``De Novo'' Applications for a Federal Savings Association Charter

SUMMARY: The Office of Thrift Supervision (OTS or Office) is today

proposing a regulation incorporating, with certain changes, its current

statement of policy on ``de novo'' applications for a federal savings

association charter (Policy Statement). The proposed changes are

intended not only to make the Policy Statement into a regulation, but

also to conform it with current law and to facilitate the application

process by simplifying the regulatory scheme, thereby reducing the cost

of compliance.

The Federal Home Loan Bank Board (FHLBB), the OTS's predecessor

agency, originally promulgated the Policy Statement to provide specific

guidance on the content of de novo applications. Many provisions in the

current Policy Statement have, however, become obsolete or redundant,

or are otherwise unnecessary, as a result of changes in federal laws

and regulations addressing capital adequacy, business plans, officer

and director qualifications, insider conflicts of interest and

transactions with affiliates. These revised statutes and regulations

now adequately address many of the issues previously covered by the

Policy Statement. Because the remaining revised OTS de novo provisions

contain requirements, not merely guidance, the OTS believes that they

should be recodified as a regulation.

DATES: Comments must be received on or before May 5, 1995.

ADDRESSES: Send comments to Director, Information Services Division,

Office of Thrift Supervision, 1700 G Street, NW., Washington, D.C.

20552, Attention Docket No. 94-158. 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. Submissions must be received by 5:00 P.M. on the day

they are due in order to be considered by the OTS. Late-filed,

misaddressed or misidentified submissions will not be considered in

this rulemaking. Comments will be available for inspection at 1700 G

Street, NW., from 1:00 P.M. until 4:00 P.M. on business days. Visitors

will be escorted to and from the Public Reading Room at established

intervals.

FOR FURTHER INFORMATION CONTACT: Gary Masters, Financial Analyst,

Corporate Activities Division (202) 906-6729; Therese L. Monahan,

Project Manager, Thrift Policy (202) 906-5740; or Valerie J.

Lithotomos, Counsel (Banking and Finance), (202) 906-6439, Regulations

and Legislation Division, Chief Counsel's Office, Office of Thrift

Supervision, 1700 G Street, NW., Washington, D.C. 20552.

SUPPLEMENTARY INFORMATION:

I. Introduction

The OTS today proposes a new regulation to revise and update its

treatment of de novo applications for federal savings association

charters.

The FHLBB originally promulgated the Policy Statement, which

appears at section 571.6 of the OTS's rules,1 to explain its

policies relating to the approval of insurance applications for newly

created, so-called de novo, institutions. At that time, the FHLBB was

the operating head of the Federal Savings and Loan Insurance

Corporation, the insurance fund for thrifts, and de novo applications

included not only applications for permission to organize and requests

for a federal charter, but also applications for insurance of

accounts.2 Sweeping statutory reforms in the past few years,

particularly the Financial Institutions Reform, Recovery, and

Enforcement Act of 19893 (FIRREA), and the Federal Deposit

Insurance Corporation Improvement Act of 19914 (FDICIA), have

effected significant changes in the structure of the agency and the

scope of its mission. For example, under FIRREA, the OTS succeeded to

the chartering and supervisory functions of the FHLBB, but the

insurance function was transferred to the Federal Deposit Insurance

Corporation (FDIC).

\1\Unless otherwise indicated, all references to specific parts

and sections in text will be to title 12 of the Code of Federal

Regulations.

\2\A bank or other depository institution that converts to a

thrift charter is not a de novo association, as that term is defined

under the current OTS Policy Statement. The definition excludes

``any entity the business of which has been conducted previously

under any charter or conducted in substantially the same form as is

proposed to be conducted by the de novo association.'' See 12 CFR

571.6(g). Thus, the provisions of the Policy Statement do not apply

to such conversions. The requirements of the qualified thrift lender

test do, however, apply. For purposes of the qualified thrift lender

test, the term ``de novo association'' includes any newly chartered

thrift (including a bank that converts to a thrift charter). This

result is consistent with the intent and purpose of the qualified

thrift lender test. See OTS Chief Counsel's Op., March 11, 1992.

\3\Pub. L. No. 101-73, 103 Stat. 183 (1989).

\4\Pub. L. No. 102-242, 105 Stat. 2236 (1991).

---------------------------------------------------------------------------

FIRREA and FDICIA have also rewritten much of the substantive law

relevant to the OTS's de novo approval process. For instance, section

32 of the Federal Deposit Insurance Act (FDIA), which was added by

section 914 of FIRREA, requires officers and directors for a de novo to

be approved by the OTS.5 In addition, the OTS's regulations

regarding transactions with affiliates and conflicts of interest have

been substantially revised due to the incorporation, through section 11

of the Home Owners' Loan Act (HOLA),6 of the substance of sections

23A, 23B, 22(g) and 22(h) of the Federal Reserve Act (FRA). Finally,

the OTS's policy concerning net worth maintenance agreements also has

changed; such agreements are no longer required in the context of de

novo applications.

\5\See OTS Thrift Bulletin No. 45 (April 25, 1990).

\6\12 U.S.C.A. 1468 (West Supp. 1994).

---------------------------------------------------------------------------

Although the Policy Statement has been amended over the years to

integrate some of these changes in the law,7 a thorough revision

is now warranted to conform the OTS's de novo chartering policies with

the totality of significant statutory and regulatory changes that have

recently occurred. [[Page 12104]] The OTS, therefore, proposes to

remove obsolete statutory references, eliminate redundancy, enhance

where possible consistency with the policies of other federal banking

agencies, clarify the OTS's most recent policy considerations, and

generally provide for more flexible standards for processing

applications for the establishment of de novo federal savings

associations. The OTS also intends to recodify these provisions as part

of its regulations on the incorporation of federal savings

associations.

\7\See 48 FR 51270 (November 7, 1983); 48 FR 54320 (December 2,

1983); 54 FR 49411 (November 30, 1989).

---------------------------------------------------------------------------

II. Statutory and Regulatory Requirements

A. Statutory Requirements

The statutory chartering and insurance framework initially

established by FIRREA provided that the FDIC could insure the accounts

of a de novo federal savings association upon application by the

savings association and upon receipt by the FDIC of a certificate

issued by the Director of the OTS.8 The OTS, as chartering

authority for federal savings associations, was required to certify to

the FDIC that it had considered certain factors, set forth at section 6

of the Federal Deposit Insurance Act (FDIA), in granting a federal

thrift charter. These factors included: (1) the financial history and

condition of the association; (2) the adequacy of its capital

structure; (3) its future earnings prospects; (4) the character and

fitness of its proposed management; (5) the risk presented to the

insurance fund; (6) the convenience and needs of the community to be

served; and (7) whether the association's proposed corporate powers

would be consistent with the purposes of the FDIA.9

\8\12 U.S.C.A. 1815(a)(2) (West 1989).

\9\12 U.S.C.A. 1816 (West 1989).

---------------------------------------------------------------------------

FDICIA removed this certification requirement. Instead, a de novo

federal savings association may obtain insurance of its accounts ``upon

application and examination by the [FDIC] and approval by the [FDIC]

Board of Directors * * *.''10 In acting on the application for

insurance, the FDIC Board is required to consider the statutory factors

enumerated at section 6 of the FDIA and set forth above. FDICIA made no

changes to the section 6 factors. The FDIC has issued a Statement of

Policy Regarding Applications for Deposit Insurance (FDIC Policy

Statement) which establishes the standards used by the FDIC in granting

deposit insurance and provides guidelines for making applications for

insured status.11

\10\12 U.S.C.A. 1815 (a)(1) (West Supp. 1994).

\11\57 FR 12825 (April 13, 1992).

---------------------------------------------------------------------------

Although the OTS is no longer required to certify to the FDIC that

it has considered the factors in section 6 of the FDIA, section 5(e) of

the HOLA12 requires the OTS to make findings that resemble the

section 6 factors before granting a federal charter. Section 5(e) of

the HOLA requires the OTS to determine: (1) the character of the

organizers; (2) the need for the association in the community to be

served; (3) the reasonable probability of the association's usefulness

and success; and (4) whether the association can be established without

undue injury to existing local thrift and home financing institutions.

In addition, pursuant to the Community Reinvestment Act of 197713

(CRA), the OTS must assess the new institution's proposed CRA statement

and plans for meeting the credit needs of its community (including low-

and moderate-income neighborhoods) and must take that assessment into

account in determining whether to grant a charter.

\12\12 U.S.C.A. 1464(e) (West Supp. 1994).

\13\Community Reinvestment Act of 1977, Pub. L. No. 95-128, tit.

8, sec. 802, 91 Stat. 1147 (codified at 12 U.S.C. 2901, et seq.

(1980)).

---------------------------------------------------------------------------

B. Current OTS Policy Statement

Minimum Capitalization Requirement and Business and Investment

Plans. The current OTS Policy Statement sets the minimum level of

capitalization for de novo institutions at $3 million, with a provision

that the Office will consider approving a de novo applicant having at

least $2 million if certain criteria are met. Among those criteria are

that the applicant would be located in, and intended to serve, an area

with a population not exceeding 50,000, and that the applicant will be

community-oriented.

The current OTS Policy Statement provides that the Office must

consider certain factors in order for an applicant to obtain insurance

of accounts by the FDIC. Among the factors to be considered are the

association's future earnings prospects, the general character and

fitness of the association's management, and the convenience and needs

of the community to be served. The Office may grant a new charter only

if, among other things, in the judgment of the Director a necessity

exists for such association in the community to be served.

Policies Pertaining to Management Officials. The current OTS Policy

Statement requires controlling shareholders to personally agree to

maintain the association's required regulatory capital for a minimum of

five years. It also contains provisions requiring the filing of a plan

to identify areas where conflicts of interest and abuse of corporate

opportunity may occur.

Standard Approval Conditions. Currently, standard conditions on

application approvals are not listed in the policy statement. Standard

conditions, however, are imposed for all approvals of de novo

applications and are contained in the OTS's Applications Processing

Handbook.

III. Description of Proposed Revisions

A. Deletion of Obsolete Statutory References and Deletion of Certain

Duplicative Factors

The proposal would delete obsolete statutory references. Current

Sec. 571.6(b) contains language requiring that the OTS certify to the

FDIC that it has considered the factors listed under section 5(a)(2) of

the FDIA.14 Since FDICIA eliminated this certification requirement

from the statute, we propose a parallel deletion from the rule. These

pre-FDICIA certification requirements are also contained in

Secs. 543.2(g)(2) and 552.2-1(b)(2), which address the organization of

federal mutual and federal stock institutions, respectively. We

similarly propose to delete these sections in their entirety.

\14\12 U.S.C.A. 1815(a)(2) (West 1989).

---------------------------------------------------------------------------

The proposal would also delete current section 571.6(b)(2), which

contains language regarding certain factors considered in evaluating

applications to organize a federal savings association. Among others,

these factors require the agency to consider whether there is a

reasonable probability of the association's usefulness and success, and

whether, in the judgment of the Director of the OTS, a necessity exists

for the association in the community to be served. These factors are

duplicative of the factors that already appear in sections 543.2(g)(1)

and 552.2-1(b)(1).

B. Other Proposed Revisions

Minimum Capitalization and Business Plan Requirements. The proposal

revises the minimum capitalization and business plan requirements for

de novo applicants. When the Policy Statement was first adopted, since

de novo applicants did not have a proven ``track record'' or a

supervisory history, the FHLBB believed it was appropriate to set a

minimum level of capitalization for de novo associations. In addition,

the FHLBB [[Page 12105]] believed that de novo associations, as new

companies, presented risks not associated with other institutions.

These minimum capitalization requirements were intended to ensure that

a de novo institution commenced operations in a safe and sound manner

and to protect the insurance fund. To the same end, the FHLBB also

required submission of detailed information on the institution's

business plan for its first few years of operation, including

descriptions of proposed management, management policies, investment

policies and operations.

Minimum capitalization and business plan requirements remain

appropriate safeguards because of the absence, in the case of a de

novo, of any operating or supervisory history. However, those

requirements would be revised by today's proposal.

Under the proposal, the standard minimum capitalization requirement

would be decreased from $3 million to $2 million. The OTS could impose

a higher or lower capital requirement on a case-by-case basis. The

proposal would conform the minimum capitalization requirement to that

of the insuring agency, the FDIC,15 while providing flexibility

and information vital to the OTS in making its statutorily required

determinations. It also would streamline the de novo application

process and reduce the financial burden on applicants wishing to

organize federal de novo institutions.

\15\See FDIC Policy Statement, 57 FR 12822 (April 13, 1992).

---------------------------------------------------------------------------

In securities offerings for a de novo institution, the OTS proposes

that all securities of a particular class in the initial offering be

sold at the same price. The minimum initial capitalization is the

amount of proceeds net of all incurred and anticipated securities

issuance expenses, organization expenses, pre-opening expenses, or any

expenses paid (or funds advanced) by organizers that are to be

reimbursed from the proceeds of the securities offering.

The business plan provisions have been revised to consolidate

certain provisions, to bring the requirements up-to-date, and to delete

obsolete statutory references. The proposal clarifies the required

elements of the business plan, including descriptions of lending,

leasing and investment activity, plans for meeting the qualified thrift

lender requirements, deposit, savings and borrowing activity,

compliance with the CRA, continuation or succession of competent

management, and information on the proposed institution's ability to

maintain required minimum regulatory capital levels.

C. Policies Pertaining to Management Officials

Capital Maintenance Requirements. The proposal would delete the

current capital maintenance requirements in order to conform to the

current OTS policy. Current Sec. 571.6(d)(4) requires controlling

shareholders to agree to maintain a de novo association's required

regulatory capital level for a minimum of five years. Controlling

shareholders are also prohibited from pledging more than 50% of their

stock to secure borrowed funds to finance their stock purchase for a

period of three years.16 Under the proposal, the provisions

requiring controlling shareholders to execute capital maintenance

agreements have been deleted and replaced by a new provision that

requires a certification by legal counsel that the establishment of the

de novo institution has been consummated in accordance with the

provisions of all applicable laws and regulations, the application, and

the Office's order. These changes will streamline the application

process, conform the process to current OTS rules and policy and will

reduce the burden on organizers of a federal de novo institution.

\16\See 12 CFR 571.6(d)(3)(iii).

---------------------------------------------------------------------------

Since 1991, it has been the OTS's policy generally not to require

prospectively the execution of capital maintenance agreements by

controlling shareholders of a de novo institution. Under the Prompt

Corrective Action provisions of section 38 of FDICIA,17 which were

enacted in 1991, and as implemented by OTS regulations,18 the OTS

may not approve a capital restoration plan for any ``undercapitalized''

institution unless each company that controls the institution

guarantees the institution's compliance with the plan until it has been

adequately capitalized for four consecutive quarters and unless each

such company provides adequate assurances of performance of the plan.

Thus, sufficient statutory and regulatory protections currently exist

to assure that savings associations maintain adequate capital and to

deal with capital deficiencies promptly and thoroughly.

\17\12 U.S.C.A. 1831o(e)(2)(C) (West Supp. 1994).

\18\12 CFR 565.5.

---------------------------------------------------------------------------

Conflicts of Interest and Usurpation of Corporate Opportunity. The

proposal would delete provisions requiring the organizers of a de novo

to file a plan identifying areas where conflicts of interest and abuse

of corporate opportunity may occur and describing specific policies and

actions that the association will institute to avoid that abuse.

Existing statutory and regulatory requirements obviate the need for

this information in the application process. For instance, section

571.9, the OTS's ``Corporate Opportunity Statement of Policy,'' makes

clear that directors, officers and other persons having the power to

direct the management of a savings association stand in a fiduciary

relationship to the association and its accountholders or shareholders

that requires them to avoid conflicts of interest and self-dealing.

The Corporate Opportunity Statement of Policy prohibits usurpation

of corporate opportunities by insiders, if taking advantage of a

business opportunity would breach their fiduciary obligations. The

purpose of the Corporate Opportunity Statement of Policy, which was

intended ``to codify existing common law fiduciary principles,''19

is to protect savings associations from managers and controlling

parties who might divert beneficial business opportunities from their

savings associations to themselves or their affiliates in violation of

applicable fiduciary rules.20

\19\39 FR 6696 (February 22, 1974).

\20\See also OTS's Statement Concerning the Responsibilities of

Directors and Officers of Insured Depository Institutions (November

16, 1992).

---------------------------------------------------------------------------

Concerns relating to the avoidance of conflicts of interest and

usurpation of corporate opportunity are addressed not only through the

Corporate Opportunity Statement of Policy, but also by the statutory

requirements governing transactions between savings associations and

their affiliates and insiders. Transactions with affiliates and insider

transactions at savings associations have become subject to the

comprehensive statutory and regulatory framework that applies to banks

under sections 23A, 23B, 22(g) and 22(h) of the Federal Reserve

Act21 (FRA). These sections of the FRA were made applicable to

savings associations by provisions of FIRREA and by FDICIA. The OTS has

substantially revised its regulations22 to implement the statutory

restrictions of sections 23A, 23B, 22(g) and 22(h) of the FRA.

\21\12 U.S.C.A. 371c, 371c-1, 375 and 375b (West 1989 and Supp.

1994). See also 12 U.S.C.A. 1468 (West Supp. 1994).

\22\See 12 CFR 563.41, 563.42 and 563.43.

---------------------------------------------------------------------------

The current statutory and regulatory structure thus eliminates the

need for a separate statement of these restrictions in rules governing

the organization of de novo institutions. Therefore, the proposed

regulation deletes the requirements for the filing of plans for

[[Page 12106]] avoidance of conflicts of interest and usurpations of

corporate opportunity.

Standard Approval Conditions. The proposed rule revises and

codifies the standard approval conditions for de novo institutions. The

OTS has generally imposed approval conditions in order to ensure

compliance with its substantive regulations, to address unique

supervisory concerns, and to impose subsequent oversight by the OTS

regional offices. However, a number of these standard conditions, such

as those imposing specific controls on insider and affiliate

transactions, have become redundant or obsolete. For example, a

previously imposed standard condition required the submission of

extensive background material by controlling shareholders, directors

and officers both prior to and after consummation of the transaction.

Current statutory and policy requirements already adequately address

this issue and a standard condition is not necessary.23 However,

the proposal retains a requirement that provides for the collection of

information on the performance of management, which gives the OTS an

additional supervisory tool for institutions without proven track

records.

\23\Section 32 of the FDIA, which was added by FIRREA, requires

certain savings associations and thrift holding companies to notify

the OTS and provide it with relevant information prior to adding or

replacing directors or hiring senior executive officers if, among

other things, the association has been chartered for less than two

years. See 12 U.S.C.A. 1831i (West 1989); 58 FR 45421 (August 30,

1993) (OTS final rule implementing section 32); OTS Thrift Bulletin

No. 45 (April 25, 1990).

---------------------------------------------------------------------------

Recodification of Requirements. Under the proposed amendment, the

requirements for creation of a de novo institution will be moved from

part 571, Statement of Policy, to part 543, Incorporation,

Organization, and Conversion of Federal Mutual Associations, and

incorporated into part 552, Incorporation, Organization, and Conversion

of Federal Stock Associations, by cross-reference to part 543. This

recodification will make these provisions easier to locate, as they

will be grouped with other federal savings association regulations

rather than with policies affecting all savings associations.

Recodifying these provisions as regulations should also minimize any

confusion about their status as requirements, rather than only

guidance.

IV. Request for Comment

The OTS requests comments from interested parties on all aspects of

this proposal. In addition, the OTS is specifically soliciting comment

on whether or not there should be a deletion or revision of the current

section 571.6(c), which contains requirements regarding the composition

of the board of directors. This section was added in 1984.24 It

specifically provides, among other things, that a majority of the board

of directors must be representative of the state in which the

association is located, and that it must be diversified and composed of

individuals with varied business and professional experience. The FDIC

Policy Statement25 and that of the Office of the Comptroller of

the Currency (OCC) have similar requirements. The OCC Policy Statement

states that local directors encourage ``community support.''26 The

OTS is requesting comment on whether the explicit requirements for a

board of directors with diverse backgrounds and ties to the de novo's

home state continue to serve a useful purpose. The OTS also is

requesting comment on the factors currently in its Policy Statement

that are to be considered in judging whether the board of directors

meets these requirements.

\24\49 FR 41243 (October 22, 1984).

\25\57 FR 12825 (April 13, 1992).

\26\12 CFR 5.20(d)(3)(iv)(B).

---------------------------------------------------------------------------

V. 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.

VI. Paperwork Reduction Act

The reporting requirements contained in this proposed rule have

been submitted to the Office of Management and Budget for review in

accordance with the Paperwork Reduction Act of 1980 (44 U.S.C.

3504(h)). Comments on the collection of information should be sent to

the Office of Management and Budget, Paperwork Reduction Project

(1550), Washington, D.C. 20503, with copies to the Office of Thrift

Supervision, 1700 G Street, NW., Washington, D.C. 20552.

The reporting requirements in this proposed rule are found in 12

CFR 543.3. The information is needed by the OTS to reduce the risk of

loss to newly-chartered institutions and the Savings Association

Insurance Fund.

Estimated number of respondents: 10

Estimated average burden per respondent: 110 hours

Estimated annual frequency of responses: 1

Estimated total annual reporting burden: 1100 hours

VII. Regulatory Flexibility Act Analysis

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

OTS certifies that this proposed rule will not have a significant

economic impact on a substantial number of small entities. The proposal

does not impose additional burdens or requirements upon a small entity

that files an application to become a de novo institution.

List of Subjects

12 CFR Part 543

Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 552

Reporting and recordkeeping requirements, Savings associations,

Securities.

12 CFR Part 571

Accounting, Conflicts of interest, Investments, Reporting and

recordkeeping requirements, Savings associations.

Accordingly, the Director, Office of Thrift Supervision, hereby

proposes to amend parts 543, 552, and 571, chapter V, title 12 of the

Code of Federal Regulations, as set forth below:

SUBCHAPTER C--REGULATIONS FOR FEDERAL SAVINGS ASSOCIATIONS

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

MUTUAL ASSOCIATIONS

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

follows:

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

seq.

Sec. 543.2 [Amended]

2. Section 543.2 is amended by removing and reserving paragraph

(g)(2).

3. A new Sec. 543.3 is added to read as follows:

Sec. 543.3 ``De Novo'' applications for a Federal savings association

charter.

(a) Definitions. For purposes of this section, the terms ``de novo

association'' and ``de novo applicant'' mean any savings and loan

association, savings association, or savings bank that has submitted to

the Office an application for permission to organize a Federal savings

association, the business of which has not been conducted previously

under any charter or conducted in substantially the same form as is

proposed to be conducted by the de novo association for a period of

three years.

(b) Minimum initial capitalization. (1) A de novo association must

have not [[Page 12107]] less than two million dollars in initial

capital stock (stock institutions) or initial pledged savings or cash

(mutual institutions), except as provided in paragraph (b)(2) of this

section. The minimum initial capitalization is the amount of proceeds

net of all incurred and anticipated securities issuance expenses,

organization expenses, pre-opening expenses, or any expenses paid (or

funds advanced) by organizers that are to be reimbursed from the

proceeds of a securities offering. In securities offerings for a de

novo institution, all securities of a particular class in the initial

offering shall be sold at the same price.

(2) On a case by case basis, the Director may, for good cause,

approve a de novo applicant that has less than two million dollars in

initial capital or may require an applicant to have more than two

million dollars in initial capital.

(c) Business and investment plans of newly-chartered associations.

(1) In order for the Office to make the determinations required under

section 5(e) of the Home Owners' Loan Act, a de novo applicant for a

Federal charter shall submit a business plan describing, for the first

three years of operation, the major areas of operation, including, but

not limited to:

(i) Lending, leasing and investment activity, including plans for

meeting Qualified Thrift Lender requirements within the timeframes

established in 12 CFR 563.50(d);

(ii) Deposit, savings and borrowing activity;

(iii) Interest-rate risk management;

(iv) Internal controls and procedures;

(v) A Community Reinvestment Act statement, pursuant to 12 CFR part

563e, and plans for meeting the credit needs of the proposed de novo's

community (including low- and moderate- income neighborhoods);

(vi) Projected statement of condition; and

(vii) Projected statement of operations.

(2) The business plan shall provide for the continuation or

succession of competent management subject to the approval of the

Regional Director, and shall further provide that any material change

in, or deviation from, the business plan must receive the prior

approval of the Regional Director. The business plan shall demonstrate

the proposed institution's ability to maintain required minimum

regulatory capital under 12 CFR parts 565 and 567 for the duration of

the plan.

(d) Composition of the board of directors. (1) A majority of a de

novo association's board of directors must be representative of the

state in which the savings association is located. The Office generally

will consider a director to be representative of the state if such

director resides, works or maintains a place of business in the state

in which the savings association is located. If the association is

located in a Metropolitan Statistical Area (MSA), Primary Metropolitan

Statistical Area (PMSA) or Consolidated Metropolitan Statistical Area

(CMSA) that incorporates portions of more than one state, a director

will be considered representative of the association's state if he or

she resides, works or maintains a place of business in the MSA, PMSA or

CMSA in which the association is located.

(2) The de novo association's board of directors must be

diversified and composed of individuals with varied business and

professional experience. In addition, except in the case of a de novo

association that is wholly-owned by a holding company, no more than

one-third of a board of directors may be in closely related businesses.

The background of each director must reflect a history of

responsibility and personal integrity, and must show a level of

competence and experience sufficient to demonstrate that such

individual has the ability to direct the policies of the association in

a safe and sound manner. Where a de novo association is owned by a

holding company that does not have substantial independent economic

substance, the foregoing standards will be applied to the holding

company.

(e) Management Officials. (1) Proposed stockholders of ten percent

or more of the stock of a de novo association will be considered

management officials of the association for the purpose of the Office's

evaluation of the character and qualifications of the management of the

association. In connection with the Office's consideration of an

application for permission to organize and subsequent to issuance of a

Federal savings association charter to the association by the Office,

any individual or group of individuals acting in concert, who owns or

proposes to acquire, directly or indirectly, ten percent or more of the

stock of an association subject to this section, shall submit a

Biographical and Financial Report to the Regional Director.

(2) Each new director of a de novo institution shall sign an ``Oath

of Director for Savings Associations.'' The original of the document,

executed, shall be submitted to the Regional Director.

(f) Standard conditions. The following are standard conditions that

are imposed in any Office approval order relating to a de novo

application:

(1) The de novo institution must receive all required regulatory

approvals prior to the establishment of the de novo institution, with

copies of all such approvals supplied to the appropriate Regional

Office.

(2) The de novo institution must represent that there have been no

substantial changes with respect to the de novo institution as

disclosed in the information currently before the Office, including but

not limited to changes in directors, shareholders, or in the business

plan. The de novo institution must also represent that no additional

information that would have a materially adverse bearing on any feature

of the application has been brought to the attention of the applicant.

(3) The de novo institution shall provide for employment of senior

executive officers who shall be charged with the full administrative

and managerial responsibilities of the de novo institution under

policies established by its board of directors. The performance of such

individuals will be periodically reviewed and their continued

employment will be subject to approval by the appropriate Regional

Director, or his designee, for a period of three years.

(4) If applicable, the de novo institution shall submit to the

appropriate Regional Office a list of stockholders of the de novo

institution, and holders of any stock options and/or warrants,

including each individual stockholder's name, address, amount of stock

purchased, and principals of companies owning stock in the de novo

institution, total purchase price, and any affiliation between

stockholders.

(5) No later than 10 calendar days from the date of the

consummation of the establishment or acquisition of the de novo

institution, the de novo institution shall file, with the appropriate

Regional Office, a certification by legal counsel stating the effective

date(s) of its insurance and its opening, the exact number of shares of

stock, if applicable, of the de novo institution, and that the

establishment (or acquisition, if appropriate) of the de novo

institution has been consummated in accordance with the provisions of

all applicable laws and regulations, the application, and the Office's

order.

(g) Supervisory transactions. This section does not apply to any

application for a Federal savings association charter submitted in

connection with a transfer or an acquisition of the business or

accounts of a savings association if the Office determines that such

transfer or acquisition is instituted for supervisory purposes, or in

connection with [[Page 12108]] applications for Federal charters for

interim de novo associations chartered for the purpose of facilitating

mergers or holding company reorganizations.

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

STOCK ASSOCIATIONS

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

follows:

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

Sec. 552.2-1 [Amended]

5. Section 552.2-1 is amended by adding the phrase ``and

Sec. 543.3'' after the phrase ``of 543.2'' in paragraph (a), and by

removing and reserving paragraph (b)(2).

SUBCHAPTER D--REGULATIONS APPLICABLE TO ALL SAVINGS ASSOCIATIONS

PART 571--STATEMENTS OF POLICY

6. 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. 571.6 [Removed]

7. Section 571.6 is removed.

Dated: August 25, 1994.

By the Office of Thrift Supervision.

Jonathan L. Fiechter,

Acting Director.

[FR Doc. 95-5315 Filed 3-3-95; 8:45 am]

BILLING CODE 6720-01-P