Regulatory Review

SUMMARY: Pursuant to section 303(a) of the Community Development and

Regulatory Improvement Act of 1994 (CDRIA) and the Regulatory

Reinvention Initiative of the Vice President's National Performance

Review, the Office of Thrift Supervision (OTS) has reviewed chapter V

of the Code of Federal Regulations (CFR), where OTS regulations are

codified. OTS reviewed each regulation to determine whether it is

necessary, imposes the least possible burden consistent with safety and

soundness, and is written in a clear, straightforward manner.

As a result of this review, OTS has identified a number of

regulations that can be eliminated as duplicative or unnecessary. The

agency is today proposing to remove those sections from its

regulations. OTS has also identified a number of ways in which its

regulations could be streamlined or reorganized into a more user-

friendly document. Before proposing such structural changes, however,

the agency is today requesting comment on whether such changes would

sufficiently improve the CFR to merit the effort to make the changes

and the effort required from the industry to become familiar with the

new structure.

DATES: Comments must be received on or before October 27, 1995.

ADDRESSES: Send comments to Chief, Dissemination Branch, Records

Management and Information Policy, Office of Thrift Supervision, 1700 G

Street NW., Washington, D.C. 20552, Attention Docket No. 95-160. These

submissions may be hand-delivered to 1700 G Street NW., from 9:00 a.m.

to 5:00 p.m. on business days; they may be sent by facsimile

transmission to FAX Number (202) 906-7755. Comments will be available

for inspection at 1700 G Street NW., from 1:00 p.m. until 4:00 p.m. on

business days.

FOR FURTHER INFORMATION CONTACT: Therese L. Monahan, Project Manager,

Thrift Policy (202) 906-5740; or Valerie J. Lithotomos, Counsel

(Banking and Finance), Regulations and Legislation Division, Chief

Counsel's Office, (202) 906-6439, Office of Thrift Supervision, 1700 G

Street NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

Today, the OTS is publishing the first in a series of proposals to

streamline, update, and generally improve its regulations. The OTS

conducted a comprehensive review of its regulations in the spring of

1995 pursuant to section 303 of CDRIA and the Administration's

Reinvention Initiative.1 In response to the Administration's

mandate to create grass roots partnerships and the desire to negotiate,

not dictate rules, OTS sought specific industry comments on regulatory

burden through town meetings and industry roundtable meetings held by

the Acting Director and Regional Directors. In addition, OTS obtained

further industry input from America's Community Bankers (ACB).2

The ACB surveyed some of its members and offered a summary of survey

findings to the OTS. ACB's survey collected industry feedback on OTS's

regulatory structure and various communication vehicles used to

disseminate OTS interpretations and guidance. ACB reported a generally

favorable response to OTS's overall plan to streamline and reorganize

its regulations in order to reduce regulatory burden.

\1\ See the Department of Treasury's Summary Report on the

President's Regulatory Reform Initiatives.

\2\ America's Community Bankers is a trade association

representing 2,000 savings associations and community financial

institutions and related business firms.

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OTS Staff in both the Washington and Regional Offices reviewed the

regulations and policy statements contained in chapter V of the CFR to

``streamline and modify those regulations and policies in order to

improve efficiency, reduce unnecessary costs, * * * eliminate

unwarranted constraints on credit availability [and] remove

inconsistencies and outmoded and duplicative requirements.'' 3

\3\ Section 303 of CDRIA, 12 U.S.C. 4803(a)(1)(A), (B).

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Preliminary staff recommendations for improvements to the

regulations were based on the following criteria:

Is the regulation current?

Can the regulation be eliminated without endangering

safety and soundness, diminishing consumer protection, or violating

statutory requirements?

Is the regulation's subject matter more suited for a

policy statement?

Is the regulation consistent with the regulations of the

other federal banking agencies?

Can the regulation be understood without consulting an

attorney?

Is the regulation written as a stand-alone regulation,

without confusing cross-references?

Is the regulation required by statute?

Are the regulations/parts/sections ordered in a logical

fashion?

This review identified a number of ways in which OTS's regulations

could be improved. The agency is undertaking a five-step process to

improve its regulations. Today's proposal reflects the first two steps

of that process.

First, the agency seeks public comment on a number of potential

ways OTS could streamline and restructure its regulations to make them

more user-friendly. These potential improvements, discussed in Section

II of this preamble, have been suggested by OTS Washington and Regional

staff. OTS is particularly interested in whether such reorganization

and restructuring would make OTS's regulations easier for the public to

use.

Second, the proposal seeks comment on the deletion of a number of

specific parts and sections the agency has identified as outdated or

unnecessary. These regulations are discussed more fully in Section III

of this preamble. The agency also seeks comment on some technical

modifications to its regulations, including changes made to update

cross-references and definitions.

[[Page 44443]]

As a third step in this reinvention of regulations, the agency

expects to issue over the next year a series of more substantive

proposals to make more significant changes in a number of key areas of

its regulations, including regulations governing lending, subsidiaries,

charter and by-laws, insurance, preemption, and adjustable-rate

mortgages. Comments received on the organizational changes proposed

today will also be considered in each of those more substantive

reviews.

The fourth step in this reinvention is OTS's participation in the

interagency review of its regulations, along with those of the other

federal banking agencies, with a view to implementing section 303(a)(2)

of CDRIA by making regulations and guidance implementing common

statutory provisions and supervisory policies more uniform. This review

is taking place under the auspices of the Federal Financial

Institutions Examination Council.

Finally, the agency has identified some regulations that would

require statutory changes before the regulation could be removed or

updated. These include removing the liquidity regulation at part 566,

which is required by section 6 of the HOLA, removing the requirement

that Federal savings associations maintain membership in a Federal Home

Loan Bank, which is required by section 5(f) of the HOLA, and providing

additional lending flexibility under the Qualified Thrift Lender test,

which is required by section 10(m) of the HOLA. The agency has

submitted potential legislative changes on these and other burdensome

statutory provisions to the Congress.

II. Request for Comment on Possible Reorganization of OTS

Regulations

OTS's current regulatory structure has evolved over the years in

response to sweeping statutory changes and changes in policy direction

based on the difference in the general condition and makeup of the

thrift industry. When chapter V of the CFR is viewed as a whole, some

subject areas are addressed in multiple areas of the regulations. For

example, a savings association considering whether to create a service

corporation or an operating subsidiary would currently, at a minimum,

look at Secs. 545.74, 545.81, 563.37, 563.41, and 571.21. An

institution considering a merger with another depository institution

might have to review regulations in parts 546, 552, and 563.

Historically, OTS's predecessor agency, the Federal Home Loan Bank

Board (FHLBB), looked at the source of statutory authority and charter

type of affected institutions in organizing subchapters of chapter V of

the CFR. Regulations in former subchapter B (12 CFR 520 et seq.) were

promulgated pursuant to the FHLBB's authority under the Federal Home

Loan Bank Act (FHLBA); regulations in subchapter C (12 CFR 540 et seq.)

were promulgated under the FHLBB's chartering authority for federal

savings associations under the Home Owner's Loan Act (HOLA); and

regulations in subchapter D (12 CFR 560 et seq.) were promulgated under

the FHLBB's authority as operating head of the Federal Savings and Loan

Insurance Corporation (FSLIC) under title IV of the National Housing

Act (NHA) for all FSLIC-insured institutions.

The Financial Institutions Reform, Recovery, and Enforcement Act

(FIRREA) created the OTS in 1989 and substantially overhauled the

statutes governing the regulation of savings associations. Title IV of

the NHA was repealed and some authorities under which the FHLBB had

issued regulations pursuant to the FHLBA and title IV of the NHA were

transferred to the HOLA, which itself was revised. The HOLA now serves

as the primary statutory authority for OTS regulation of all savings

associations, regardless of charter.

In October, 1989, OTS, the Federal Deposit Insurance Corporation

(FDIC), and the Federal Housing Finance Board divided up the

regulations of the former FHLBB and FSLIC among themselves in

accordance with their new statutory responsibilities. In November,

1989, OTS published a recodification of its regulations. This

recodification reflected some reorganization of the regulations into a

more user-friendly format, but because of time constraints did not

include a total structural overhaul.

From January, 1992 until January, 1993, OTS reviewed and revised

its regulations with a view to removing outdated and unnecessary

regulations. It held public hearings in February, 1992 and requested

industry comments on regulations that could be removed or modified. It

published a notice of proposed rulemaking in September, 1992 and

adopted a final regulation in January, 1993 that removed a number of

obsolete or redundant regulations. The agency did not propose as part

of that process to restructure the regulations, remove regulations that

duplicated statutory authority, or revise regulations setting forth

certain implied powers. At that time, the agency believed that such

changes could result in more confusion than benefit for those subject

to OTS regulations.4

\4\ See 57 FR 40350 (September 3, 1992).

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If the OTS were drafting its regulations on a totally clean slate,

the regulations would not be organized as they are now. However, the

cost of changing an existing and familiar structure could exceed the

benefit derived from creating a more logical organizational structure.

As part of the substantive review of major areas of OTS regulations

such as lending, subsidiaries, and corporate governance, OTS is

considering, and seeks public input on, how much restructuring related

regulations would help CFR users. Some specific types of reorganization

that would cut across subject areas are set forth below.

A. Should OTS Consolidate Common Definitions of General Applicability

now in Parts 541, 561, 563, and 583 in a new Part 501?

1. Background

Currently, several subchapters of OTS's regulations have

definitional parts. In the 1989 recodification of OTS's regulations,

the agency removed duplicative definitions from parts 541 (definitional

part for subchapter C) and 561 (definitional part for subchapter D) and

clarified that definitions in each of those parts applied to both

subchapters unless a specific regulation provided otherwise. Subchapter

F, the regulations for savings and loan holding companies, has its own

definitional part, part 583, with some duplicative, some unique, and

some slightly different definitions.

Other parts and sections, such as part 564 (Appraisals), part 567

(Capital), and Sec. 563.51 (Qualified Thrift Lender), contain

definitions that generally apply only to that part or section. Recent

OTS regulations have included definitions for new terms in the revised

section, in part because this is the common practice at the other

banking agencies. Some of these section- or part-specific regulations

have themselves been cross-referenced in other sections. For example,

the agency's transactions-with-affiliates regulation, 12 CFR 563.41,

defines ``subsidiary'' by referring to Sec. 567.1(dd), the capital

regulation, but defines ``savings association'' by referring to

Sec. 583.21, the definitions used for savings and loan holding

companies.

2. Possible Revision

The OTS is considering consolidating all definitions used or

referenced in more than one part or section into a new part 501.

Definitions used only in a particular part or section would remain with

that unit. Placing all common definitions in a new part 501 would

significantly simplify the structure of

[[Page 44444]]

OTS's regulations. We expect that it may save time for users searching

for a definition and trying to determine the regulations to which the

definition applies. It may also minimize confusion resulting from

duplicative or conflicting definitions of the same term and reduce the

amount of cross-referencing needed. As with any structural change,

users might experience initial confusion until they became familiar

with the new structure. When OTS did a similar consolidation of

definitions on a smaller scale in 1989, however, no major problems were

reported.

B. Should OTS Consolidate the Remaining Safety and Soundness

Regulations in Part 545 Into Part 563?

1. Background

In 1989, FIRREA amended both the HOLA and the Federal Deposit

Insurance Act (FDIA) in a number of ways that subjected both federally

and state chartered savings associations to similar requirements.

Additional statutory changes in the Federal Deposit Insurance

Corporation Improvement Act of 1991 (FDICIA) have resulted in more

similar authority and safety-and-soundness-based restrictions for state

and federally chartered entities. Under section 28 of the FDIA, the

type and amount of activities in which state-chartered savings

associations may engage without specific FDIC approval are tied more

closely to the types and levels of activities permitted for federal

savings associations.

As a result of these statutory changes and a general effort by OTS

to remove duplicative regulations and apply regulations consistently to

institutions regardless of charter type, most new safety-and-soundness-

based regulations have been placed in subchapter D, usually in part

563. Additionally, over the years a number of regulations found in

parts 545 and 563 have been written to include cross-references to

regulations found in the other part. For example, definitional parts

541 and 561 each already cross-reference their counterpart. The real

estate regulation for federal savings associations at Sec. 545.32

cross-references the agency's general real estate lending regulations

at Secs. 563.35(d), 563.100, and 563.101. Similarly, the regulation on

high loan-to-value loans by all savings associations found at

Sec. 563.37 cross-references restrictions found in the federal savings

association regulations at Sec. 545.38.

2. Possible Revisions

The OTS seeks input from the industry and other users of its

regulations on whether its regulations would be improved by

consolidating all safety-and-soundness-based regulations into part 563.

The purpose of this consolidation would be to simplify and streamline

the structure of OTS regulations, not to impose additional restrictions

on state-chartered institutions. If institutions find the current

structure familiar and workable, such a consolidation could create an

unnecessary burden. The agency is also concerned that such a

consolidation could be perceived as an attempt to increase the

regulatory burden on state-chartered associations, rather than an

attempt to consolidate requirements applicable to savings associations

regardless of their charters that are currently scattered in several

subchapters of chapter V.

As part of today's proposal, the agency is proposing to eliminate a

number of regulations applicable to federal savings associations that

merely cross-reference or duplicate requirements found in part 563. If

OTS decided to consolidate the regulations further, it would first

review the targeted regulations in part 545 to determine which safety-

and-soundness-based regulations or portions of those regulations

originally applicable to federal savings associations were appropriate

for all savings associations. Any remaining restrictions found to be

unnecessary would be removed from the regulations before the

regulations were consolidated into part 563.

C. Should OTS's Regulations Comprehensively Codify Thrift Powers or

Should OTS Delete Regulations That Only Repeat Statutory Authority or

set Forth an Implied Power?

1. Background

Chapter V of the CFR, where OTS's regulations are codified, is

inconsistent. It repeats some, but not all, statutory powers and

restrictions and some, but not all, implied powers and restrictions on

those powers. This has led to confusion.

In discussing regulations with OTS field personnel, some

institutions have indicated that they believe that chapter V of the CFR

is a self-contained document. Others, while recognizing that Chapter V

is not currently the sole repository of information on thrift powers,

believe that it would be more useful if it codified all implied and

statutory powers. Still others believe that Chapter V should be

simplified by removing all regulations that merely repeat statutory

authority.

a. Statutory powers. Over the years, the OTS and its predecessor,

the FHLBB, have generally omitted or removed regulations that do no

more than repeat statutory language or cite statutory authority in the

course of other regulatory burden reduction projects. The agency's view

has been that removing duplicative language from the regulations can

minimize necessary updating when Congress amends a statute.

Currently, OTS has specific regulations and portions of regulations

that repeat statutory language (e.g., Secs. 545.44 (mortgage

transactions with the Federal Home Loan Mortgage Corporation) and 584.3

(transactions with affiliates)). Other regulations repeat statutory

authority in one paragraph and then set limitations on that authority

in succeeding paragraphs (e.g., Secs. 545.39 (loans guaranteed under

the Foreign Assistance Act) and 545.46 (commercial loans)).

b. Implied powers. Some OTS regulations set forth an implied power

of savings associations (a power that is incidental to the exercise of

powers expressly set forth in statutes or regulations), such as

Secs. 545.17 (funds transfer services) and 556.12 (deposit assurance of

direct deposit of Social Security payments). Other implied powers of

savings associations, and interpretations of the scope of express

statutory powers, have not been codified as regulations. Savings

associations must look to legal opinions or regulatory handbooks for

information on these powers. This reflects the factually specific

manner in which issues on implied powers are usually first presented to

the agency. OTS's regulations have never completely reflected all of

savings associations' implied powers or restrictions on these powers.

2. Proposed revisions

OTS is considering which of two diametrically opposed approaches

might result in a more useful Chapter V.

The first alternative would be to include all statutory and implied

powers of thrifts in OTS regulations. This would create a

comprehensive, but significantly longer, regulatory document. A truly

self-contained document that includes a complete recitation of both

statutory and implied powers might be a valuable resource, but could

become quickly outdated as statutes are amended. Given the evolving

nature of the market for financial services, a comprehensive listing of

implied powers in the regulations would definitely require frequent

updating.

The second alternative would be to eliminate all regulations that

merely

[[Page 44445]]

repeat statutory powers or that list implied powers. Handbooks or legal

opinions would provide a more complete discussion. This would decrease

total CFR pages and streamline the regulations. A variation of this

alternative might be to increase specific citations to statutory

authority in the regulations but remove repetitions of statutory

language. A regulation could set forth the existence of implied powers

and the standards used to determine those powers.

Pending public comment on these alternatives, today's proposal

takes a middle position. It suggests deletion of several regulations

that merely refer to statutory authority without any additional

regulatory interpretation. Today's proposal would not, however, remove

those regulations that contain paragraphs setting forth both statutory

authority and regulatory restrictions on that authority because the OTS

seeks public input on whether this format is more helpful than

burdensome. The proposal also neither removes the regulations listing

certain implied powers of savings associations nor adds regulations

setting forth other implied powers.

D. Should Policy Statements in Parts 556 and 571 Be Deleted and Recast

Either as Regulations or Placed as Guidance Placed in the Appropriate

Regulatory Handbook?

1. Background

Parts 556 and 571 of the CFR contain policy statements adopted by

OTS or its predecessor agency, the FHLBB, after notice and comment

rulemaking. The original concept behind codifying policy statements in

the CFR was to make these agency interpretations and guidance readily

available to savings associations. Since 1989, however, OTS has been

gradually eliminating policy statements from these parts and

incorporating their substance either into regulations after notice and

comment rulemaking or as guidance in regulatory handbooks. These

handbooks are provided to all savings associations and are available to

others by subscription. The handbooks compile information from various

sources on current agency interpretations and guidance and contain more

detail than the CFR.

2. Possible Revisions

One alternative is to review each of the policy statements

currently appearing in the CFR and determine, after notice and comment,

whether it should be adopted as a regulation. Those not adopted as

regulations would be placed as guidance in the appropriate regulatory

handbooks. This would streamline the CFR and aid in providing a more

concise and less confusing organizational structure.

Another alternative would be to continue to include some policy

statements in Chapter V of the CFR where the agency believed that this

would be the best vehicle for acquainting savings associations and

other CFR users of the agency's most significant interpretations. The

agency seeks comments on what criteria would be most useful in choosing

which policy statements to codify, if this approach were chosen.

E. What is the Best Method of Communicating Different Types of

Information, Guidance, Policies, Restrictions, and Requirements?

1. Background

Savings associations that look only at the CFR for information on

OTS interpretive rules, policies, procedures, and guidance have barely

scratched the surface of available materials. New issues arise and are

addressed in fact-specific situations. Some are first presented by a

request for a legal opinion, others through an on-site examination,

others in discussions with an interagency task force. OTS also

communicates policy positions via Regulatory Handbooks, Transmittals,

Thrift and Regulatory Bulletins, legal opinions, Letters to Chief

Executive Officers (CEO Letters), preambles to regulations,

instructions to the Thrift Financial Report, press releases, and

speeches.

There are vast differences in the types and time sensitivity of

information communicated. It is not likely that the agency could ever

adopt just one form of communication. However, the agency is striving

to keep communications as clear, simple, and timely as possible.

Because not all methods of communication reach all of OTS's

audiences equally, confusion has arisen in some rapidly developing

areas. For example, OTS sent CEO Letters to savings associations

notifying them of delays in implementation of the interest-rate risk

component of the capital regulation while the agency developed an

appeals process. Law firms who needed that information in preparing

disclosure statements discussing capital requirements for those savings

associations did not receive this information directly. Some

discussions on the scope of regulations appear only in the preamble

accompanying those regulations when they are published in the Federal

Register, not in the CFR. The agency's communications on implied powers

usually take the form of legal opinions, which are available through

computerized legal databases that may not be regularly accessed by some

savings associations.

The agency has also heard complaints from some users that some of

the more informal means of communication, such as press releases,

speeches, and CEO letters are not indexed or numbered and are thus more

difficult to identify and obtain after issuance.

2. Request for Comment in Developing Possible Revisions

The agency is considering, and seeks public input on, establishing

standards for which means of communication would be preferred for

particular types of information. Among the criteria that could be used

in determining the appropriate method would be: (1) The urgency of

communicating the information; (2) the audience to be reached (both

primary and secondary audiences); (3) whether industry or public input

must be obtained through notice and comment rulemaking; and (4) whether

the situation to be addressed is evolving, increasing the likelihood

for changes in the agency's position. The agency is also considering

whether there are more ways in which the agency can receive and make

information available electronically.

III. Proposed Deletions and Modifications to Regulations

Set forth below are regulations that OTS is proposing to delete

because they are no longer useful. The OTS is also proposing to delete

cross-references to sections that are being deleted.

A. Regulations To Be Removed or Modified Because of Obsolescence or

Redundancy

1. Recordkeeping

a. Statements of Condition (562.3). The OTS is proposing to remove

the regulation requiring savings associations to publish an annual

statement of condition in a newspaper and to make such ``counter

statements'' available at each home and branch office. These

requirements have proven burdensome and unnecessary. The newspaper

publication requirement was added to parallel a statutory requirement

that national banks publish such statements of condition. That

requirement for national banks was repealed in 1994. The Acting

Director of OTS waived the requirement for savings associations to make

such publications in December, 1994.

The agency has found that counter statements are not often used by

savings

[[Page 44446]]

association customers and duplicate information already available. The

other federal banking agencies do not impose a similar requirement on

the depository institutions they regulate. A savings association

customer seeking such information may ask the savings association for

it, or may obtain the information from the OTS.

b. Filing and signature requirements (563g.5). The OTS proposes to

decrease the required number of copies of an offering circular filed in

connection with securities offerings under part 563g to reduce the

regulatory burden and associated costs. The number of required copies

of offering circulars would be reduced from 25 to 9.

2. Policy Statements (556.4, 556.6, 556.8, 556.9, 556.11, 556.14,

556.15)

As discussed above in Section II, the OTS is seeking comment on

whether it should remove all of its policy statements from the CFR,

adopting some as regulations after notice and comment and transferring

others to guidance. As part of its review, the OTS has identified a

number of policy statements that are either outdated, merely reflect

current business practice, or otherwise provide no meaningful guidance

beyond that contained in the regulations themselves. The agency is

proposing to delete those statements. Section 556.4 (Insurance)

duplicates sections 571.4 and 563.35. Section 556.8 (Suretyship)

duplicates section 545.103; section 556.9 (Imposition of late charges

and due-on-sale clauses) duplicates the contents of parts 590 and 591;

section 556.11 (Prepayment penalty on mortgage loans) reiterates

section 545.34(c); and section 556.14 (Chief executive officer of a

branch office) duplicates information found in the model bylaws for

Federal mutual associations. Section 556.6 (Savings accounts) is not

totally consistent with Regulation DD,5 and is otherwise outdated.

Section 556.15 (Drive-in and pedestrian facilities) contains some

outdated provisions and otherwise merely reiterates common business

practice.

\5\ 12 CFR Part 230 (1995).

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3. Operational Regulations

The OTS proposes to remove a number of obsolete or duplicative

regulations addressing a variety of operational issues for savings

associations.

a. Electronic Fund Transfers (Part 533). Part 533 provides that

electronic fund transfers by savings associations are subject to

Regulation E, 12 CFR part 205 (1995). OTS proposes to delete this part

in its entirety because it is unnecessary and may cause confusion. By

its terms, Regulation E applies to consumer electronic funds transfers

at all financial institutions, including savings associations. Other

regulations that apply to all financial or depository institutions are

not separately cross-referenced in OTS's regulations.

b. Withdrawal requests (545.15). The OTS is proposing to remove

this section because it imposes unnecessary restrictions.

c. Issuance of mutual capital certificates (545.18); Issuance of

net worth certificates (545.19); Borrowing, issuing obligations and

giving security (545.20); Employment contracts (545.122); Negotiable

order of withdrawal accounts authorized (563.8); and Form, return and

maturity of securities (563.72). These sections are proposed for

deletion because they either merely repeat that a savings association

has the authority to do something that is authorized elsewhere or that

the activity is subject to restrictions set forth in other regulations.

Section 545.18 repeats authority found in section 5(b)(5) of the HOLA

and refers to Sec. 563.74, which governs all mutual capital

certificates issued by savings associations. Section 545.19 repeats

authority found in section 13 of the FDIA. Section 545.20 repeats

authority found in section 5(b) of the HOLA. Section 545.122 duplicates

section 563.39. Section 563.8 repeats authority found in 12 U.S.C.

1832. Section 563.72 merely reiterates that securities approved by OTS

under other provisions are approved.

d. Financial futures transactions (545.136) and Financial options

transactions (545.137). These sections are proposed for deletion

because they merely reiterate that federal savings associations may

engage in these types of transactions subject to the limitations set

forth in 12 CFR Part 563, Subpart F. The agency is separately reviewing

Subpart F for potential future updating and revision.

e. Limitation on transaction of business (552.2-4). This section is

proposed for deletion because it merely reiterates that part 552 sets

forth when companies may engage in business as a Federal stock

association.

f. Membership in a Federal Home Loan Bank (563.49). This section

expired on April 19, 1995, and, thus, should be removed. Federal

savings associations are still required to maintain FHLB membership by

section 5(f) of the HOLA and the FHLBA.

4. Regulations on Savings and Loan Holding Companies and Affiliates

a. Loans and other transactions with affiliates and subsidiaries

(563.41(d)(1)). The statutory provisions limiting thrifts' full use of

the sister bank and thrift exemption provisions of sections 23A and 23B

of the Federal Reserve Act expired on December 31, 1994. OTS therefore

proposes to remove this parallel regulatory provision.

b. Transactions with affiliates (584.3). This section is proposed

for deletion because it merely sets forth a statutory restriction

without any regulatory interpretation or guidance.

c. Penalty for loss of QTL status (584.6). This section is proposed

for deletion because it duplicates the penalties stated in section

563.52, which OTS proposes to amend to refer to the statutory

penalties.

5. Organizational Revisions (Parts 500, 504, 515, and 529; Sections

510.1, 510.3, 543.12, 563d.200.30, and 584.11)

a. Simplification of Part 500. The OTS is proposing today to

simplify part 500, which sets forth its statutory authority and

organizational structure. The OTS proposes to delete sections 500.3,

500.4, and 500.5 and incorporate them into the general statement of

authority at Sec. 500.1. Because the current recitation of OTS's

structure is out of date, the OTS proposes to delete sections 500.11

through 500.17 and to modify section 500.10 accordingly. The OTS will

publish a notice setting forth its current organizational structure. As

that structure is modified in the future, revised notices will be

published.

b. National Security Information (Part 504). The OTS proposes to

delete part 504 in its entirety. Part 504 was issued by the FHLBB,

predecessor to the OTS, pursuant to the requirements of subpart E of

Executive Order 12356, April 2, 1982 (Order). The Order applies to the

Department of the Treasury, which has issued implementing regulations.

These regulations apply to the OTS as a component part of the Treasury

Department. Thus, the OTS proposes to delete this part because it is

unnecessary.

c. Use of Penalty Mail in the Location and Recovery of Missing

Children (Part 515). The Department of Justice's Office of Juvenile

Justice and Delinquency Prevention guidelines are promulgated pursuant

to the authority of Sec. 3220(a)(1) of title 39 of the United States

Code. Pursuant to Sec. 3220(a)(2), each ``executive department and

independent establishment of the Government of the United States shall

prescribe regulations under which penalty mail sent by such

[[Page 44447]]

department or establishment may be used in conformance with the

guidelines prescribed under paragraph (1).'' As a component of the

Treasury Department, rather than itself an executive department or

independent establishment, the OTS is subject to any regulations

Treasury may adopt on this topic. Accordingly, OTS proposes to remove

part 515.

d. Nondiscrimination in Federally Assisted Programs (Part 529). The

purpose of part 529 was to effectuate the provisions of title VI of the

Civil Rights Act of 1964, which prohibits, among other things,

discrimination in programs and activities receiving federal assistance.

The OTS is not authorized to extend any federal financial assistance to

any program or activity.

This part was initially adopted by the FHLBB. The FHLBB established

a Housing Opportunity Allowance Program in the early 1970's that

provided federal assistance through the Federal Home Loan Banks to

provide housing for low- and middle-income families. That program

effectively ceased to exist in 1978. Thus, part 529 is unnecessary and

the OTS proposes to delete it.

e. Miscellaneous Organizational Regulations (Sections 510.1,

510.3). Section 510.1 sets forth agency policy on ex parte

communications in contested applications. Section 510.1 is proposed for

deletion because it is confusing, not consistent with the

Administrative Procedure Act (APA), and does not reflect current agency

policy. This proposed deletion would not affect ex parte communications

in adjudicative proceedings under the APA, which are governed by part

509. OTS will review the procedures currently contained in Sec. 510.1

and transfer any remaining relevant provisions to the Applications

Processing Handbook. The OTS also proposes to delete section 510.3

because it is unnecessary. The section simply repeats the obvious:

organizational regulations of the OTS are to be read as a whole with

other regulations of the agency.

f. Bank Insurance Fund-insured Federal savings banks (543.12). This

regulation merely repeats OTS's statutory authority under section 5(o)

of the HOLA to issue a Federal charter to a former state-chartered

savings bank that will maintain its deposit insurance by the Bank

Insurance Fund. OTS proposes to delete the regulation.

g. Delegation of authority to the Chief Counsel (563d.200-30 and

563g.22). In order to provide greater organizational flexibility, the

OTS has been removing specific delegations of authority from its

regulations. Delegations of authority are now contained in Director's

Orders and do not need to be codified in regulation. Therefore, OTS

proposes to remove these regulations and issue the appropriate

delegations in Director's Orders.

h. Hearings (584.11). This regulation applies to hearings on

applications to the OTS regarding savings and loan holding companies.

The OTS is preparing a Thrift Bulletin setting forth the agency's

current procedures for hearings or other appeals on all types of

applications. Accordingly, the OTS proposes to remove Sec. 584.11.

B. Other Technical Amendments

1. Definition of Unimpaired Capital and Unimpaired Surplus (563.41 and

563.43)

In March, 1995, the OTS revised its definition of ``unimpaired

capital and unimpaired surplus'' for purposes of its loans-to-one-

borrower regulation 6, 12 CFR 563.93, to follow the newly revised

definition of ``capital and surplus'' promulgated by the Office of the

Comptroller of the Currency (OCC) 7 for its lending limits

regulation. Recently, the Board of Governors of the Federal Reserve

System has proposed to adopt the OCC definition of capital and surplus

for its insider lending regulations at Regulation O.8 To reduce

confusion, OTS is today proposing to adopt the same definition of

``unimpaired capital and surplus'' for transactions with affiliates and

insider lending regulations as it adopted for the loans-to-one-borrower

regulation. This will make these regulations consistent with the

proposed change to the Federal Reserve Board definition.

\6\ 60 FR 15861 (March 28, 1995), amending 12 CFR 563.93(b)(11).

\7\ See 60 FR 8526 (February 15, 1995).

\8\ 60 FR 19869 (April 20, 1995).

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2. Definition of Organization of Economic Cooperation and Development

(OECD)-based country (567.1(p))

The other federal banking agencies have proposed to modify the

definition of ``OECD-based country'' in their capital regulations and

guidelines to reflect a new standard for when the sovereign debt of a

country would qualify for the lowest risk-weight category under the

risk-based capital regulations.9 This proposed change is identical

to that proposed by the other agencies. It would add a requirement that

in order to qualify for the lowest risk weight category, such sovereign

debt must not have been restructured in the previous five years. For

purposes of this rule, an event of restructuring of external sovereign

debt generally would include renegotiations of terms arising from the

country's inability or unwillingness to meet its external debt service

obligations. Renegotiations of debt in the normal course of business

generally do not indicate transfer risk of the kind that would preclude

an OECD-based country from qualifying for lower risk-weight treatment.

One example of such a routine renegotiation would be a renegotiation to

allow the borrower to take advantage of a change in market conditions,

such as a decline in interest rates.

\9\ For a more complete discussion of the background for this

proposed change, see the proposed rule published by the OCC at 54 FR

45243 (September 1, 1994).

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IV. Executive Order 12866

The Director of the OTS has determined that this proposed rule does

not constitute a ``significant regulatory action'' for the purposes of

Executive Order 12866.

V. Regulatory Flexibility Act Analysis

Pursuant to section 605(b) of the Regulatory Flexibility Act, the

OTS certifies that this proposal will not have a significant economic

impact on a substantial number of small entities. The proposal does not

impose any additional burdens or requirements upon small entities and

lowers several paperwork and other burdens on all savings associations.

VI. Unfunded Mandates Act of 1995

The OTS has determined that the requirements of this proposed rule

will not result in expenditures by State, local, and tribal

governments, or by the private sector, of more than $100 million in any

one year. Accordingly, a budgetary impact statement is not required

under section 202 of the Unfunded Mandates Act of 1995.

List of Subjects

12 CFR Part 500

Organization and functions (Government agencies).

12 CFR Part 504

Classified information.

12 CFR Part 510

Administrative practice and procedure.

12 CFR Part 515

Infants and children, Postal service.

12 CFR Part 529

Administrative practice and procedure, Civil rights.

[[Page 44448]]

12 CFR Part 533

Consumer protection, Electronic funds transfers, Savings

associations.

12 CFR Part 543

Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 545

Accounting, Consumer protection, Credit, Electronic funds

transfers, Investments, Manufactured homes, Mortgages, Reporting and

recordkeeping requirements, Savings associations.

12 CFR Part 552

Reporting and recordkeeping requirements, Savings associations,

Securities.

12 CFR Part 556

Savings associations.

12 CFR Part 562

Accounting, Reporting and recordkeeping requirements, Savings

associations.

12 CFR Part 563

Accounting, Advertising, Crime, Currency, Flood insurance,

Investments, Mortgages, Reporting and recordkeeping requirements,

Savings associations, Securities, Surety bonds.

12 CFR Part 563d

Authority delegations (Government agencies), Reporting and

recordkeeping requirements, Savings associations, Securities.

12 CFR Part 563g

Reporting and recordkeeping requirements, Savings associations,

Securities.

12 CFR Part 567

Capital, Savings associations.

12 CFR Part 571

Accounting, Conflicts of interest, Investments, Reporting and

recordkeeping requirements, Savings associations.

12 CFR Part 583

Holding companies, Savings associations.

12 CFR Part 584

Administrative practice and procedure, Holding companies, Reporting

and recordkeeping requirements, Savings associations, Securities.

Accordingly, and under the authority of 12 U.S.C. 1462a, the Office

of Thrift Supervision proposes to amend chapter V, title 12, Code of

Federal Regulations, as set forth below.

SUBCHAPTER A--ORGANIZATION AND PROCEDURES

PART 500--ORGANIZATION AND CHANNELLING OF FUNCTIONS

1. The authority citation for part 500 continues to read as

follows:

Authority: 12 U.S.C. 1462a, 1463, 1464.

Sec. 501.1 [Amended]

Secs. 500.3-500.5 [Removed]

2. The existing text of Sec. 500.1 is designated as paragraph (a),

the existing texts of Secs. 500.3, 500.4 and 500.5 are redesignated as

paragraphs (b), (c) and (d), respectively, of Sec. 500.1, and

Secs. 500.3, 500.4, and 500.5 are removed.

3. Section 500.10 is amended by adding two new sentences at the end

of the section to read as follows:

Sec. 500.10 The OTS or The Office.

* * * The Director directs and carries out the mission of the OTS

with the assistance of offices reporting directly to him. One of these

offices oversees the direct examination and supervision of savings

associations by regulatory staff to ensure the safety and soundness of

the industry.

Secs. 500.11-500.17 [Removed]

4. Sections 500.11 through 500.17 are removed.

PART 504--[REMOVED]

5. Part 504 is removed.

PART 510--MISCELLANEOUS ORGANIZATIONAL REGULATIONS

6. The authority citation for part 510 continues to read as

follows:

Authority: 5 U.S.C. 301; 12 U.S.C. 1462a, 1463, 1464.

Sec. 510.3 [Removed]

7. Section 510.3 is removed.

PART 515--[REMOVED]

8. Part 515 is removed.

SUBCHAPTER B--CONSUMER-RELATED REGULATIONS

PART 529--[REMOVED]

9. Part 529 is removed.

PART 533--[REMOVED]

10. Part 533 is removed.

PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL

MUTUAL ASSOCIATIONS

11. The authority citation for part 543 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et

seq.

Secs. 543.12-543.13 [Removed]

12. Sections 543.12 and 543.13 are removed.

PART 545--OPERATIONS

13. The authority citation for part 545 continues to read as

follows:

Authority: 12 U.S.C. 1462a, 1463, 1464, 1828.

Secs. 545.15, 545.18-545.20, 545.44, 545.122, 545.136-

545.137 [Removed]

14. Sections 545.15, 545.18 through 545.20, 545.44, 545.122,

545.136 and 545.137 are removed.

PART 552--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL

STOCK ASSOCIATIONS

15. The authority citation for part 552 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a.

Sec. 552.2-4 [Removed]

16. Section 552.2-4 is removed.

Sec. 552.6-2 [Amended]

17. Section 552.6-2 is amended by removing the phrase

``Sec. 545.122 of this subchapter'' in paragraph (b), and by adding in

lieu thereof the phrase ``Sec. 563.39 of this chapter''.

PART 556--STATEMENTS OF POLICY

18. The authority citation for part 556 continues to read as

follows:

Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1464, 1701j-3; 15 U.S.C.

1693-1693r.

Secs. 556.4, 556.6, 556.8-556.9, 556.11, 556.14-556.15 [Removed]

19. Sections 556.4, 556.6, 556.8 through 556.9, 556.11, and 556.14

through 556.15 are removed.

PART 562--REGULATORY REPORTING STANDARDS

20. The authority citation for part 562 continues to read as

follows:

Authority: 12 U.S.C. 1463.

Sec. 562.3 [Removed]

21. Section 562.3 is removed.

PART 563--OPERATIONS

22. The authority citation for part 563 continues to read as

follows:

[[Page 44449]]

Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,

1817, 1828, 3806; 42 U.S.C. 4106.

Secs. 563.8, 563.49, 563.72 [Removed]

23. Sections 563.8, 563.49 and 563.72 are removed.

24. Section 563.41 is amended by removing the period at the end of

paragraph (b)(10)(iv) and adding a semicolon in its place, by adding

paragraph (b)(11), by removing paragraph (d)(1), by redesignating

paragraphs (d)(2) through (d)(7) as paragraphs (d)(1) through (d)(6),

respectively, and by removing the phrase ``After January 1, 1995, any''

in the introductory text of newly designated paragraph (d)(1) and

adding the word ``Any'' in its place, to read as follows:

Sec. 563.41 Loans and other transactions with affiliates and

subsidiaries.

* * * * *

(b) * * *

(11) The term capital stock and surplus of the savings association

means ``unimpaired capital and unimpaired surplus'' as defined at

Sec. 563.93(b)(11) of this part.

* * * * *

Sec. 563.42 [Amended]

25. Section 563.42 is amended by removing the phrase ``Sec. 563.41,

any bank, any savings association in a structure qualifying under

Sec. 563.41(d)(1) of this part or, after January 1, 1995,'' in

paragraph (d)(1), and by adding in lieu thereof the phrase

``Sec. 563.41 of this part, any bank, or''.

26. Section 563.43 is amended by adding paragraph (f) to read as

follows:

Sec. 563.43 Loans by savings associations to their executive officers,

directors and principal shareholders.

* * * * *

(f) References to the term ``unimpaired capital and unimpaired

surplus'' shall be deemed to refer to ``unimpaired capital and

unimpaired surplus'' as defined at Sec. 563.93(b)(11) of this part.

Sec. 563.52 [Amended]

27. Section 563.52 is amended by removing the phrase ``Sec. 584.6

of this chapter'' in paragraph (b), and by adding in lieu thereof the

phrase ``12 U.S.C. 1467a(m)''.

PART 563d--SECURITIES OF SAVINGS ASSOCIATIONS

28. The authority citation for part 563d is revised to read as

follows:

Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 78c(b), 78l,

78m, 78n, 78w, 78d-1.

Sec. 563d.200-30 [Removed]

29. Section 563d.200-30 is removed.

PART 563g--SECURITIES OFFERINGS

30. The authority citation for part 563g continues to read as

follows:

Authority: 12 U.S.C. 1462a, 1463, 1464; 15 U.S.C. 78c(b), 78l,

78m, 78n, 78p, 78w.

31. Section 563g.5 is amended by revising paragraphs (b)(1) and

(b)(2) to read as follows:

Sec. 563g.5 Filing and signature requirements.

* * * * *

(b) Number of copies. (1) Unless otherwise required, any filing

under this part shall include nine copies of the document to be filed

with the OTS, as follows:

(i) Seven copies, which shall include one manually signed copy with

exhibits, three conformed copies with exhibits, and three conformed

copies without exhibits, to the Dissemination Branch, Records

Management and Information Policy; and

(ii) Two copies, which shall include one manually signed copy with

exhibits and one conformed copy, without exhibits, to the Regional

Director.

(2) Within five days after the effective date of an offering

circular or the commencement of a public offering after the effective

date, whichever occurs later, nine copies of the offering circular used

shall be filed with the OTS, as follows: seven copies to the

Dissemination Branch, Records Management and Information Policy, and

two copies to the Regional Director.

* * * * *

Sec. 563g.22 [Removed]

32. Section 563g.22 is removed.

PART 567--CAPITAL

33. The authority citation for part 567 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828

(note).

34. Section 567.1 is amended by revising the first two sentences of

paragraph (p) to read as follows:

Sec. 567.1 Definitions.

* * * * *

(p) OECD-based country. The term OECD-based country means a member

of the grouping of countries that are full members of the Organization

of Economic Cooperation and Development, plus countries that have

concluded special lending arrangements with the International Monetary

Fund (IMF) associated with the IMF's General Arrangements to Borrow,

but excludes any OECD country which has rescheduled its external

sovereign debt in the previous five years. These countries are

hereinafter referred to as OECD countries. * * *

* * * * *

PART 571--STATEMENTS OF POLICY

35. The authority citation for part 571 continues to read as

follows:

Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464.

Sec. 571.24 [Amended]

36. Section 571.24 is amended by removing the phrase ``parts 528

and 529'' in paragraph (a), and by adding in lieu thereof the phrase

``part 528''.

PART 583--DEFINITIONS

37. The authority citation for part 583 is revised to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.

Sec. 583.17 [Amended]

38. Section 583.17 is amended by removing the phrase ``Sec. 584.6

of this subchapter'', and by adding in lieu thereof the phrase ``12

U.S.C. 1467a(m)''.

PART 584--REGULATED ACTIVITIES

39. The authority citation for part 584 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.

Sec. 584.2a [Amended]

40. Section 584.2a is amended by removing the phrase ``Sec. 584.6

of this subchapter'' in paragraph (a)(2), and by adding in lieu thereof

the phrase ``12 U.S.C. 1467a(m)''.

Sec. 584.2-1 [Amended]

41. Section 584.2-1 is amended by removing the phrase ``Sec. 584.3

of this part'' where it appears in paragraphs (b)(2) and (b)(3)

introductory text, and by adding in lieu thereof the phrase ``12 U.S.C.

1467a(m)''.

Secs. 584.3, 584.6, 584.11 [Removed]

42. Sections 584.3, 584.6 and 584.11 are removed.

Dated: August 21, 1995.

By the Office of Thrift Supervision.

Jonathan L. Fiechter,

Acting Director.

[FR Doc. 95-21160 Filed 8-25-95; 8:45 am]

BILLING CODE 6720-01-P