Integration of National Bank and Federal Savings Association Regulations: Licensing Rules

Federal RegisterMay 18, 2015

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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Parts 4, 5, 7, 14, 24, 32, 34, 100, 116, 143, 144, 145, 146, 150, 152, 159, 160, 161, 162, 163, 174, 192, 193

[Docket ID OCC-2014-0007]

RIN 1557-AD80

Integration of National Bank and Federal Savings Association Regulations: Licensing Rules

AGENCY:

Office of the Comptroller of the Currency, Treasury.

ACTION:

Final rule.

SUMMARY:

The Office of the Comptroller of the Currency (OCC) is adopting a final rule to integrate its rules relating to policies and procedures for corporate activities and transactions involving national banks and Federal savings associations, to revise some of these rules in order to eliminate unnecessary requirements consistent with safety and soundness and to promote fairness in supervision, and to make other technical and conforming changes. The OCC also is adopting amendments to update its rules for agency organization and function.

DATES:

This final rule is effective July 1, 2015.

FOR FURTHER INFORMATION CONTACT:

For additional information, contact Heidi Thomas, Special Counsel; Melissa Lisenbee, Attorney; or Stuart Feldstein, Director, Legislative and Regulatory Activities Division, (202) 649-5490, for persons who are deaf or hard of hearing, TTY, (202) 649-5597; Kevin Corcoran, Assistant Director, or Richard Cleva, Senior Counsel, Bank Activities and Structure, (202) 649-5500; or Stephen Lybarger, Deputy Comptroller for Licensing, (202) 649-6319, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.

SUPPLEMENTARY INFORMATION:

I. Background

Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),

transferred to the OCC all functions of the former Office of Thrift Supervision (OTS) and the Director of the OTS relating to Federal savings associations.

As a result, the OCC is now responsible for the ongoing examination, supervision, and regulation of Federal savings associations, in addition to national banks and Federal branches and agencies. With some exceptions, the OCC has one set of rules applicable to national banks and another set of rules applicable to Federal savings associations, or, where appropriate, to all savings associations.

Public Law 111-203, 124 Stat. 1376 (2010).

Title III of the Dodd-Frank Act transferred the functions of the former OTS relating to state savings associations to the Federal Deposit Insurance Corporation (FDIC). Dodd-Frank Act, section 312(b)(2)(C), 12 U.S.C. 5412(b)(2)(C). The Dodd-Frank Act also transferred to the OCC the rulemaking authority of the OTS relating to all savings associations, both state and Federal, unless rulemaking authority is provided to another agency by a specific statute.

See

Dodd-Frank Act, section 312(b)(2)(B)(i)(II), 12 U.S.C. 5412(b)(2)(B)(i)(II). On July 21, 2011, the OCC issued an interim final rule and request for comments that restated the former OTS regulations as 12 CFR parts 100 through 197, with nomenclature and other technical changes.

See

76 FR 48950 (Aug. 9, 2011). The FDIC has identified a number of independent bases for rulemaking authority for state savings associations in some cases. Where there is no such independent rulemaking authority, the FDIC will enforce applicable OCC regulations for state savings associations.

The OCC previously has issued rulemakings that integrated, or proposed to integrate, its rules for national banks and Federal savings associations relating to lending limits, capital, flood insurance, and safety and soundness standards.

See

78 FR 37930 (June 25, 2013), 78 FR 62018 (Oct. 11, 2013), 78 FR 65108 (October 30, 2013), and 79 FR 54518 (September 11, 2014), respectively. Furthermore, the OCC has integrated its rules relating to consumer protection in insurance sales, Bank Secrecy Act compliance, management interlocks, appraisals, disclosure and reporting of Community Reinvestment Act (CRA)-related agreements, and the Fair Credit Reporting Act.

See

79 FR 28393 (May 16, 2014).

The OCC is in the process of reviewing its rules to determine whether it is appropriate to integrate them into a single set of rules for both national banks and savings associations, taking into account consistency with the underlying statutes that apply to each type of institution. The key objectives of this review are to reduce regulatory duplication, promote fairness in supervision, eliminate unnecessary burden consistent with safety and soundness, and create efficiencies for both national banks and savings associations, as well as the OCC.

Concurrent with our integration of national bank and Federal savings association rules, the OCC also is reviewing OTS-issued supervisory policies to integrate them into the OCC's policy framework and to rescind any issuances that are duplicative, outdated, or replaced by other supervisory guidance. Our goal is to produce uniform policies for national banks and Federal savings associations, while recognizing differences that exist in statute. This policy review is occurring in conjunction with this integration rulemaking project. Many OTS-issued supervisory policies already have been integrated, rescinded, or replaced by new or existing OCC guidance. We will update this policy guidance, as appropriate, to reflect the integration of OCC rules as of the effective date of the final rules. Until that time, the Dodd-Frank Act provides that all such OTS issuances continue in effect until modified, terminated, set aside, or superseded.

See

Dodd-Frank Act section 316(b)(2) (12 U.S.C. 5414(b)(2)); OCC Bulletins 2011-47 (Dec. 11, 2011), 2012-2 (Jan. 6, 2012), 2012-3 (Jan. 6, 2012), 2012-15 (May 17, 2012), 2013-34 (Nov. 20, 2013), and 2014-49 (Oct. 1, 2014); and

www.occ.gov/publications/publications-by-type/comptrollers-handbook/index-comptrollers-handbook.html.

As part of this review of our national bank and savings association rules, the OCC published in the

Federal Register

on June 10, 2014, a proposal to integrate its rules relating to corporate activities and transactions involving national banks and Federal savings associations (licensing rules). One of the objectives of this rulemaking is to create, where possible, filing parity for all activities and transactions addressed in the OCC's licensing rules. The OCC believes that it is more equitable and efficient to have a single filing and review process for corporate activities and transactions of national banks and Federal savings associations. In addition, the OCC is in the latter stages of developing an electronic applications filing system capable of handling applications and other filings from both national banks and Federal savings associations. Accordingly, another important objective of this rulemaking is to complete the integration of our licensing rules expeditiously so that we can include these integrated rules in this new applications system.

79 FR 33260.

Concurrently, the OCC also is participating in an interagency review of regulations pursuant to section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA).

The EGRPRA requires the Federal Financial Institutions Examination Council (FFIEC) and the OCC, the FDIC, and the Board of Governors of the Federal Reserve System (Federal Reserve Board) (collectively, the Agencies) to conduct a review of all their regulations to identify outdated, unnecessary, or unduly burdensome regulations applicable to insured depository institutions. The FFIEC and the Agencies must conduct this review at least once every 10 years, and the next review must be completed by December 31, 2016. Over the next two years the OCC, FDIC and Federal Reserve Board will issue joint notices requesting comments on their rules pursuant to the EGRPRA. The EGRPRA contemplates that the Agencies will initiate appropriate rulemakings to change or eliminate outdated, unnecessary, or unduly burdensome rules, as appropriate, based on the comments received.

12 U.S.C. 3311.

The Agencies published the first EGRPRA notice on June 4, 2014,

and requested comments on three categories

of rules, including the Agencies' licensing rules.

The licensing Notice of Proposed Rulemaking (NPRM or proposed rule) indicated that the OCC would consider comments received in response to both the EGRPRA notice and the NPRM when finalizing its licensing integration rule. We received eight comment letters on our licensing rules and our licensing proposed rule in response to our first EGRPRA notice, and this final rule reflects these comments.

79 FR 32172.

The OCC issued its second EGRPRA notice, requesting review of banking operations, capital, and the Community Reinvestment Act regulations, on February 13, 2015, 80 FR 7980.

As part of this EGRPRA review, the Agencies also are holding a number of outreach meetings to provide interested parties with an opportunity to comment on regulatory burden reduction in our regulations. This preamble discusses relevant comments received at outreach meetings held on December 2, 2014, in Los Angeles, Calif., and February 4, 2015 in Dallas, Texas, to the extent they relate to OCC licensing rules.

II. Overview of the Final Rule

Twelve CFR part 5 sets forth the OCC's rules, policies and procedures for national bank corporate activities and transactions. Subpart A sets forth the generally applicable rules and procedures, while subparts B through D contain the rules for national bank initial activities, the expansion of activities, and other changes in activities and operations. Subpart E addresses a national bank's payment of dividends, and subpart F addresses Federal branches and agencies. The OCC's equivalent rules, policies and procedures for Federal savings associations are dispersed throughout parts 100-199 with the generally applicable rules and procedures in part 116. This final rule revises part 5 to make it applicable to both national banks and Federal savings associations and, to the extent appropriate, deletes the corresponding provisions found in parts 100 through 199.

Specifically, the final rule consolidates most licensing provisions for Federal savings associations into the existing national bank rule in part 5 and eliminates parts 116, 146, 152, 159, 174 and the corresponding provision in parts 143, 144, 145, 150, 160, and 163. These combined rules are as follows:

• Rules of general applicability (subpart A)

• Organizing a national bank or Federal savings association (§ 5.20)

• Conversion from a national bank or Federal savings association to a state bank or state savings association (§ 5.25)

• Fiduciary powers of national banks or Federal savings associations (§ 5.26)

• Business combinations involving a national bank or Federal savings association (§ 5.33)

• Bank service company investments of a national bank or Federal savings association (§ 5.35)

• Investment in national bank or Federal savings association premises (§ 5.37)

• Change in location of a main office of a national bank or home office of a Federal savings association (§ 5.40)

• Corporate title of a national bank or Federal savings association (§ 5.42)

• Voluntary liquidation of a national bank or Federal savings association (§ 5.48)

• Change in control of a national bank or Federal savings association; reporting of stock loans (§ 5.50)

• Changes in directors and senior executive officers of a national bank or Federal savings association (§ 5.51)

• Change of address of a national bank or Federal savings association (§ 5.52)

• Substantial asset change by a national bank or Federal savings association (§ 5.53)

In other cases, this final rule retains separate rules for national banks and Federal savings association in part 5 because the rules do not apply to both charters, are better organized as separate rules, or their differences and complexity make integration difficult. The new Federal savings association rules are as follows:

• Federal mutual savings association charters and bylaws (§ 5.21)

• Federal stock savings association charters and bylaws (§ 5.22)

• Conversion to become a Federal savings association (§ 5.23)

• Establishment, acquisition, and relocation of a branch and establishment of an agency office of a Federal savings association (§ 5.31)

• Operating subsidiaries of a Federal savings association (§ 5.38)

• Increases in permanent capital of a Federal stock savings association (§ 5.45)

• Capital distributions by a Federal savings association (§ 5.55)

• Inclusion of subordinated debt securities and mandatorily redeemable preferred stock as supplementary (tier 2) capital (§ 5.56)

• Pass-through investments by a Federal savings association (§ 5.58)

• Service corporations of Federal savings associations (§ 5.59)

The remaining rules in part 5 continue to be applicable only to national banks, with the exception of subpart E. (Subpart E applies only to Federal branches and agencies, and we did not propose to amend it in the NPRM.) We are amending some of these rules to be consistent with the changes for Federal savings associations, revising the titles of some of these rules to reflect the inclusion of rules applicable to Federal savings associations in part 5, and making other technical changes. These national bank-only rules are as follows:

• Conversion to become a national bank (§ 5.24)

• Establishment, acquisition, and relocation of a branch of a national bank (§ 5.30)

• Expedited procedures for certain reorganizations of a national bank (§ 5.32)

• Operating subsidiaries of a national bank (§ 5.34)

• Other equity investments by a national bank (§ 5.36)

• Financial subsidiaries of a national bank (§ 5.39)

• Changes in permanent capital of a national bank (§ 5.46)

• Subordinated debt issued by a national bank (§ 5.47)

• Payment of dividends by national banks (Subpart E)

In addition to the placement and integration of Federal savings association rules, the final rule makes substantive changes to the OCC's licensing rules to eliminate unnecessary requirements and to further the safe and sound operation of the institutions the OCC supervises. Furthermore, the final rule makes conforming and technical changes to the rules in parts 5, 7, and 34 and in various provisions of parts 100 through 199 to reflect the movement of the licensing rules for savings associations to part 5, to adjust section titles, and to conform cross-references. In particular, the final rule replaces, where appropriate, references to “bank” with “national bank,” because it better parallels the term “Federal savings association.” Finally, the rulemaking amends the OCC's licensing rules to make consistent the OCC office to which a national bank or Federal savings association must file its notice or application. Specifically, the final rule amends each rule in part 5 to direct such filings to the institution's appropriate OCC licensing office or appropriate OCC supervisory office, as applicable, and, in clarifying amendments, updates the description of the OCC's supervisory structure in part 4.

A description of amendments made by this final rule, the comments received on the proposed rule, relevant comments received in response to the June 2014 EGRPRA notice, and

licensing-related comments made at the EGRPRA outreach meetings held in Los Angeles, California and Dallas, Texas appears in the section-by-section description of the final rule set forth below in Section III of this preamble. Section IV of the preamble summarizes the significant changes for national banks and Federal savings associations resulting from this final rule. Section VI of the preamble contains a redesignation table that indicates changes in the numbering of the rules as a result of this final rule. Sections IV and VI may be used as a quick-reference guide to our rulemaking and are intended to assist national banks and Federal savings associations, especially community institutions, in understanding the changes made by this rulemaking.

III. Description of the Final Rule and Public Comments

The OCC received one comment in response to the proposed rule, and that comment referred the OCC to a comment received in connection with the June 2014 EGRPRA notice. The OCC also received 48 public comments in response to the June 2014 EGRPRA notice, seven of which addressed issues related to licensing rule integration. These comments, the provisions they address, and the resulting changes to the OCC's rules are discussed below.

A. Part 4—District Offices (§ 4.5)

Part 4 covers several areas, including regulations pertaining to the OCC's organizational structure. Section 4.4 describes the role of the OCC's Washington, DC office. Section 4.5 describes the role of the OCC's district and field offices and sets forth the address of, and the geographical area covered by, each district office. However, §§ 4.4 and 4.5 do not completely describe all of the OCC's supervisory offices. We proposed to amend 12 CFR 4.5 to reflect more accurately the current supervisory structure for national banks and Federal savings associations. Specifically, we proposed to revise § 4.5 to include a description and address of the OCC's Midsize Bank Supervision program, and to provide that the district offices supervise community banks not otherwise supervised by the Washington office or Midsize Bank Supervision. The NPRM also proposed to replace the outdated reference to “duty stations” with the currently used term “field office.” We received no public comments on the proposed § 4.5 amendments and adopt them as proposed with some technical changes. First, the final rule adds American Samoa to the list of territories in § 4.5(b)(1). It was inadvertently left out of the proposed rule. Second, the final rule replaces the term “field office satellite offices” with “other supervisory offices” in § 4.5(b)(2), and makes changes to paragraph headings.

B. Part 5—Rules, Policies, and Procedures for Corporate Activities

General Comments

A number of public commenters made general comments regarding the OCC's licensing rule integration effort. One commenter, a banking trade association, supported the OCC's efforts to integrate its licensing rules as a starting point for a more efficient and streamlined regulatory regime for both national banks and Federal savings associations. However, this commenter stated that, by including a number of new substantive requirements and amendments, this rulemaking will increase burden on the industry, and is therefore inconsistent with the stated purpose of the EGRPRA process. This commenter requested that the OCC issue a separate proposed rule for any substantive changes that create burdens greater than those imposed by existing rules.

We note that the OCC has taken several considerations into account in integrating the national bank and Federal savings association rules. As stated in the preamble to the proposal, the key objective of this rulemaking is to integrate the national bank and Federal savings association rules in a way that promotes fairness in supervision, reduces regulatory duplication, eliminates unnecessary burden consistent with safety and soundness, and creates efficiencies for both national banks and savings associations, as well as the OCC. The final rule reflects a balance of these considerations.

In addition, this commenter stated that the OCC should have conducted industry outreach in advance of proposing the integration of national bank and Federal savings association licensing rules and should create a plan for outreach and the education of institutions on the proposed changes going forward. We note that we do intend to engage in efforts to educate the industry on the final rule, including discussing these changes in meetings with bankers, trade groups, and other interested parties, as appropriate, and providing summaries of the changes on the OCC's Internet Web page,

www.occ.gov

. In addition, we note that OCC staff is available to provide assistance to institutions planning a filing under the revised rules, as needed. Furthermore, the Comptroller's Licensing Manual provides applicants with more detailed explanations of the requirements and procedures for licensing filings with the OCC. The OCC is in the process of revising the Comptroller's Licensing Manual to reflect the changes made by this final rule. We will post the individual booklets of the Manual to the OCC Web site as they are finalized.

Another trade association commenter requested that the OCC provide tiered regulation that would provide different treatment for large banks and community banks. The OCC is committed to finding ways to reduce burden on community banks without negatively affecting the safety and soundness of those institutions, including applying less burdensome regulatory requirements where permissible and appropriate. However, we note that tiered regulation based on asset-size is not always appropriate in the licensing context because many of the application requirements are mandated by statutes that do not authorize the OCC to differentiate among institutions based on size or status as a community bank.

Rules of General Applicability (Part 5, Subpart A)

Twelve CFR part 5, subpart A, and 12 CFR part 116 set forth the OCC's generally applicable rules and procedures for processing filings

related to corporate activities and transactions of national banks and Federal savings associations. Both sets of regulations include filing requirements and explain where and how to file. We believe that it is more efficient to have a single filing process for national banks and Federal savings associations, where possible. As proposed, this final rule amends subpart A to apply to both national banks and Federal savings associations, to make additional substantive and technical changes to subpart A, and to remove part 116 in its entirety.

Current rules use slightly different terminology for national banks and Federal savings associations. Under 12 CFR 5.3(i), a “filing” is an application or notice submitted under part 5. Twelve CFR 116.1(a) uses the word “application” to mean an application, notice, or filing related to a Federal savings association. In this preamble, when it is not necessary to distinguish among the three, we use the word “filing” to refer to an application, notice, or other filing.

Section 5.2 Rules of General Applicability.

Current rules differ with respect to the scope and applicability of the generally applicable licensing procedures for national banks and Federal savings associations. The national bank rule at 12 CFR 5.2(a) states that the subpart A procedures

apply to all part 5 filings, unless otherwise stated.

Section 5.2(b) states that the OCC may adopt materially different procedures if it provides notice to affected parties. In contrast, the Federal savings association rule at § 116.1 states that the part 116 prefiling and filing procedures and the rules for OCC review apply to all required filings related to Federal savings associations, but that the publication requirements and the comment and meeting procedures apply only when an OCC regulation specifically incorporates these procedures or the OCC otherwise requires. Section 116.1(b) also specifies that part 116 does not apply to filings related to transactions under sections 13(c) or (k) of the Federal Deposit Insurance Act (FDI Act);

certain final agency action requests; certain requests related to litigation, enforcement proceedings, or supervisory directives or agreements; or applications filed under an OCC regulation that prescribes other application processing procedures and time frames.

Certain substantive activity or transaction rules in part 5 specify that one or more of the procedures in subpart A do not apply. In some cases, the rule specifies other procedures.

12 U.S.C. 1823(c) and (k).

We proposed to apply all subpart A procedures to all part 5 OCC filings, unless the substantive rule specifically exempts the filing or the OCC states otherwise. We received no comments on this provision and adopt the procedures as proposed. This change creates more parity for national banks and Federal savings associations when filing an application for activities and transactions addressed in part 5.

Section 5.2(c) also states that the Comptroller's Licensing Manual provides additional filing information and is available on-line and, for a fee, in print. We proposed to revise this provision to state only that the Manual is available on-line. This proposed revision reflected the OCC's decision to stop printing the Manual in hard copy, to reduce paper consumption and to ensure that the public receives only the most up-to-date information. The OCC also is in the process of updating the Manual, as well as filing forms, to contain information on both national bank and Federal savings association filings. As indicated earlier in this preamble discussion, we are updating our electronic filing system so that a single system will receive filings from both national banks and Federal savings associations.

Additionally, § 5.2(d) states that the OCC may permit electronic filing for any class of filings. In order to reflect the agency's move toward the more efficient and less costly electronic filings, we proposed to revise this provision to state that the OCC encourages all filings to be made electronically. We received one comment on the § 5.2 filing procedures, which requested that the OCC make electronic submission available for all forms and reporting requirements. Currently, certain OCC licensing forms can be filled and submitted electronically,

e.g.,

branch establishment. Furthermore, the modifications the OCC is currently making to its electronic filing system, as discussed above, will permit national banks and Federal savings associations to submit all filings electronically. No changes are needed to our proposed rule to incorporate this comment, and we therefore adopt § 5.2(d) as proposed.

Section 5.3 Definitions.

Section 5.3 contains definitions of terms used throughout part 5. We proposed to amend many of these definitions so that they would apply to both national bank and Federal savings association filings in part 5. For example, we proposed to amend the definition of “capital and surplus” to include reference to Federal savings associations.

We note that the OCC issued a final rule on October 11, 2013 that, among other things, integrates the OCC's national bank and Federal savings association capital rules.

See

78 FR 62018. The OCC issued an interim final rule on Feb. 28, 2014, that amends the OCC's rules, including part 5, to reflect this integration. 79 FR 11300.

The OCC also proposed to amend the definition of “eligible bank” in § 5.3(g) to add the term “eligible savings associations.” Currently, an “eligible bank” is a national bank that (1) is well capitalized under the OCC's Prompt Corrective Action (PCA) regulations, (2) has a composite rating of 1 or 2 under the Uniform Financial Institutions Rating System (CAMELS), (3) has an “Outstanding” or “Satisfactory” Community Reinvestment Act (CRA) rating, and (4) is not subject to a cease and desist order, consent order, formal written agreement, or PCA directive, or, if it is, the OCC has informed the bank that it may nonetheless be treated as an “eligible bank.” Under certain rules in part 5, an eligible bank may receive expedited review of a filing in the manner set out in the rule. Section 5.13(a)(2) sets out additional information about the expedited review process.

Part 116 also has an expedited review process for certain filings. Specifically, § 116.5 provides that a Federal savings association filing will receive expedited treatment unless: (1) It has a composite or compliance rating below 2 or a CRA rating of “Needs to Improve” or “Substantial Noncompliance,” (2) it fails any part 3 capital requirement, as applicable, and has been notified that it is in troubled condition,

(3) it does not have a composite, compliance, or CRA rating, or (4) the applicable regulation does not specifically state that expedited treatment is available.

“Troubled condition” for this purpose is currently defined at 12 CFR 163.555.

We proposed to amend § 5.3(g) by defining “eligible bank or eligible savings association” (instead of “eligible bank”) and by adding an OCC compliance rating of 1 or 2 to the eligibility requirements for all institutions. As indicated in the preamble to the proposed rule, the OCC believes that a bank's compliance with consumer-related statutes and regulations should be a factor in determining whether a bank may qualify for expedited treatment. In addition, we note that, because a Federal savings association's compliance rating is included in part 116 as one of the criteria for expedited review, the addition of this rating to § 5.3(g) is a change for national banks, but not for Federal savings associations. However, as explained in greater detail below, because § 5.13(a)(2)(i) permits the OCC to remove a filing from expedited review if it raises certain issues, including compliance concerns,

this is not a significant change for national banks. We are making one technical clarification to this provision, however. We are replacing the reference to OCC compliance rating with consumer compliance rating under the Uniform Interagency Consumer Compliance Rating System, which is the more accurate name for this rating.

In addition, § 5.2(b) provides the OCC with the authority to make exceptions for particular filings, where appropriate.

Also, the proposal clarified that the CRA rating component of “eligible bank or eligible savings association” applies only if the CRA is applicable to the institution. We proposed this change because some limited purpose banks, such as trust banks, are not subject to the CRA.

We received one comment on proposed § 5.3(g). This commenter stated that adding a compliance rating as part of the eligibility requirement is redundant because it is already included in the CAMELS composite rating. However, while compliance is a factor in the management component of the CAMELS rating, the compliance rating referred to by the commenter, and in our proposed rule, is a separate assessment from the CAMELS rating,

with different objectives and assessment factors. This commenter also stated that adding a compliance rating component to the expedited review process would create no greater certainty for national banks regarding eligibility for expedited review because the OCC would still have the discretion to remove filings from expedited review. The OCC disagrees. As indicated above, the OCC may remove a filing from expedited review if it raises compliance concerns. Because banks would know prior to applying for expedited processing whether or not their consumer compliance rating would prevent them from qualifying for such treatment, we believe that this change would provide more certainty regarding a bank's eligibility for expedited review before it begins that process.

For these reasons, the OCC is adopting the amendment to § 5.3(g) as proposed, with the technical clarification to the name of the compliance rating, discussed above.

We note that, with respect to Federal savings associations, there may be changes for some filings because the criteria in §§ 5.3 and 116.5 are not identical. Under the current rules, the two standards are similar in that they both require a composite CAMELS rating of 1 or 2 and a CRA rating of outstanding or satisfactory. In addition, if an institution has not received a rating, it is not eligible for expedited treatment under either set of current rules and would remain ineligible under the final rule. However, under the current savings association rule both well and adequately capitalized institutions are eligible for expedited treatment. Under the final rule, only savings associations that are well capitalized qualify for expedited review. We proposed to apply the well capitalized requirement to savings associations because, in the OCC's experience, national banks and Federal savings associations that are less than well capitalized are more likely than other institutions to present supervisory concerns and, therefore, expedited review is not necessarily appropriate. As a result, some savings associations that qualify for expedited treatment under the current rule may no longer qualify for such treatment under the final rule.

A second difference involves the supervisory condition of the savings association. Under the current savings association rule, the OCC must not have notified the institution that it is in a troubled condition while, under the new rule, an eligible savings association must not be subject to certain orders, agreements or directives. Although these standards are slightly different, we expect the outcomes generally will be similar and we will monitor for significant disparities.

The OCC also proposed to amend the definition of “eligible depository institution” to address the fact that either a national bank or a Federal savings association may enter into a transaction with an eligible depository institution. We received no comments on this provision and adopt it as proposed.

We also proposed to change the § 5.3 definition of “notice.” Section 5.3(j) defines a notice as a submission informing the OCC that a national bank intends to engage in or has commenced certain corporate activities or transactions. Under § 5.3, an “application” is a submission requesting prior OCC approval to engage in various corporate activities and transactions. The two definitions suggest that a “notice” does not require OCC approval. However, the rules use the term “notice” in several different ways. In some rules, a “notice” is the same as an application in that the filer must obtain prior OCC approval before engaging in the activity or transaction. In other rules, a “notice” is similar to an application in that, while the OCC does not “approve” the filing, the OCC may disapprove it. In still other rules, the notice only informs the OCC that the filer intends to engage in or has engaged in a transaction. The OCC may review the notice, but there is no requirement of prior OCC approval. Some of the latter notices can be filed after-the-fact. We proposed to add language to § 5.3(j) stating that the specific meaning of

notice

depends on the context of the rule in which it is used and may require the filer to obtain prior OCC approval before engaging in the activity or transaction, may provide the OCC with authority to disapprove the notice, or may be informational requiring no official OCC action. We also proposed to add Federal savings associations to § 5.3(j). We received no comments on this provision and adopt it as proposed.

The OCC also proposed to strike the § 5.3 definition of “appropriate district office” and, instead, to define “appropriate OCC licensing office” as described at

www.occ.gov

and “appropriate OCC supervisory office” as described in subpart A of 12 CFR part 4. We proposed this change to eliminate confusion caused by the current definition with respect to where a filing should be made. The proposal included conforming changes throughout part 5. We received no comments on these proposed changes, and we adopt the amendments as proposed.

The OCC also proposed to change the definition of “short-distance relocation,” a term that is used in current national bank branch and main office relocations regulations,

to reference both national bank main office relocations and Federal savings association home office relocations, consistent with the changes proposed in 12 CFR 5.40 and discussed elsewhere in this rulemaking.

See

12 CFR 5.30(h)(2) and 12 CFR 5.40(d)(5)(ii), respectively.

As explained in the discussion of the changes to 12 CFR 5.40, the Federal savings association home office is the equivalent of a national bank main office.

The current “short-distance relocation” definition in the banking rule also references whether a branch is located within a “central city of a MSA (metropolitan statistical area).” The Office of Management and Budget (OMB), which designates MSAs, uses the term “principal city” in describing MSAs.

The current Federal savings association regulation also uses the term “principal city.” We proposed to amend the rule for national banks to use the term “principal city,” to conform with the MSA terminology used by OMB. We received no comments on these proposed changes and adopt the amendments as proposed.

See, e.g.,

www.ffiec.gov/Geocode/help1.aspx

(referencing MSAs and principal cities).

§ 5.4 Filing required.

Section 5.4(a) directs a depository institution to file an application or notice with the OCC to engage in national bank activities and transactions described in part 5. As a result of the other changes made by this final rule to part 5, this directive also applies to Federal savings associations with respect to part 5 transactions and activities. No change is needed to the regulatory language in § 5.4 to achieve this result.

We received one comment letter on the general requirement to file a notice or application. This commenter advocated that institutions that are well capitalized and well managed generally should be exempt from prior notice or approval requirements, as in the FRB's Regulation Y (12 CFR 225.4(b)(1)) for purchases and redemptions of holding company stock for well-capitalized holding companies that meet certain requirements. The OCC disagrees with this comment. In many cases, we are required to consider approval standards under the relevant statute, and in these cases and in others, the review process serves a significant supervisory purpose. Furthermore, as described below, our licensing rules provide expedited processing for certain highly rated

institutions for many filings. We therefore decline to make this change.

Section 5.4(b) states that forms and instructions for filings are available in the Comptroller's Licensing Manual or from an OCC district office. We proposed to revise this section because the Manual is now only available on-line. As noted above, the OCC will be updating this Manual, and it will contain information on both national bank and Federal savings association filings.

Section 5.4(c) states that, at a filer's request, the OCC may accept another agency's form or filing if it contains substantially the same information required by the OCC. Section 116.25(c), which allows the OCC to waive certain filing requirements, has been used for this same purpose with respect to Federal savings association filings. Under the final rule, this option remains available for both national banks and Federal savings associations.

Section 5.4(d) directs a filer to submit a filing or other submission to the OCC's Director for District Licensing at the appropriate district office, unless directed otherwise in a prefiling communication. For Federal savings associations, § 116.40(a) directs filings to the Director for District Licensing at the appropriate OCC licensing office or the OCC licensing office at OCC headquarters. In addition, under § 116.40(b), if a filing involves significant issues of law or policy, or if the applicable regulation or form so directs, the applicant must also file copies at the OCC headquarters licensing office.

We proposed to change § 5.4(d) to direct that applicants address part 5 filings and related submissions to the appropriate OCC licensing or appropriate OCC supervisory office (unless the OCC advises otherwise through a prefiling communication) and to state that the relevant addresses are on the OCC's Internet Web page,

www.occ.gov

Furthermore, the OCC's current rules do not specify how many copies an applicant must file with the OCC. This information generally is stated on the form itself or in the Comptroller's Licensing Manual. In contrast, § 116.40(a) states that Federal savings association filers must submit to the appropriate licensing office or the OCC licensing office at headquarters the original form plus the number of copies specified on the application. If the number of copies is not specified there, § 116.40(a) directs applicants to submit the original plus two copies. We proposed to remove this requirement from the regulation for Federal savings associations and, instead, direct Federal savings association filers to consult the appropriate form and the Comptroller's Licensing Manual for information on the number of required copies.

Section 5.4(e) permits an applicant to incorporate by reference information contained in another OCC application or filing, provided that the material (1) is attached to the application, (2) is current, and (3) is responsive to the requested information. The filing must clearly indicate that the information is incorporated and include a cross-reference to the incorporated information. With respect to Federal savings association filings, § 116.25(c), which allows the OCC to waive certain filing requirements, is currently used to allow incorporation by reference. Moreover, the Federal savings association filing forms themselves typically provide for incorporating by reference other documents. We proposed to apply § 5.4(e) to all filings with the OCC, without any change to the regulatory language and with no material change to affected institutions or persons.

Finally, § 116.15(b)(2) encourages all applicants to contact the appropriate OCC licensing office to determine whether the applicant must attend a prefiling meeting or whether the submission of a draft business plan or other information would expedite the application review process. Section 116.20 describes the required contents of a draft business plan.

In contrast, part 5, subpart A does not include rules on prefiling meetings, although other rules in part 5 may address these meetings,

and the OCC may request such a meeting on a case-by-case basis under § 5.2(b). Subpart A also does not address the submission of business plans to the OCC.

Certain Federal savings association activity and transaction rules also address these meetings.

See, e.g.,

12 CFR 116.15(a)(1) (discussing prefiling meetings when organizing a Federal savings association).

See,

e.g.,

12 CFR 5.20(i) (discussing prefiling meetings when organizing a national bank); and 12 CFR 5.24(d)(2) (discussing prefiling meetings when converting to a national bank).

The OCC has found that prefiling meetings, as well as the submission of business plans or other information before such meetings, often result in a more efficient review process. Accordingly, we proposed to revise subpart A by adding a new § 5.4(f) that encourages application filers to contact the OCC to determine the need for a prefiling meeting, regardless of whether a prefiling meeting is specifically required by another regulation. This new provision also states that the OCC will decide on a case-by-case basis whether a meeting is necessary and that the prior submission of a draft business plan or other relevant information may expedite the process. Unlike part 116, however, the new provision does not specify the information to include in a draft business plan because that level of detail is better handled in the Comptroller's Licensing Manual.

We received no specific public comments on these proposed changes to § 5.4. However, one commenter at the Los Angeles EGRPRA outreach meeting advocated the use of prefiling meetings for both the agency and the organizers. We are adopting the amendments as proposed.

Section 5.5 Filing fees.

Section 5.5 states that an applicant shall submit filing fees in the form of a check made payable to the OCC. The rule also states that the OCC publishes a fee schedule annually and does not generally refund filing fees. Section 116.45(a)(3) addresses the payment of Federal savings association filings fees, directing applicants to submit fees to the appropriate OCC licensing office and permitting applicants to pay fees by check, money order, cashier's check, or wire transfer.

We proposed to apply § 5.5 to all fees paid to the OCC and to revise § 5.5 to state that fees may be paid by check, money order, cashier's check, or wire transfer. This statement is consistent with both the current Federal savings association rule and the OCC's ability to accept these forms of payment from all filers. The proposed section also states that additional filing fee information, including where to submit the fee, can be found in the Comptroller's Licensing Manual. Finally, as a technical amendment, we proposed to remove the word “annually” from the § 5.5 description of when the OCC publishes a fee schedule, to clarify that, as stated in 12 CFR 8.8, the OCC may publish an interim or amended filing fee schedule, in addition to its annual publication.

We received no public comments on the proposed § 5.5 amendments and adopt these amendments as proposed.

Section 5.7 Investigations.

Section 5.7 states that the OCC may examine or investigate and evaluate facts related to a filing to the extent necessary to reach an informed decision. Section 116.230 has a narrower scope and time frame, providing that the OCC may conduct an eligibility examination at any time before it deems an application complete. We proposed to apply § 5.7 to all filings received by the OCC, including those related to Federal savings associations, because the OCC believes that the more flexible approach in § 5.7 is preferable.

Section 5.7 also states that, as described in 12 CFR 8.6, the OCC has the authority to assess fees for special examinations and investigations. Section 8.6 is currently applicable to both national banks and Federal savings associations and related filings, as a result of the July 21, 2011 final rule,

discussed above. As a result, the application of § 5.7 to Federal savings association filings is a technical change only.

76 FR 43549.

We received no public comments on the proposed § 5.7 amendments, and adopt them as proposed.

Section 5.8 Public notice.

Under § 5.8(a), on the date of filing or as soon as practicable before or after filing, a national bank applicant shall publish a public notice in a general circulation newspaper in the community in which the applicant proposes to engage in business. The rules do not specify the language in which the applicant must publish the notice.

Under § 116.60, a Federal savings association applicant must publish notice no earlier than seven days before, and no later than the date of, the filing. Under § 116.80, the applicant must publish this notice in an English-language newspaper unless the OCC determines that the primary language of a significant number of adult residents of the community is not English, in which case the agency may require the applicant to publish simultaneously one or more additional notices in the appropriate language or languages.

We proposed to apply § 5.8(a) to all applicants, and we are adopting the amendments as proposed. As a result, Federal savings associations are no longer required to publish a public notice within the seven days before the filing date but may publish as soon as practicable before or after filing, unless otherwise required.

This change provides Federal savings association filers with the same flexibility that national bank filers have on when to publish a public notice while still providing the public with timely notice.

Certain activities and transactions are exempt from the § 5.8 notice requirements and subject to other notice requirements.

See, e.g.,

12 CFR 5.50(g) (notice of change in bank control).

In addition, final § 5.8(a) includes the requirement from § 116.80 to publish notices in English and, if the OCC determines it is necessary, also in other languages. This change further ensures that interested persons have meaningful access to the § 5.8(a) notice.

Section 5.8(b) now states that a public notice must include: (1) A statement that a filing is being made, (2) the date of the filing, (3) the applicant's name, (4) the subject matter of the filing, (5) a statement that the public may submit comments to the OCC and where such comments should be sent, (6) the comment period closing date, and (7) any other information that the OCC requires. Section 116.55 requires similar, but not identical, information to be included in a public notice.

The OCC proposed to revise § 5.8(b) to include Federal savings associations and to add some requirements to the notice included in § 116.55. We did not receive any comments on these proposed changes and are adopting the amendments as proposed. As a result, in addition to what § 5.8(b) currently requires, a public notice related to a national bank filing must also include: (1) The name of the institution that is the subject of the filing, (2) a statement that the public portion of the filing is available on request, and (3) the address of the applicant. The public notice also must state that the public may submit comments to the appropriate OCC licensing office and provide the address of this office. A public notice related to a Federal savings association filing, in addition to the information currently required under § 116.55, also must include a specific statement that a filing is being made and the date of the filing. The OCC believes that new § 5.8(b) will provide the public with the full range of helpful information and will treat all part 5 filings consistently, while adding little additional burden for filers. We also are adopting other proposed minor technical changes to § 5.8(b).

Section 5.8(c) currently requires a filer to confirm that the § 5.8(a) notice has been published by delivering to the OCC a statement of the date of publication, the name and address of the paper in which notice was published, and a copy of the notice. Federal savings association filers are required to do the same, although this requirement is set forth on the application itself and not included in the regulatory text. The OCC is adopting the proposal to apply § 5.8(c) to both national bank and Federal savings association filings pursuant to part 5.

Section 5.8(d) currently states that the OCC may consider more than one transaction, or a series of transactions, to be a single filing for purposes of the publication requirements of this section. When filing a single public notice for multiple transactions, the filer shall explain in the notice how the transactions are related. Although this is not specifically permitted under part 116, it has been an accepted practice for Federal savings association filings. No changes to § 5.8(d) are necessary for it to apply to a Federal savings association filing. Under this rulemaking, both national banks and Federal savings associations may continue to engage in this practice, which eliminates unnecessary publications while ensuring that the public's need for notice is met.

Section 5.8(f) allows the OCC to require or give public notice and request comment on any filing and in any manner that it determines is appropriate for a particular filing. There is no equivalent provision in part 116. The OCC is adopting the proposal to apply this provision to both national banks and Federal savings associations.

In addition, § 116.240(b) provides that, prior to the end of the applicable review period, if the OCC determines that an issue of law or change in circumstances has arisen that will substantially affect an application, it may require an applicant to publish, among other things, a new public notice. Although no specific national bank rule provides for this result, the OCC has a similar practice for national bank filings. In order to codify and clarify this practice, the OCC proposed to add a new § 5.8(g) that states that the OCC, at its discretion, may require an applicant to publish a new public notice if: (1) The applicant submits either a revised filing or new or additional information related to a filing, (2) there is a major issue of law or a change in circumstances that arises after a filing, or (3) the agency determines that a new public notice is appropriate. This provision does not represent a material change for either national bank or Federal savings association filers. The OCC did not receive any comments on this change, and we are adopting the amendment as proposed.

Section 5.9 Public availability.

Section 5.9 addresses access to the public portion of a filing and the confidential treatment that may be provided to certain information in a filing. Specifically, § 5.9(a) states that the OCC will provide a copy of the public portion of a pending filing in response to a written request made to the appropriate district office. A person may submit a written request to the OCC's Communication's Division for a copy of the public portion of a decided or closed application. In either case, the OCC may impose a fee for the copy. Section 5.9(b) explains that a public file consists of the portions of the filing, supporting data, supplementary information, and information submitted by interested persons to the extent that these items have not been afforded confidential treatment.

Section 5.9(c) addresses the confidential treatment of information included in a filing, explaining both that an applicant and an interested person submitting information may request that specific information be treated as confidential under the Freedom of Information Act (FOIA)

and how to make this request. The provision also states that if the OCC does not consider the information to be confidential, the agency may include that information in the public portion of a filing after providing notice to the submitter. In addition, it permits the OCC to determine, on its own initiative, that certain information should be treated as confidential and to withhold that information from the public file.

5 U.S.C. 552.

Section 116.35 addresses the public and confidential aspects of a Federal savings association filing. Paragraph (a) states that the OCC generally makes part 116 submissions available to the public but may keep portions confidential. Section 116.35(b) provides that an applicant may request confidential treatment of certain portions of a filing and explains how to make this request. It also states that the OCC will not treat as confidential the portion of a filing that describes how an applicant plans to meet its CRA objectives and notes that the agency will advise an applicant before it makes information designated as confidential available to the public.

We proposed to apply § 5.9 to all filings made pursuant to part 5, as revised. We received no public comments on the proposed § 5.9 amendments, and are adopting them as proposed. This revision is not intended to result in material changes for either national bank or Federal savings association filings. Although § 5.9 does not explicitly address the OCC's treatment of filing information regarding how a filer plans to meet its CRA objectives, the OCC does not treat this information as confidential.

We are also adopting other minor proposed changes to § 5.9(a) and (c), including to which OCC office a request to obtain the public portion of a decided or closed application or to withhold information from a public file should be submitted.

Section 5.10 Comments.

Section 5.10(a) provides that any person may submit a comment to the appropriate district office during the comment period. Section 5.10(b)(1) provides that, unless otherwise stated, the comment period runs for 30 days after publication of the § 5.8(a) public notice. Under § 5.10(b)(2), the OCC may extend the comment period if an applicant either fails to file all required publicly available information in a timely manner or makes a request for confidential treatment that is not granted by the OCC and that delays the public availability of information. The comment period also may be extended to develop factual information needed to consider the application or if the OCC determines that other extenuating circumstances exist. In addition, the rule provides that the OCC may give an applicant an opportunity to respond to comments received during the comment period.

The Federal savings association rules are much more detailed, particularly with respect to application comments. Section 116.110 provides that any person may comment on a filing and § 116.120(a) states that a comment should include all relevant facts supporting the commenter's position. It further provides that a comment should address at least one reason why the OCC may deny the application under relevant law, recite facts and data supporting these reasons, and discuss how the approval could harm the commenter or any community. Under § 116.120(b), any request for a meeting must be included with the comment. Section 116.130 states that a commenter must file with the appropriate OCC licensing office and simultaneously must provide a copy of any written comment to the applicant. Under § 116.140, a commenter must file a comment within 30 days after publication of the initial public notice and further states that the OCC may consider later filed comments if the comment will assist in the disposition of the application.

The OCC has found that the less detailed and prescriptive approach in the current part 5 rules works well for both filers and the public and proposed to apply § 5.10 to all filings received by the OCC, with one clarification. We received no public comments on the proposed § 5.10 amendments and are adopting them as proposed. Therefore, the final rule will result in two changes with respect to Federal savings association filings. First, the amended rule does not specify what information to include in a comment. Second, a commenter on a Federal savings association filing will not be required to provide a copy of the comment to the Federal savings association, although the commenter may still do so if preferred. Instead, the Federal savings association will obtain a copy of the public portion of any comment from the OCC. The rule clarifies that comments relating to either a national bank or a Federal savings association should be submitted to the appropriate OCC licensing office. This is consistent with the current Federal savings association rule.

The OCC also is adopting other proposed changes to § 5.10 that affect both national banks and Federal savings associations. First, as revised, § 5.10(b)(1) provides that the OCC may require a new comment period of up to 30 days if a new public notice is required under proposed § 5.8(g). This change is necessary to provide interested parties with an opportunity to comment when a new notice is published, which, as explained in the discussion of proposed § 5.8(g), may be required in certain circumstances. Finally, the OCC is adopting a minor change to § 5.10(b)(2) to clarify that the OCC can extend any comment period, either an original or a new comment period. We did not receive any comments on these provisions.

Section 5.11 Hearings and other meetings.

Pursuant to § 5.11(a), any person can request a hearing on a filing by submitting to the appropriate district office a description of the issues or facts to be presented and explaining why a written submission is not adequate. The requestor must simultaneously provide the request to the applicant. As noted above, under § 116.120(b), the person must include a request for a hearing (referred to as a meeting in this section) in the comment and explain why written submissions are insufficient. Also under § 116.130, the person must file the comment, including the meeting request with the appropriate OCC licensing office, with a copy to the applicant.

We proposed to apply § 5.11(a) to all OCC hearing requests with respect to both national banks and Federal savings associations. As with the other proposed changes to § 5.11, the OCC did not receive any comments related to § 5.11(a) and we are adopting it as proposed, with one technical change. As a result, pursuant to the new § 5.11(a), a person seeking a hearing on a filing pertaining to a Federal savings association will no longer be required to request a hearing as part of a comment submission, and a hearing request would be submitted to the appropriate OCC office. This revision provides added flexibility to those requesting hearings related to Federal savings association filings.

Section 5.11(b) states that the OCC may grant or deny a hearing request, limit the issues to those it deems relevant or material, and order a hearing in the public's interest. Under § 5.11(c), if the OCC denies a hearing request, the agency will notify the requestor of the

reason for the denial. Sections 116.170(a) and (b) are substantively the same as § 5.11(b) and (c). The OCC is adopting the proposal to apply § 5.11(b) and (c) to all hearings with no substantive change for affected parties.

Section 5.11(d) describes the OCC's pre-hearing procedures. Specifically, under § 5.11(d)(1), if the OCC decides to hold a hearing, it sends a Notice of Hearing to the applicant, the person requesting the hearing, and anyone else who requests a copy. The Notice states the subject and date of the filing, the time and place of the hearing, and the issues to be addressed at the hearing. Section 5.11(d)(2) states that the OCC appoints a presiding officer to conduct a hearing.

There are no equivalent provisions in the Federal savings association regulations. Instead, § 116.170(a) states that the OCC may either grant a meeting request or hold one on its own initiative, and it may limit the issues considered at a meeting to those it deems relevant or material. The OCC is adopting the proposal to apply § 5.11(d)(1) to all part 5 OCC hearings so that all interested parties are notified of an upcoming hearing when it is scheduled. As proposed, the rule would have amended § 5.11(d)(1) to state that the OCC may limit the issues considered at a hearing to those it determines are relevant or material. We are removing this statement in § 5.11(d)(1) in the final rule because it is duplicative of the language in § 5.11(b), and therefore unnecessary.

Section 5.11(e) states that a person who wishes to appear at a hearing shall notify the appropriate district office within 10 days after the OCC issues a Notice of Hearing. It also requires, at least five days before the hearing, that each participant submit the names of witnesses and one copy of each exhibit to be presented, to the OCC, the applicant, and any other person the OCC requires. There are no equivalent rules for Federal savings associations. The OCC is adopting the proposal to apply § 5.11(e) to all persons who wish to appear at an OCC hearing. Section 5.11(e) allows the OCC and other persons to prepare for a hearing and results in a more efficient and productive hearing.

Section 5.11(f) states that the OCC arranges for a hearing transcript and states that the person requesting a hearing generally bears the cost of one copy of the transcript. There is no equivalent part 116 provision. The OCC is adopting the proposal to apply this provision to all OCC hearings and also to replace the “generally bears” phrase with “may be required to bear.” This change reflects the fact that the OCC generally has not passed this cost onto a person who requests a hearing but may find it appropriate to do so in certain cases. Although this is a technical change with respect to national bank filers, a person requesting a hearing on a filing pertaining to a Federal savings association should be aware that, under the amended rule, a hearing transcript will be prepared and that the person may be required to pay its cost.

Section 5.11(g) explains how a part 5 hearing is conducted, providing generally that the applicant and participants may make opening statements and present witnesses, material, and data. It also requires a copy of any documentary material to be provided to the OCC, the applicant, and each participant. In contrast, the § 116.180 procedures for Federal savings association hearings provide that the OCC may conduct a meeting in any format, including telephone conferences, face-to-face meetings, or formal meetings. In addition, both §§ 5.11(g) and 116.180 provide that the Administrative Procedure Act, the Federal Rules of Evidence, the Federal Rules of Civil Procedure, and the OCC's relevant rules of practice and procedure (12 CFR part 19 and part 109, respectively) do not apply to these hearings. The OCC is adopting the proposal to apply § 5.11(g) to all subpart A hearings.

Under § 5.11(h), at an applicant's or participant's request, the OCC may keep the hearing record open for up to 14 days following its receipt of the hearing transcript. The agency resumes processing the filing after the record closes. Section 116.190 states that if the OCC conducts a meeting, it may suspend the applicable filing time frames. If suspended, the time period will resume when the OCC determines that the record has been sufficiently developed to support a determination on the issue(s) considered at the meeting.

The proposal would apply § 5.11(h) to all filings on which a hearing is held. The OCC is adopting this provision in the final rule unchanged, and as a result, all applicants, commenters, and other interested persons should be aware that the hearing record may be kept open for up to 14 days following receipt of the transcript, after which the OCC will resume processing the filing. The OCC believes that the public and affected parties benefit from knowing how long the record will remain open following a hearing.

Finally, § 5.11(i) addresses meetings other than hearings that the OCC may hold in connection with an application. Section 5.11(i)(1) states that the OCC may hold a public meeting either in response to a written request received during the comment period or on its own initiative. These public meetings are arranged and overseen by a presiding officer. Alternatively, under § 5.11(i)(2), the OCC may arrange a private meeting with an applicant or other interested parties to clarify, narrow, and resolve the issues. As noted above, § 116.180 states that the OCC may conduct meetings related to Federal savings association filings in any format.

As proposed, the OCC is adding paragraph (i)(3) to § 5.11, stating that the OCC may limit the issues considered at a meeting to those it determines to be relevant or material. This provision is substantively the same as the provision added to § 5.11(d) (regarding hearings) and permits the agency to ensure that meetings are meaningful and efficient. The OCC also is adopting minor, clarifying changes to § 5.11(i).

The final rule adds a new paragraph § 5.11(i)(4) that states that the OCC may conduct a meeting in any format that it determines is appropriate, including a telephone conference, a face-to-face meeting, or a more formal meeting. This new provision, which mirrors § 116.180(a), does not change what is permissible for the OCC, but rather highlights the options available to the agency. The proposed rule included this provision in § 5.11(g)(4). However, as the subject matter of paragraph (g) is hearings, this provision more appropriately belongs in paragraph (i), which contains the rules for meetings.

Section 116.185 states that the OCC will not approve or deny an application at a meeting. Although no similar language is included in either current or revised § 5.11, it is the OCC's practice not to decide on applications at hearings or other meetings. While hearings and meetings provide an opportunity for interested persons to share information with the OCC, the OCC considers information obtained at a hearing together with other materials and information pertaining to the application before rendering a decision. Decisions on filings are discussed in greater detail below.

In addition, § 116.190 provides that the OCC may suspend the application processing time frames if it decides to conduct a meeting. Although the part 5, subpart A rules do not state this directly, § 5.10(b)(2) allows the OCC to extend a comment period when necessary, § 5.11(h) allows the OCC to keep a hearing record open for 14 days after a hearing and resume processing the filing only when the record closes,

and revised § 5.13(a)(2) allows the OCC to extend the expedited review period in certain circumstances or remove a filing from expedited review when necessary. These provisions provide the OCC with the tools it needs to adjust the processing time frames when appropriate, while balancing the need for interested persons to have a predictable set of procedures on which to rely.

Section 5.12 Computation of time.

The OCC computes the relevant time periods related to a national bank filing by including the day of the act or event (

e.g.,

the date an application is received by the OCC) and the last day of a time period even if it is a Saturday, Sunday, or legal holiday. Under § 116.10, for a Federal savings association filing, the OCC does not include the day of the act or the event that commences the time period. When the last day is a Saturday, Sunday or Federal holiday, the time period runs until the end of the next day that is not a Saturday, Sunday or Federal holiday.

A single set of time computation rules for OCC filings would promote efficiency. Accordingly, we proposed to change § 5.12 to mirror the current Federal savings association rule. We received one comment in support of this change, and we are adopting the amendment as proposed. We also note that revised § 5.12 replaces “legal holiday” with “Federal holiday,” consistent with the current Federal savings association rule, to eliminate confusion when a legal state holiday is not also a Federal holiday.

Section 5.13 Decisions.

Under § 5.13(a), the OCC may approve or deny a national bank filing based on the OCC's review and consideration of the record, including the activities, resources, or condition of a filer's affiliate to the extent relevant. Under § 5.13(a)(1), the OCC may impose conditions on an approval, including to address significant supervisory, CRA (if applicable), or compliance concerns.

Section 5.13(a)(2) explains the OCC expedited review process for filings concerning “eligible” banks, as defined in § 5.3. Specifically, these filings are deemed approved a certain number of days after the filing date or the close of the public comment period (or extension of the comment period under § 5.10), unless, prior to this date, the OCC notifies the filer otherwise. The number of days after which a particular filing is deemed approved varies depending on the activity or transaction at issue and is set out in the substantive part 5 rule for that particular activity or transaction.

For example, § 5.20(j) provides that certain applications to establish a national bank are deemed preliminarily approved as of the 15th day after the close of the public comment period or the 45th day after the filing is received by the OCC, whichever is later, unless the OCC takes certain action to remove the filing from expedited review.

Under § 5.13(a)(2)(i), the OCC may extend the expedited review period for filings subject to the CRA up to 10 days if the OCC receives comments containing certain assertions about the bank's CRA performance. Section 5.13(a)(2)(ii) states that the OCC will remove a filing from expedited review if a filing or a comment raises a significant supervisory, CRA (if applicable), compliance, legal, or policy concern or issue. The OCC will provide a written explanation if this removal occurs. Section 5.13(a)(2)(iii) also states that not all adverse comments cause the OCC to extend the expedited review period or remove a filing from expedited review.

Finally, § 5.13(a)(2)(iv) provides that if approval of a filing is contingent on the approval of another filing, or if multiple requests for approval are combined in a single application, none of the filings is deemed approved unless all of the applications are subject to expedited review procedures and the longest time period expires without the OCC issuing a decision or notifying the bank that the filings are not eligible for expedited review.

Filings that are not eligible for, or do not receive, expedited review are considered under the standard review process. The process and timeframes associated with the standard review process vary depending on the nature and circumstances of a filing and are set forth in the applicable rule.

Under § 5.13(b), the OCC may deny a filing if a significant supervisory, CRA (if applicable), compliance, legal, or policy concern exists or if an applicant fails to provide the OCC with information that it requests. Pursuant to § 5.13(c), a filing must contain the information required in the applicable part 5 rule, as well as any information the OCC may require. Section 5.13(c) further provides that the OCC may deem a filing abandoned if information that is required or requested is not provided within a specified time period and may return a filing it finds to be materially deficient.

Section 5.13(d) provides that the OCC will notify a filer and other interested party (or parties) of the final disposition of a filing, including a notification confirming expedited review. If a filing is denied, the OCC will explain the reasons for the denial. Under § 5.13(e), the OCC will make a decision public if it represents new or changed policy or issues of general interest. In rendering decisions, the OCC also may elect not to disclose information that it deems to be private or confidential.

Section 5.13(f) provides that a filer can appeal a decision by writing to the Deputy Comptroller for Licensing or the OCC Ombudsman (or, in some cases, to the Chief Counsel). Section § 5.13(g) provides that when the OCC approves or conditionally approves a filing, the agency generally gives the filer a specified period of time in which to commence the activity and generally does not grant extensions.

Finally, § 5.13(h) states that the OCC can nullify a filing decision if, for example, it discovers a misrepresentation or omission in a filing or supporting material after it renders a filing decision. A person responsible for a material misrepresentation or omission may be subject to various sanctions, including criminal penalties. The OCC also may nullify a filing decision that is contrary to law, regulation, or OCC policy or that was granted due to clerical or administrative error or a material mistake of law or fact.

Pursuant to part 116, a Federal savings association filing may receive either expedited treatment or standard treatment. If a filer is eligible for expedited treatment, as determined under § 116.5, it may file its application in the form of a notice. Pursuant to § 116.200, 30 days after filing a notice, the filer may engage in the proposed activity or transaction unless the OCC: (1) Requests additional information;

(2) determines that standard treatment is appropriate; (3) suspends the applicable time frame under § 116.190; or (4) disapproves the notice.

Section 116.200(a) explains the sequence of events and timing when the OCC requests additional information about a notice.

Pursuant to § 116.25, an applicant files a standard application if it is not eligible for expedited treatment. Under § 116.210, within 30 calendar days after receiving a standard application, the OCC will: (1) Notify the applicant that the application is complete and review will commence; (2) request more information; or (3) determine that the application is materially deficient, in which case the OCC will not process the filing. If the OCC takes no action, an application is deemed complete and the review period begins. Under § 116.270, this review period is generally 60 calendar days after an application is complete but may be extended. For example, under § 116.270(c), the OCC may extend the review period for up to

30 days for any reason or for as long as needed if the application presents a significant issue of law or policy requiring additional time to resolve. In either situation, the OCC must provide a written notification of any extension.

Section 116.280 explains that the OCC will approve or deny an application before the end of the applicable review period and will notify applicants of the decision. Under § 116.280(b), the application is approved if the OCC fails to notify an applicant.

Section 116.220 provides a detailed explanation of how the OCC will process an application if the OCC requests more information to complete a filing, including the time frames for taking certain actions. Section 116.240(a) explains that even if an application is deemed complete under § 116.210, the OCC may still require the filer to provide additional information to resolve or clarify an issue presented by the application. If the OCC determines that a major issue or law or change of circumstances has arisen, it may notify the filer that the application is now incomplete and require a new public notice to be filed under § 116.250. Under § 116.290, an application that is not approved or denied within two calendar years of filing is deemed withdrawn, subject to certain exceptions.

As is clear, the OCC has two different, albeit similar, sets of application processing procedures. In order to gain the efficiencies inherent in administering a single set of procedures and to create parity for OCC-regulated institutions, we proposed to apply § 5.13 to all OCC filings and to amend § 5.13, as described below.

The OCC did not receive written comments on any of the proposed changes to § 5.13. Commenters at both the Los Angeles and Dallas EGRPRA outreach meetings requested that the OCC make decisions on new charters and other applications at the district level instead of in Washington, DC. We agree with the importance of the relevant district office in the decision-making process, and our current process involves district level input in application decisions as well as our licensing office in Washington. Most filings are processed by the relevant district office and typically involve examination staff familiar with the applicant. The Comptroller's Licensing Manual also encourages applicants to contact the director for district licensing at the appropriate OCC district office to discuss the proposal.

However, it is also important for the OCC's Washington office to be involved in the applications process in order to address significant or novel issues, to provide consistency in OCC decision-making, and to utilize staff expertise available in OCC headquarters. For these reasons, we decline to make any changes to our rule to reflect this comment.

See, e.g.,

the Charters Booklet of the Comptroller's Licensing Manual, p. 23.

We therefore are adopting § 5.13 as proposed.

As a result, Federal savings association filers will need to determine whether a filing is eligible for expedited review under subpart A based on the § 5.3(g) definition of “eligible bank or eligible savings association.” Because, as explained above, the criteria in §§ 5.3 and 116.5 are substantively similar, the OCC believes the status of most savings associations as eligible or not eligible will not be affected by the requirement to use the definition in § 5.3, nor does the OCC anticipate that there will be a significant difference in the filings that are eligible for expedited review under the current rules and the rules as revised. Furthermore, unlike § 116.200, part 5, subpart A, does not state the applicable expedited review time frames. These time frames are unique to the type of activity or transaction and are set out in the relevant part 5 section detailing that activity or transaction. If a filing is not eligible for expedited review, the filer must follow the standard review procedures set out in the rules applicable to the particular activity or transaction at issue.

In addition, the OCC is adopting the following proposed changes to § 5.13, which apply to filings related to both national banks and Federal savings associations. Specifically, the final rule adds a statement to the § 5.13(a) introductory language providing that when reviewing a filing, the OCC may consider information available from any source, including any comments submitted by interested parties or views expressed by interested parties at meetings with the OCC.

With respect to § 5.13(a)(2) concerning expedited review, the final rule removes the clause that states that the OCC grants eligible banks expedited review within a specified time, “including any extension of the comment period granted pursuant to § 5.10.” This change reflects the fact that when the OCC grants an extension of the comment period under § 5.10 a filing is no longer considered under the expedited review procedures. The circumstances that lead to an extended comment period are generally not compatible with expedited review.

In addition, as discussed above, § 5.13(a)(2)(i) provides that the OCC may extend the expedited review period for a filing subject to the CRA for up to 10 days if a comment makes certain assertions about the CRA and § 5.13(a)(2)(ii) provides that the OCC will remove a filing from expedited review if the filing presents significant supervisory, CRA (if applicable), compliance, legal or policy concerns or issues. This section also explains what constitutes a significant CRA concern in this context.

The final rule combines § 5.13(a)(2)(i) and (ii) into new § 5.13(a)(2)(i). These changes simplify § 5.13(a)(2) and are not intended to have a substantive effect on expedited review procedures. Comments and concerns about the CRA will continue to be given the same weight. The OCC also is adopting other proposed minor, technical, or conforming changes to § 5.13.

Organizing a National Bank or Federal Savings Association; Federal Savings Association Charters and Bylaws (§ 5.20, New § 5.21, New § 5.22)

Overview.

Twelve CFR 5.20 sets forth the requirements and procedures involved in organizing a

de novo

national bank. Corresponding rules applicable to organizing Federal savings associations are set forth in various CFR parts: Part 143 sets forth the requirements and procedures for organizing a Federal mutual savings association; part 144 covers the charter and bylaws of Federal mutual savings associations; and part 152 sets forth the requirements and procedures for organizing a Federal stock savings association and also contains the requirements for the charter and bylaws of Federal stock savings associations, as well as related matters, including shareholders, board of directors, and officers. In addition, § 163.1 imposes certain rules concerning a Federal savings association's charter and bylaws.

Many of the procedures organizers must follow to charter a national bank or Federal savings association are substantively similar. The OCC believes that many of these rules should be coordinated and harmonized to promote consistency and equal treatment between the two types of institutions and to remove unnecessary regulatory burden where possible. To accomplish these goals, the proposed rule amended § 5.20 to include Federal savings associations, added to § 5.20 some provisions that address the organizing process currently in parts 143 and 152, and removed other provisions in part 143, 152, and 163 that address the organizing process (§§ 143.2 through 143.7, 152.1 and 152.2, and 163.1).

The regulations for national banks and for Federal savings associations treat the provisions related to “organizing documents” (organization certificate and articles of association for national banks, charter for Federal savings associations, and bylaws) differently.

For national banks, there are several applicable statutes, but few regulations.

For Federal savings associations, there are no statutory requirements, but §§ 144.1 and 152.3 contain requirements for charters of Federal mutual savings associations and Federal stock savings associations, respectively, and §§ 144.2 and 152.4 contain requirements for the bylaws of Federal mutual savings associations and Federal stock savings associations, respectively. Also, the charter provisions for Federal mutual savings associations are substantially different from national banks and Federal stock savings associations. These differences stem from the unique characteristics of Federal mutual charters, such as the inability of members to communicate directly with each other (because membership is based on the depository relationship) under § 144.8, the use of “running proxies,”

and the potential that certain charter or bylaw provisions could later affect a mutual-to-stock conversion by the association. These characteristics require greater controls over changes to the Federal mutual charter to prevent the inappropriate transfer of the association's equity and to prevent provisions that may impede a mutual-to-stock conversion. In order to preserve the enforceability of the Federal savings association charter and bylaw requirements and to ensure the necessary controls unique to the Federal mutual savings association charter, we proposed to continue to include separate provisions concerning a Federal savings association's charter and bylaws.

It may be helpful to clarify terminology. For national banks, the term “charter” is used to refer to the certificate of authority to commence banking issued by the OCC under 12 U.S.C. 27. A national bank's “articles of association” is similar to a business corporation's articles of incorporation setting out the general features of the business's organizational structure and purpose. A Federal savings association's “charter” issued by the OCC under 12 U.S.C. 1464(a)(2) is the agency's authorization to engage in business as a savings association, but it also contains provisions comparable to a national bank's articles of association.

Additional guidance for national banks is provided by sample articles and bylaws in the Comptroller's Licensing Manual (

www.occ.gov/publications/publications-by-type/licensing-manuals/index-licensing-manuals.html#sd

) and by review of the proposed documents during the application process.

A “running proxy” generally is a proxy executed by a member of a mutual savings association, which authorizes directors of the association to cast the votes the member otherwise would be authorized to cast, and which, rather than pertaining to a specific member meeting, is effective for an indefinite period of time.

Specifically, we proposed to amend 12 CFR part 5, subpart B, by: (1) Revising § 5.20 to apply to both national banks and Federal savings associations and to make certain other changes as described below; (2) adding a new § 5.21 (based on part 144) to specify the language and requirements for the Federal mutual savings association charter, bylaws, and charter amendments and to require a Federal mutual savings association to make its charter and bylaws available to accountholders; and (3) adding a new § 5.22 (based on §§ 152.3 through 152.11) to specify the language and requirements for the Federal stock savings association charter, bylaws, charter amendments, and related matters. In addition, we proposed to amend parts 143, 144, 152, and 163 by rescinding various provisions in those parts concerning charters and bylaws.

Applying Existing National Bank Requirements to Federal Savings Associations.

The majority of the proposed changes to § 5.20 apply existing requirements for organizing a national bank to organizing a Federal savings association by inserting “Federal savings association” where appropriate. Most of these amendments result in little or no change to existing practices concerning an application to charter a Federal savings association. However, potential organizers should carefully review the following amendments that would change the current process.

First, based on statute and longstanding practice, the OCC uses a two-part approval process for

de novo

national bank charters. The OCC will issue a preliminary approval after an application is filed, if the OCC determines it meets the applicable standards. Once it has received this approval, the national bank in organization proceeds to organize, raise capital, obtain any other regulatory approvals, and become ready to commence business. Many of these steps are not specified in § 5.20 but instead are provided in the OCC's preliminary approval and in the Charters Booklet of the Comptroller's Licensing Manual. The OCC issues a “final approval” and the national bank's charter only after all these steps are concluded, including compliance with any conditions imposed in the preliminary approval. Under the current Federal savings association rule, the OCC issues only one approval before it issues the charter but this approval is subject to the institution completing various post-approval organizational steps and other requirements before it can commence business. These steps and requirements are specified in §§ 143.4, 143.5, 143.6, and 152.1(c) through 152.1(i).

The national bank and Federal savings association processes in practice may not be different, but the OCC believes that use of a formal two-part approval framework provides more certainty and reduces the risk of an institution inadvertently operating before it has completed all required steps. Applying the bank rule's two-step approval process to savings associations also enhances consistency between the chartering application process for national banks and Federal savings associations. Therefore, we proposed to make an application to charter a Federal savings association subject to the two-part approval process contained in § 5.20(i)(5) and to remove §§ 143.4, 143.5, 143.6, and 152.1(c) through 152.1(i). We did not receive any comments on this change and are adopting it as proposed.

Second, § 5.20(i)(5)(iv) provides that preliminary approval expires if the national bank has not raised the required capital within 12 months or has not commenced business within 18 months. Sections 143.5(d) and 152.1(i) provide that a Federal savings association's charter becomes void if organization is not completed within six months after approval. The OCC proposed to amend § 5.20(i)(5)(iv) to apply the same 12- and 18-month expiration periods to Federal savings associations, rather than the six-month period. We received one comment in support of this change, and we are adopting it as proposed.

Third, we proposed to add Federal savings associations and savings and loan holding companies to § 5.20(j), which allows for expedited review of an application to establish a full-service national bank filed by a bank holding company with a lead depository institution that is an eligible depository institution. The current regulations for chartering a

de novo

Federal savings association do not have a comparable expedited review process. Under this expedited review, the application is deemed preliminarily approved by the OCC as of the 15th day after the close of the public comment period or the 45th day after the filing is received by the OCC, whichever is later, unless the OCC notifies the applicant prior to that date that: (1) The filing is not eligible for expedited review, (2) the OCC is extending the review period, or (3) the OCC has determined the proposed bank

will offer banking services that are materially different than those provided by the lead depository institution of the holding company. We also proposed to limit the availability of this expedited review to applications to charter a national bank or Federal savings association where the existing lead depository institution is an eligible national bank or eligible Federal savings association. In those cases, the OCC will have knowledge and experience of the lead institution's operations and will be familiar with the holding company. In cases where a state institution is the lead depository institution, the OCC will not have that knowledge and experience, and we believe expedited review would not be appropriate. We did not receive any comments on these changes, and are adopting the amendments as proposed.

We note that we received comments at the Los Angeles EGRPRA outreach meeting requesting that the Agencies shorten their review period for

de novo

applications. In general, the OCC review period is 120 days for independent national banks and Federal savings associations and 45 to 90 days for institutions that are part of a holding company. The OCC believes that this timing is appropriate as it provides us with sufficient time to complete our analysis of the application, including the assessment of proposed management and the reasonableness of the proposed business plan. We therefore decline to make any change to this review period.

Fourth, the OCC is adopting the proposal to add Federal savings associations to § 5.20(k)(3), which addresses investments in bankers' banks and § 5.20(l), which addresses chartering special purpose institutions. These provisions reflect authority that national banks and Federal savings associations possess. We did not receive any comments on this change.

Fifth, parts 143, 144, 152, and 163 contain various filing procedural matters. As discussed above, the OCC is amending part 5, subpart A, rules of general applicability, to include filing rules and procedures for Federal savings associations for all matters covered by part 5. Thus, because Federal savings associations are included in § 5.20 and new §§ 5.21 and 5.22 are added to part 5, filings related to the organizing process and to charters and bylaws will be governed by the filing provisions in subpart A. The final rule, therefore does not include the filing procedures provisions in parts 143, 144, 152, and 163 in the amendments to § 5.20, or in new §§ 5.21 and 5.22.

Amendments That Specifically Cover Federal Savings Association Matters.

The OCC proposed to incorporate certain provisions contained in parts 143 and 152 into § 5.20. Specifically, with respect to an application to organize a Federal savings association, section 5(e) of the Home Owners' Loan Act (HOLA)

requires the OCC to consider whether: (1) The applicants are of good character and responsibility; (2) there is a need for the association in the community to be served; (3) there is a reasonable probability of usefulness and success; and (4) there will be undue injury to existing local thrift and home financing institutions. These criteria are included in §§ 143.2(g)(1) and 152.1(b)(1), and the proposed rule added them to § 5.20(e). We received one comment suggesting that the OCC should no longer consider whether there is necessity for the Federal savings association in the community to be served because this would be duplicative of other factors the OCC considers, such as probability of usefulness and success under § 152.1(b)(1)(iii). However, the OCC's consideration of whether a “necessity exists” is required by section 5(e) of the HOLA. We therefore adopt the amendments as proposed.

12 U.S.C. 1464(e).

Sections 143.2(g)(2)(i) and 152.1(b)(3)(i) provide that approval of an application to organize a Federal mutual or stock savings association, respectively, is conditioned on OCC receipt of written confirmation from the FDIC that accounts will be insured. Similar requirements appear in §§ 143.5(c) and 152.1(f) (when a charter is issued, a Federal savings association, or a Federal stock savings association, respectively, must promptly meet all requirements necessary to obtain FDIC insurance of its accounts), as well as §§ 143.5(d) and 152.1(h)(1) (organization of a Federal savings association, or a Federal stock savings association, respectively, is complete when, among other things, the OCC receives confirmation of FDIC insurance).

For these reasons, the OCC proposed in § 5.20(e)(3) to retain the requirement that all Federal savings associations be insured by the FDIC. We did not receive any comments on this proposed change and adopt the amendment as proposed.

Application of Federal Savings Association Application Requirements to National Bank Applications.

The OCC proposed to amend § 5.20 to apply certain requirements applicable to Federal savings associations to both national banks and Federal savings associations. First, § 143.1(a) prohibits a Federal savings association from adopting a title that misrepresents the nature of the institution or the services it offers. The OCC believes that incorporating such a provision in a regulation is good public policy because it protects both customers and the institution. Therefore, we proposed to amend § 5.20(e)(1) to apply this requirement to both Federal savings associations and national banks. We received one comment in support of this proposal and we adopt the amendment as proposed.

Second, § 143.3(b)(1) requires that all securities of a particular class in an initial offering must be sold at the same price. The OCC proposed to amend § 5.20(i)(5)(iii) to apply this requirement to both Federal savings associations and national banks. This requirement promotes fairness and uniformity, does not allow insiders to gain an unfair advantage over other shareholders, and discourages the formation of an institution for speculative purposes. Moreover, the FDIC also imposes this requirement in determining whether to approve an application for deposit insurance.

We did not receive any comments on this proposed change and adopt it as proposed.

See

FDIC Statement of Policy on Applications for Deposit Insurance, 63 FR 44752, 44757 (Aug. 20, 1998), and FDIC Financial Institution Letter FIL-56-2014 (Nov. 20, 2014) and related Q&As at

https://www.fdic.gov/news/news/financial/2014/fil14056a.pdf

Third, §§ 143.5(d) and 152.1(i) require that, in the event the organization of a Federal savings association is not completed, all cash collected on subscriptions shall be returned. We proposed to amend § 5.20(i)(5)(iv) to apply this requirement to both Federal savings associations and national banks. We received no comments on this proposed change and adopt it as proposed.

Elimination of Certain Federal Savings Association Approval Criteria.

The OCC proposed to rescind the following provisions of parts 143 and 152 that are redundant, unnecessary, or no longer appropriate.

First, the OCC did not propose that § 5.20 include §§ 143.2(g)(1) and 152.1(b)(1), which require the OCC to consider whether the Federal savings association will provide credit for housing in a safe and sound manner and whether the factors in § 143.3 (regarding capitalization, business and investment plans, the board of directors, and management) will be met. These approval criteria are not statutorily required. In most cases, these factors are similar to factors the OCC currently considers either under § 5.20 or as a matter of practice. Moreover, the provision of housing credit also is addressed by the lending and investment provisions of 12 U.S.C. 1464(c) and the qualified thrift lender test of 12 U.S.C. 1467a(m).

Second, as proposed, the final rule does not include the requirement in § 143.3(d) that the majority of a de novo Federal savings association's board of directors be representative of the state in which the association is located. We believe that this requirement is outdated and unnecessary given the advanced communication technology available today, and that it may unnecessarily impede the formation of new Federal savings associations. We note that one commenter to the June EGRPRA notice requested that we remove this requirement. The final rule retains the existing provision in § 5.20(g)(1), applicable to Federal savings association by this rulemaking, that the institution's initial board of directors generally is composed of many, if not all, of the organizers of the institution, and that the organizing group must include diverse community involvement.

Third, the OCC proposed to rescind §§ 143.7 and 152.17, which exempt from the requirements of part 143 and §§ 152.1 and 152.2 Federal savings associations created in connection with an association in default or in danger of default. These provisions are not necessary in light of the FDIC's authority, as part of the resolution process, to create new and bridge Federal savings associations under 12 U.S.C. 1821(m) and (n).

Fourth, we proposed to rescind § 143.3(f), which provides that the normal requirements that apply to an application to charter a Federal savings association do not apply to a supervisory transaction. This provision is not necessary because the OCC has the ability to waive such requirements under 12 CFR 5.2(b). Also, we proposed to rescind the requirements in §§ 143.5(c) and 152.1(f) for a proposed Federal savings association to promptly qualify as a member of a Federal Home Loan Bank. The HOLA no longer requires such membership.

We did not receive comments opposed to the removal of these provisions. Therefore, we adopt the amendments as proposed.

Amendments to Reflect Current OCC Policy or Practice.

The OCC proposed several amendments to update § 5.20 to reflect current OCC policy or practice. Specifically, the OCC proposed to amend § 5.20(f)(1) to update the OCC's general policy in making determinations regarding charter applications to reflect the OCC's statutory mission as amended in section 314 of the Dodd-Frank Act.

12 U.S.C. 1.

Second, § 5.20(g)(2) notes that, as a condition of a charter approval, the OCC retains the right to object to the hiring of any officer or appointment or election of any director for a two-year period from the date the institution commences business. We proposed to clarify that, in appropriate instances, the OCC may impose this condition for a longer period. This regulatory change reflects current authority and practice.

Third, § 5.20(g)(3)(ii) requires a proposed director to be able to supply or have a realistic plan to enable the institution to obtain capital when needed. The OCC proposed to clarify that this requirement applies to the proposed directors as a group, rather than each director individually.

We did not receive comments on any of these proposed changes. Therefore, we adopt the amendments as proposed.

Federal Mutual Savings Association Charter, Bylaws and Related Provisions.

As discussed above, the OCC believes it is necessary and appropriate to continue to include separate regulations setting forth the provisions concerning a Federal savings association's charter and bylaws. With respect to Federal mutual savings associations, these provisions are currently in part 144. The OCC proposed to add a new § 5.21, “Federal Mutual Savings Associations Charters and Bylaws,” which incorporates most of part 144. We did not receive comments on any of proposed new § 5.21 and adopt this section as proposed, with minor changes to § 5.21(j), discussed below.

New § 5.21(d) sets forth exceptions to the rules of general applicability. More specifically, it provides that §§ 5.8 through 5.11 do not apply to this section. These sections provide for public notice, public availability, comments and hearings on an application. The OCC believes it is not necessary to subject the charter and bylaws requirements to these provisions. This belief is consistent with current requirements for Federal mutual savings associations as well as national banks. New § 5.21(e) prescribes the language and requirements for a Federal mutual savings association charter and is substantively identical to § 144.1. New § 5.21(f) through (h) cover matters related to charter amendments and are substantively identical to § 144.2. New § 5.21(i) requires a Federal mutual savings association to make its charter, bylaws, and all amendments available to accountholders at all times in each savings association office, and to deliver to any accountholders a copy of the charter, bylaws or amendments, upon request. This provision is substantively identical to § 144.7.

See

related discussion concerning 12 CFR 163.1(b)

infra.

New § 5.21(j) specifies the language and requirements for Federal mutual savings association bylaws. This new paragraph reflects the provisions in § 144.5. To reflect advances in technology, the final rule updates the provision regarding meetings of the board of directors by permitting telephonic or electronic participation of board members. The current rule provides only for telephonic participation. We note that the final rule also adds section headings and makes corresponding paragraph numbering changes to § 5.21(j).

Section 144.5(b)(11) provides that directors may only be removed “for cause” as defined in § 163.39 of this chapter, by a vote of the holders of a majority of the shares then entitled to vote at an election of directors,” and § 144.5(b)(10) provides that “[a]ny officer may be removed by the board of directors with or without cause, but such removal, other than for cause, shall be without prejudice to the contractual rights, if any, of the person so removed.” For ease of use, the OCC is including the definition of “for cause” in new § 5.21(j)(2)(x)(B), rather than cross-referencing the definition in § 163.39. Where the term “for cause” is used elsewhere in § 5.21, and in § 5.22, for Federal stock savings associations, the regulation references the definition at § 5.21(j)(2)(x)(B).

The OCC believes that many of the bylaw provisions in § 144.5 are unnecessarily detailed or self-evident. Therefore, new § 5.21 does not include the provisions described below.

Federal mutual savings associations will not be required to amend their existing bylaws to conform to these changes.

Section 144.5(b)(1) discusses the annual meeting of members. It provides, among other things, that the meeting be held “as designated by its board of directors, at a location within the state that constitutes the principal place of business of the association, or at any other convenient place the board of directors may designate.” New § 5.21(j)(2)(i) does not include the requirement that the meeting be held in the state that constitutes the principal place of business of the association. The OCC believes that this requirement introduces unnecessary detail into the regulation and that, in certain cases, there may be locations outside the state constituting the association's principal place of business at which the annual meeting may be held that are appropriately convenient to members.

Section 144.5(b)(2) provides, among other things, that the subject matter of a special shareholder meeting must be established in the notice for such meeting. The OCC believes this provision is self-evident and unnecessarily detailed and it is not included in new § 5.21(j).

Section 144.5(b)(3) covers the requirements for providing notice of meetings to members. Among other things, it provides that notice must be provided at a member's last address appearing on the books of the association. The OCC believes this provision merely states the obvious and it is not included in new § 5.21(j)(2)(iii).

Section 144.5(b)(4) states that the purpose of determining the record date is to determine the “members entitled to notice of or to vote at any meeting of members or any adjournment thereof, or in order to make a determination of members for any other proper purpose.” The OCC believes this provision is self-evident and it is not included in new § 5.21(j)(2)(iv).

Section 144.5(b)(6) provides that procedures must be established for voting by proxy pursuant to the rules and regulations of the OCC, “including the placing of such proxies on file with the secretary of the association, for verification, prior to the convening of such meeting.” The OCC believes the inclusion language is self-evident and unnecessarily detailed and it is not included in § 5.21(j)(2)(vi).

Section 144.5(b)(9) provides that board of director meetings “shall be under the direction of a chairman, appointed annually by the board; or in the absence of the chairman, the meetings shall be under the direction of the president.” The OCC believes this provision is unnecessarily detailed and it is not included in § 5.21(j)(2)(ix).

Section 144.5(b)(10) provides, among other things, that “[a]ll officers and agents of the association, as between themselves and the association, shall have such authority and perform such duties in the management of the association as may be provided in the bylaws, or as may be determined by resolution of the board of directors not inconsistent with the bylaws. In the absence of any such provision, officers shall have such powers and duties as generally pertain to their respective offices.” The OCC believes this provision is unnecessary and self-evident and it is not included in § 5.21(j)(2)(x).

Section 144.5(b)(11) covers vacancies, resignation, and removal of directors. New § 5.21(j)(2)(xi) does not include the requirements in § 144.5(b)(11) that directors be elected by ballot and that resignation of a director be by written notice. The OCC believes that these provisions are self-evident.

Section 144.5(b)(12) covers the powers of the board of directors. It provides, among other things, that a board may, by resolution, “appoint from among its members and remove an executive committee and one or more other committees, which committee[s] shall have and may exercise all the powers of the board between the meetings or the board; but no such committee shall have the authority of the board to amend the charter or bylaws, adopt a plan of merger, consolidation, dissolution, or provide for the disposition of all or substantially all the property and assets of the association. Such committee shall not operate to relieve the board, or any member thereof, of any responsibility imposed by law.” This section further provides that a board may fix the compensation of directors, officers, and employees. The OCC believes these provisions are self-evident and unnecessarily detailed, and therefore, they are not included in § 5.21(j)(2)(xii).

Section 144.5(b)(14) provides in part that procedures for the introduction of new business at the annual meeting may require that such new business be stated in writing and filed with the secretary prior to the annual meeting at least 30 days prior to the date of the annual meeting. The OCC believes this provision is overly detailed and unnecessary. Accordingly, the OCC is not including this provision in new § 5.21(j)(2)(xiv).

Finally, § 144.5(b)(16) provides that the bylaws may address age limitations for directors or officers as long as they are consistent with applicable Federal law, rules or regulations. The OCC believes this provision is self-evident and unnecessary and therefore it is not included in new § 5.21(j)(2)(xvi).

Federal Stock Savings Association Charter, Bylaws and Related Provisions.

The provisions concerning the charter and bylaws of a Federal stock savings association, as well as related provisions, are currently in §§ 152.3 through 152.9. The OCC proposed to add a new § 5.22, “Federal Stock Savings Association Charters and Bylaws,” which incorporates most of §§ 152.3 through 152.9. We did not receive any comments on this proposed change and are adopting new § 5.22 as proposed, with one change to § 5.22(l)(1) as discussed below.

New § 5.22(d) sets forth exceptions to the rules of general applicability. More specifically, it provides that §§ 5.8 through 5.11 do not apply to this section. These sections provide for public notice, public availability, comments and hearings on an application. The OCC believes it is not necessary to subject the charter and bylaws requirements to these provisions.

New § 5.22(e) prescribes the language and requirements for a Federal stock savings association charter and is substantively identical to § 152.3. New § 5.22(f) through (i) cover matters related to charter amendments and are substantively identical to § 152.4, with the addition of one provision. Section 152.4(b)(8) provides that a Federal stock savings association may amend its charter by adding certain anti-takeover provisions following mutual to stock conversions. One such provision is a prohibition on a person acquiring more than 10 percent of any class of equity securities of the association, unless “the purchase of shares [is] by a tax-qualified employee stock benefit plan which is exempt from the approval requirements under § 174.3(c)(2)(i)(D) of the OCC's regulations.” The final rule eliminates the cross-reference and includes the appropriate language in § 5.22(g)(8). The OCC does not intend for this amendment to have any substantive effect.

New § 5.22(j) specifies the requirements for adopting and filing Federal stock savings association bylaws. This paragraph reflects the provisions in § 152.5 with two exceptions. The first sentence of § 152.5(a) provides that “[a]t its first organizational meeting, the board of directors of a Federal stock association shall adopt a set of bylaws for the administration and regulation of its affairs.” The third sentence requires the bylaws to contain sufficient provisions to govern the association in accordance with the requirements of other sections of part 152 and prohibits the bylaws from containing a provision that is inconsistent with those sections or with applicable laws, rules, regulations or the association's charter. The OCC believes that these two provisions are unnecessarily detailed and self-evident and they are not included in new § 5.22(j).

The OCC is adding a new § 5.22(k) to address shareholder meetings and related matters. This paragraph reflects the provisions in § 152.6 with two exceptions. Section 152.6(a) provides, among other things, that shareholder meetings must be held in the state in which the association has its principal place of business. With respect to shareholder voting by proxy, § 152.6(f) provides, in part, that a “proxy may designate as holder a corporation, partnership or company as defined in

part 174 of this chapter, or other person.” Section 5.22(k) does not include these provisions because the OCC believes they are unnecessary.

Federal stock savings associations will not be required to amend their existing bylaws to conform to these changes.

The OCC is adding a new § 5.22(l) to address matters involving a Federal stock savings association's board of directors. This paragraph reflects the provisions in § 152.7, with certain exceptions. Section 152.7(b) sets forth the permissible number and terms of directors to be included in an association's bylaws. It provides, among other things, that in “the case of a converting or newly chartered association where all directors shall be elected at the first election of directors, if a staggered board is chosen, the terms shall be staggered in length from one to three years.” Section 152.7(g) addresses matters concerning executive and other committees of a board of directors. It provides in pertinent part that each committee, to the extent provided in the resolution or bylaws of the association, shall have and may exercise all of the authority of the board of directors, subject to certain exceptions. The OCC believes these provisions are overly detailed and unnecessary. Accordingly, § 5.22(l)(2) and (7), respectively, do not include these provisions. In addition, this final rule does not include the provision in proposed § 5.22(l)(1), taken from § 152.7(a), that requires the savings association's board of directors to annually elect a chairman of the board from among its members and designate the chairman of the board, when present, to preside over meetings. As proposed, the final rule does not include this requirement in the new Federal mutual savings associations rule, § 5.21 because we find it to be unnecessarily detailed. We are removing this provision from § 5.22(l)(1) for the same reason and to conform our rules for stock and mutual Federal savings associations.

New § 5.22(m) addresses matters involving a Federal stock savings association's officers. This paragraph is substantively identical to § 152.8, with one exception. Section 152.8 mandates that a Federal stock savings association have certain officers. It further provides that the “board of directors also may elect or authorize the appointment of such other officers as the business of the association may require. The officers shall have such authority and perform such duties as the board of directors may from time to time authorize or determine. In the absence of action by the board of directors, the officers shall have such powers and duties as generally pertain to their respective offices.” The OCC believes that the quoted provision is self-evident and unnecessary and therefore has not included it in new § 5.22(m).

New § 5.22(n) addresses stock certificates. This new paragraph is substantively identical to § 152.9, with one exception. Section 152.9(a) provides in pertinent part that the “certificates shall be signed by the chief executive officer or by any other officer of the association authorized by the board of directors, attested by the secretary or an assistant secretary, and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent or a registrar other than the association itself or one of its employees. Each certificate for shares of capital stock shall be consecutively numbered or otherwise identified.” The OCC believes this provision is overly detailed and is not included in new § 5.22(n)(1).

Federal Savings Association Charter and Bylaws Availability Requirement.

Section 163.1(b) requires each Federal savings association to cause a true copy of its charter and bylaws and all amendments thereto to be available to accountholders at all times in each office of the savings association, and to deliver to any accountholders a copy of such charter and bylaws or amendments thereto, upon request. As discussed above, § 144.7 imposes the same requirement, but is applicable only to Federal mutual savings associations.

There is no comparable requirement for national banks and the OCC believes this provision is no longer necessary for Federal stock savings associations as this information is relatively easy for accountholders of these types of institutions to obtain. Conversely, accountholders of Federal mutual savings associations may not have easy access to these documents in light of the inability of accountholders to communicate directly with each other under § 144.8. Accordingly, the final rule continues to apply this requirement only with respect to Federal mutual savings associations under new § 5.21(i).

Disposition of current Federal savings association organization, charter, and bylaws provisions.

As discussed above, we proposed amendments to remove from Title 12 of the Code of Federal Regulations §§ 143.2 through 143.7, all of part 144 except § 144.8, § 152.1(b)(1), § 152.1(c) through (i), §§ 152.2 through 152.9, § 152.17, § 163.1(b), and § 163.22(b)(1)(ii) and (b)(2). We did not receive any comments on these proposed changes and are adopting the amendments as proposed.

Section 144.8, which addresses communication between members of a Federal mutual savings association, is not a licensing regulation and does not involve an application process. The OCC is leaving it unchanged. Because it will be the only section that remains in part 144, the OCC is renaming part 144 as part 144—Federal mutual savings associations—communication between members.

Other provisions of § 152.2, which provide procedures for the organization of interim Federal savings associations, are addressed in revisions to the business combinations regulation—§ 5.33, described below. The remaining provisions of part 143, part 152, and part 163 contain other provisions applicable to Federal mutual and stock savings associations. The OCC is rescinding some of these provisions as described elsewhere in this preamble.

Charter Conversions (New § 5.23, § 5.24, New § 5.25)

Twelve CFR 5.24 sets forth the rules and procedures that a state bank, state savings association, or Federal savings association must follow to convert to a national bank and for a national bank to convert to a state bank or Federal or state savings association. The OCC's rules for a mutual depository institution to convert to a Federal mutual savings association are at 12 CFR 143.8 through 143.14, and the rules for a stock form depository institution to convert to a Federal stock savings association are at 12 CFR 152.18. The rules for a Federal savings association to convert to a national bank or state bank are set forth at 12 CFR 152.19 and 163.22(b)(1)(ii) and (b)(2). While there are some differences in procedures, as discussed below, the rules for national banks and Federal savings associations are substantively similar.

We proposed to simplify this regulatory framework by: (1) Revising § 5.24 to include only rules for converting into a national bank, (2) placing all rules for converting into a Federal savings association (either stock or mutual) in new § 5.23, and (3) placing rules for conversion from national bank and Federal savings association charters in new § 5.25. We also proposed additional substantive and technical changes to these rules. The substantive changes include provisions implementing section 612 of the Dodd-Frank Act, which prohibits conversions from state to Federal charter, or Federal to state charter, in certain circumstances and adds requirements to the conversion process.

We did not receive any comments related to charter conversions. We therefore adopt the amendments to these provisions as proposed, with the changes described below.

Implementation of section 612 of the Dodd-Frank Act.

Section 612 of the Dodd-Frank Act added several provisions that address conversions. First, section 612(b) amended 12 U.S.C. 35 to provide that the OCC may not approve an application by a state bank or a state savings association to convert to a national bank or Federal savings association during any period in which the state bank or state savings association is subject to a cease and desist order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, a state banking supervisor or the appropriate Federal banking agency with respect to a significant supervisory matter or a final enforcement action by a state Attorney General. We do not need to amend our regulations to implement this prohibition because current regulations include compliance with applicable law among the criteria for approval or denial, and this criterion is carried over in the final rule.

Specifically, §§ 5.24(e)(2)(x) and 5.23(d)(2)(ii)(J) require the conversion application to include information about enforcement actions and other supervisory criticisms and the applicant's analysis of whether conversion is permissible under 12 U.S.C. 35, as amended by section 612. We will use this information to assess the permissibility of the proposed conversion under section 35, including the possibility of using the exception to the prohibition on conversions provided in section 612.

See

§§ 5.23(d)(1) and 5.24(d) (each incorporating § 5.13(b)).

Subsection (d) of section 612 provides for an exception to the prohibition. Specifically, the prohibition on conversion does not apply if: (1) The Federal banking agency that would be the appropriate Federal banking agency after the conversion (the OCC in conversions of a state-chartered institution to a national bank or Federal savings association) gives written notice of the proposed conversion to the current Federal appropriate banking agency or state bank supervisor that issued the enforcement action, including a plan to address the significant supervisory matter in a manner that is consistent with the safe and sound operation of the institution; (2) the current Federal appropriate banking agency or state bank supervisor that issued the enforcement action does not object to the conversion or the plan; (3) after conversion, the plan is implemented; and (4) in the case of a final enforcement action by a state Attorney General, approval of the conversion is conditioned on the institution's compliance with the terms of such final enforcement action. Section 612(d) is codified as a note attached to 12 U.S.C. 35. Applicants should be aware that the Agencies have issued interagency guidance stating the Agencies' position that such exceptions would be rare, and generally would occur only when the institution already has substantially addressed the matters in the enforcement action or there are substantial changes in circumstances.

See

Interagency Statement on Section 612 of the Dodd-Frank Act: Restrictions on Conversions of Troubled Banks (November 26, 2012), available at

www.occ.gov/news-issuances/bulletins/2012/bulletin-2012-39a.pdf

Second, section 612(b) added a new section 12 U.S.C. 214d prohibiting a national bank from converting to a state bank or state savings association during any period in which the national bank is subject to a cease and desist order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, the OCC with respect to a significant supervisory matter. Section 612(c) similarly added a new paragraph (6) to the end of section 5(i) of the HOLA

prohibiting a Federal savings association from converting to a state bank or state savings association during any period in which the Federal savings association is subject to a cease and desist order (or other formal enforcement order) issued by, or a memorandum of understanding entered into with, the OTS or the OCC with respect to a significant supervisory matter. The exception to the prohibitions on conversions in section 612(d), discussed above, applies to the prohibitions in sections 214d and 1464(i)(6). As amended by this final rule, § 5.25(d)(3) requires that the information that must be submitted to the OCC when a national bank or Federal savings association plans to convert to a state bank or state savings association must include a discussion of the impact of any enforcement action on the permissibility of the conversion under 12 U.S.C. 214d or 1464(i)(6). This discussion will assist the OCC in monitoring compliance with these statutes.

Section 5(i), 12 U.S.C. 1464(i)(6).

Third, paragraph (e)(1) of section 612 requires that at the time an insured depository institution files a conversion application, it must transmit a copy of the conversion application to both the appropriate Federal banking agency for the institution and the Federal banking agency that would become the appropriate Federal banking agency for the institution after the proposed conversion. Reflecting this statutory requirement, as noted above, the final rule adds to our regulations at §§ 5.23(d)(2)(ii), 5.24(e)(2), and 5.25(d)(3)(i)(last sentence) a requirement to send a copy of the conversion application to the appropriate Federal banking agencies. Including the requirement in our regulations will help ensure applicants are aware of this requirement.

Conversion to a national bank charter.

As part of the reorganization of the conversion rules, the final rule moves the provisions governing national bank conversions to a state bank or Federal savings association from § 5.24 to new §§ 5.25 and 5.23, respectively. As a result, § 5.24 applies only to conversions to become a national bank. The final rule also makes several other changes to § 5.24.

The final rule adds “stock state savings associations” to the description of the types of institutions that can apply to convert to a national bank and also adds the word “stock” before the phrase “Federal savings associations” throughout revised § 5.24. Stock state savings associations currently are included in the rule because they are within the definition of “state bank” incorporated from 12 U.S.C. 214(a). We are adding the express term both in the interest of eliminating any confusion and because section 612 added the term “state savings association” to 12 U.S.C. 35. We are adding the term “stock” to Federal savings association for clarity as well. National banks are corporate bodies, and a mutual institution cannot become a national bank unless it has first changed into corporate form under other law. These changes clarify the existing regulation and have no substantive impact.

Section 5.24(d) states the OCC's policy for approving and disapproving conversions to national bank charters. The final rule adds a statement that the institution seeking to convert to a national bank charter must obtain all necessary regulatory and shareholder approvals. Although this requirement is not new, it was not previously stated in § 5.24. There is a similar provision in the current Federal savings association regulation, § 143.8(a)(2). The final rule continues this requirement for Federal savings associations in § 5.23, and adds this requirement for national banks as well.

The final rule also clarifies the information the applicant must include in the application. As proposed, § 5.24(e)(2)(vii) in the final rule requires applicants to add bank service company investments and other equity investments to the current requirement to identify subsidiaries. This change reflects the OCC's current practice in conversion applications of reviewing the legal permissibility for the converted national bank to continue to hold these investments.

The OCC currently requests an applicant to include a business plan in the application on a case-by-case basis

during the application process. Proposed 5.24(e)(2)(ix) requires the application to include a business plan if the converting institution: (1) Has been operating for less than three years, or (2) plans to make significant changes to its business after the conversion.

We believe this requirement should apply to all such applications because a business plan would provide valuable information about the financial institution's safety and soundness and allow the OCC to make a more informed decision. The final rule amends this provision to also require a business plan at the request of the OCC. This amendment allows the OCC to require a business plan in other circumstances, as necessary, and conforms this provision to that included in new § 5.23(d)(2)(ii)(I). Though the preamble to the proposed rule referred to this amendment, it was inadvertently omitted in the regulatory text of proposed § 5.24.

Appendix G of the “Charters” booklet of the Comptroller's Licensing Manual (Significant Deviations after Opening) contains a discussion of what constitutes a “significant change.”

Section 5.24 currently addresses the OCC's authority to permit a national bank to retain nonconforming assets of a converting state bank, subject to the requirements in 12 U.S.C. 35. The final rule (redesignated as paragraph (e)(4) in the revised regulation) clarifies that a converted national bank also may be permitted to retain nonconforming activities (as well as assets) of a state bank or stock state savings association and nonconforming assets or activities of a Federal stock savings association for a transition period after conversion. We believe this provision facilitates the transition from a state institution or Federal savings association to a national bank and also incorporates current OCC practice.

Current OCC rules require both a notice or application to the OCC to convert out of a Federal savings association charter

and an application to the OCC to convert to the new national bank charter.

The notice or application to convert out must demonstrate compliance with applicable laws regarding the permissibility, requirements, and procedures for the conversion.

The proposed rule included both a notice requirement to convert out of the existing charter in proposed § 5.25(e) and the application requirement to convert to a national bank in proposed § 5.24. Upon further review, we are removing the conversion out notice requirement from § 5.25(e) and instead adding a new paragraph (f) to § 5.24 to require a Federal savings association to include the information from this notice in its application to convert to a national bank. This process is less burdensome for Federal savings associations as they will no longer be required to file both a “conversion out” notice and a “conversion in” application to the OCC to accomplish the conversion transaction.

§ 163.22(b).

§ 163.22(b)(2).

§ 5.24.

As proposed, the final rule also amends the expedited review provisions for a conversion application filed by an eligible depository institution. These provisions are set forth in the current rule at § 5.24(d)(4) and redesignated in this final rule as § 5.24(h). The final rule limits the availability of expedited review to applications by institutions already supervised by the OCC (

i.e.,

conversions from a Federal savings association to a national bank pursuant to § 5.24 or from a national bank to a Federal savings association pursuant to § 5.23). In those cases, the OCC is already familiar with the institution. The OCC will require more time to review a state institution applicant's condition and proposal, and therefore, expedited review would not be appropriate in those cases.

The final rule also extends the expedited review period from 30 days to 60 days. New § 5.23(d)(4) contains a similar expedited review provision for conversions of an eligible national bank to a Federal savings association.

In addition, the final rule adds a new paragraph (i) to § 5.24 (paragraph (h) in the proposed rule) providing that the resulting national bank after a conversion is the same business and corporate entity as the converting institution, and all assets, rights, liabilities, obligations, and other business of the converting institution continue in the resulting national bank by operation of law. This paragraph reflects longstanding case law under 12 U.S.C. 35

and is similar to statutory provisions in 12 U.S.C. 214b (continuation in conversion of national bank to state bank or merger of national bank into state bank) and 12 U.S.C. 215(e) and 215a(e) (continuation in consolidation or merger of national or state bank into national bank). The specific language is based on 12 U.S.C. 214b and on current provisions governing Federal savings associations at §§ 146.14 (Federal mutual savings associations) and 152.18(b) (Federal stock savings associations).

See, e.g., Michigan Insurance Bank

Eldred,

143 U.S. 293, 300 (1892);

Metropolitan National Bank

Claggett,

141 U.S. 520, 527 (1891).

See generally,

CJS Banks and Banking, § 529 (citing cases); 10 a.m. Jur. 2d § 203 (citing cases).

Finally, the final rule adds provisions to § 5.24 to implement section 612 of the Dodd-Frank Act, which are discussed below, and makes several technical or housekeeping changes to § 5.24 to make it easier to read.

Conversion to a Federal savings association charter.

As noted above, the final rule creates a new § 5.23 to address conversions of a mutual depository institution to a Federal mutual savings association or of a stock depository institution to a Federal stock savings association. This new section is similar to § 5.24, conversions to a national bank, except that references to national banking laws are replaced by references to the HOLA, including the statutory criteria in section 5(e) of the HOLA for granting a Federal savings association charter.

The requirements of § 5.23 include many of the requirements in the current Federal savings association conversion regulations. However, the final rule does not retain certain provisions in parts 143 and 152 for which there is no statutory requirement in the HOLA. These include the confidentiality provisions set forth at § 143.8, which instead are addressed under the OCC's general confidentiality regulations, 12 CFR part 4, and the public notice and inspection requirements set forth at § 143.9(a)(2) (incorporating § 143.2(d)), which require public notice and inspection for applications to organize a new savings association. The OCC believes public notice is unnecessary in the case of conversions because the business of the existing institution continues under its new charter. We note that if there are instances where the OCC believes publication is warranted, the OCC could require publication under § 5.23(d)(3), which allows the OCC to require public notice if an application presents significant or novel policy, supervisory, or legal issues.

The final rule excludes a number of provisions in § 143.9 that advise applicants of the various steps in the process. Instead, the OCC addresses this information through the Comptroller's Licensing Manual, application forms, and the application process.

As with the amendments to § 5.24, the final rule adds a new paragraph § 5.23(f) that contains the provision regarding the “conversion out” aspect for national banks applying to convert to a Federal stock savings association originally included in proposed § 5.25(e)(1) and (e)(3). As a result, a national bank converting to a Federal stock savings association must include in its application filed pursuant to § 5.23

information demonstrating compliance with the applicable requirements of 12 U.S.C. 214a instead of including this information in a separate notice to the OCC. This process is less burdensome for national banks because they will not have to file both a notice and an application for these transactions, as provided in the current and proposed rule.

We note that there are four significant differences between §§ 5.24 and 5.23. First, the definition of “depository institution” for purposes of § 5.23, which is based on the definition in §§ 143.8(a) and 152.13, includes credit unions, unlike the definition in § 5.3(f), which is used in § 5.24. This is because credit unions may convert to a mutual Federal savings association but not to a national bank. Second, paragraph (c) of § 5.23 provides that the converting institution must have deposits insured by the FDIC or, if it is not so insured, must obtain insurance before converting. While some national banks may be uninsured,

i.e.,

trust banks that do not accept deposits, all Federal savings associations are required to be insured. Third, paragraph (d)(2)(ii)(K) of § 5.23, requires a converting institution that does not meet the qualified thrift lender test of 12 U.S.C. 1467a(m) to include a plan to achieve compliance within a reasonable period of time and to request an exception from the OCC in the application. This requirement reflects agency practice but is not expressly included in the current regulation. Fourth, paragraph (e) of § 5.23 includes certain provisions contained in § 143.10 that are unique to conversions of a mutual depository institution to a Federal mutual savings association. These provisions reflect the unique organizational structure of mutual depository institutions, which are not owned by shareholders but are mutual enterprises composed of depositor-members.

Lastly, the final rule includes provisions in § 5.23 to implement section 612 of the Dodd-Frank Act, as discussed below.

Conversion from a national bank or Federal savings association charter to a state charter.

New § 5.25 addresses conversions from a national bank or Federal savings association to a state charter. Proposed § 5.25(d) provided that converting from a Federal charter does not require prior OCC approval. Instead, the institution must file a notice with the OCC. This process is a change for some Federal savings associations. Under the current regulations, Federal savings associations that are not eligible for expedited treatment must file an application to convert to a national bank or state bank.

Under the new rule, this notice must contain a copy of its conversion application to the regulator to which it is applying for approval to convert (as required by section 612 of the Dodd-Frank Act), a showing of its compliance with applicable requirements for converting from the charter (as required under the current rule), and a discussion of any issues regarding the permissibility of the conversion under section 612 of Dodd-Frank Act. This section also requires the institution to file a copy of its conversion application with the Federal banking agency that would become its appropriate Federal banking agency after the conversion, pursuant to section 612 of the Dodd-Frank Act, as discussed below.

See

12 CFR 152.19 and 163.22(b)(2).

The proposed rule had required, at new § 5.25(e), institutions planning to convert between a national bank and a Federal savings association to file a notice with the OCC to convert out of the old charter. This filing would be in addition to filing an application to convert to the new charter. As noted above, the final rule removes this notice requirement and instead adds a provision to § 5.23(f) and to § 5.24(f) to require that this “conversion-out” information be included in its application filed pursuant to § 5.23 or § 5.24. As a result, national banks and Federal savings associations will not have to file both a notice and an application for these transactions, as required by the current and proposed rule.

As discussed above, the applicable “converting-in” regulation (§ 5.24 or § 5.23) requires the institution to file an application with the OCC with respect to the “converting-in” aspect of the transaction.

Disposition of current Federal savings association conversion regulations.

Sections 5.23 and 5.25 will replace most of the current Federal savings association regulations on conversions. Accordingly, the final rule removes §§ 143.8, 143.9, 143.10, 143.14, 152.18, and 152.19.

As proposed, the final rule also removes § 143.11, which provides for an organizational plan for governance during the first six years after a state mutual savings bank converts to a Federal charter. The OCC believes that the application process is sufficient for the OCC to monitor a the converting institution's compliance with the requirements for Federal mutual savings banks.

This preamble discusses the removal of § 163.22(b)(1)(ii) and (b)(2) in the discussion of amendments to the OCC's rules regarding the organization of a national bank or Federal savings association and Federal savings association charters and bylaws, above. Other provisions of this rulemaking remove the remaining provisions of part 143 (except for § 143.12), part 152 and § 163.22.

Section 143.12, which implements section 5(i)(4) of the HOLA,

addresses grandfathered authority of certain Federal savings associations. It is not a licensing regulation and does not involve an application process. The final rule leaves § 143.12 unchanged. As a result of other changes in this rulemaking, it will be the only section that remains in part 143. Therefore, the final rule renames part 143 as part 143—Federal Savings Associations—Grandfathered Authority.

12 U.S.C. 1464(i)(4).

Fiduciary Powers (§ 5.26)

Twelve CFR 5.26 contains the application requirements and processes for national banks' fiduciary powers. Twelve CFR part 150, subpart A (§§ 150.70 through 150.125) addresses the fiduciary powers application requirements and processes for Federal savings associations. We proposed to consolidate the application and notice filing procedures for fiduciary powers for national banks and Federal savings associations by revising § 5.26 to cover Federal savings associations, incorporating certain provisions from part 150 in § 5.26, amending § 150.70 to remove the current language regarding filing requirements, directing Federal savings associations to § 5.26 for the application and notice procedures they should follow, and deleting §§ 150.80 through 150.125, which contain additional current Federal savings association filing requirements. We received one comment on our fiduciary powers rule, discussed below. We are adopting the amendments to § 5.26 and part 150, subpart A as proposed.

In general, the final rule revises § 5.26 by adding language that makes it applicable to both national banks and Federal savings associations. The final rule also makes the following revisions to the application requirements in § 5.26.

First, the final rule adds § 5.26(e)(2)(iii) to provide examples of factors the OCC will consider when reviewing an application to exercise fiduciary powers. These factors include financial condition, adequacy of capital, character and ability of proposed trust management, the adequacy of any proposed business plan, and the needs of the community served. These factors help to clarify the standard of review the OCC will use. Three of the factors are requirements found in both the

National Bank Act

and the HOLA:

Capital adequacy, requiring that the needs of the community be served, and providing that the OCC may consider any other factors or circumstances that the agency considers proper. A review of the financial condition of the national bank or Federal savings association, the experience and character of the management of the institution, and the adequacy of any proposed business plan are all factors that the OCC already takes into account when reviewing an application submitted by a national bank or Federal savings association to conduct fiduciary powers. In addition, the Federal savings association rule, § 150.100, includes the factor requiring assessment of the financial condition, the overall performance, and the proposed supervision of the Federal savings association.

12 U.S.C. 92a(i).

12 U.S.C. 1464(n)(8).

Second, the final rule adds a new paragraph (e)(5) to § 5.26. This paragraph requires a national bank or a Federal savings association that has not conducted previously approved fiduciary powers for 18 consecutive months to provide a notice to the OCC containing the information required by § 5.26(e)(2)(i) 60 days in advance of commencing the activities. This amendment is similar to a requirement for Federal savings associations at § 150.560, which requires filing a notice if the savings association has not conducted the fiduciary activity for five years after it was approved to engage in the activity. We have determined, however, that 18 months is a more appropriate timeframe for this notice because the management and condition of a national bank or Federal savings association may change in a shorter period of time. This amendment ensures that both a national bank and a Federal savings association previously granted fiduciary powers will still have the financial ability and managerial expertise necessary to conduct fiduciary activities in a safe and sound manner. The OCC also believes this notification is important because it will enable the agency to allocate supervisory resources to evaluate the institution when it resumes fiduciary activities in which it has not engaged for a long period of time.

Third, the final rule adds a new § 5.26(e)(1)(iv) that specifies that a national bank or Federal savings association that has received approval from the OCC to exercise limited fiduciary powers and would like to exercise full fiduciary powers must apply to the OCC. An applicant can apply for approval to offer limited services (authority for one or more specific type of fiduciary powers described in the application) or to offer full services (authority to exercise all powers authorized under the law). If an institution received prior approval to offer only certain services, it would need to file an application if it wished to begin offering other services. However, an institution that received approval to exercise full fiduciary powers could add to the activities in which it engages without additional application.

Finally, incorporating Federal savings associations in the application framework of § 5.26 also results in some other minor changes or clarifications of requirements for Federal savings associations. New paragraphs (b)(2) and (4) of § 5.26 set out circumstances in which a Federal savings association does not need to apply for fiduciary powers in connection with certain mergers. The new provision in § 5.26(e)(1)(iv), discussed above, requiring an application when an institution previously approved only to exercise specified limited powers planned to exercise more powers, replaces a current provision requiring a Federal savings association to apply if it planned to conduct fiduciary activities that are “materially different” from those previously approved, regardless of whether the prior approval had been for limited or full powers. Section 5.26(e)(3) provides for expedited review of applications by eligible national banks and eligible Federal savings associations. Part 150 does not provide for expedited treatment of fiduciary powers applications by Federal savings associations.

We received one comment with respect to fiduciary powers in response to our June EGRPRA notice. This comment requested that we amend the approval process in the existing Federal savings association rule, § 150.70(b), so that once the OCC has granted a Federal savings association permission to exercise some fiduciary powers, the association may exercise all fiduciary powers without further approval. The OCC disagrees with this commenter. The exercise of all fiduciary powers may raise safety and soundness concerns not associated with the exercise of limited fiduciary powers. Therefore, as described above, we are adopting the provision as proposed. We note that the change in standard of fiduciary activities “materially different from previously approved” in the current Federal savings association rule to the standard of limited powers to full powers in § 5.26 should reduce regulatory burden by lessening the need for a later filing.

Establishment, Acquisition, and Relocation of a Branch (§ 5.30 and § 5.31)

Overview.

Section 5.30 of the OCC's rules addresses the establishment, acquisition, and relocation of national bank branch offices. Sections 145.92, 145.93, 145.95, and 145.96 address these subjects for Federal savings associations and also cover agency offices for Federal savings associations.

While these national bank and Federal savings association rules address a common subject there are two important differences between them, namely the definition of “branch” (and many provisions related to the definition) and the scope of the requirement for prior OCC approval.

These differences stem from the statutes applicable to national banks and Federal savings associations.

An agency office is an office of a Federal savings association that services, originates, or approves loans and contracts; manages or sells real estate owned by the savings association; or conducts fiduciary activities or activities ancillary to the savings association's fiduciary business, or, with the approval of the OCC, provides other services.

See

12 CFR 145.96.

There are also differences in the locations at which a national bank or a Federal savings association may establish a branch. Generally, Federal savings associations have somewhat broader branching authority than national banks. The relevant application procedure regulations do not address this subject.

Specifically, with respect to national banks, the term “branch” is defined by statute. The McFadden Act defines a “branch” as an office “at which deposits are received, or checks paid, or money lent.”

Over the years, the meaning of the term in various contexts has been addressed extensively in case law and regulatory interpretation. The OCC codified much of that interpretive explanation in § 5.30 and in a number of provisions in part 7 that specify what constitutes a branching activity and what does not. For Federal savings associations, the HOLA does not have a general definition of “branch.”

Consideration of whether an office of a Federal savings association is a branch office has focused on activities involving deposit accounts, not lending. Furthermore, there is little in the regulations specifying which activities

are branching activities and which are not.

Section 5155(j) of the Revised Statutes, 12 U.S.C. 36(j).

There is a definition of “branch” in section 5(m) of the HOLA, 12 U.S.C. 1464(m), but it addresses branching only in the District of Columbia. In that subsection, branch is defined as an office “at which accounts are opened or payments are received or withdrawals are made.” 12 U.S.C. 1464(m)(2).

In addition,the statutes authorizing a national bank to establish a branch require that it obtain approval from the OCC.

Accordingly, the OCC licensing regulations at 12 CFR 5.30 require national banks to file an application and obtain OCC approval for every branch. The HOLA does not have a general provision requiring approval for a Federal savings association to establish a branch.

By regulation, at § 145.93, the OCC (continuing a provision originally adopted by the OTS) requires an application for a Federal savings association to establish or relocate a branch, but this rule also provides certain exceptions.

See

12 U.S.C. 36(b), 36(c), 36(g).

However, the provision regarding branching in the District of Columbia does require prior regulatory approval. 12 U.S.C. 1464(m)(1).

As part of the OCC's EGRPRA review, the OCC will consider whether to recommend to Congress a statutory change to make the requirements for establishing or relocating a branch consistent for national banks and Federal savings associations.

The proposal retained these differences between national banks and Federal savings associations. Specifically, we proposed to add a new § 5.31 to part 5 in order to bring the establishment and relocation of branches by a Federal savings association within the licensing procedures of part 5 and did not propose adding Federal savings associations to 12 CFR 5.30 New § 5.31 is similar in format to § 5.30, but includes provisions based on §§ 145.92 and 145.93 regarding the definition of “branch” and the scope of the application requirements. Section 5.31 also includes the provisions of § 145.96 regarding agency offices. As a result, national banks and Federal savings associations generally will continue to be subject to different branching application provisions and requirements.

The preamble to the proposed rule also requested comment on two alternatives to the proposed rule's treatment of branching by Federal savings associations. The first alternative required Federal savings associations to file applications to establish or relocate a branch without exceptions. This alternative would harmonize the treatment of the branch licensing regulations of national banks and Federal savings associations in order to simplify our licensing procedures and provide for comparable treatment of national banks and Federal savings associations. The second alternative approach required Federal savings associations to file an after-the-fact notice instead of an application in cases where an application was not required. Such a notice would enable the OCC to obtain timely information on Federal savings association branching activity without requiring eligible Federal savings association to obtain prior OCC approval to engage in an activity that they now may do without approval.

We also proposed several minor substantive clarifications in § 5.30.

We adopt § 5.30 as proposed. We also adopt § 5.31 as proposed with the addition of the second alternative outlined above. We received one comment letter on this branching proposal and the alternatives. This comment is discussed below. Also as proposed, the final rule removes 12 CFR 145.93, 145.95 and 145.96, and makes a conforming change to § 145.92.

Branches of national banks (§ 5.30).

The final rule revises § 5.30(c), the scope section. Section 5.30(c)(2) (formerly part of § 5.30(c)) continues to provide that the standards of § 5.30 (governing review and approval of applications by the OCC) and, as applicable, 12 U.S.C. 36(b), applies to branches established as a result of a business combination approved under § 5.33. The final rule adds branches acquired or retained in a conversion approved under § 5.24 to the scope of § 5.30, while maintaining the application procedures set forth in § 5.24 for these transactions. The addition of branches acquired or retained in a conversion under § 5.24 to this section reflects current practice.

The final rule also revises the definition of “branch.” Section 5.30(d)(1)(ii)(B) currently excepts from the definition of “branch” a facility that is located at the site of, or is an extension of, an approved main office or branch office of the national bank. The final rule amends this paragraph to state that the OCC will consider a drive-in or pedestrian facility located within 500 feet of a public entrance to an existing main office or branch office to be such an extension, provided the functions performed at the drive-in or pedestrian facility are limited to functions ordinarily performed at a teller window. This “bright-line” 500-foot test for national banks is consistent with § 145.93(b)(1), which provides this exception for Federal savings associations. The final rule also adds new § 5.30(d)(1)(iii) to describe more clearly what is not a branch, including ATMs and remote service units,

as well as loan production offices, deposit production offices, administrative offices, and any other office that does not engage in any of the activities set out in paragraph (d)(1).

The final rule also amends § 7.4003 (establishment and operation of a remote service unit) to add a number of additional examples of remote service units. The rule expands this illustrative list in order to modernize the regulation to capture new technology with similar functional capability.

In addition, the final rule updates § 5.30(e), relating to the principles that guide the OCC in making determinations on applications under this section, to reflect the OCC's statutory mission as amended in section 314 of the Dodd-Frank Act.

12 U.S.C. 1(a).

Finally, the final rule amends § 5.30(f)(6), which sets forth the procedures fo

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