Supplemental Standards of Ethical Conduct for Employees of the Federal Deposit Insurance Corporation

SUMMARY: The Federal Deposit Insurance Corporation, with the

concurrence of the Office of Government Ethics (OGE), proposes to issue

regulations for the employees of the Corporation which would supplement

the Standards of Ethical Conduct for Employees of the Executive Branch

(Executive Branch-wide Standards) issued by OGE. The proposed rule is a

necessary supplement to the Executive Branch-wide Standards and has

been designed to address the specialized functions and operations of

the Corporation. The proposed rule would establish: prohibitions on

borrowing and extensions of credit; prohibitions on the ownership of

certain financial interests; prohibitions on the purchase of property

controlled by the Corporation or the Resolution Trust Corporation

(RTC); limitations on official dealings with former employers and

clients; disqualification requirements relating to employment of family

members outside the Corporation; and limitations on outside employment

activities.

DATES: Comments must be received on or before September 12, 1994.

ADDRESSES: Send comments to Robert E. Feldman, Acting Executive

Secretary, FDIC, 550 17th Street, NW, Washington, DC 20429. Comments

may be hand-delivered to room 400, 1776 F Street, NW, Washington, DC

20429 on business days between 8:30 a.m. and 5 p.m. [FAX number: (202)

898-3838].

FOR FURTHER INFORMATION CONTACT: Katherine A. Corigliano, Assistant

Executive Secretary (Ethics), (202) 898-7272; Richard M. Handy, Ethics

Program Manager, (202) 898-7271; or Paul A. Jeddeloh, Senior Program

Attorney, (202) 898-7161, all at the FDIC.

SUPPLEMENTARY INFORMATION:

I. Background

On August 7, 1992, the Office of Government Ethics published the

Standards of Ethical Conduct For Employees of the Executive Branch. See

57 FR 35006-35067, as corrected at 57 FR 48557 and 57 FR 52583, with an

additional grace period extension at 59 FR 4779-4780. The Executive

Branch-wide Standards, now codified at 5 CFR part 2635 and effective

February 3, 1993, establish uniform standards of ethical conduct for

executive branch employees.

With the concurrence of the OGE, 5 CFR 2635.105 and the Resolution

Trust Corporation Completion Act (P.L. 103-204) authorize the

Corporation to publish agency-specific supplemental regulations

necessary to implement its ethics programs. The Corporation and OGE

have determined that the following supplemental regulations contained

in the proposed rule are necessary to successfully continue the

Corporation's ethics program in light of the Corporation's unique

programs and operations. The proposed supplemental rule addresses

issues relevant to the Corporation's specialized roles as the insurer,

conservator, receiver, liquidator, organizer of bridge banks, and

regulator or back-up enforcement agency for FDIC-insured depository

institutions. Upon finalization of the supplemental regulation, the

Corporation will, as proposed, delete those portions of 12 CFR part 336

that are superseded by the Executive Branch-wide Standards and the

supplemental regulations.

II. Analysis of Regulation

The following regulations are proposed to appear in new part 3201

of 5 CFR chapter XXII.

Section 3201.101 General

(a) Purpose. Proposed Sec. 3201.101(a) explains that the

regulations would apply to all Corporation employees and would

supplement the Executive Branch-wide Standards. Because they are

covered under rules applicable to the Department of the Treasury, two

members of the Board of Directors, the Comptroller of the Currency and

the Director of the Office of Thrift Supervision, would be covered only

by those provisions of the supplemental regulation specifically made

applicable to them in connection with their activities as members of

the Corporation's Board of Directors.

(b) Corporation ethics officials. Proposed Sec. 3201.101(b)

explains that the Designated Agency Ethics Official would be the

Executive Secretary and that the Alternate Agency Ethics Official would

be the Assistant Executive Secretary (Ethics) of the FDIC. This

provision would delegate authority to the Executive Secretary and the

Assistant Executive Secretary (Ethics) to act in such capacities as

contemplated under 5 CFR part 2638. The provision would continue the

designations currently found at 12 CFR part 336, as updated to

accommodate organizational changes.

(c) Agency designees. Proposed Sec. 3201.101(c) specifies those

employees who would hold the authority to act as agency designees under

the Executive Branch-wide Standards and the supplemental regulation. It

also explains that only the Ethics Counselor or Alternate Ethics

Counselor would be able to delegate authority to act as agency

designees and that such delegation would have to be in writing and

could not be re-delegated.

(d) Definitions. Proposed Sec. 3201.101(d) would include as an

affiliate those companies which control, are controlled by, or are

under common control with, an FDIC-insured depository institution. The

definition for affiliate was taken from the Bank Holding Company Act of

1956 and is intended to be broadly interpreted and include any holding

companies, subsidiaries, or other affiliated companies of an FDIC-

insured depository institution.

The term appropriate director would include the heads of offices

and divisions in the Washington office, the highest ranking officials

in each division in the regional offices, and the Ethics Counselor.

The term covered employee would include all employees of the

Corporation required to file confidential or public financial

disclosure reports under 5 CFR part 2634 or 5 CFR part 3202.

Under the proposed regulation, the term employee would include all

persons, other than special Government employees, employed by the

Corporation. Pursuant to the Resolution Trust Corporation Completion

Act (P.L. 103-204), the Corporation is also required to consider the

employees of contractors as employees of the Corporation for certain

purposes. Therefore, the term employee would include, for purposes of 5

CFR part 2635 and Secs. 3201.103 and 3201.104 of this part, any

individual who, pursuant to a contract or any other arrangement,

performs functions or activities of the Corporation, under the direct

supervision of an officer or employee of the Corporation. The term

employee would not include independent contractors who are not deemed

to be employees under 12 U.S.C. 1822(f)(1)(B). In the case of members

of the Board of Directors, it would include only the three members

appointed by the President under 12 U.S.C. 1812(a)(1)(C).

The proposed regulation provides a broad definition of the term

security which includes an interest in debt or equity instruments such

as, for example, stocks, bonds, and commercial paper. However, the term

security would not include a deposit account.

The term State nonmember bank is a statutory term taken from 12

U.S.C. 1813 and would include all State banks that are not members of

the Federal Reserve System.

The definition of subsidiary was taken from section 3(w) of the

Federal Deposit Insurance Act, codified to 12 U.S.C. 1813(w), and would

include all companies owned or controlled directly or indirectly by

another company.

Section 3201.102 Extensions of Credit From FDIC-Insured Depository

Institutions

The proposed rules on extensions of credit from FDIC-insured

depository institutions provide the conditions under which certain

specified categories of Corporation employees can obtain credit from

depository institutions insured by the Corporation. Restrictions on the

availability of credit to Corporation employees are necessary for

several reasons. First, 5 CFR 2635.403(a) permits the Corporation to

prohibit or restrict the acquisition or holding of a financial interest

or class of financial interests by Corporation employees, and the

spouses and minor children of those employees, when the Corporation has

made the determination that the acquisition or holding of such

financial interests would cause a reasonable person to question the

impartiality and objectivity with which Corporation programs are

administered, and 5 CFR 2635.403(c) specifically provides that the term

financial interest may include an indebtedness relationship. For

purposes of the extensions of credit covered by Sec. 3201.102 (a)

through (d), the Corporation has made such a determination. These

prohibitions and restrictions on employees entering into financial

arrangements with institutions over which the Corporation has

regulatory and resolution authority are necessary to prevent loss of

public confidence in the integrity of the Corporation. In addition, the

borrowing prohibition would incorporate the substance of the statutory

prohibition at 18 U.S.C. 213 on bank examiners accepting certain loans.

Finally, limitations on borrowing from FDIC-insured depository

institutions would avoid a high number of employee disqualifications

that would have a detrimental effect on the Corporation's

administration of its multifaceted responsibilities.

Under proposed Sec. 3201.102(a), a current or contingent financial

obligation of an employee is considered a financial obligation for

purposes of the prohibition, disqualification, and retention provisions

of proposed Sec. 3201.102. A current or contingent financial obligation

of a spouse or minor child is attributed to the employee for purposes

of this section since the Corporation has determined, pursuant to 5 CFR

2635.403(a), that there is a direct and appropriate nexus between the

efficiency of the service and the prohibitions and restrictions in

Sec. 3201.102 as applied to the spouses and minor children of

Corporation employees.

Under proposed Sec. 3201.102(b), members of the Board of Directors

and other Corporation officials who are in top management positions

would be prohibited from incurring financial obligations with an

institution over which the Corporation has primary Federal supervisory

authority or a subsidiary of such an institution. A deputy or an

assistant to the Board of Directors or to an individual board member, a

covered employee who is an assistant to such deputy or assistant, the

director of a Washington office or division (other than the Division of

Supervision), and a covered employee immediately subordinate to such a

director would be included in the restricted class. The prohibition

would not apply to credit extended through an ordinary credit card

relationship due to the standardized handling and low credit amounts

customary in such relationship.

Under Sec. 3201.102(c), depository institutions examination staff,

including all covered employees assigned to the Division of

Supervision, would be prohibited from obtaining credit from an FDIC-

insured State nonmember bank, the class of FDIC-insured depository

institutions for which the FDIC has primary supervisory responsibility,

any subsidiary of such bank, or any person employed by such bank. An

exception would be carved out for an ordinary credit card relationship

but, for those employees assigned to regional or field offices, the

exception would be limited to credit cards offered by FDIC-insured

State nonmember banks located outside the employee's region of

assignment. The rule, which is substantially the same as 12 CFR

336.16(a), is consistent with 18 U.S.C. 213 which prohibits examiners

from accepting credit from institutions which they have examined. Under

the proposed rule, an employee would be required to file a report upon

obtaining a credit card from a State nonmember bank located outside the

employee's region of assignment.

Proposed Sec. 3201.102(d) would impose a two-year prohibition on an

employee in the Division of Finance, the Division of Depositor and

Asset Services, the Division of Resolutions, or the Legal Division, or

who is a member of a standing committee of the Board of Directors

obtaining credit from an FDIC-insured depository institution or its

subsidiary when the employee has participated personally and

substantially in certain matters affecting the institution, its

predecessor or successor, or an affiliate of such institution. This

prohibition would be applicable to the universe of FDIC-insured

depository institutions and would be limited to those Corporation

employees who perform functions associated with the audit, resolution,

liquidation, supervision, or agency deliberation affecting a specific

FDIC-insured depository institution. The two-year prohibition has been

designed to eliminate concerns over potential benefits that an employee

holding a sensitive non-examiner position could derive through a

financial relationship with an institution that has close business ties

to the Corporation. An exception has been made for an ordinary credit

card relationship. The definition of personally and substantially can

be found at 5 CFR 2635.402(b)(4) of the Executive Branch-wide

Standards.

Proposed Sec. 3201.102(e)(1) would prohibit a member of the

depository institution's examination staff, including senior level

staff, from participating in the supervisory review of any institution

with which they hold an extension of credit. No exceptions to this rule

have been provided due to the sensitive nature of the duties involved.

Under proposed Sec. 3201.102(e)(2)-(4), a covered employee and the

Comptroller of the Currency and the Director of the Office of Thrift

Supervision would be prohibited from participating in matters affecting

persons with whom the employee has an outstanding extension of credit.

Exceptions have been provided for ordinary credit card relationships or

when the agency designee, with the concurrence of the appropriate

director, determines that participation by the employee would be

appropriate under the standard outlined under 5 CFR 2635.502(d).

Proposed Sec. 3201.102(f) would clarify that an employee may retain

certain extensions of credit that he or she would be prohibited from

obtaining anew. For example, an employee who had obtained an extension

of credit prior to employment with the Corporation would not be

required to refinance the credit. Any extension of credit retained

under this section would be required to be reported to an agency

designee. An employee would not be allowed to renew or renegotiate the

credit without the consent of the agency designee and appropriate

director or, in the case of certain higher-level officials, without the

consent of the Ethics Counselor. This provision is substantially the

same as current 12 CFR 336.16(d), and extensions of credit which were

permissibly held under such provision could be retained under the new

provision.

Section 3201.103 Prohibitions on Ownership of Securities of FDIC-

Insured Depository Institutions

The Corporation has determined that, in light of its sensitive and

diverse mission involving the institutions that it insures,

restrictions on employee ownership of securities in such institutions

are necessary in order to maintain public confidence in the

impartiality and objectivity with which the Corporation executes its

various functions; eliminate concerns by private entities that

sensitive information provided to the Corporation might be used for

private gain; and avoid the widespread disqualification of employees

from their duties which could result in the Corporation having

difficulty in performing its mission. Under proposed Sec. 3201.103(a),

an employee would be prohibited from having a direct or indirect

ownership interest in a security of an FDIC-insured depository

institution or an affiliate of such institution.

As proposed, the exceptions in Sec. 3201.103(b) would allow an

employee to acquire, own or control certain direct and indirect

ownership interests in an FDIC-insured depository institution. For

example, an employee would be permitted to retain an interest which had

been acquired prior to employment with the Corporation or involuntarily

acquired by the employee such as by gift, stock split, or through a

merger of a company. An employee could also acquire, own or control an

interest in an FDIC-insured depository institution through the

investment vehicle of a publicly traded or available diversified

investment fund when the fund does not have an objective or practice of

concentrating its investments in securities of the financial services

sector. An employee who owned securities of an FDIC-insured depository

institution under one of the exceptions in proposed Sec. 3201.103(b)

would be disqualified under 5 CFR 2635.402 from participating in any

particular matter that, by reason of his or her ownership of those

securities, affects his or her financial interests or those of his or

her spouse or minor child.

Under proposed Sec. 3201.103(c), the Ethics Counselor could require

an employee, or the spouse or minor child of an employee, to divest an

ownership interest that would otherwise be allowed to be retained under

Sec. 3201.103(b) using the standard set forth in 5 CFR 2635.403(b).

Section 3201.104 Restrictions Concerning the Purchase of Property Held

by the Corporation or the RTC as Conservator, Receiver, or Liquidator

of the Assets of an Insured Depository Institution, or by a Bridge Bank

Organized by the Corporation

In order to avoid any self-dealing, appearance of self-dealing,

adversarial relationship with the Corporation, or diminution of public

confidence in the Corporation's ability to accomplish its mission, an

employee, or the spouse or minor child of an employee, would be

prohibited under Sec. 3201.104(a) from purchasing assets held by the

Corporation or the Resolution Trust Corporation (RTC) as conservator,

receiver, or liquidator or held by a bridge bank organized by the

Corporation. In such roles, the Corporation and the RTC generally act

as a fiduciary to the creditors of failed depository institutions.

Property held by the RTC has been included in the proposed prohibition

because of the RTC's significant ties with the Corporation.

As proposed, Sec. 3201.104(b) would disqualify an employee involved

in the disposition of the assets of a failed insured depository

institution from participation in the disposition of such assets when

the employee knows that a person with whom he or she holds a covered

relationship intends to purchase such assets. Written notification of

the disqualification would be required to be made by the employee to

his or her immediate supervisor and the agency designee.

Section 3201.105 Prohibition on Dealings With Former Employers,

Associates, and Clients

In order to avoid the appearance of favoritism and maintain the

integrity of the Corporation's regulatory oversight, insurance

assessments, and resolution and liquidation transactions, proposed

Sec. 3201.105(a) would prohibit an employee, for a period of one year

after entering on duty with the Corporation, from participating in

official Corporation matters involving an employer with whom the

employee worked during the year preceding the employee's entry on duty

with the Corporation. Proposed Sec. 3201.105(b) would include within

the definition of the term employer a broad range of persons, as

defined in 5 CFR 2635.502, with whom the employee has a covered

relationship. In an individual case, Sec. 3201.105(c) would give the

agency designee discretion to extend the prohibition beyond the one

year period that would automatically apply to all new Corporation

employees.

Section 3201.106 Employment of Family Members Outside the Corporation

As proposed, Sec. 3201.106 would continue the Corporation's

requirement at 12 CFR 336.21 that an employee be disqualified from

participation in particular matters involving employers of family

members or members of the employee's household. It would also require

the employee to report the employment of family members or members of

the employee's household by FDIC-insured depository institutions or

companies that have business, or are seeking to do business, with the

Corporation. This requirement eliminates the potential for any

appearance of preferential treatment in those instances where

employment of a family member or a member of the employee's household

would be likely to raise questions regarding the appropriateness of

actions taken by the employee or the Corporation.

Section 3201.107 Outside Employment and Other Activities

Proposed Sec. 3201.107(a) would prohibit an employee from providing

services, for compensation, to an FDIC-insured depository institution

or to a person employed by such institution. The prohibition is based,

in part, on 18 U.S.C. 1909, which prohibits an examiner from performing

any service for compensation for any FDIC-insured depository

institution or for any person connected therewith.

Similarly, proposed Sec. 3201.107(b) would restrict an employee

from using certain professional licenses in compensated outside

activities when the employee's duties to the Corporation involve those

activities. The areas involved in the prohibition have been limited to

areas identified as especially sensitive and critical to corporate

operations.

Proposed Sec. 3201.107(c) would make it the responsibility of the

employee to consult with an agency designee concerning outside

employment or activities that could result in disqualification of the

employee from his or her official duties.

Section 3201.108 Related Statutory and Regulatory Authorities

This section sets forth additional statutory and regulatory

authorities with which an employee should be familiar.

Section 3201.109 Provisions of 5 CFR Part 2635 Not Applicable to

Corporation Employees

Certain provisions of the Standards of Ethical Conduct have been

determined by the Corporation to be inapplicable to its employees based

on the Corporation's status as a mixed-ownership Corporation. To avoid

confusion, the authorities which are not applicable to the Corporation

and its employees would be listed in Sec. 3201.109 (b) through (e).

Proposed Sec. 3201.109(a) would caution examiners that they may not use

the gift exceptions in 5 CFR 2635.204 to accept a gift that would

violate the criminal prohibitions in 18 U.S.C. 213 against examiners

accepting gifts or gratuities from the institutions they examine.

III. Removal of FDIC Employees Responsibilities and Conduct

Regulations and Related Modifications

On the effective date of the final rule, the Employee

Responsibilities and Conduct regulation, 12 CFR part 336, will be

amended to remove and reserve subparts A, B, C, E, and F, Secs. 336.1-

336.23 and 336.29-336.37, and remove the appendix to part 336. As

proposed, a new Sec. 336.1 will be added to provide a cross-reference

to the Corporation's supplemental ethical conduct regulation, to be

codified at 5 CFR part 3201, the Corporation's supplemental financial

disclosure regulation at 5 CFR part 3202, and to the Executive Branch-

wide financial disclosure and standards of ethical conduct regulations

at 5 CFR parts 2634 and 2635. 12 CFR part 336, subpart D, Secs. 336.24

through 336.28, was removed and reserved by action of the Board of

Directors of the Corporation dated November 24, 1992, 57 FR 39628.

IV. Matters of Regulatory Procedure

Administrative Procedure Act

This proposed rulemaking is in compliance with the Administrative

Procedure Act (5 U.S.C. 553) and allows for a 60-day comment period.

Regulatory Flexibility Act

The Board of Directors has concluded that the proposed rule will

not impose a significant economic hardship on small institutions.

Therefore, the Board of Directors hereby certifies pursuant to section

605 of the Regulatory Flexibility Act (5 U.S.C. 605) that the proposed

rule will not have a significant economic impact on a substantial

number of small business entities within the meaning of the Regulatory

Flexibility Act (5 U.S.C. 601 et seq.).

Paperwork Reduction Act

The Board of Directors has determined that this proposed regulation

does not contain any information collection requirements that require

the approval of the Office of Management and Budget pursuant to the

Paperwork Reduction Act (44 U.S.C. 3501 et seq.).

List of Subjects

5 CFR Part 3201

Administrative practice and procedure, Conflict of interests,

Government employees, Reporting and recordkeeping requirements.

12 CFR Part 336

Conflict of interests, Government employees.

Dated at Washington, D.C. this 14th day of June, 1994.

By Order of the Board of Directors.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Acting Executive Secretary.

Concurred in this 1st day of July, 1994.

Stephen D. Potts,

Director, Office of Government Ethics.

For the reasons set forth in the preamble, the Federal Deposit

Insurance Corporation, with the concurrence of the Office of Government

Ethics, is proposing to amend title 5, Chapter XXII, of the Code of

Federal Regulations and title 12, Chapter III, of the Code of Federal

Regulations as follows:

5 CFR CHAPTER XXII--FEDERAL DEPOSIT INSURANCE CORPORATION

1. A new part 3201 is added to 5 CFR Chapter XXII to read as

follows:

PART 3201--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES

OF THE FEDERAL DEPOSIT INSURANCE CORPORATION

Sec.

3201.101 General.

3201.102 Extensions of credit from FDIC-insured depository

institutions.

3201.103 Prohibitions on ownership of securities of FDIC-insured

depository institutions.

3201.104 Restrictions concerning the purchase of property held by

the Corporation or the RTC as conservator, receiver, or liquidator

of the assets of an insured depository institution, or by a bridge

bank organized by the Corporation.

3201.105 Prohibition on dealings with former employers, associates,

and clients.

3201.106 Employment of family members outside the Corporation.

3201.107 Outside employment and other activities.

3201.108 Related statutory and regulatory authorities.

3201.109 Provisions of 5 CFR part 2635 not applicable to Corporation

employees.

Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government

Act of 1978); 12 U.S.C. 1819(a), 1822; 26 U.S.C. 1043; E.O. 12674,

54 FR 15159, 3 CFR, 1989 Comp., p. 215, as modified by E.O. 12731,

55 FR 42547, 3 CFR, 1990 Comp., p. 306; 5 CFR 2635.105, 2635.403,

2635.502, and 2635.803.

Sec. 3201.101 General.

(a) Purpose. The regulations in this part apply to employees of the

Federal Deposit Insurance Corporation (Corporation) and supplement the

Standards of Ethical Conduct for Employees of the Executive Branch

contained in 5 CFR part 2635. Where specified, these regulations also

apply to the Comptroller of the Currency and the Director of the Office

of Thrift Supervision in connection with their activities as members of

the Corporation's Board of Directors.

(b) Corporation ethics officials. The Executive Secretary of the

Corporation shall act as the Corporation's Ethics Counselor and as its

Designated Agency Ethics Official under 5 CFR part 2638. The Assistant

Executive Secretary (Ethics) shall act as the Corporation's Alternate

Ethics Counselor and as the Alternate Agency Ethics Official.

(1) The Ethics Counselor or Alternate Ethics Counselor may delegate

authority to one or more employees to serve as Deputy Ethics

Counselors.

(2) The delegation to a Deputy Ethics Counselor shall be in writing

and cannot be redelegated.

(c) Agency designees. The Ethics Counselor and Alternate Ethics

Counselor shall serve as the agency designee for purposes of making the

determinations, granting the approvals, and taking other actions

required by an agency designee under part 2635 and this part. The

Ethics Counselor or Alternate Ethics Counselor may delegate authority

to Deputy Ethics Counselors or to other employees to serve as agency

designees for specified purposes. The delegation to any agency designee

shall be in writing and cannot be redelegated.

(d) Definitions. For purposes of this part:

(1) Affiliate, as defined in 12 U.S.C. 1841(k), means any company

that controls, is controlled by, or is under common control with

another company.

(2) Appropriate director means the head of a Washington office or

division or the highest ranking official assigned to a regional office

in each division or the Ethics Counselor.

(3) Covered employee means an employee of the Corporation required

to file a public or confidential financial disclosure report under 5

CFR part 2634 or 5 CFR part 3202.

(4) Employee means an officer or employee, other than a special

Government employee, of the Corporation including a member of the Board

of Directors appointed under the authority of 12 U.S.C. 1812(a)(1)(C),

and a liquidation graded employee. For purposes of 5 CFR part 2635 and

Secs. 3201.103 and 3201.104, employee includes any individual who,

pursuant to a contract or any other arrangement, performs functions or

activities of the Corporation, under the direct supervision of an

officer or employee of the Corporation.

(5) Security includes an interest in debt or equity instruments.

The term includes, without limitation, a secured or unsecured bond,

debenture, note, securitized assets, commercial paper, and all types of

preferred and common stock. The term includes an interest or right in a

security, whether current or contingent, a beneficial or legal interest

derived from a trust, the right to acquire or dispose of any long or

short position, an interest convertible into a security, and an option,

right, warrant, put, or call with respect to a security. The term

security does not include a deposit account.

(6) State nonmember bank means any State bank as defined in 12

U.S.C. 1813(e) which is not a member of the Federal Reserve System.

(7) Subsidiary, as defined in 12 U.S.C. 1813(w), means any company

which is owned or controlled directly or indirectly by another company.

Sec. 3201.102 Extensions of credit from FDIC-Insured depository

institutions.

(a) Credit subject to this section. The prohibition,

disqualification, and retention provisions of this section apply to a

current or contingent financial obligation of the employee. For

purposes of this section, a current or contingent financial obligation

of an employee's spouse or minor child is considered to be an

obligation of the employee.

(b) Prohibition on acceptance of credit from FDIC-insured State

nonmember banks applicable to certain high-level officials. (1) An

employee described in paragraph (b)(2) of this section shall not,

directly or indirectly, accept or become obligated on an extension of

credit from an FDIC-insured State nonmember bank or its subsidiary,

except credit extended through the use of a credit card under the same

terms and conditions as are offered to the general public.

(2) The prohibition in paragraph (b)(1) of this section applies to:

(i) An employee who is a member of the Board of Directors, an

assistant or deputy to the Board of Directors or to an appointed Board

member, and a covered employee who is an assistant to such person; and

(ii) The director of a Washington office or of a division, other

than the Division of Supervision, and a covered employee who holds a

position immediately subordinate to such director.

(c) Prohibition on acceptance of credit from FDIC-insured State

nonmember banks for employees assigned to the Division of Supervision.

(1) An employee described in paragraph (c)(2) of this section shall

not, directly or indirectly, accept or become obligated on an extension

of credit from an FDIC-insured State nonmember bank or from an officer,

director, employee, or subsidiary of such bank, except:

(i) For an employee assigned to the Washington office, credit

extended through the use of a credit card on the same terms and

conditions as are offered to the general public; and

(ii) For an employee assigned to other than the Washington office,

credit extended by an FDIC-insured State nonmember bank headquartered

outside the employee's region of official assignment through the use of

a credit card on the same terms and conditions as are offered to the

general public.

(2) The prohibition in paragraph (c)(1) of this section applies to

the Executive Director for Supervision and Resolutions, the Director of

the Division of Supervision, a covered employee immediately subordinate

to the Director of the Division of Supervision and the following

employees assigned to the Division of Supervision: an Assistant

Director, Regional Director, Deputy Regional Director, Assistant

Regional Director, examiner, assistant examiner, review examiner,

compliance examiner, assistant compliance examiner, and a covered

employee.

(3) Upon accepting credit extended by a credit card in accordance

with paragraphs (c)(1)(i) or (c)(1)(ii) of this section, the employee

shall be disqualified in accordance with paragraph (e)(1) of this

section, and, within 30 days of accepting such credit, shall file with

the appropriate director a Statement of Credit Card Obligation in

Insured State Nonmember Bank and Acknowledgement of Conditions for

Retention--Notice of Disqualification.

(d) Two-year prohibition on acceptance of credit from FDIC-insured

depository institutions. (1) An employee described in paragraph (d)(2)

of this section shall not, directly or indirectly, accept or become

obligated on an extension of credit from an FDIC-insured depository

institution or its subsidiary for a period of two years from the date

of the employee's last personal and substantial participation in an

audit, resolution, liquidation, supervisory proceeding, or internal

agency deliberation affecting that particular institution, its

predecessor or successor, or any subsidiary of such institution. This

prohibition does not apply to credit obtained through the use of a

credit card under the same terms and conditions as are offered to the

general public.

(2) The prohibition in paragraph (d)(1) of this section applies to

an employee in the Division of Finance, Division of Depositor and Asset

Services, Division of Resolutions, Legal Division, or who is a member

of a standing committee of the Board of Directors whose official duties

include:

(i) Audit of insured depository institutions for deposit insurance

assessment purposes;

(ii) Resolution or liquidation of failed or failing insured

depository institutions;

(iii) Participation in the supervision of insured depository

institutions or enforcement proceedings under the Federal Deposit

Insurance Act; or

(iv) Internal agency deliberations affecting a particular insured

depository institution, its predecessor or successor, or a subsidiary

of such institution.

(e) Employee disqualification. (1) An employee described in

paragraph (c)(2) of this section shall not participate in an

examination, audit, visitation, review, or investigation, or other

particular matter involving an FDIC-insured depository institution or

other person with whom the employee has an outstanding extension of

credit.

(2) A covered employee, other than an employee who is described in

paragraph (c)(2) of this section, shall not participate in any

particular matter involving an FDIC-insured depository institution or

other person with whom the employee has an outstanding extension of

credit.

(3) Disqualification is not required under paragraph (e)(2) of this

section:

(i) If the credit was extended through the use of a credit card on

the same terms and conditions as are offered to the general public; or

(ii) When the agency designee, with the concurrence of the

appropriate director, has authorized the employee to participate in the

matter using the standard set forth in 5 CFR 2635.502(d).

(4) The Comptroller of the Currency and the Director of the Office

of Thrift Supervision shall be disqualified from matters pending before

the Board of Directors to the same extent as a covered employee subject

to paragraph (e)(2) of this section.

(f) Retention and renegotiation of pre-existing extensions of

credit. (1) Nothing in this section prohibits the retention of a pre-

existing extension of credit that an employee would be prohibited from

accepting by Sec. 3201.102 (b) or (c) if the extension of credit was

permitted to be retained under 12 CFR part 336 prior to the adoption of

this regulation or if the employee's acceptance of the extension of

credit was proper at the time the obligation was incurred, as in the

case of an extension of credit incurred prior to commencement of

employment or reassignment to another division or location. Subsequent

action affecting the status of the creditor, such as merger,

acquisition, or transaction under 12 U.S.C. 1823, does not change the

character of an extension of credit that was proper when incurred. An

employee who retains a pre-existing extension that he or she would be

prohibited from accepting by Sec. 3201.102 (b) or (c) shall report the

pre-existing extension of credit to the appropriate director or agency

designee within 30 days from the following event, as appropriate:

(i) Adoption of this part;

(ii) Commencement of employment;

(iii) Assignment to another division or location; or

(iv) Action affecting the status of the creditor.

(2) Any renegotiation of a pre-existing extension of credit shall

be treated as a new extension of credit that is subject to the

prohibitions contained in Sec. 3201.102 (b) through (d). An employee

may request that an exception be made to the prohibitions to permit

renegotiation of a pre-existing extension of credit. Any such request

shall be made in writing to the appropriate director and agency

designee, or in the case of an employee described in paragraph (b)(2)

(i) and (ii) of this section, to the Ethics Counselor, stating:

(i) The purpose of the renegotiation;

(ii) The terms and conditions of the original extension of credit;

(iii) The terms and conditions now available to the general public;

(iv) The terms and conditions now offered to the employee;

(v) The action the employee has taken to move the loan to an

institution from which an employee would not be prohibited from

accepting an extension of credit; and

(vi) The financial hardship, if any, denial of the request will

cause.

(3) After submission of the request, the appropriate director and

agency designee, or the Ethics Counselor, may grant the employee's

request based upon a written determination that the request is not

inconsistent with 5 CFR part 2635 or otherwise prohibited by law and

that, under the particular circumstances, application of the

prohibition is not necessary to avoid the appearance of the misuse of

position or loss of impartiality, or otherwise to ensure confidence in

the impartiality and objectivity with which agency programs are

administered.

Sec. 3201.103 Prohibitions on ownership of securities of FDIC-insured

depository institutions.

(a) Prohibition on ownership. Except as permitted by this section,

an employee or the spouse or minor child of an employee, shall not

acquire, own, or control, directly or indirectly, a security of an

FDIC-insured depository institution, or an affiliate of an FDIC-insured

depository institution.

(b) Exception to prohibition for certain interests. Nothing in this

section prohibits an employee, or the spouse or minor child of an

employee, from:

(1) Acquiring, owning or controlling the securities of certain

publicly traded bank holding companies or their nonbank subsidiaries

where the bank holding company is not primarily engaged in banking and

either the bank holding company or the bank it holds is exempt under

the provisions of the Bank Holding Company Act of 1956 and which are

identified as such by the Board of Governors of the Federal Reserve

System (a list of exempt institutions can be obtained from the

Corporation's Ethics Section);

(2) Acquiring, owning, or controlling the securities of certain

nonfinancial savings association holding companies whose principal

business is unrelated to the financial services industry and which are

identified as such by the Office of Thrift Supervision pursuant to 5

CFR 3101.109(b)(3)(ii) (a list of such institutions can be obtained

from the Corporation's Ethics Section);

(3) Retaining a security of an FDIC-insured depository institution

or an affiliate of an FDIC-insured depository institution if the

security was permitted to be retained by the employee under 12 CFR part

336 prior to the adoption of this regulation, was obtained prior to

commencement of employment with the Corporation, or was acquired by a

spouse prior to marriage to the employee;

(4) Acquiring, owning, or controlling a security of an FDIC-insured

depository institution or the affiliate of an FDIC-insured depository

institution where the security was acquired by inheritance, gift, stock

split, involuntary stock dividend, merger, acquisition, or other change

in corporate ownership, exercise of preemptive right, or otherwise

without specific intent to acquire the security. This provision permits

the retention of any such interest only where:

(i) The employee makes full, written disclosure on FDIC form 2410/

07 to the Ethics Counselor within 30 days of commencing employment or

acquiring the interest; and

(ii) The employee is disqualified in accordance with 5 CFR part

2635, subpart D, from participating in any particular matter that

affects his or her financial interests, or that of his or her spouse or

minor child;

(5) Acquiring, owning, or controlling an interest in a publicly

traded or publicly available investment fund which, in its prospectus,

does not indicate the objective or practice of concentrating its

investments in the financial services sector and the employee neither

exercises control nor has the ability to exercise control over the

financial interests held in the fund; or

(6) Using an FDIC-insured depository institution or an affiliate of

an FDIC-insured depository institution as custodian or trustee of

accounts containing tax-deferred retirement funds.

(c) Divestiture. Based upon a determination of substantial conflict

under 5 CFR 2635.403(b), the Ethics Counselor may require an employee,

or the spouse or minor child of an employee, to divest a security he or

she is otherwise authorized to retain under paragraph (b) of this

section.

Sec. 3201.104 Restrictions concerning the purchase of property held by

the Corporation or the RTC as conservator, receiver, or liquidator of

the assets of an insured depository institution, or by a bridge bank

organized by the Corporation.

(a) Prohibition on purchase of property. An employee, and an

employee's spouse or minor child shall not, directly or indirectly,

purchase or acquire any property held or managed by the Corporation or

the Resolution Trust Corporation (RTC) as conservator, receiver, or

liquidator of the assets of an insured depository institution, or by a

bridge bank organized by the Corporation, regardless of the method of

disposition of the property.

(b) Disqualification. An employee who is involved in the

disposition of assets held by the Corporation or the RTC as

conservator, receiver, or liquidator of the assets of an insured

depository institution, or by a bridge bank organized by the

Corporation shall not participate in the disposition of assets held in

such capacities when the employee knows that any party with whom the

employee has a covered relationship, as defined in 5 CFR

2635.502(b)(1), is or will be attempting to acquire such assets. The

employee shall provide written notification of the disqualification to

his or her immediate supervisor and the agency designee.

Sec. 3201.105 Prohibition on dealings with former employers,

associates, and clients.

(a) An employee is prohibited for one year from the date of entry

on duty with the Corporation from participating in a particular matter

when an employer, or the successor to the employer, for whom the

employee worked at any time during the one year preceding the

employee's entrance on duty is a party or represents a party to the

matter.

(b) For purposes of this section, the term employer means a person

with whom the employee served as officer, director, trustee, general

partner, agent, attorney, accountant, consultant, contractor, or

employee.

(c) The one-year period of disqualification imposed by paragraph

(a) of this section may be extended in an individual case based on a

written determination by the agency designee that, under the particular

circumstances, the employee's participation in the particular matter

would cause a reasonable person with knowledge of the facts to question

his or her impartiality.

Sec. 3201.106 Employment of family members outside the Corporation.

(a) Disqualification of employees. An employee shall not

participate in an examination, audit, investigation, application,

contract, or other particular matter if the employer of the employee's

spouse, child, parent, brother, sister, or a member of the employee's

household is a party or represents a party to the matter, unless an

agency designee authorizes the employee to participate using the

standard in 5 CFR 2635.502(d).

(b) Reporting certain relationships. A covered employee shall make

a written report to an agency designee within 30 days of the employment

of the employee's spouse, child, parent, brother, sister, or a member

of the employee's household by:

(1) An FDIC-insured depository institution or its affiliate;

(2) A firm or business with which, to the employee's knowledge, the

Corporation has a contractual or other business or financial

relationship; or

(3) A firm or business which, to the employee's knowledge, is

seeking a business or contractual relationship with the Corporation.

Sec. 3201.107 Outside employment and other activities.

(a) Prohibition on employment with FDIC-insured depository

institutions. An employee shall not provide service for compensation,

in any capacity, to an FDIC-insured depository institution or an

employee or person employed by or connected with such institution.

(b) Use of professional licenses. A covered employee who holds a

license related to real estate, appraisals, securities, or insurance

and whose official duties with the Corporation require personal and

substantial involvement in matters related to, respectively, real

estate, appraisal, securities, or insurance is prohibited from using

such license, other than in the performance of his or her official

duties, for the production of income. The appropriate director, in

consultation with an agency designee, may grant exceptions to this

prohibition based on a finding that the specific transactions which

require use of the license will not create an appearance of loss of

impartiality or use of public office for private gain.

(c) Responsibility to consult with agency designee. An employee who

engages in, or intends to engage in, any outside employment or other

activity that may require disqualification from the employee's official

duties shall consult with an agency designee prior to engaging in or

continuing to engage in the activity.

Sec. 3201.108 Related statutory and regulatory authorities.

(a) 18 U.S.C. 213, which prohibits an examiner from accepting a

loan or gratuity from an FDIC-insured depository institution examined

by him or her or from any person connected with such institution.

(b) 18 U.S.C. 1906, which prohibits disclosure of information from

a bank examination report except as authorized by law.

(c) 17 CFR 240.10b-5 which prohibits the use of manipulative or

deceptive devices in connection with the purchase or sale of any

security.

(d) 18 U.S.C. 1909, which prohibits examiners from providing any

service for compensation for any bank or person connected therewith.

Sec. 3201.109 Provisions of 5 CFR part 2635 not applicable to

Corporation employees.

The following provisions of 5 CFR part 2635 are not applicable to

employees of the Corporation:

(a) Because of the restrictions imposed by 18 U.S.C. 213 on

examiners accepting loans or gratuities, an examiner in the Division of

Supervision may not use any of the gift exceptions at 5 CFR 2635.204 to

accept a gift from an FDIC-insured depository institution examined by

him or her or from any person connected with such institution.

(b) Provisions of 41 U.S.C. 423 (Procurement integrity) and the

implementing regulations at 48 CFR 3.104 (of the Federal Acquisition

Regulation) applicable to procurement officials referred to in:

(1) 5 CFR 2635.202(c)(4)(iii);

(2) The note following 5 CFR 2635.203(b)(7);

(3) Example 5 following 5 CFR 2635.204(a);

(4) Examples 2 and 3 following 5 CFR 2635.703(b)(3);

(5) 5 CFR 2635.902(f), (h), (l), and (bb);

(c) Provisions of 31 U.S.C. 1353 (Acceptance of travel and related

expenses from non-Federal sources) and the implementing regulations at

41 CFR part 304-1 (Acceptance of payment from a non-Federal source for

travel expenses) referred to in 5 CFR 2635.203(b)(8)(i).

(d) Provisions of 41 CFR Chapter 101 (Federal Property Management

Regulations) referred to in 5 CFR 2635.205(a)(4).

(e) Provisions of 41 CFR Chapter 201 (Federal Information Resources

Management Regulation) referred to in Example 1 following 5 CFR

2635.704(b)(2).

12 CFR CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION

PART 336--EMPLOYEE RESPONSIBILITIES AND CONDUCT

2. The authority citation for part 336 is revised to read as

follows:

Authority: 5 U.S.C. 7301; 12 U.S.C. 1819(a).

3. Section 336.1 is revised to read as follows:

Sec. 336.1 Cross-reference to employee ethical conduct standards and

financial disclosure regulations.

Employees of the Federal Deposit Insurance Corporation

(Corporation) are subject to the Executive Branch-wide Standards of

Ethical Conduct at 5 CFR part 2635, the Corporation regulation at 5 CFR

part 3201 which supplements the Executive Branch-wide Standards, the

Executive Branch-wide financial disclosure regulations at 5 CFR part

2634, and the Corporation regulation at 5 CFR part 3202 which

supplements the Executive Branch-wide financial disclosure regulations.

Secs. 336.2-336.23, 336.29-336.37 [Removed]

Appendix to Part 336--[Removed]

4. Sections 336.2 through 336.23 and 336.29 through 336.37 and all

subpart headings are removed and the appendix to part 336 is removed.

[FR Doc. 94-16557 Filed 7-11-94; 8:45 am]

BILLING CODE 6714-01-P