# Employment Contracts, Mutual to Stock Conversions

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/fr%3A2020-12784

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** July 14, 2020
- **Citation:** 85 FR 42630

## Text

DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Parts 3, 4, 11, 16, 19, 23, 26, 32, 108, 112, 141, 160, 161, 163, 192, and 195
[Docket ID OCC-2018-0041]
RIN 1557-AE21
Employment Contracts, Mutual to Stock Conversions

AGENCY:

Office of the Comptroller of the Currency (OCC), Treasury.

ACTION:

Final rule and technical amendments.

SUMMARY:

The OCC is issuing a final rule that repeals the OCC's employment contracts rule for Federal savings associations. This change was recommended in the March 2017 Economic Growth and Regulatory Paperwork Reduction Act report. The final rule also amends the OCC's rule for conversions from mutual to stock form of a savings association to reduce burden, provide clarity, increase flexibility, and update cross-references. Additionally, the final rule updates cross-references to repealed and integrated rules, removes unnecessary definitions, and makes technical changes to other OCC rules.

DATES:

This rule is effective on August 13, 2020.

FOR FURTHER INFORMATION CONTACT:

For additional information, contact Charlotte Bahin, Senior Advisor for Thrift Supervision, (202) 649-6281, Marta Stewart-Bates, Senior Attorney, (202) 649-5490, Chief Counsel's Office, for persons who are deaf or hearing impaired, TTY, (202) 649-5597, Office of the Comptroller of the Currency, 400 7th Street SW, Washington, DC 20219.

SUPPLEMENTARY INFORMATION:

I. Background

The OCC continually reviews its regulations with the goal of updating them to reduce burden, increase flexibility, and provide clarity where possible.
1

Section 2222 of the Economic Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA) requires that, at least once every 10 years, the Federal Financial Institutions Examination Council (FFIEC) and each appropriate Federal banking agency (Agencies) represented on the FFIEC (the OCC, the Federal Deposit Insurance Corporation (FDIC), and the Board of Governors of the Federal Reserve System (Federal Reserve Board)) conduct a review of their regulations.
2

The purpose of this review is to identify outdated or otherwise unnecessary regulatory requirements imposed on insured depository institutions. Specifically, EGRPRA requires the Agencies to categorize and publish their regulations for comment, requesting commenters to identify areas of the regulations that are outdated, unnecessary, or unduly burdensome, and eliminate unnecessary regulations to the extent that such action is appropriate. The Agencies completed their second EGRPRA review on March 30, 2017, and published a Report to Congress in the
Federal Register
.
3

The OCC published a proposed rule on January 8, 2020,
4

that sought comment on OCC proposed changes recommended in the March 2017 EGRPRA report, including the repeal of 12 CFR 163.39 (Federal savings association employment contracts) and possible amendments to 12 CFR 9.8 and 150.420 (fiduciary recordkeeping) and 9.10 and 150.320 (acceptable collateral for fiduciary funds awaiting investment or distribution).
5

1
Most recently, the OCC published for notice and comment amendments to 12 CFR part 5 (Rules, Policies, and Procedures for Corporate Activities) and 12 CFR part 7 (Activities & Operations).
See
85 FR 18728 (April 2, 2020); 85 FR 40794 (July 7, 2020).

2
Section 2222 of EGRPRA is codified at 12 U.S.C. 3311(b).

3
82 FR 15900 (March 30, 2017).

4
85 FR 1052 (January 8, 2020).

5
See FFIEC Joint Report to Congress (March 2017), available at
https://www.ffiec.gov/pdf/2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.

The OCC also proposed to amend 12 CFR part 192 (Federal savings association conversions from mutual to stock form) to reduce burden, increase flexibility, and replace cross-references to repealed 12 CFR 197 (Securities offerings rules for Federal savings associations) with cross-references to 12 CFR part 16 (Securities offering disclosure rules). The OCC proposed to clarify which forms and accounting standards savings associations must use in connection with a part 192 conversion and to increase flexibility and reduce burden for Federal savings associations by encouraging electronic filing, electronic meetings, providing notice by email, and reducing the number of copies of proxy materials that must be filed with the OCC.

Finally, the proposed rule contained various technical and clarifying amendments to 12 CFR parts 3, 4, 8, 11, 16, 19, 23, 26, 32, 108, 112, 141, 160, 161, and 163.

II. Summary of the Proposals, Comments Received, and the Final Rule

In response to the proposal, the OCC received four comment letters from industry stakeholders and the public. The commenters generally supported the proposed amendments, but requested particular changes and additional clarity.

A. Employment Contracts for Federal Savings Associations

Twelve CFR 163.39 sets forth the requirements for a Federal savings association that enters into an employment contract with its officers and employees. Section 163.39(a) requires written employment contracts for officers and employees that are approved by a Federal savings association's board of directors. Section 163.39(a) also prohibits a Federal savings association from entering into an employment contract with any of its officers or other employees if the employment contract would constitute an unsafe or unsound practice. Under section 163.39(b), a contract must include a Federal savings association's right to terminate the employee at will. There are no similar requirements for national banks.

In March 2017, the FFIEC made its Joint Report to Congress under EGRPRA. One EGRPRA commenter recommended that the OCC eliminate § 163.39 in its entirety because the regulation only applies to Federal savings associations and there is no reason to distinguish Federal savings associations from national banks. Additionally, the EGRPRA commenter stated that it is unnecessary to require board approval of all employment contracts because there are comprehensive safety and soundness standards and interagency guidance on compensation.

The OCC proposed to eliminate § 163.39 in its entirety. Commenters supported the repeal. One commenter agreed that the OCC should eliminate the entire rule because it is confusing and unnecessarily burdensome. Another commenter stated that the requirements are more onerous than those applied to national banks because the current rule applies to all Federal savings association employment contracts and mandates a number of detailed contractual provisions that must be included in each contract. The commenter noted that the OCC already has a robust regulatory framework governing Federal savings association employment contracts, making the rule duplicative and unnecessary, and that there are no persuasive policy reasons for the OCC to impose more stringent

regulatory requirements on the employment contracts of Federal savings associations as opposed to national banks. The commenter stated that the current rule increases a Federal savings association's litigation risks and limits its ability to tailor its compensation programs in ways that best suit its size and complexity.

The OCC is repealing 12 CFR 163.39 in its entirety. The repeal provides for consistent treatment of Federal savings associations and national banks with respect to employment contracts and compensation. The OCC believes that the current framework of rules and guidance on compensation and employment contracts, independent of § 163.39, is adequate to address and safeguard against unsafe and unsound employment and compensation practices for Federal savings associations. Federal savings associations, like national banks, are subject to the safety and soundness standards of 12 U.S.C. 1818; 12 CFR part 30, the prohibition on unsafe and unsound compensation in appendix A to part 30; the prompt corrective action restrictions on compensation to senior executive officers in 12 CFR 6.6(a)(3) and section 38 of the Federal Deposit Insurance Act (FDIA); and are informed by the 2010 Interagency Guidance on Sound Incentive Compensation Policies. Moreover, the boards of directors at national banks and Federal savings associations have oversight responsibilities for compensation, benefits arrangements, and employment contracts for their executive officers and employees.

The repeal of § 163.39 also reduces burden and increases flexibility for Federal savings associations by eliminating the requirement for written contracts that the board of directors must approve, although Federal savings associations are not prohibited from voluntarily using those procedures for their employment contracts. It is a good corporate governance practice to have agreements relating to employment and compensation in writing and that the board, or committee thereof, review and approve those agreements. The repeal of § 163.39 does not alter any other obligation with regard to employment agreements entered into by a Federal savings association. For example, if there are other laws and regulations that apply to a Federal savings association regarding employment contracts, the repeal of § 163.39 does not affect the application of those laws.

B. Fiduciary Recordkeeping

12 CFR part 9 sets forth the standards that apply to national bank fiduciary activities. Twelve CFR part 150 sets forth the standards that apply to the fiduciary activities of Federal savings associations. Sections 9.8 and 150.420 contain requirements for the documentation and retention of records for fiduciary accounts at national banks and Federal savings associations, respectively. Sections 9.8(b) and 150.420 require national banks and Federal savings associations to retain fiduciary account records for a period of three years from the later of the termination of the account or the termination of any litigation relating to the account. During the 2017 EGRPRA process, a commenter recommended that the OCC amend 12 CFR 9.8(b) to require the retention of documents for a “necessary period” or to refer to applicable State law on the retention of documents, instead of the current three-year requirement. The commenter explained that three years may be inadequate to protect beneficiaries in some situations, such as a suit filed by a beneficiary against a predecessor trustee more than three years after an account is closed but before a State statute of limitations has run.

In the proposal, the OCC requested comment on whether to amend §§ 9.8(b) and 150.420 to require a national bank or Federal savings association to retain fiduciary account records for the later of three years from the termination of account, three years from the termination of any litigation relating to the account, or the minimum period required by applicable fiduciary State law. The OCC noted that this approach could place additional burdens on institutions by increasing the number of years an institution would be required to retain records, and because this approach may require institutions to monitor changes to states' fiduciary laws. The OCC received no comments in response and declines to amend §§ 9.8(b) and 150.420. The OCC notes that nothing in §§ 9.8(b) and 150.420 prohibits financial institutions from holding fiduciary account records longer than the three-year period.

C. Acceptable Collateral for Self-Deposited Trust Funds

Under 12 U.S.C. 92a(d), 12 CFR 9.10(b)(1), 12 U.S.C. 1464(n)(3), and 12 CFR 150.310, a national bank or Federal savings association may deposit trust funds awaiting investment or distribution in the commercial, savings, or other department of the bank, unless prohibited by applicable law. To the extent the funds are not insured by the Federal Deposit Insurance Corporation (FDIC), the national bank or Federal savings association must set aside U.S. bonds or other securities and assets designated by the OCC as collateral for the deposit. Sections 9.10(b)(2) and 150.320 list acceptable collateral types for national banks and Federal savings associations, respectively. During the notice and comment period for the 2017 EGRPRA report, one commenter suggested an expansion of the § 9.10(b)(2) list of acceptable collateral for fiduciary funds to allow for other instruments that provide similar protection from loss.

In the proposed rule, the OCC requested comment on whether to expand the list of acceptable collateral in §§ 9.10(b)(2) and 150.320 to include additional types of instruments. The OCC received one comment in response. The commenter requested that the OCC expand the list of acceptable collateral to include Federal Home Loan Bank (FHLB) letters of credit. The same commenter also requested that, with respect to surety bonds as an acceptable form of collateral, the OCC remove the phrase “unless prohibited by applicable law” from 12 CFR 9.10(b)(2)(iv) and 150.320(d) because the phrase requires institutions to conduct burdensome 50-state surveys to ensure compliance. The OCC plans to take these comments into consideration in any future proposal to revise the OCC's fiduciary rules.

D. Amendments to Securities Offering Disclosure Rules

Twelve CFR 16.8 provides an exemption from the registration and prospectus requirements for offers and sales of national bank- or Federal savings association-issued securities that satisfy the requirements of SEC Regulation A (17 CFR part 230) (General rules and regulations, Securities Act of 1933). The SEC's Form 1-A, the offering statement required by Regulation A, requires audited financial statements for certain offerings. However, a national bank or Federal savings association in organization does not have an operating history and cannot generate detailed financial statements that require an audit. The audited financial statements of a national bank or Federal savings association in organization typically do not add materially to the information already available to the OCC through the chartering process. The OCC proposed to amend § 16.15(e) to clarify that a national bank or Federal savings association in organization is not required to include audited financial statements as part of its offering statement for the issuance of securities pursuant to § 16.8, unless the OCC determines otherwise.

Twelve CFR 16.17 sets forth the filing requirements and inspection of

documents for securities offerings. The OCC proposed to add a sentence to § 16.17(b) to clarify that all registration statements, offering documents, amendments, notices, or other documents relating to a mutual to stock conversion pursuant to 12 CFR part 192 must be filed with the appropriate OCC licensing office and not the Securities and Corporate Practices Division of the OCC.

The OCC received one comment in support of the amendments to the securities offering disclosure rules in §§ 16.15 and 16.17. The OCC is finalizing those amendments as proposed.

E. Removal, Suspension, or Debarment of Independent Public Accountants

Section 36(g)(4)(A) of the FDIA (12 U.S.C. 1831m(g)(4)(A)) provides that the FDIC or an appropriate Federal banking agency may remove, suspend, or bar an independent public accountant, upon a showing of good cause, from performing audit services required by section 36. The OCC's implementing rules for insured national banks and insured Federal branches of foreign banks are set forth in subpart P to 12 CFR part 19. The former Office of Thrift Supervision (OTS) implemented section 36(g)(4) with respect to insured savings associations at 12 CFR 513.8, and these rules are substantively identical to subpart P. However, when republishing the former OTS rules as OCC rules pursuant to Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), the OCC inadvertently did not republish 12 CFR 513.8 nor amend subpart P of part 19 to apply to Federal savings associations. In the proposed rule, the OCC proposed amendments that would correct that error by amending subpart P to also apply to insured Federal savings associations.

In addition, the OCC proposed several clarifying amendments to subpart P. First, the OCC proposed amending § 19.243(b)(2), which provides that hearings will be conducted in the same manner as other hearings under the Uniform Rules of Practice and Procedure (12 CFR part 19, subpart A), by adding a cross-reference to the specific rules and limitations for subpart P hearings set forth in § 19.243(c)(4). Second, the OCC proposed a clarifying change to § 19.243(c)(3), which currently states that an accountant or firm immediately suspended from performing audit services may, within 10 calendar days after service of the notice of immediate suspension, file a petition to stay the immediate suspension with the OCC and that, if no petition is filed, the immediate suspension will remain in effect. The OCC proposed to clarify that if the accountant or firm has not filed a petition within 10 calendar days, they have waived their right to file a petition. The OCC also proposed to revise § 19.243(c)(3) (petition for stay of immediate suspension) to add a cross-reference to § 19.243(c)(2), which sets forth the rules for when the OCC may lift an immediate suspension. Third, the OCC proposed to amend § 19.243(c)(4), which provides that upon request of a stay petition, the Comptroller must designate a presiding officer who must fix a place and time for the hearing that is not more than 10 calendar days after receipt of the petition, unless extended by the OCC at the request of petitioner. The amendment provides that a later hearing date may occur only if permitted by the OCC, and, therefore, the request for an extension would not receive automatic approval. This change would allow the OCC some discretion as to how far into the future a hearing may take place. Fourth, the OCC proposed a technical correction to subpart P by adding “insured Federal branches of foreign banks” where appropriate and removing references to Federal “agencies.” Section 36(g)(4) of the FDIA only applies to insured depository institutions and no insured Federal agencies exist. Finally, the OCC proposed to replace the word “shall” with “must,” “will,” or other appropriate language, which is the recommended drafting style of the
Federal Register
.

The OCC received one comment on the proposed amendments to subpart P of part 19. The commenter supports the application of subpart P of part 19 to Federal savings associations. The commenter also supports the clarifying amendments to subpart P of part 19 that provide more detailed procedures for the removal, suspension, or debarment of an independent public accountant. With respect to the proposed amendment to § 192.243(c)(4) that would give the OCC 10 days to hold a stay petition hearing (unless the presiding officer allows further time requested by the petitioner), the commenter urges the OCC to exercise reasonable judgment in each circumstance. Therefore, the OCC finalizes the amendments to subpart P of part 19 as proposed. Under both the current rule and the amended rule, the presiding officer is expected to exercise reasonable judgment in their discretion to determine whether to allow further time requested by the petitioner in § 192.243(c)(4).

F. Definitions of Loans to Small Businesses and Loans to Small Farms in Lending Limits Rules

The OCC proposed to revise the definitions of “small business loans” and “small farm loans or extensions of credit” in 12 CFR 32.2(cc) and (dd) of the lending limits rule to align the definitions with the language of the Call Report instructions. The revisions to § 32.2(dd) clarify that the $500,000 limit contained within the “loans to small farms” definition in the Call Report instructions does not apply for purposes of the supplemental lending limit program.

The OCC received one comment on the proposed changes. The commenter encouraged the OCC to work collaboratively with other federal agencies on the definitions of a “small business” and a “small farm” so that there is greater consistency across all prudential financial regulators and regulations. The commenter believes this will assist banks as they lend to these segments of the economy. The commenter recommended that the definitions in the Call Report should also be consistent with the definitions adopted. The commenter filed a corresponding letter in response to the Federal banking agencies' request for comment
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on ways to modify the current requirements for reporting data on loans to small businesses and small farms in the Call Report.

6
84 FR 55687 (October 17, 2019).

Because the OCC did not propose to amend the definitions of “small businesses” and “small farms” in the proposal and because this final rule is not an interagency rulemaking, the OCC is unable to make the changes recommended by the commenter in this final rule. However, the federal banking agencies received and are considering the corresponding comment letter submitted in response to the agencies' request for comment on ways to modify the current requirements for reporting data on loans to small businesses and small farms in the Call Report.

Therefore, the OCC is finalizing the changes to § 32.2(cc) and (dd) and making the technical change of replacing the terms “small business loans” and “small farm loans or extensions of credit” with the terms “loans to small businesses” and “loans or extensions of credit to small farms,” respectively, to conform with the Call Report instructions. These technical changes are made to §§ 32.2(cc), 32.2(dd), 32.7(a)(1), 32.7(a)(2), and 32.7(d).

G. Savings Association Conversions From Mutual to Stock Form

The OCC proposed amendments to 12 CFR part 192, which governs how a savings association may convert from mutual to stock form of ownership under standard and voluntary supervisory conversions. The amendments reduce burden, provide clarity, and increase flexibility for savings associations and make several technical amendments. Unless otherwise noted, part 192 applies to both Federal and State savings associations.

Forms.
The OCC proposed to amend § 192.5(b) to clarify that a savings association must use the forms prescribed under part 192 and 12 CFR part 16 (the securities offering disclosure rules for Federal savings associations and national banks), including the applicable form for a registration statement under § 16.15. Use of the registration forms required by § 16.15 is currently the standard industry practice, and should not increase burden on savings associations. The OCC also proposed to clarify the accounting guidance and requirements used in the preparation and filing of these forms, financial statements, and related financial data under part 192. The accounting guidance and requirements that applied to part 192 conversions and proxy materials were repealed in 2017.
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New § 192.5(d) would provide that the institution must prepare and present the form and content of financial statements and related financial data in a filing under part 192 in accordance with U.S. Generally Accepted Accounting Principles (GAAP), pursuant to 12 U.S.C. 1463(b)(2)(A), and other applicable accounting guidance and requirements as specified by the OCC in the relevant mutual to stock conversion forms required under § 192.5(b). The OCC notes that it is currently revising its forms under part 192, including Form AC (Application for Conversion); Form PS (Proxy Statement); Form OC (Offering Circular); and Form OF (Order Form), to conform with these amendments to part 192.

7

See
82 FR 8082 (January 23, 2017).

The OCC proposed a technical change to this section by defining “OCC” as the Office of the Comptroller of the Currency in the text of § 192.5(b).

The OCC received one comment on the proposed changes to § 192.5. The commenter supports the proposed changes to § 192.5 that would specify which forms a Federal savings association must use when converting from mutual to stock form because the changes would increase clarity. The OCC is finalizing the amendments to § 192.5 as proposed.

Electronic filing and computation of time.
The OCC proposed a new § 192.7 to encourage the electronic filing of all part 192 applications, notices, or other documents through
http://www.banknet.gov,
consistent with other licensing-related filings
8

and a new § 192.8 to clarify the computation of time under part 192 when the last day of a time period falls on a Saturday, Sunday, or Federal holiday. Specifically, in computing the time period, the OCC would exclude the day of the act or event (
e.g.,
the date an application is received by the OCC) from when the period begins to run. When the last day of a time period is a Saturday, Sunday, or Federal holiday, the time period would run until the end of the next day that is not a Saturday, Sunday, or Federal holiday. This amendment makes the computation of time under part 192 consistent with the computation of time rule that applies to corporate activities and transactions pursuant to 12 CFR part 5.
9

8

See
12 CFR 5.2(d).

9

See
12 CFR 5.12.

The OCC received one comment in support of the additions of new §§ 192.7 and 192.8. The OCC is finalizing §§ 192.7 and 192.8 as proposed.

Definitions.
In § 192.25, the OCC proposed to add definitions of “community offering,” “offering circular,” and “voluntary supervisory conversion,” because these terms are currently undefined in part 192. The proposal defined “community offering” as the offering to sell to members of the general public in the savings association's community the securities not subscribed for in the subscription offering and provides that the community offering may occur concurrently with the subscription offering and any syndicated community offering or upon conclusion of the subscription offering. The proposal defined “offering circular” as the securities offering materials for the conversion. The proposal defined “voluntary supervisory conversion” as a mutual to stock conversion for a savings association that is unable to complete a standard mutual to stock conversion under subpart A to part 192 and that meets the eligibility requirements of § 192.625.

The OCC also proposed to add several definitions to § 192.25 that are currently included in 12 CFR part 141 (Definition for regulations affecting Federal savings associations), and 12 CFR part 161 (Definitions for regulations affecting all savings associations). Although the definitions in parts 141 and 161 apply to part 192, the OCC believes that it is more appropriate, for clarity and as an aid to the reader, to include these definitions in part 192 than in a separate rule. Specifically, the proposal would add the definition of: (1) “appropriate Federal banking agency” from § 161.7, which is defined in section 3 of the FDIA (12 U.S.C. 1813(q)); (2) “demand accounts” from § 161.16, as meaning non-interest-bearing demand deposits that are subject to check or to withdrawal or transfer on negotiable or transferable order to the savings association and that are permitted to be issued by statute, regulation, or otherwise and are payable on demand; (3) “Federal savings association” from § 141.11, which means a Federal savings association or Federal savings bank chartered under section 5 of the Home Owners' Loan Act (HOLA) (12 U.S.C. 1464); (4) “savings account” from § 161.42, which means any withdrawable account, including a demand account, except this term does not mean a tax and loan account, a note account, a United States Treasury general account, or a United States Treasury time deposit-open account; and (5) “savings association” from § 161.43, which means a savings association as defined in section 3 of the FDIA (12 U.S.C. 1813(b)(1)). In addition, the OCC proposed to add the definition of “state” to mean any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands. This definition would be the same as the definition in § 161.50 as amended by this rule, discussed below.

Finally, the OCC proposed to add a definition of “state savings association,” defined to have the same definition as in section 3 of the FDIA (12 U.S.C. 1813(b)(3)). This definition is not included in parts 141 or 161. However, the OCC believes it would be helpful to define this term in part 192 because the proposed rule adds the definitions of other related terms.

The OCC received one comment on the amendments to § 192.25. The commenter supports the definitions of “community offering” and “offering circular” in § 192.25 because the commenter believes the definitions reflect common sense and clarity. However, the commenter believes that the definition of “voluntary supervisory conversion” is incomplete because it does not specify what is needed to

qualify for a voluntary supervisory conversion. The commenter believes that it would be more helpful to have a definition of the term that also includes the full eligibility requirements for a voluntary supervisory conversion. In the interest of keeping the definition concise, the OCC believes the cross-reference to § 192.625 in the definition of “voluntary supervisory conversion” to be sufficient, as the cross-reference directs the reader to the subpart of part 192 that specifies the eligibility requirements for this type of conversion. Therefore, the OCC is finalizing the amendments to § 192.25 as proposed.

Prior to conversion.
Twelve CFR 192.100 (Preparing for a conversion) requires that a savings association's board, or subcommittee of the board, meet with the appropriate Federal banking agency before adopting its plan of conversion. The OCC proposed to increase flexibility by allowing in person or electronic board meetings for purposes of § 192.100. The OCC also proposed to amend § 192.115 (Review of business plan by the appropriate Federal banking agency) to clarify that the business plan must be filed as a confidential exhibit to Form AC (Application for Conversion).

The OCC received one comment in support of the proposed changes to §§ 192.100 and 192.115. The OCC is finalizing the amendments to §§ 192.100 and 192.115 as proposed.

Plan of conversion.
Twelve CFR 192.135 (Notifying members of plan of conversion) requires that a savings association promptly notify its members that its board of directors adopted a plan of conversion and that a copy of the plan is available for the members' inspection in its home office and its branch offices. The savings association must make this notice by mailing a letter to each member or by publishing a notice in the local newspaper in every local community where the savings association has an office. The savings association may also issue a press release. The OCC proposed to increase flexibility and reduce burden by allowing a savings association to email a letter with a notification of the plan of conversion instead of mailing a letter to its members who receive electronic communication. The amendment also allows a savings association to make the press release available on its website.

The OCC received one comment in support of its proposed changes to § 192.135. The OCC is finalizing the amendments to § 192.135 as proposed.

Rejection of application for conversion.
Twelve CFR 192.150 (Information required in an application for conversion) provides that the appropriate Federal banking agency will not accept for filing, and will return, any application for conversion that is executed improperly, materially deficient, substantially incomplete, or that provides for unreasonable conversion expenses. The OCC proposed to amend § 192.150(b) to permit, rather than require, the appropriate Federal banking agency to return any application for conversion that is executed improperly, materially deficient, substantially incomplete, or that provides for unreasonable conversion expenses. A materially deficient or substantially incomplete application may not always be returned, especially if it is submitted electronically as a PDF document or if there are supervisory or enforcement reasons to retain the application.

The OCC received one comment in support of its proposed changes to § 192.150. The OCC finalizes the amendments to § 192.150 as proposed.

Notice of filing of application and comment process.
Twelve CFR 192.185 sets forth the process for commenters to submit public comments on an application for conversion. Section 192.185 currently requires a commenter to file the original and one copy of any comments on an application for conversion with the appropriate OCC licensing office. The OCC proposed to amend § 192.185 to require the commenter to file only one copy of the comment instead of both an original and copy of any comments with the appropriate OCC licensing office.

The OCC received one comment on the amendment to § 192.185. The commenter supports the proposed change because it eliminates unnecessary paperwork. The OCC finalizes the amendment to § 192.185 as proposed.

Proxy solicitation.
Twelve CFR 192.275 requires a savings association to file seven copies of its revised proxy materials and related documents as an amendment to its application for conversion. The OCC proposed to revise § 192.275 to reduce burden for savings associations by requiring the filing of only one copy of these materials with the OCC. The OCC also proposed to amend § 192.275(c) to remove the requirement that four copies of the revised proxy solicitation materials be marked to clearly indicate the changes from the prior filing. Instead, the savings association would need to file only one copy of the revised proxy solicitation materials that clearly indicates the changes.

The OCC received one comment on the proposed amendments to § 192.275. The commenter believes the amendments would eliminate unnecessary paperwork. The OCC is finalizing the amendments to § 192.275 as proposed.

Offering circular requirements.
Twelve CFR 192.300 currently requires a Federal savings association to file its offering circular with the Securities and Corporate Practices Division of the OCC and that a State savings association file its offering circular with the appropriate FDIC region in compliance with part 192 and Form OC, and, where applicable, part 197. The OCC proposed to amend § 192.300 to replace the cross-reference to repealed part 197 with a more specific cross-reference to the applicable SEC registration statement form required under 12 CFR 16.15. Additionally, the OCC proposed to clarify that a Federal savings association must file its offering circular with the appropriate OCC licensing office, not the Securities and Corporate Practices Division.

As a corresponding change, the OCC proposed to amend § 16.17 (Filing requirements and inspection of documents) to clarify that all registration statements, offering documents, amendments, notices, or other documents relating to a mutual to stock conversion pursuant to part 192 must be filed with the appropriate OCC licensing office.

The OCC proposed to amend §§ 192.305(b) and (c), 192.310(a), and 192.310(b) to clarify that the SEC, not the “appropriate Federal banking agency,” declares Federal savings association holding company offering circulars effective in mutual to stock conversions under part 192.

The OCC received one comment on the amendments to §§ 192.300, 192.305, and 192.310 and no comments on the amendment to § 16.17. The commenter supports the proposed changes to § 192.300 that would specify where the offering circular must be filed and what forms must be included because the changes will reduce the potential for confusion. The same commenter also supports the clarifications in §§ 192.305(b), (c), 192.310(a), and 192.310(b). The OCC finalizes the amendments to §§ 192.300, 192.305, 192.310, and 16.17 as proposed.

Offers and sales of stock.
Section 192.340(d) states that any person who is found to have violated the restrictions in § 192.340(b) may face prosecution or other legal action. To clarify and make consistent the actions that may result from engaging in any of the prohibited activities listed in § 192.340, the OCC proposed to amend § 192.340(d) to state that persons engaged in any of the activities listed in § 192.340(a) and

§ 192.340(b) may be subject to enforcement actions, civil money penalties, or criminal prosecution.

The OCC received one comment on the amendment to § 192.340. The commenter disagrees with the proposed changes to § 192.340(d) that impose sanctions for violating the conversion share restrictions found in § 192.340(a) and (b). The commenter believes that the OCC already has broad powers to seek an enforcement action and that the proposed changes are unnecessary. The OCC is finalizing the amendment to § 192.340 as proposed because the change clarifies the variety of tools available to address violations of §§ 192.340(a) and (b).

Priority of accounts.
Twelve CFR 192.430 describes the requirements for charter amendments, charter cancellations, and new charters that apply to a savings association conducting a conversion under part 192. The OCC proposed to add a new paragraph in § 192.430 to require that, in any conversion pursuant to this section that involves a mutual holding company, the charter of each resulting subsidiary savings association of the holding company must contain a provision, specified in § 192.430(d), indicating that the claims of depositors of the savings association have the same priority as the claims of general creditors of the savings association not having priority (other than any priority arising or resulting from consensual subordination) over other general creditors of the association. The former OTS regulation for mutual holding companies, 12 CFR 575.9(b) (2011), originally required the inclusion of a similar priority of accounts provision in the charters of subsidiary savings associations of mutual holding companies, regardless of whether the subsidiary had a State or Federal charter. When promulgating 12 CFR 575.9(b), the OTS stated that the purpose of the priority of accounts provision was to ensure that claims of depositors of the insured institution were not relegated to a lower priority because the deposits confer membership rights in the association's mutual holding company.
10

However, after the enactment of the Dodd-Frank Act, which transferred the holding company regulations of the former OTS to the Federal Reserve Board,
11

the Federal Reserve Board republished 12 CFR 575.9(b) as a Federal Reserve Board regulation without including this charter requirement because it related to savings associations and not mutual holding companies.
12

The OCC believes that the priority of accounts provision in the former OTS regulation protected member rights, and the amendment reinstates this charter requirement for all savings association subsidiaries of a mutual holding company.
13

10

See
56 FR 1126, 1133 (January 11, 1991).

11
Section 312(b)(1), Public Law 111-203. 121 Stat. 1376 (July 21, 2010).

12

See
76 FR 56508, 56523 (September 13, 2011) (“[This section] contains the provisions from section 575.9 concerning charters, as revised to delete unnecessary provisions specific to savings associations and to reflect the change in supervisory authority.”)
See also,
12 CFR 239.13.

13
Twelve CFR 5.21 requires all Federal mutual savings association charters to include this priority of accounts provision.

The OCC received one comment on the addition of new paragraph (d) to § 192.430. The commenter is uncertain that the addition regarding priority of accounts is necessary. While the commenter acknowledges that the OCC may view the addition as protective of depositor rights, the commenter also believes that the FDIC rules for conservatorship and receivership would govern any asset distribution. Because the FDIC has the definitive role, the commenter believes that it is not clear that the new language on priority of accounts is needed. Further, the commenter suggests that if the OCC includes the new priority of accounts language in § 192.430(d), it also adds a proviso that recognizes that the rights of depositors are “subject to any applicable legal and regulatory requirements affecting depositors' rights.” In response, the OCC notes that, notwithstanding this priority of accounts provision, if a savings association is placed in conservatorship or receivership, its assets would be distributed in accordance with the FDIA, 12 U.S.C. 1811,
et seq.,
and the depositor preference provisions of section 11(d)(11) of the FDIA, 12 U.S.C. 1821(d)(11). The OCC believes the addition of the priority of accounts provision is crucial to protecting members' rights by ensuring that claims of depositors of the insured institution are not relegated to a lower priority because the deposits confer membership rights in the association's mutual holding company. For these reasons, the OCC is finalizing § 192.430(d) as proposed.

Liquidation account.
A liquidation account represents the potential interest of all the savings association's eligible account holders and supplemental eligible account holders in the savings association's net worth at the time of conversion. A liquidation sub-account represents the potential interest of each individual eligible account holder and supplemental account holder in the liquidation account. Twelve CFR 192.460 sets forth how a savings association determines the initial balances of liquidation sub-accounts. The OCC proposed to revise § 192.460(a)(1) to provide that a savings association must calculate the initial liquidation sub-account balance of each eligible and supplemental eligible account holder at the time of the conversion. Because current § 192.460 does not explain when a savings association must perform the calculation, this amendment clarifies that the initial liquidation sub-accounts must be calculated at the time of the conversion.

Section 192.460(a)(1) provides the calculation for a savings account held by an eligible account holder, which is to multiply the initial balance of the liquidation account by a fraction that has as its numerator the qualifying deposit in the savings account expressed in dollars on the eligibility record date and as its denominator the total qualifying deposits of all eligible account holders on the eligibility record date. Section 192.460(a)(2) provides the same calculation for a savings account held by a supplemental eligible account holder, except that the eligibility record date is replaced with the supplemental eligibility record date. However, the denominator used for the calculation of the initial sub-account balances for both eligible account holders and supplemental eligible account holders is incorrect because the denominator in the current regulation does not include both the deposits of eligible account holders and the deposits of the supplemental eligible account holders. This results in both eligible account holders and supplemental account holders having a greater claim than their appropriate portion of the liquidation account.

The amendments correct this error by inserting language in § 192.460 similar to that in the previous OTS regulation, renumbering the § 192.460(a)(1) and (a)(2) calculations to be in § 192.460(a)(2) and (a)(3), making the denominator in the fractions in § 192.460(a)(2) and (a)(3) the total sub-account balances of eligible account holders
and
supplemental eligible account holders as calculated in proposed revised § 192.460(a)(5). As proposed, § 192.460(a)(5) provides that the denominator for calculating the initial sub-account balance of each eligible and supplemental eligible account holder is the sum of the numerator calculations in § 192.460(a)(2) through (a)(4). These changes make clear that the eligible account holders and the supplemental

eligible account holders would be allocated their proportionate shares of the liquidation account (the association's net worth, as defined in 12 CFR 192.455).

In addition, the 2002 OTS amendments to the liquidation account provision inadvertently removed language that addressed savings accounts that increased in value between the eligible record date and the supplemental eligibility record date.
14

As a result, the current regulation does not address accounts that increased in value between the two dates. Therefore, the OCC proposed to add language in § 192.460(a)(4) providing that for a savings account held on both the eligibility record date and the supplemental eligibility record date, the amount of the qualifying deposit for calculating the sub-account is the higher account balance of the savings account on either the eligibility record date or the supplemental eligibility record date. The initial sub-account is calculated by multiplying the liquidation account balance by the following fraction: The numerator is the higher amount of the qualifying deposit in the savings account on either the eligibility record date or the supplemental eligibility record date and the denominator is the calculation in proposed § 192.460(a)(5).

14

See
67 FR 52009 (August 9, 2002). The pre-2002 OTS regulation at 12 CFR 563b.3(f)(4) stated “The initial subaccount balance for a savings account held by an eligible account holder and/or supplemental eligible account holder shall be determined by multiplying the opening balance in the liquidation account by a fraction of which the numerator is the amount of qualifying deposits in such savings account on the eligibility record date and/or the supplemental eligibility record date and the denominator is the total amount of qualifying deposits of all eligible account holders and supplemental eligible account holders in the converting savings association on such dates. For savings accounts in existence at both dates, separate subaccounts shall be determined on the basis of the qualifying deposits in such saving accounts on such record dates.”

The OCC invited comment on whether the proposed changes to § 192.460 help to clarify the computation of liquidation sub-account balances, asking specifically whether commenters have any alternative methods for clarifying these computations. The OCC received one comment in response. The commenter requested that, with respect to the calculation of the initial balance of liquidation sub-accounts and required adjustments in §§ 192.460 and 192.470, the OCC provide a more detailed explanation as to how the calculation of sub-accounts prohibits sub-account increases. The commenter believes that the statements in §§ 192.460(b) and 192.470(b) that a Federal savings association may not increase the balance of liquidation sub-accounts are insufficient to prevent confusion. The commenter appears to suggest that the statements should instead be included in the calculation formulas set forth in §§ 192.460(a) and 192.470(a).

In response to the comment, § 192.470(a)(1) is revised to clarify that the liquidation sub-account balance must not be increased and to provide that a savings association must reduce the balance of an eligible account holder's or supplemental eligible account holder's sub-account if the deposit balance in the account holder's savings account at the close of business on any annual closing date (ACD)
15

falls below the lesser of: (i) The deposit balance in the account holder's savings account as of the relevant eligibility record date; or (ii) the deposit balance in the account holder's savings account as of its lowest balance as of any subsequent ACD. Also, § 192.470(a)(2) is revised to clarify that the proportionate reduction in the liquidation sub-account must be made from its balance at the time of conversion and to provide that the reduction in the account holder's liquidation sub-account from its balance at the time of conversion must be proportionate to the reduction in the account holder's savings account from its balance at the time of conversion. In addition, § 192.470(e) is revised to clarify that, if there is a complete liquidation, the savings association must provide the account holder of a liquidation sub-account with a liquidation distribution in the amount of the account holder's remaining liquidation sub-account balance.

15
For purposes of § 192.470, the annual closing date (ACD) is the end of the savings association's fiscal year.

For example, at the time of conversion, the account holder's savings account balance is $10,000 and the account holder's liquidation sub-account balance is $1,000. At ACD 1, if the savings account balance is $8,000, then the liquidation sub-account balance is proportionately reduced from $1,000 by 20 percent to $800. At ACD 2, if the savings account balance is $9,000, then the liquidation sub-account balance is $800. At ACD 3, if the savings account balance is $5,000, then the liquidation sub-account balance is proportionately reduced from $1,000 by 50 percent to $500.

Contributions to charitable organizations.
Twelve CFR 192.550 permits a savings association to contribute some of its conversion shares or proceeds to a charitable organization, provided certain requirements are met. One of these requirements, set forth at 12 CFR 192.575(a)(3), is that the charitable organization must annually provide the appropriate Federal banking agency with a copy of the annual report that it submitted to the IRS. The OCC proposed to remove this requirement because it is often not used and, if necessary, the OCC may obtain it from the IRS or request it directly from the charitable organization.

The OCC received one comment in support of removal of paragraph (a)(3) in § 192.575 and finalizes the amendment as proposed.

Prohibition on self-dealing for charitable organizations.
12 CFR 192.575 (Other requirements for charitable organizations) provides that a charitable organization may not engage in self-dealing. The OCC proposed to amend § 192.575(a) to provide that a charitable organization
must
not engage in self-dealing, to emphasize the prohibition on self-dealing. The OCC also proposed to move the requirement that the charitable organization comply with all laws necessary to maintain its tax-exempt status under the Internal Revenue Code to a new paragraph (a)(5) in § 192.575.

The OCC received no comments on the proposed amendments to § 192.575(a) and finalizes the amendments as proposed.

Voluntary supervisory conversions.
Section 192.600 describes the purposes of subpart B to part 192, which governs voluntary supervisory mutual to stock conversions. A voluntary supervisory conversion is a transaction to recapitalize an eligible mutual savings association where the association's members have no rights of approval or participation and no rights to the continuance of any legal or beneficial ownership interest in the converted association pursuant to a plan of voluntary supervisory conversion approved by a majority of the board of directors of the converting savings association. The OCC proposed new language in § 192.600 to clarify that a voluntary supervisory mutual to stock conversion would be appropriate when the appropriate Federal banking agency and, in the case of a State-chartered savings association, the appropriate State banking regulator, determines that the savings association has demonstrated that it is unable to complete a standard mutual to stock conversion under subpart A to part 192.

Section 192.650 sets forth the information required to be included in a plan of voluntary supervisory conversion. Among other things, current § 192.650 requires the savings association's name and address; the

name, address, date and place of birth, and social security number of each proposed purchaser of conversion shares. The OCC proposed to remove the personal identifying information from the plan of voluntary supervisory conversion (
i.e.,
the name, address, date and place of birth, and social security number of each proposed purchaser of conversion shares) as the OCC does not believe the inclusion of such information is necessary or appropriate. The plan is a publicly available document and the OCC believes that requiring this information raises privacy concerns. The OCC also proposed to amend § 192.650 to remove from the plan of voluntary supervisory conversion the title, per-unit par value, number, and per-unit and aggregate offering price of shares that the savings association will issue; and the number and percentage of shares that each investor will purchase. The OCC does not find this information to be necessary in the plan of voluntary supervisory conversion. In addition, the OCC proposed to move the information required in the plan by § 192.650(e) (the aggregate number and percentage of shares that each director, officer, and any affiliates or associates of the director or officer will purchase) to the application for voluntary supervisory conversion in § 192.660(d)(5). The OCC believes this information more appropriately belongs in the application, rather than the plan, because the OCC reviews these proposed purchases during the application review process and because the proposed purchases may change during the review of the application. As a result, under revised § 192.650, a plan for voluntary supervisory conversion would be required to contain a complete description of the proposed voluntary supervisory conversion that also describes plans for any liquidation account and certified copies of all resolutions relating to the conversion adopted by the savings association's board of directors.

Twelve CFR 192.660 specifies the information a savings association must include in its application for voluntary supervisory conversion. To assist in its review of these applications, the OCC proposed to require the application to contain some additional information. As described in the preceding paragraph, the OCC proposed to relocate the information contained in current § 192.650(e) (the aggregate number and percentage of shares that each director, officer, and any affiliates or associates of the director or officer will purchase) to § 192.660(d)(5). The OCC proposed to add a new § 192.660(e)(3) to require that the voluntary supervisory conversion application include any securities offering circular and other securities disclosure materials that the savings association has prepared to use in connection with the proposed voluntary supervisory conversion. In addition, the OCC proposed to require that the application include a statement indicating the role in the successor savings association each director, officer, and affiliate of the savings association or associate of the director or officer will have after the conversion. The OCC finds that information on the role that each director, officer, affiliate, and associate will have after the conversion to be necessary for consideration of the decision factors in § 192.670(c) and (d).
16

Finally, the OCC proposed to require as part of this application any other information requested by the OCC, as authorized by law.

16
Under § 192.670(c) and (d), the appropriate Federal banking agency will generally approve a voluntary supervisory conversion application unless it determines the savings association or its acquiror, or the controlling parties or directors and officers of the savings association or its acquiror, have engaged in unsafe or unsound practices in connection with the voluntary supervisory conversion, or the savings association fails to justify an employment contract incidental to the conversion, or the employment contract will be an unsafe or unsound practice or represent a sale of control.

The OCC received one comment letter on subpart B of part 192 concerning voluntary supervisory conversions. As a general matter, the commenter believes that the policy objectives of this subpart are confusing and that it could benefit from further review and consultation with industry stakeholders to clarify the goals of the subpart. The commenter urged the OCC to clearly state the policy objectives and goals of voluntary supervisory conversions and describe in general terms its expectations for the conversion.

The commenter also had several specific recommendations for subpart B of part 192 that are unrelated to the OCC's proposed amendments. First, the commenter states that it is not clear when a financial institution qualifies as “significantly undercapitalized” under § 192.625(a)(1). The commenter asserts that, in the past, the OTS tied the component to capital standards and Prompt Corrective Action (PCA). The commenter believes that the OCC should clarify whether PCA levels are a triggering event for a voluntary supervisory conversion and, if so, expressly cross-reference those provisions and state whether there will be PCA waivers or growth restrictions.

In response to the comment regarding PCA, the OCC may take into account the PCA levels and other capital standards when determining a savings association's eligibility for a voluntary supervisory conversion. However, the PCA levels are not the sole determinant of: A “significantly undercapitalized” or “undercapitalized” determination on eligibility under § 192.625(a)(1); a “severe financial circumstances” determination on eligibility under § 192.625(a)(2); and an “adequately capitalized” determination on viability after a voluntary supervisory conversion under § 192.625(b)(1). The PCA category is only one factor in making these decisions. Among other factors, these decisions may include the OCC assessing capital adequacy based on the savings association's risk profile and risk management.
17

Therefore, the OCC declines to cross-reference the PCA provisions in § 192.625.

17
The PCA capital categories generally are not to be considered indications of capital adequacy under 12 CFR 3, the OCC's capital rules. For example, a bank that is well capitalized for the purposes of PCA may be found by the OCC to have inadequate capital for the purposes of 12 CFR 3. The OCC assesses capital adequacy based on the bank's risk profile relative to its risk management.
See
OCC Bulletin 2018-33, Prompt Corrective Action: Guidelines and Rescissions (September 28, 2018), available at
https://www.occ.gov/news-issuances/bulletins/2018/bulletin-2018-33.html.

Second, the commenter asserts that the market supporting voluntary supervisory conversions is limited and that subordinated debt may be an alternative means to help an undercapitalized Federal savings association become adequately capitalized and viable. Because the OCC did not propose any subordinated debt-related amendments in the proposed rule, the OCC declines to address this concern in the final rule.

Finally, the commenter believes that the provision in § 192.670(d) that generally limits employment contracts to one year for existing management of Federal savings associations that are undergoing voluntary supervisory conversions is in potential conflict with the provision in § 192.660(d)(5) which recognizes that directors, officers, and their affiliates and associates may participate in a voluntary supervisory conversion. The commenter is concerned that an officer with a one-year contract is unlikely to make a significant investment in a Federal savings association. The OCC disagrees that § 192.670(d) and 192.660(d)(5) are in conflict. The OCC believes that it is not likely that the deciding factor for significant investment hinges on whether the officer's employment contract is limited to one year and that

there is no evidence of correlation between contract length and investment.

Federal Home Loan Bank (FHLB) membership.
The OCC proposed to remove the references to FHLB membership in §§ 192.135(b)(12) and 192.660(g)(4) because Federal savings associations are no longer required to be members of the FHLB System.
18

The existing provisions of part 192 that reference FHLB membership were drafted when FHLB System membership was required for Federal savings associations. Whether the Federal savings association retains FHLB membership has no impact on the OCC's consideration of an application for a voluntary supervisory conversion in § 192.660(g)(4), nor would it be of interest to members as part of the notice in § 192.135(b)(12).

18
In 1999, HOLA was amended to no longer require Federal savings associations to become FHLB members.
See
12 U.S.C. 1464(f); Public Law 106-102 section 603 (1999).

The OCC received one comment in support of the removal of the references to FHLB membership in §§ 192.135 and 192.660 and finalizes these amendments as proposed.

Technical amendments.
The OCC proposed several global technical changes to part 192. First, the OCC proposed to change the text of part 192 from the OTS question and answer format to the standard format of the national bank rules in 12 CFR parts 1 through 50. Second, the OCC proposed to add paragraph headings in compliance with
Federal Register
guidelines. Third, the OCC proposed to clarify that calendar days are used for computations of time under part 192. Finally, the OCC proposed to replace cross-references to the repealed 12 CFR part 197 (2017) (Securities offering disclosure rules) with cross-references to the OCC rule that now applies to Federal savings associations, 12 CFR part 16.

Furthermore, the OCC proposed to make a number of technical changes to specific sections of part 192. First, the OCC proposed to amend § 192.200 to remove the cross-reference to the FDIC's repealed capital rules in subpart Z to 12 CFR part 390. In addition, the OCC proposed to remove from § 192.520(b) the cross-reference to 12 CFR part 167 and replace it with a cross-reference to integrated 12 CFR part 3. Finally, the OCC proposed to amend § 192.660 by replacing an outdated cross-reference to the Thrift Financial Report with the Call Report.

The OCC received one comment in support of the technical amendments to part 192 and finalizes the amendments as proposed.

H. Miscellaneous Technical Amendments

The OCC proposed to amend subpart J to 12 CFR part 3 to correct an out-of-date cross-reference. Currently, at 12 CFR 3.601(b), OCC regulations provide, in part, that a capital directive (
i.e.,
an order issued by the OCC to a national bank or Federal savings association to take certain actions to achieve and/or maintain a specified capital ratio) is enforceable in the same manner and to the same extent as a final cease and desist order as defined under 12 U.S.C. 1818(k). Because section 1818(k) has been repealed, the OCC proposed to amend § 3.601(b) to provide instead that a capital directive is enforceable under section 1818(i) in the same manner and to the same extent as an effective and outstanding cease and desist order issued pursuant to section 1818(b) that has become final. This revision is consistent with the OCC's existing authority as set forth under the International Lending Supervision Act at 12 U.S.C. 3907(b) and is not intended to have any substantive impact on the procedures for the enforcement of a capital directive.

The OCC proposed to amend 12 CFR 4.14(a)(9) to remove cross-references to 12 CFR parts 194 (2017) and 197, which have been repealed. The requirements in former parts 194 and 197 have been added to 12 CFR parts 11 and 16, respectively, and the cross-references to those parts have been added to § 4.14(a)(9) accordingly.

The OCC proposed to amend 12 CFR 4.34(c)(2), 4.37(a)(2)(ii), 108.6(d), 108.7(c) and (d), and 112.4 to change “the OCC's Enforcement and Compliance Division” to “the OCC's Law Department.” Similarly, the proposal would amend 12 CFR 11.3(a), 16.17(a) and (f), and 16.30(a) by removing the phrase “the OCC's Securities and Corporate Practices Division” and replacing it with “the OCC's Law Department.”

The OCC proposed to amend 12 CFR 8.2 to change “full service” to “full-service.”

The OCC proposed to amend 12 CFR 23.6 to change an incorrect singular subject and verb to the correct plural subject and verb.

The OCC proposed to amend 12 CFR 26.6(b)(4) to correct a cross-reference. The cross-reference to § 5.51(c)(6) is incorrect; the correct cross-reference is § 5.51(c)(7).

The OCC proposed to remove several definitions in the OCC's rules for Federal and State savings associations that are no longer necessary. These definitions are currently included in 12 CFR part 141 (Definition for regulations affecting Federal savings associations) and 12 CFR part 161 (Definitions for regulations affecting all savings associations). These definitions apply only to the OCC's rules in 12 CFR parts 100 through 195 that the former OTS originally issued and the OCC republished as OCC rules pursuant to the Dodd-Frank Act. Because the OCC has integrated and amended a number of these rules, many of the terms defined in parts 141 and 161 are no longer used in parts 100 through 195 and, therefore, these definitions are no longer necessary. Specifically, the OCC proposed to remove the definitions of “Act,” “debit card,” “improved nonresidential real estate,” “improved residential real estate,” “interim Federal savings association,” “interim state savings association,” “unimproved real estate,” “withdrawal value of a savings account,” “accountholder,” “audit period,” “land loan,” “low-rent housing,” “Money Market Deposit Accounts,” “Negotiable Order of Withdrawal (NOW) accounts,” “nonresidential construction loan,” “nonwithdrawable account,” “parent company,” “principal office,” “service corporation,” and “subordinated debt security.”

The OCC also proposed to amend the definition of “state” in 12 CFR 161.50 so that it is identical to the definition of this term in section 3 of the FDIA (12 U.S.C. 1813(a)(3)). Specifically, the definition includes any territory of the United States, American Samoa, the Trust Territory of the Pacific Islands, and the Northern Mariana Islands, in addition to a State, the District of Columbia, Guam, Puerto Rico, and the Virgin Islands.

The OCC proposed to amend 12 CFR 160.60(b)(3) to remove a cross-reference to the repealed 12 CFR 163.43 and replace it with 12 CFR 31.2. The rule also amends parts 160 and 163 to define “OCC” as the Office of the Comptroller of the Currency in the text of §§ 160.1 and 163.47 and to define “FDIC” as the Federal Deposit Insurance Corporation in § 163.80.

Finally, the OCC proposed to update the authority citation for 12 CFR 195.11(a) to include a citation to section 312 of the Dodd-Frank Act (12 U.S.C. 5412(b)(2)(B)).

The OCC received one comment in support of the miscellaneous, technical amendments and finalizes them as proposed.

III. Regulatory Analysis

Regulatory Flexibility Act

The Regulatory Flexibility Act, 5 U.S.C. 601
et seq.,
(RFA), requires an agency, in connection with a final rule, to prepare a final Regulatory Flexibility Analysis describing the impact of the rule on small entities (defined by the Small Business Administration (SBA) for purposes of the RFA to include commercial banks and savings institutions with total assets of $600 million or less and trust companies with total revenue of $41.5 million or less) or to certify that the final rule would not have a significant economic impact on a substantial number of small entities. The OCC currently supervises approximately 782 small entities, of which 258 are Federal savings associations.
19

The final rule places one new mandate on Federal savings associations to submit additional information to the OCC as part of their voluntary supervisory conversion applications to convert from mutual to stock form pursuant to 12 CFR 192.660. Because the additional reporting requirement for Federal savings associations that are converting from mutual to stock form through a voluntary supervisory conversion would likely require minimal additional effort and cost relative to the overall cost of the conversion, the costs associated with this additional information would likely be
de minimis.
Therefore, the OCC certifies that the final rule would not have a significant economic impact on a substantial number of OCC-supervised small entities.

19
The OCC bases its estimate of the number of small entities on the SBA's size thresholds for commercial banks and savings institutions, and trust companies, which are $600 million and $41.5 million, respectively. Consistent with the General Principles of Affiliation 13 CFR 121.103(a), the OCC counts the assets of affiliated financial institutions when determining if we should classify an OCC-supervised institution a small entity. The OCC uses December 31, 2018, to determine size because a “financial institution's assets are determined by averaging the assets reported on its four quarterly financial statements for the preceding year.” See footnote 8 of the U.S. Small Business Administration's
Table of Size Standards.

Unfunded Mandates Reform Act of 1995

Consistent with the Unfunded Mandates Reform Act, the OCC's review considers whether the mandates imposed by the final rule may result in an expenditure of $100 million or more (currently $154 million adjusted for inflation) by state, local, and tribal governments, or by the private sector, in any one year. The final rule places one new mandate on Federal savings associations to submit additional information to the OCC as part of their voluntary supervisory conversion applications to convert from mutual to stock form pursuant to 12 CFR 192.660. This additional requirement for Federal savings associations to submit additional information to the OCC would likely require minimal effort and cost relative to the overall cost of the conversion. Therefore, we conclude that the final rule would not result in the expenditure of $100 million or more annually ($154 million adjusted for inflation) by state, local, and tribal governments, or by the private sector.

Paperwork Reduction Act

Under the Paperwork Reduction Act of 1995,
20

the OCC may not conduct or sponsor, and a person is not required to respond to, an information collection unless the information collection displays a valid OMB control number. The OCC submitted the information collection requirements contained in the final rule at the proposed rule stage. OMB filed a comment on the submission instructing the OCC to resubmit the collection at the final rule stage. Therefore, the OCC has submitted the information collection requirements imposed by the final rule to OMB for review.

20
44 U.S.C. 3501
et seq.

The final rule adds a new § 192.660(e)(3) to require that the voluntary supervisory conversion application include a statement indicating the role in the successor savings association each director, officer, and affiliate of the savings association or associate of the director or officer will have after the conversion. This burden for this requirement will be added to the existing information collection for OCC's Licensing Manual.

Title:
Voluntary Supervisory Conversion Application: Successor Savings Association Roles.

OMB Control No.:
1557-NEW.

Frequency of Response:
On occasion.

Affected Public:
Businesses or other for-profit organizations.

Estimated Number of Respondents:
1.

Estimated Burden per Respondent:
2 hours.

Estimated Total Annual Burden:
2 hours.

In the proposed rule, the OCC invited comments on:

(a) Whether the collections of information are necessary for the proper performance of the functions of the OCC, including whether the information has practical utility;

(b) The accuracy of the OCC's estimates of the burden of the collections of information;

(c) Ways to enhance the quality, utility, and clarity of the information to be collected;

(d) Ways to minimize the burden of the collections on respondents, including through the use of automated collection techniques or other forms of information technology; and

(e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information.

The OCC received no comments on the information collection requirements.

Riegle Community Development and Regulatory Improvement Act of 1994

Pursuant to section 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA),
21

in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on IDIs, each Federal banking agency must consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, section 302(b) of RCDRIA requires new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on IDIs generally to take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.
22

21
12 U.S.C. 4802(a).

22

Id.
at 4802(b).

In accordance with these provisions of RCDRIA, the OCC considered any administrative burdens, as well as benefits, that the final rule would place on IDIs and their customers in determining the effective date and administrative compliance requirements of the final rule. The final rule contains one new mandate for IDIs in the form of additional reporting requirements for voluntary supervisory conversion applications under 12 CFR 192.660(e)(3). Because the additional reporting requirements for Federal savings associations that are converting from mutual to stock form through a voluntary supervisory conversion would likely require minimal additional effort and cost relative to the overall cost of the conversion, we expect that the additional burden of collecting this information for the application will be
de minimis.
In conjunction with the

requirements of RCDRIA, the final rule is effective on August 13, 2020.

Congressional Review Act

For purposes of Congressional Review Act (CRA), the Office of Management and Budget (OMB) makes a determination as to whether a final rule constitutes a “major” rule.
23

If a rule is deemed a “major rule” by the OMB, the CRA generally provides that the rule may not take effect until at least 60 days following its publication.
24

23
5 U.S.C. 801
et seq.

24
5 U.S.C. 801(a)(3).

The CRA defines a “major rule” as any rule that the Administrator of the Office of Information and Regulatory Affairs of the OMB finds has resulted in or is likely to result in (1) an annual effect on the economy of $100,000,000 or more; (2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions; or (3) significant adverse effects on competition, employment, investment, productivity, innovation, or on the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.
25

As required by the CRA, the OCC will submit the final rule and other appropriate reports to Congress and the Government Accountability Office for review.

25
5 U.S.C. 804(2).

List of Subjects

12 CFR Part 3
Administrative practice and procedure, Banks, banking, Federal Reserve System, Investments, National banks.

12 CFR Part 4
Administrative practice and procedure, Freedom of Information, Individuals with disabilities, Minority businesses, Organization and functions (Government agencies), Reporting and recordkeeping requirements, Women.

12 CFR Part 11
Business information, National banks, Reporting and recordkeeping requirements, Securities.

12 CFR Part 16
National banks, Reporting and recordkeeping requirements, Securities.

12 CFR Part 19
Crime, Equal access to justice, Investigations, National banks, Penalties, Securities.

12 CFR Part 23
Banks, banking, National banks, Reporting and recordkeeping requirements.

12 CFR Part 26
Antitrust, Holding companies, National banks.

12 CFR Part 32
National banks, Reporting and recordkeeping requirements.

12 CFR Part 108
Administrative practice and procedure, Crime, Savings associations.

12 CFR Part 112
Administrative practice and procedure, Investigations.

12 CFR Part 141
Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 160
Consumer protection, Investments, Manufactured homes, Mortgages, Reporting and recordkeeping requirements, Savings associations, Securities.

12 CFR Part 161
Administrative practice and procedure, Savings associations.

12 CFR Part 163
Accounting, Administrative practice and procedure, Advertising, Crime, Currency, Investments, Mortgages, Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 192
Reporting and recordkeeping requirements, Savings associations, Securities.

12 CFR Part 195
Community development, Credit, Investments, Reporting and recordkeeping requirements, Savings associations.

For the reasons set out in the preamble, the OCC amends 12 CFR chapter I as follows:

PART 3—CAPITAL ADEQUACY STANDARDS

1. The authority citation for part 3 continues to read as follows:

Authority:

12 U.S.C. 93a, 161, 1462, 1462a, 1463, 1464, 1818, 1828(n), 1828 note, 1831n note, 1835, 3907, 3909, and 5412(b)(2)(B).

§ 3.2
[Amended]

2. Section 3.2 is amended in in paragraph (1) of the definition of “Qualifying master netting agreement” by adding “and” after “counterparty;”.

3. Section 3.601 is amended by revising paragraph (b) to read as follows:

§ 3.601
Purpose and scope.

(b) A directive issued under this rule, including a plan submitted under a directive, is enforceable under the provisions of 12 U.S.C. 1818(i) in the same manner and to the same extent as an effective and outstanding cease and desist order issued pursuant to 12 U.S.C. 1818(b) that has become final. Violation of a directive may result in assessment of civil money penalties in accordance with 12 U.S.C. 3909(d).

PART 4—ORGANIZATION AND FUNCTIONS, AVAILABILITY AND RELEASE OF INFORMATION, CONTRACTING OUTREACH PROGRAM, POST-EMPLOYMENT RESTRICTIONS FOR SENIOR EXAMINERS

4. The authority citation for part 4 continues to read as follows:

Authority:

5 U.S.C. 301, 552; 12 U.S.C. 1, 93a, 161, 481, 482, 484(a), 1442, 1462a, 1463, 1464 1817(a), 1818, 1820, 1821, 1831m, 1831p-1, 1831o, 1833e, 1867, 1951
et seq.,
2601
et seq.,
2801
et seq.,
2901
et seq.,
3101
et seq.,
3401
et seq.,
5321, 5412, 5414; 15 U.S.C. 77uu(b), 78q(c)(3); 18 U.S.C. 641, 1905, 1906; 29 U.S.C. 1204; 31 U.S.C. 5318(g)(2), 9701; 42 U.S.C. 3601; 44 U.S.C. 3506, 3510; E.O. 12600 (3 CFR, 1987 Comp., p. 235).

§ 4.14
[Amended]

5. Section 4.14 is amended in paragraph (a)(9) by removing the phrase “parts 11, 16, 194 or 197 of this chapter” and adding in its place “part 11 or 16 of this chapter”.

§ 4.34
[Amended]

6. Section 4.34 is amended in paragraph (c)(2) by removing the phrase “and Compliance”.

§ 4.37
[Amended]

7. Section 4.37 is amended in paragraph (a)(2)(ii) by removing the phrase “and Compliance”.

PART 11—SECURITIES EXCHANGE ACT DISCLOSURE RULES

8. The authority citation for part 11 continues to read as follows:

Authority:

12 U.S.C. 93a, 1462a, 1463, 1464 and 5412(b)(2)(B); 15 U.S.C. 78j-1(m), 78m, 78n, 78p, 78w, 78l, 7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265.

§ 11.3
[Amended]

9. Section 11.3 is amended:

a. In paragraph (a)(1)(i) and the second sentence of paragraph (a)(1)(ii) by removing the phrase “the Securities and Corporate Practices Division” and by adding the phrase “the OCC's Law Department” in its place; and
b. In the first sentence of paragraph (a)(1)(ii) by removing the phrase “the OCC's Securities and Corporate Practices Division” and by adding the phrase “the OCC's Law Department” in its place.

PART 16—SECURITIES OFFERING DISCLOSURE RULES

10. The authority citation for part 16 continues to read as follows:

Authority:

12 U.S.C. 1
et seq.,
93a, 1462a, 1463, 1464, and 5412(b)(2)(B).

§ 16.15
[Amended]

11. Section 16.15 is amended in paragraph (e) by adding the phrase “or as part of its offering statement for the offer and sale of its securities pursuant to 12 CFR 16.8,” after “registration statement for the offer and sale of its securities,”.

12. Section 16.17 is amended:
a. In paragraph (a), by removing the phrase “the OCC's Securities and Corporate Practices Division” and by adding the phrase “the OCC's Law Department” in its place;
b. In paragraph (b), by adding a sentence at the end; and
c. In the first and second sentences of paragraph (f), by removing the phrase “the OCC's Securities and Corporate Practices Division” and by adding the phrase “the OCC's Law Department” in its place.
The addition reads as follows:

§ 16.17
Filing requirements and inspection of documents.

(b) * * * All registration statements, offering documents, amendments, notices, or other documents relating to a mutual to stock conversion pursuant to 12 CFR part 192 must be filed with the appropriate OCC licensing office at
http://www.banknet.gov/.

§ 16.30
[Amended]

13. Section 16.30 is amended in paragraph (a) by removing the phrase “the OCC's Securities and Corporate Practices Division” and by adding the phrase “the OCC's Law Department” in its place.

PART 19—RULES OF PRACTICE AND PROCEDURE

14. The authority citation for part 19 continues to read as follows:

Authority:

5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 93a, 164, 481, 504, 1817, 1818, 1820, 1831m, 1831o, 1832, 1884, 1972, 3102, 3108(a), 3110, 3909, and 4717; 15 U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, 78w, and 1639e; 28 U.S.C. 2461 note; 31 U.S.C. 330 and 5321; and 42 U.S.C. 4012a.

§ 19.241
[Amended]

15. Section 19.241 is amended by:
a. Removing the phrase “Federal Deposit Insurance Act (FDI Act)” and adding in its place “FDIA”;
b. Removing the phrase “section 36 of the FDI Act” and adding in its place “section 36 of the FDIA”; and
c. Removing the phrase “insured national banks and Federal branches and agencies of foreign banks” and adding in its place the phrase “insured national banks, insured Federal savings associations, and insured Federal branches of foreign banks”.

§ 19.242
[Amended]

16. Section 19.242 is amended:
a. By removing the word “shall” in the introductory text; and
b. In paragraph (b), by adding “(12 U.S.C. 1831m)” after the phrase “section 36 of the FDIA”.

17. Section 19.243 is amended:
a. In paragraph (a)(1) introductory text, by adding “(12 U.S.C. 1831m)” after “section 36 of the FDIA”;
b. In paragraph (a)(1) introductory text, by adding the phrase “, insured Federal savings associations, or insured Federal branches of foreign banks” after the phrase “national banks”;
c. In paragraphs (a)(1)(vi) and (vii), by removing the word “state” and adding the word “State” in its place;
d. In paragraph (a)(3), by removing the phrase “particular national bank or class of national banks” and adding in its place the phrase “particular insured national bank, insured Federal savings association, or insured Federal branch of a foreign bank or class of insured national banks, insured Federal savings associations, or insured Federal branches of foreign banks”;
e. In paragraph (b)(2) by:
i. Removing the word “shall” and adding in its place the word “will”; and
ii. Adding the phrase “, subject to the limitations in § 19.243(c)(4)” at the end of the second sentence;
f. In paragraph (c)(1) introductory text, by adding the phrase “, insured Federal savings associations, or insured Federal branches of foreign banks” after the phrase “national banks”;
g. In paragraph (c)(3), by revising the last sentence;
h. In paragraph (c)(4) by:
i. Removing the phrase “who shall fix a place” in the first sentence and adding in its place the phrase “who will fix a place”;
ii. Removing the phrase “unless extended” in the first sentence and adding in its place the phrase “unless further time is allowed by the presiding officer”;
iii. Removing the phrase “there shall be no discovery” in the last sentence and adding in its place the phrase “there will be no discovery”; and
iv. Removing the phrase “of this part shall apply” and adding in its place “of this part apply”;
i. In paragraph (c)(5), by removing the word “shall” in the first sentence and adding in its place the word “will”; and
j. In paragraph (c)(6), by removing the word “shall” wherever it appears and adding in its place the word “will”.
The revision reads as follows:

§ 19.243
Removal, suspension, or debarment.

(c) * * *

(3) * * * If no petition is filed within 10 calendar days, the right to a petition is waived and the immediate suspension remains in effect pursuant to paragraph (c)(2).

18. Section 19.244 is amended:
a. By revising the section heading;
b. In paragraph (a) introductory text, by adding the phrase “, insured Federal savings associations, or insured Federal branches of foreign banks” after the phrase “national banks”;
c. In paragraph (a)(1) by:
i. Adding the word “former” before the phrase “Office of Thrift Supervision”; and
ii. Adding “(12 U.S.C. 1831m)” after the phrase “section 36 of the FDIA”;
d. In paragraph (b) by:
i. Adding the word “insured” before the phrase “national banks”;
ii. Adding the phrase “, insured Federal savings associations, or insured Federal branches of foreign banks” after the phrase “national banks”; and
iii. Removing the word “shall” and adding in its place the word “must”.
The revision reads as follows:

§ 19.244
Automatic removal, suspension, or debarment.

§ 19.245
[Amended]

19. Section 19.245 is amended:
a. By adding a comma after the word “suspension” in the section heading;
b. In paragraph (a), by removing the word “shall” and adding in its place the word “will”;

c. In paragraph (b) introductory text by:

i. Adding the word “insured” before the phrase “national bank”; and
ii. Adding the phrase “, insured Federal savings association, or insured Federal branch of a foreign bank” after the phrase “national bank”;
d. In paragraph (b)(1), by removing “§ 19.243(a)(1)(vi) through (a)(1)(vii) or § 19.244(a)(2) through (a)(3)” and adding in its place “§ 19.243(a)(1)(vi) through (vii) or § 19.244(a)(2) and (3)”;
e. In paragraph (b)(2), by removing the phrase “Sarbanes-Oxley Act)” and adding in its place the phrase “Sarbanes-Oxley Act”; and
f. In paragraph (c), by removing the word “shall” and adding in its place the word “must”.

§ 19.246
[Amended]

20. Section 19.246 is amended:
a. In paragraph (a), by removing the word “shall” and adding in its place the word “must”; and
b. In paragraph (b):
i. By removing the phrase “shall bear” wherever it appears and adding in its place the word “bears”; and
ii. In the penultimate and last sentences, by removing the word “shall” and adding in its place the word “will”.

PART 23—LEASING

21. The authority citation for part 23 continues to read as follows:

Authority:

12 U.S.C. 1
et seq.,
24(Seventh), 24(Tenth), and 93a.

§ 23.6
[Amended]

22. Section 23.6 is amended by:
a. Removing the word “lease” before the phrase “entered into pursuant to this part” and adding in its place the word “leases”; and
b. Removing the word “is” before the phrase “subject to the lending limits prescribed” and adding in its place the word “are”.

PART 26—MANAGEMENT INTERLOCKS

23. The authority citation for part 26 continues to read as follows:

Authority:

12 U.S.C. 1, 93a, 1462a, 1463, 1464, 3201-3208, 5412(b)(2)(B).

§ 26.6
[Amended]

24. Section 26.6 is amended in paragraph (b)(4) by removing “5.51(c)(6)” and adding in its place “5.51(c)(7)”.

PART 32—LENDING LIMITS

25. The authority citation for part 32 continues to read as follows:

Authority:

12 U.S.C. 1
et seq.,
12 U.S.C. 84, 93a, 1462a, 1463, 1464(u), 5412(b)(2)(B), and 15 U.S.C. 1639h.

26. Section 32.2 is amended by revising paragraphs (cc) and (dd) to read as follows:

§ 32.2
Definitions.

(cc)
Loans to small businesses
means loans or extensions of credit “secured by nonfarm nonresidential properties” or “commercial and industrial loans” as defined in the instructions for preparation of the Consolidated Report of Condition and Income.

(dd)
Loans or extensions of credit to small farms
means “loans secured by farmland” or “loans to finance agricultural production and other loans to farmers” as defined in the instructions for preparation of the Consolidated Report of Condition and Income.

27. Section 32.7 is amended by revising the section heading and paragraphs (a) and (d) to read as follows:

§ 32.7
Residential real estate loans, loans to small businesses, and loans or extensions of credit to small farms (“Supplemental Lending Limits Program”).

(a)
Residential real estate, loans to small businesses, and loans or extensions of credit to small farms.
(1) In addition to the amount that a national bank or savings association may lend to one borrower under § 32.3, an eligible national bank or eligible savings association may make residential real estate loans or extensions of credit to one borrower in the lesser of the following two amounts: 10 percent of its capital and surplus; or the percent of its capital and surplus, in excess of 15 percent, that a State bank or savings association is permitted to lend under the State lending limit that is available for residential real estate loans or unsecured loans in the State where the main office of the national bank or savings association is located. Any such loan or extension of credit must be secured by a perfected first-lien security interest in 1-4 family real estate in an amount that does not exceed 80 percent of the appraised value of the collateral at the time the loan or extension of credit is made.

(2) In addition to the amount that a national bank or savings association may lend to one borrower under § 32.3, an eligible national bank or eligible savings association may make loans to small businesses to one borrower in the lesser of the following two amounts: 10 percent of its capital and surplus; or the percent of its capital and surplus, in excess of 15 percent, that a State bank is permitted to lend under the state lending limit that is available for loans to small businesses or unsecured loans in the state where the main office of the national bank or home office of the savings association is located.

(3) In addition to the amount that a national bank or savings association may lend to one borrower under § 32.3, an eligible national bank or eligible savings association may make loans or extensions of credit to small farms to one borrower in the lesser of the following two amounts: 10 percent of its capital and surplus; or the percent of its capital and surplus, in excess of 15 percent, that a State bank or savings association is permitted to lend under the State lending limit that is available for loans or extensions of credit to small farms or unsecured loans in the State where the main office of the national bank or savings association is located.

(d)
Discretionary termination of authority.
The appropriate supervisory office may rescind a bank's or savings association's authority to use the supplemental lending limits in paragraphs (a)(1), (2), and (3) of this section based upon concerns about credit quality, undue concentrations in the bank's or savings association's portfolio of residential real estate, loans to small businesses, or loans or extensions of credit to small farms, or concerns about the bank's or savings association's overall credit risk management systems and controls. The bank or savings association must cease making new loans or extensions of credit in reliance on the supplemental lending limits upon receipt of written notice from the appropriate supervisory office that its authority has been rescinded.

PART 108—REMOVALS, SUSPENSIONS, AND PROHIBITIONS WHERE A CRIME IS CHARGED OR PROVEN

28. The authority citation for part 108 continues to read as follows:

Authority:

12 U.S.C. 1464, 1818, 5412(b)(2)(B).

§ 108.6
[Amended]

29. Section 108.6 is amended in paragraph (d) by removing the phrase “and Compliance”.

§ 108.7
[Amended]

30. Section 108.7 is amended in the first sentence of paragraph (c) and in paragraph (d) by removing the phrase “and Compliance”.

§ 108.13
[Amended]

31. Section 108.13 is amended in paragraph (c) by removing the phrase “and Compliance”.

PART 112—RULES FOR INVESTIGATIVE PROCEEDINGS AND FORMAL EXAMINATION PROCEEDINGS

32. The authority citation for part 112 continues to read as follows:

Authority:

12 U.S.C. 1462a, 1463, 1464, 1467, 1467a, 1813, 1817(j), 1818(n), 1820(c), 5412(b)(2)(B); 15 U.S.C. 78
l
.

§ 112.4
[Amended]

33. Section 112.4 is amended in the second sentence by removing the phrase “and Compliance”.

PART 141—DEFINITIONS FOR REGULATIONS AFFECTING FEDERAL SAVINGS ASSOCIATIONS

34. The authority citation for part 141 continues to read as follows:

Authority:

12 U.S.C. 1462a, 1463, 1464, 5412(b)(2)(B).

§ § 141.2, 141.8, 141.15, 141.16, 141.18, and 141.19
[Removed and Reserved]

35. Sections 141.2, 141.8, 141.15, 141.16, 141.18, and 141.19 are removed and reserved.

§ § 141.27 and 141.28
[Removed]

36. Sections 141.27 and 141.28 are removed.

PART 160—LENDING AND INVESTMENT

37. The authority for part 160 continues to read as follows:

Authority:

12 U.S.C. 1462a, 1463, 1464, 1467a, 1701j-3, 1828, 3803, 3806, 5412(b)(2)(B); 42 U.S.C. 4106.

§ 160.1
[Amended]

38. Section 160.1 is amended in paragraph (a) by removing “OCC” and adding in its place the phrase “Office of the Comptroller of the Currency (OCC)”.

§ 160.60
[Amended]

39. Section 160.60 is amended in paragraph (b)(3) by removing the phrase “12 CFR part 32 and § 163.43 of this chapter” and adding in its place “12 CFR 31.2 and part 32 of this chapter”.

PART 161—DEFINITIONS FOR REGULATIONS AFFECTING All SAVINGS ASSOCIATIONS

40. The authority citation for part 161 continues to read as follows:

Authority:

12 U.S.C. 1462a, 1463, 1464, 1467a, 5412(b)(2)(B).

§ § 161.3, 161.6, 161.26, 161.27, 161.28. 161.29, 161.30, 161.31
[Removed and Reserved]

41. Sections 161.3, 161.6, 161.26, 161.27, 161.28, 161.29, 161.30, and 161.31 are removed and reserved.

§ 161.37
[Amended]

42. Section 161.37 is amended by removing the first sentence.

§ § 161.39 and 161.45
[Removed and Reserved]

43. Sections 161.39 and 161.45 are removed and reserved.

44. Section 161.50 is revised to read as follows:

§ 161.50
State.
The term “State” means any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands.

§ 161.51
[Removed and Reserved]

45. Section 161.51 is removed and reserved.

PART 163—SAVINGS ASSOCIATIONS—OPERATIONS

46. The authority citation for part 163 continues to read as follows:

Authority:

12 U.S.C. 1462a, 1463, 1464, 1467a, 1817, 1820, 1828, 1831o, 3806, 5101
et seq.,
5412(b)(2)(B); 31 U.S.C. 5318; 42 U.S.C. 4106.

§ 163.39
[Removed and Reserved]

47. Section 163.39 is removed and reserved.

§ 163.47
[Amended]

48. Section 163.47 is amended in paragraph (d) by removing “OCC” and adding in its place the phrase “Office of the Comptroller of the Currency (OCC)”.

§ 163.76
[Amended]

49. Section 163.76 is amended:
a. In paragraph (b), by removing the phrase “§ 197.10 of this chapter” and adding in its place “§ 16.32 of this chapter”; and
b. In paragraph (c), in the Form of Certification, by removing “]” after the phrase “I should call the Office of the Comptroller of the Currency”.

§ 163.80
[Amended]

50. Section 163.80 is amended in paragraph (c) by removing the phrase “or the FDIC” and adding in its place the phrase “or the Federal Deposit Insurance Corporation (FDIC)”.

§ 163.180
[Amended]

51. Section 163.180 is amended by removing the first paragraph designation of (d)(12)(i)(A) and its subject heading “General rule” and redesignating the paragraph as paragraph (d)(12)(i) introductory text.

52. Part 192 is revised to read as follows:

PART 192—CONVERSIONS FROM MUTUAL TO STOCK FORM

Sec.
192.5
Purpose, prescribed forms, waiver.
192.7
Electronic filing.
192.8
Computation of time.
192.10
Forming a holding company upon conversion.
192.15
Forming a charitable organization upon conversion.
192.20
Acquiring another insured depository institution upon conversion.
192.25
Definitions.

Subpart A—Standard Conversions

Prior to Conversion

192.100
Preparing for a conversion.
192.105
Information required in business plan.
192.110
Review of business plan by chief executive officer and board of directors.
192.115
Review of business plan by the appropriate Federal banking agency.
192.120
Confidentiality of conversion information.
Plan of Conversion

192.125
Adoption of plan of conversion by board of directors.
192.130
Information required in plan of conversion.
192.135
Notifying members of adopted plan of conversion.
192.140
Amendments to plan of conversion.
Filing Requirements

192.150
Information required in an application for conversion.
192.155
Filing an application for conversion.
192.160
Request for confidential treatment.
192.165
Amendments to an application for conversion.
Notice of Filing of Application and Comment Process

192.180
Public notice of an application for conversion.
192.185
Public comment on application for conversion.
Agency Review of the Application for Conversion

192.200
Review, approval, or denial of application for conversion.
192.205
Court review of final action on application for conversion.
Vote by Members

195.225
Approval of plan of conversion by members.
192.230
Members' voting eligibility.
192.235
Notice of members' meeting.
192.240

Submission of documents to the appropriate Federal banking agency after the members' meeting.

Proxy Solicitation

192.250
Compliance with proxy solicitation provisions.
192.255
Form of proxy requirements.
192.260
Previously executed proxies.
192.265
Proxies executed under this part.
192.270
Proxy statement requirements.
192.275
Filing revised proxy materials.
192.280
Mailing member's proxy solicitation materials.
192.285
Prohibited solicitations.
192.290
Remedial measures for prohibited solicitations.
192.295
Re-solicitation of proxies.
Offering Circular

192.300
Offering circular requirements.
192.305
Distribution of offering circular.
192.310
Filing a post-effective amendment to an offering circular.
Offers and Sales of Stock

192.320
Order of priority to purchase conversion shares.
192.325
Timing of offer to sell conversion shares.
192.330
Pricing of conversion shares.
192.335
Procedures for the sale of conversion shares.
192.340
Prohibited sales practices.
192.345
Permissible forms of subscriber payment.
192.350
Interest on payments for conversion shares.
192.355
Subscription rights for eligible account holders and supplemental eligible account holders.
192.360
Officers, directors, and associates as eligible account holders.
192.365
Purchase of conversion shares by other voting members.
192.370
Limits on aggregate purchases by officers, directors, and associates.
192.375
Allocation of oversubscribed conversion shares.
192.380
Purchase of conversion shares by employee stock ownership plan.
192.385
Purchase limitations.
192.390
Community offering of conversion shares.
192.395
Other conditions for community and public offerings.
Completion of the Offering

192.400
Time period for completion of sale of stock.
192.405
Extension of the offering period.
Completion of the Conversion

192.420
Time period for completion of the conversion.
192.425
Termination of conversion.
192.430
Charter amendments.
192.435
Corporate existence after conversion.
192.440
Stockholder voting rights after conversion.
192.445
Savings account holder's account after conversion.
Liquidation Account

192.450
Liquidation accounts.
192.455
Initial balance of liquidation account.
192.460
Initial balance of liquidation sub-account.
192.465
Retention of voting rights based on liquidation sub-accounts.
192.470
Required adjustments to liquidation sub-accounts.
192.475
Definition of liquidation.
192.480
Effect of liquidation account on net worth.
192.485
Required liquidation account provision in new Federal charter.
Post-Conversion

192.500
Possible management stock benefit plans after conversion.
192.505
Restrictions on the trading of shares by directors, officers, and associates.
192.510
Repurchase of shares after conversion.
192.515
Information to be filed with Federal banking agency prior to repurchase of shares.
192.520
Declaring and paying dividends after the conversion.
192.525
Restrictions on acquisition of shares after conversion.
192.530
Other post-conversion requirements.
Contributions to Charitable Organizations

192.550
Donating conversion shares or conversion proceeds to a charitable organization.
192.555
Member approval of charitable contributions.
192.560
Limitations on charitable contributions.
192.565
Contents of organizational documents of charitable organization.
192.570
Conflicts of interest among directors.
192.575
Other requirements for charitable organizations.

Subpart B—Voluntary Supervisory Conversions

192.600
Voluntary supervisory conversions.
192.605
Conducting a voluntary supervisory conversion.
192.610
Member rights in a voluntary supervisory conversion.
Eligibility

192.625
Eligibility for a voluntary supervisory conversion.
192.630
Eligibility of State-chartered savings bank for voluntary supervisory conversion.
Plan of Supervisory Conversion

192.650
Contents of plan of voluntary supervisory conversion.
Voluntary Supervisory Conversion Application

192.660
Contents of voluntary supervisory conversion application.
Appropriate Federal Banking Agency Review of the Voluntary Supervisory Conversion Application

192.670
Approval of voluntary supervisory conversion application.
192.675
Conditions imposed upon approval of voluntary supervisory conversion application.
Offers and Sales of Stock

192.680
Offer and sale of shares in a voluntary supervisory conversion.
Post-Conversion

192.690
Restrictions on acquisition of additional shares after voluntary supervisory conversion.

Authority:

12 U.S.C. 1462a, 1463, 1464, 1467a, 2901
et seq.,
5412(b)(2)(B); 15 U.S.C. 78c, 78
l
, 78m, 78n, 78w.

§ 192.5
Purpose, prescribed forms, waiver.

(a)
General.
This part governs how a savings association may convert from the mutual to the stock form of ownership. Subpart A of this part governs standard mutual-to-stock conversions. Subpart B of this part governs voluntary supervisory mutual-to-stock conversions. This part supersedes all inconsistent charter and bylaw provisions of Federal savings associations converting to stock form.

(b)
Prescribed forms.
A savings association must use the forms prescribed under this part and part 16 and provide such information as the appropriate Federal banking agency may require under the forms and by regulation. The forms required under this part include: Form AC (Application for Conversion); Form PS (Proxy Statement); Form OC (Offering Circular); Form OF (Order Form); and the applicable form for a registration statement under 12 CFR 16.15. Forms AC, PS, OC, and OF are available on the website of the Office of the Comptroller of the Currency (OCC) at
http://www.occ.gov
.

(c)
Waivers.
The appropriate Federal banking agency may waive any requirement of this part or a provision in any prescribed form. To obtain a waiver, a savings association must file a written request with the appropriate Federal banking agency that:

(1) Specifies the requirement(s) or provision(s) the savings association wants the appropriate Federal banking agency to waive;

(2) Demonstrates that the waiver is equitable; is not detrimental to the savings association, its account holders, or other savings associations; and is not contrary to the public interest; and

(3) Includes an opinion of counsel demonstrating that applicable law does not conflict with the waiver of the requirement or provision.

(d)
Financial statements.
The form and content of financial statements and related financial data in a filing under this part must be prepared and presented in accordance with U. S. generally accepted accounting principles and other applicable accounting guidance and requirements

as specified by the OCC in the forms required under paragraph (b) of this section.

§ 192.7
Electronic filing.

For Federal savings associations, the OCC encourages the electronic filing of all applications, notices, or other documents required by this part through
http://www.banknet.gov/
. The Comptroller's Licensing Manual describes the OCC's electronic filing procedures.

§ 192.8
Computation of time.

In computing the period of days, the OCC excludes the day of the act or event (
e.g.,
the date an application is received by the OCC) from when the period begins to run. When the last day of a time period 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.

§ 192.10
Forming a holding company upon conversion.
A savings association may convert to the stock form of ownership as part of a transaction where the savings association organizes a holding company to acquire all of the savings association's shares upon their issuance. In this transaction, the savings association's holding company will offer rights to purchase its shares instead of the savings association's shares. Regulations of the Board of Governors of the Federal Reserve System address holding company application requirements.

§ 192.15
Forming a charitable organization upon conversion.
When a savings association converts to the stock form, it may form a charitable organization. A savings association's contributions to the charitable organization are governed by the requirements of §§ 192.550 through 192.575.

§ 192.20
Acquiring another insured depository institution upon conversion.
When a savings association converts to stock form, it may acquire for cash or stock another insured depository institution that is already in the stock form of ownership.

§ 192.25
Definitions.
The following definitions apply to this part and the forms prescribed under this part:

Acting in concert
has the same meaning as in 12 CFR 5.50(d)(2). The rebuttable presumptions of 12 CFR 5.50(f)(2), other than 12 CFR 5.50(f)(2)(ii)(A) and (B), apply to the share purchase limitations at §§ 192.355 through 192.395.

Affiliate of,
or a person
affiliated with,
a specified person is a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the specified person.

Appropriate Federal banking agency
means appropriate Federal banking agency as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).

Associate
of a person is:

(1) A corporation or organization (other than a savings association or its majority-owned subsidiaries), if the person is a senior officer or partner, or beneficially owns, directly or indirectly, 10 percent or more of any class of equity securities of the corporation or organization.

(2) A trust or other estate, if the person has a substantial beneficial interest in the trust or estate or is a trustee or fiduciary of the trust or estate. For purposes of §§ 192.370 through 192.395 and 192.505, a person who has a substantial beneficial interest in a savings association's tax-qualified or non-tax-qualified employee stock benefit plan, or who is a trustee or a fiduciary of the plan, is not an associate of the plan. For the purposes of § 192.370, a savings association's tax-qualified employee stock benefit plan is not an associate of a person.

(3) Any person who is related by blood or marriage to such person and:

(i) Who lives in the same home as the person; or

(ii) Who is the savings association's director or senior officer, or a director or senior officer of the savings association's holding company or its subsidiary.

Association members
or
members
are persons who, under applicable law, are eligible to vote at the meeting on conversion.

Community offering
means the offer to sell to the members of the general public in the savings association's community the securities not subscribed for in the subscription offering. The community offering may occur concurrently with the subscription offering and any syndicated community offering, or upon conclusion of the subscription offering.

Control
(including
controlling, controlled by,
and
under common control with
) means the direct or indirect power to direct or exercise a controlling influence over the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise as described in 12 CFR 5.50.

Demand accounts
means non-interest-bearing demand deposits that are subject to check or to withdrawal or transfer on negotiable or transferable order to the savings association and that are permitted to be issued by statute, regulation, or otherwise and are payable on demand.

Eligibility record date
is the date for determining eligible account holders. The eligibility record date must be at least one year before the date a savings association's board of directors adopts the plan of conversion.

Eligible account holders
are any persons holding qualifying deposits on the eligibility record date.

Federal savings association
means a Federal savings association or Federal savings bank chartered under section 5 of the Home Owners' Loan Act (HOLA) (12 U.S.C. 1464).

IRS
is the Internal Revenue Service.

Local community
includes:

(1) Every county, parish, or similar governmental subdivision in which a savings association has a home or branch office;

(2) Each county's, parish's, or subdivision's metropolitan statistical area;

(3) All zip code areas in a savings association's Community Reinvestment Act assessment area; and

(4) Any other area or category that a savings association sets out in its plan of conversion, as approved by the appropriate Federal banking agency.

Offer, offer to sell,
or
offer for sale
is an attempt or offer to dispose of, or a solicitation of an offer to buy, a security or interest in a security for value. Preliminary negotiations or agreements with an underwriter, or among underwriters who are or will be in privity of contract with a savings association, are not offers, offers to sell, or offers for sale.

Offering circular
means the securities offering materials for the conversion.

Person
is an individual, a corporation, a partnership, an association, a joint-stock company, a limited liability company, a trust, an unincorporated organization, or a government or political subdivision of a government.

Proxy soliciting material
includes a proxy statement, form of proxy, or other written or oral communication regarding the conversion.

Purchase
or
buy
includes every contract to acquire a security or interest in a security for value.

Qualifying deposit
is the total balance in an account holder's savings accounts at the close of business on the eligibility or supplemental eligibility record date. A savings association's plan of conversion may provide that only

savings accounts with total deposit balances of $50 or more will qualify.

Sale
or
sell
includes every contract to dispose of a security or interest in a security for value. An exchange of securities in a merger or acquisition approved by the appropriate Federal banking agency is not a sale.

Savings account
means any withdrawable account, including a demand account, except this term does not mean a tax and loan account, a note account, a United States Treasury general account, or a United States Treasury time deposit-open account.

S
avings association
means a savings association as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(1)).

Solicitation
and
solicit
is a request for a proxy, whether or not accompanied by or included in a form of proxy; a request to execute, not execute, or revoke a proxy; or the furnishing of a form of proxy or other communication reasonably calculated to cause a savings association's members to procure, withhold, or revoke a proxy. Solicitation or solicit does not include providing a form of proxy at the unsolicited request of a member, the acts required to mail communications for members, or ministerial acts performed on behalf of a person soliciting a proxy.

State
means any State of the United States, the District of Columbia, any territory of the United States, Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific Islands, the Virgin Islands, and the Northern Mariana Islands.

State
s
avings association
means a State savings association as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813(b)(3)).

Subscription offering
is the offering of shares through nontransferable subscription rights to:

(1) Eligible account holders under § 192.355;

(2) Tax-qualified employee stock ownership plans under § 192.380;

(3) Supplemental eligible account holders under § 192.355; and

(4) Other voting members under § 192.365.

Supplemental eligibility record date
is the date for determining supplemental eligible account holders. The supplemental eligibility record date is the last day of the calendar quarter before the appropriate Federal banking agency approves a savings association's conversion and will only occur if such agency has not approved such conversion within 15 months after the eligibility record date.

Supplemental eligible account holders
are any persons, except a savings association's officers, directors, and their associates, holding qualifying deposits on the supplemental eligibility record date.

Tax-qualified employee stock benefit plan
is any defined benefit plan or defined contribution plan, such as an employee stock ownership plan, stock bonus plan, profit-sharing plan, or other plan, and a related trust, that is qualified under section 401 of the Internal Revenue Code (26 U.S.C. 401).

Underwriter
is any person who purchases any securities from a savings association with a view to distributing the securities, offers or sells securities for a savings association in connection with the securities' distribution, or participates or has a direct or indirect participation in the direct or indirect underwriting of any such undertaking. Underwriter does not include a person whose interest is limited to a usual and customary distributor's or seller's commission from an underwriter or dealer.

Voluntary supervisory conversion
is a mutual to stock conversion for a savings association that is unable to complete a standard mutual to stock conversion under part 192, subpart A, and that meets the eligibility requirements of § 192.625.

Subpart A—Standard Conversions

Prior to Conversion

§ 192.100
Preparing for a conversion.

(a)
Meeting with appropriate Federal banking agency prior to passing plan.
A savings association's board, or a subcommittee of its board, must meet, in person or electronically, with the appropriate Federal banking agency before the savings association passes its plan of conversion. At this meeting the savings association must provide the appropriate Federal banking agency with a written strategic plan that outlines the objectives of the proposed conversion and the intended use of the conversion proceeds.

(b)
Consultation with appropriate Federal banking agency before filing application.
A savings association also should consult with the appropriate Federal banking agency before filing its application for conversion. The appropriate Federal banking agency will discuss the information that the savings association must include in the application for conversion, general issues that it may confront in the conversion process, and any other pertinent issues.

§ 192.105
Information required in business plan.

(a)
Minimum requirements.
Prior to filing an application for conversion, a savings association must adopt a business plan reflecting its intended plans for deployment of the proposed conversion proceeds. The savings association's business plan is required, under § 192.150, to be included in its application for conversion. At a minimum, the business plan must address:

(1) The savings association's projected operations and activities for three years following the conversion. These projections must include how the savings association will accomplish the following by the final year of the business plan:

(i) Deploy the conversion proceeds at the converted savings association (and holding company, if applicable);

(ii) What opportunities are available to reasonably achieve its planned deployment of conversion proceeds in the proposed market areas; and

(iii) How the deployment will provide a reasonable return on investment commensurate with investment risk, investor expectations, and industry norms. The savings association must include three years of projected financial statements. The business plan must provide that the converted savings association must retain at least 50 percent of the net conversion proceeds. The appropriate Federal banking agency may require that a larger percentage of proceeds remain in the institution.

(2) The savings association's plan for deploying conversion proceeds to meet credit and lending needs in the proposed market areas. The appropriate Federal banking agencies strongly discourage business plans that provide for a substantial investment in mortgage securities or other securities, except as an interim measure to facilitate orderly, prudent deployment of proceeds during the three years following the conversion or as part of a properly managed leverage strategy.

(3) The risks associated with the savings association's plan for deployment of conversion proceeds, and the effect of this plan on management resources, staffing, and facilities.

(4) The expertise of the savings association's management and board of directors, or plans for adequate staffing and controls to prudently manage the growth, expansion, new investment, and other operations and activities proposed in the business plan.

(b)
Prohibited information.
The savings association may not project returns of capital or special dividends in any part of the business plan. A newly

converted company may not plan on stock repurchases in the first year of the business plan.

§ 192.110
Review of business plan by chief executive officer and board of directors.

(a)
Review and approval.
A savings association's chief executive officer and members of the board of directors must review, and at least two-thirds of the board of directors must approve, the business plan.

(b)
Certification.
A savings association's chief executive officer and at least two-thirds of the board of directors must certify that the business plan accurately reflects the intended plans for deployment of conversion proceeds, and that any new initiatives reflected in the business plan are reasonably achievable. The savings association must submit these certifications with its business plan, as part of its application for conversion under § 192.150.

§ 192.115
Review of business plan by the appropriate Federal banking agency.

(a)
Agency review.
The appropriate Federal banking agency will review the savings association's business plan to determine that it demonstrates a safe and sound deployment of conversion proceeds, as part of its review of the application for conversion. In making its determination, the appropriate Federal banking agency will consider how the savings association has addressed the applicable factors of § 192.105. No single factor will be determinative.

(b)
Filing of business plan.
A savings association must file its business plan as a separate confidential exhibit to the Form AC with the appropriate OCC licensing office if it is a Federal savings association, or with the appropriate Federal Deposit Insurance Corporation (FDIC) region if it is a State savings association. The appropriate Federal banking ag

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2020-12784. Public record. Not legal advice.