amended section 18(c)(4) of
the FDI Act \8\ to eliminate the requirement for the responsible
Federal banking agency to request competitive factors reports from
either the other Federal banking agencies or the Attorney General of
the United States.\9\ Prior to FSRRA the responsible Federal banking
agency had to request competitive factors reports for Affiliate
Mergers. Second, section 606 revised section 18(c)(6) of the FDI Act
\10\ to eliminate the post-approval waiting period for Affiliate
Mergers. Prior to FSRRA the applicant in an Affiliate Merger had to
wait up to thirty days after obtaining the agency's approval before it
could consummate the transaction.
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\7\ 12 U.S.C. 1828(c).
\8\ 12 U.S.C. 1828(c)(4).
\9\ Notwithstanding this change, the responsible Federal banking
agency retains the ability to request competitive factors reports if
the circumstances warrant.
\10\ 12 U.S.C. 1828(c)(6).
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The FDIC's regulations at 12 CFR 303.61(b) provides a definition of
``corporate reorganization'' that identifies a class of mergers that
generally do not raise any competitive concerns and, therefore, do not
require the same level of competitive analysis as other mergers subject
to the Bank Merger Act. As a result, such mergers are less burdensome
on applicants. Generally, 12 CFR 303.61(b) defines the term to include
(i) mergers between an insured institution and its subsidiary or its
holding company and (ii) mergers between institutions and entities that
were ``commonly-owned.'' Institutions are ``commonly-owned'' only if
more than 50% of the voting stock of each was owned by the same entity.
The changes made by Section 606 of the FSRRA, however, indicate that
there are no competitive concerns for a class of mergers that is
broader than the class identified by the FDIC's regulation as corporate
reorganizations. Specifically, FSRRA indicates that there are no
competitive concerns for mergers that solely involve an insured
depository institution and one or more affiliates.
While the term ``corporate reorganization'' is only used in subpart
D as one of several illustrative examples of the types of mergers
covered by the Bank Merger Act, the definition could cause confusion as
to how it relates to Affiliate Mergers. As a result, the FDIC is
amending the definition of ``corporate reorganization'' in order to
conform it to the changes made by FSRRA and to avoid any confusion
about the need for competitive analyses and post-approval waiting
periods. Accordingly, the FDIC is amending 12 CFR 303.61(b) to define
``corporate reorganization'' as a merger that involves solely an
insured depository institution and one or more of its affiliates.
C. Optional Conversions
Before it was repealed, the former section 5(d)(3) of the FDI Act
\11\ generally authorized a member of one insurance fund to merge with
a member of the other fund without changing the funds that insured the
deposits of the two institutions. This type of merger was referred to
as an ``Optional Conversion'' in both section 5(d)(3) of the FDI Act
and in section 303.63(d) of the FDIC's Rules; it was also commonly
known as an ``Oakar Transaction.'' Section 303.63(d) of the FDIC's
Rules required the applicant in an Optional Conversion to identify the
merger as an ``Optional Conversion'' in its application.
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\11\ 12 U.S.C. 1815(d)(3) (repealed 2006).
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On March 31, 2006, pursuant to the Reform Act and the Amendments
Act, the former Savings Association Insurance Fund (``SAIF'') and the
former Bank Insurance Fund (``BIF'') were consolidated into a single
fund, the Deposit Insurance Fund. In addition, the Amendments Act
repealed section 5(d)(3) of the FDI Act effective with the merger of
the two funds.\12\ Since the Reform Act consolidated the two funds into
one, and since the Amendments Act repealed section 5(d)(3) of the FDI
Act, Optional Conversions are no longer possible. As a result, the FDIC
is amending section 303.63 to remove paragraph (d) Optional
conversions. The removed paragraph formerly read as follows:
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\12\ See section 8(a)(4) of the Amendments Act, Pub. L. 109-173
(2006).
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(d) Optional conversions. If the proposed merger transaction is an
optional conversion, the merger application shall include a statement
that the proposed merger transaction is a transaction covered by
section 5(d)(3) of the FDI Act (12 U.S.C. 1815(d)(3)).
D. Additional Grounds for Disapproval of a Change in Control
Section 705 of FSRRA amended section 7(j)(7) of the FDI Act \13\ to
add an additional ground for the disapproval of a proposed acquisition
of control of a bank. The additional ground for disapproval of a
proposed acquisition is if the future prospects of the institution
might jeopardize the financial stability of the bank or prejudice the
interests of the depositors of the bank.
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\13\ 12 U.S.C. 1817(j)(7).
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Section 308.111 of the FDIC's Rules lists the statutory grounds for
disapproval of a proposed acquisition of control of an insured state
nonmember bank. Since FSRRA added unfavorable future prospects of the
institution as an additional ground for disapproval of a
[[Page 2145]]
proposed acquisition, the FDIC is amending section 308.111(c) to
reflect this new ground.
E. Disclosure of Certain Supervisory Information
Section 707 of FSRRA amended section 7(a)(2) of the FDI Act \14\ by
adding a new subsection (C) that generally expands the authority of the
Federal banking agencies to furnish examination reports and other
confidential supervisory information to (1) any other Federal and State
agencies with supervisory or regulatory authority over the depository
institution or entity, (2) officers, directors and receivers of such
depository institution or entity, and (3) any other person that the
Federal banking agency determines to be appropriate.
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\14\ 12 U.S.C. 1817(a)(2).
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The FDIC's Rules authorizing the disclosure of confidential
information are found in Part 309 of its Rules. Paragraph (b)(3) of
section 309.6 entitled ``Disclosure of exempt records,'' authorizes the
disclosure of exempt records to Federal financial institution
supervisory agencies and certain other agencies.
Since section 707 of FSRRA authorized additional disclosures of
certain supervisory information, the FDIC is amending section
309.6(b)(3) to add those additional disclosures to the disclosures
previously authorized.
III. Regulatory Analysis and Procedure as to Interim Rule
A. Solicitation of Comments on Use of Plain Language
Section 722 of the Gramm-Leach-Bliley Act \15\ requires the FDIC to
use ``plain language'' in all proposed and final rules published after
January 1, 2000. The FDIC invites comments on whether the interim rule
is clearly stated and effectively organized, and how the FDIC might
make the text easier to understand.
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\15\ 12 U.S.C. 4809.
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B. Administrative Procedure Act
The interim rule takes effect upon publication in the Federal
Register. The interim rule conforms the FDIC's regulations to several
statutory provisions that were amended by FSRRA on October 13, 2006 and
by the Reform Act and the Amendments Act effective on March 31, 2006.
The statutory amendments made by FSRRA which took effect upon enactment
on October 13, 2006 and the statutory amendments made by the Reform Act
and the Amendments Act which took effect on March 31, 2006 continue in
effect. The amendments to the FDIC's regulations made by the interim
rule generally reflect the language contained in the amended statutes
without interpretation. The amendments made by the interim rule effect
no substantive changes beyond those already effected by Federal
statute. For the foregoing reasons, solicitation of public comment
prior to the effectiveness of these regulatory amendments is
unnecessary. Accordingly, pursuant to 5 U.S.C. 553(b), the FDIC finds
that good cause exists for making the rule effective upon this
publication without first seeking public comment. However, the FDIC
nonetheless invites public comment on the interim rule and will amend
the rule if appropriate after reviewing any public comments received.
C. Regulatory Flexibility Act
Pursuant to section 603(a) of the Regulatory Flexibility Act
(``RFA'') \16\ a regulatory flexibility analysis is only required when
an agency is required to publish a notice of proposed rulemaking for a
proposed rule. Since the regulatory amendments made by the interim rule
are effective upon publication in the Federal Register, and since no
notice of proposed rulemaking is required to be published, no
regulatory flexibility analysis is required.
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\16\ 5 U.S.C. 603(a).
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D. Paperwork Reduction Act
No new collections of information pursuant to the Paperwork
Reduction Act (44 U.S.C. 3501 et seq.) are contained in the interim
rule.
List of Subjects
12 CFR Part 303
Administrative practice and procedure, Bank deposit insurance,
Banks, banking, Reporting and recordkeeping requirements, Savings
associations.
12 CFR Part 308
Administrative practice and procedure, Bank deposit insurance,
Banks, banking, Claims, Crime, Equal access to justice, Fraud,
Investigations, Lawyers, Penalties.
12 CFR Part 309
Banks, banking, Credit, Freedom of information, Privacy.
Authority and Issuance
0
For the reasons set forth in the preamble, parts 303, 308, and 309 of
Chapter III of the title 12 of the Code of Federal Regulations are
amended as follows:
PART 303--FILING PROCEDURES
0
1. The authority citation for part 303 is revised to read as follows:
Authority: 12 U.S.C. 378, 1464, 1813, 1815, 1817, 1818, 1819
(Seventh and Tenth), 1820, 1823, 1828, 1831a, 1831e, 1831o, 1831p-1,
1831w, 1835a, 1843(l), 3104, 3105, 3108, 3207; 15 U.S.C. 1601-1607.
0
2. Add the following sentence at the end of Sec. 303.20 to read as
follows:
Sec. 303.20 Scope.
* * * Each bank that results from the conversion of a Federal
savings association into multiple banks pursuant to section 5(i)(5) of
the Home Owners' Loan Act, 12 U.S.C. 1464(i)(5), is treated as a
proposed depository institution or a de novo institution, as
appropriate, for purposes of this subpart.
0
3. Amend Sec. 303.61 by revising paragraph (b) to read as follows:
Sec. 303.61 Definitions.
* * * * *
(b) Corporate reorganization means a merger transaction that
involves solely an insured depository institution and one or more of
its affiliates.
* * * * *
Sec. 303.63 [Amended]
0
4. In Sec. 303.63, remove paragraph (d).
PART 308--RULES OF PRACTICE AND PROCEDURE
0
5. The authority citation for part 308 continues to read as follows:
Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505,
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4),
1831o, 1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909,
4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 780-5, 6805(b)(1); 28
U.S.C. 2461 note, 31 U.S.C. 330, 5321; 42 U.S.C. 4012a; Sec. 3100(s)
Pub. L. 104-134, 110 Stat. 1321-358.
0
6. Amend Sec. 308.111 by revising paragraph (c) to read as follows:
Sec. 308.111 Grounds for disapproval.
* * * * *
(c) Either the financial condition of any acquiring person or the
future prospects of the institution might jeopardize the financial
stability of the bank or prejudice the interest of the depositors of
the bank.
* * * * *
PART 309--DISCLOSURE OF INFORMATION
0
7. The authority citation for part 309 continues to read as follows:
Authority: 5 U.S.C. 552; 12 U.S.C. 1819(a) ``Seventh'' and
``Tenth.''
[[Page 2146]]
0
8. Amend Sec. 309.6 by adding the following new sentence at the end of
paragraph (b)(3) to read as follows:
Sec. 309.6 Disclosure of exempt records.
* * * * *
(b) * * *
(3) * * * Finally, the Director, or designee, may in his or her
discretion and for good cause, disclose reports of examination or other
confidential supervisory information concerning any depository
institution or other entity examined by the Corporation under authority
of Federal law to: any other Federal or State agency or authority with
supervisory or regulatory authority over the depository institution or
other entity; any officer, director, or receiver of such depository
institution or entity; and any other person that the Corporation
determines to be appropriate.
* * * * *
By Order of the Board of Directors.
Dated at Washington, DC, the 19th day of December, 2007. Federal
Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
[FR Doc. E8-294 Filed 1-11-08; 8:45 am]
BILLING CODE 6714-01-P