Minimum Standards of Fitness for Employment With the Federal Deposit Insurance Corporation

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 336

RIN 3064-AB43

Minimum Standards of Fitness for Employment With the Federal

Deposit Insurance Corporation

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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SUMMARY: The Federal Deposit Insurance Corporation (FDIC) is publishing

a final regulation to implement the requirements contained in section

19 of the Resolution Trust Corporation Completion Act, which amended

the Federal Deposit Insurance Act to prohibit certain persons from

[[Page 28726]]

becoming employed or providing services to the FDIC.

EFFECTIVE DATE: July 8, 1996.

FOR FURTHER INFORMATION CONTACT:

Joy Crosser, Personnel Management Specialist, Division of

Administration, (202) 942-3314; Michelle Borzillo, Counsel, Legal

Division, (202) 898-7400; or Gladys C. Gallagher, Counsel, Legal

Division, (202) 898-3833.

SUPPLEMENTARY INFORMATION: This regulation was published as a proposed

rule on February 15, 1996, 61 FR 5956. Copies were provided to

interested parties, including the National Treasury Employees Union. No

comments were received in the 30-day comment period, which ended March

15, 1996; therefore, the final rule is being published as originally

proposed, with one minor technical correction at 336.3(f), the

definition of ``Federal Deposit Insurance Funds'', to add '', or their

successors,'' after ``(RTC)''.

Paperwork Reduction Act

The collection of information contained in this rule has been

approved by the Office of Management and Budget (OMB) under control

number 3064-0121 (``Certification of Compliance With Mandatory Bars to

Employment''), pursuant to the Paperwork Reduction Act of 1995 (44

U.S.C. 3501 et seq.). Comments regarding the accuracy of the burden

estimate, and suggestions for reducing the burden, should be addressed

to the Office of Management and Budget, Paperwork Reduction Project

(3064-0121), Washington, D.C. 20503, with copies of such documents sent

to Steven F. Hanft, Assistant Executive Secretary (Regulatory

Analysis), FDIC, Room F-400, 550 17th Street, NW., Washington, DC

20429.

The collection of information in this rule is found in

Sec. 336.4(b) and takes the form of a certification of compliance.

However, in addition to the certification, the person applying for

employment must provide an attachment to the certification describing

any instance in the preceding five years in which the applicant, or a

company under the applicant's control, has defaulted on a material

obligation to an insured depository institution. The information is

used by the FDIC to identify those persons prohibited from becoming

employed by or providing services to the FDIC.

The estimated annual reporting burden for the collection of

information requirement in this rule is summarized as follows:

Number of Respondents: 200.

Number of Responses per Respondent: 1.

Total Annual Responses: 200.

Hours per Response: 20 minutes.

Total Annual Burden Hours: 66.6.

This regulation was developed consistent with the intent of section

303(a) of the Riegle Community Development and Regulatory Improvement

Act of 1994, 12 U.S.C. 4803(a), to reduce regulatory burden and improve

efficiency.

Small Business Regulatory Enforcement Fairness Act

The Small Business Regulatory Enforcement Fairness Act of 1996

(Public Law 104-121) provides (with a few limited exceptions) for

Congressional review of agency rules. An exception is provided,

however, for rules relating to agency management or personnel (5 U.S.C.

804(3)). Since this regulation will only affect individuals who are

employed or will seek employment with the FDIC, the Board has

determined that it is a rule relating to agency management or personnel

and thus is not subject to Congressional review.

Regulatory Flexibility Act

The Board hereby certifies that the rule does not have a

significant economic impact on a substantial number of small entities

within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et

seq.). This regulation affects only those individuals who are employed

or will become employed by the FDIC. Therefore, the provisions of that

Act relating to an initial and final regulatory analysis (5 U.S.C. 603

and 604) do not apply here.

Background

The Resolution Trust Corporation Completion Act (hereafter referred

to as the Completion Act), Pub. L. 103-204, enacted on December 17,

1993, amended section 12 of the Federal Deposit Insurance Act, 12

U.S.C. 1822, to prohibit any person from becoming employed or providing

service to or on behalf of the FDIC who does not meet minimum standards

of competence, experience, integrity, and fitness.

The Completion Act provides that FDIC employees are subject to

title 18 of the U.S. Code, and are subject to the ethics and conflict

of interest rules and regulations issued by the Office of Government

Ethics, including those concerning employee conduct, financial

disclosure, and post-employment activities. The statute also provides

that the Corporation shall issue regulations implementing provisions

that prohibit any person from becoming employed who: has been convicted

of any felony; has been removed from, or prohibited from participating

in the affairs of any insured depository institution pursuant to any

final enforcement action by any appropriate federal banking agency;

demonstrated a pattern or practice of defalcation regarding obligations

to insured depository institutions; or caused a substantial loss to

federal deposit insurance funds. The statute requires the collection

from applicants for employment information describing any instance

during the preceding 5 years in which the applicant or a company under

the applicant's control defaulted on a material obligation to an

insured depository institution, along with other information the

Corporation may require by regulation. The Completion Act gives the

Corporation sole discretion over any issues that arise as a result of

these prohibitions, and any decisions made by the Corporation shall not

be subject to review.

A. Scope of the Regulation

FDIC operates in a number of separate and distinct capacities and

situations. This part applies to all FDIC employees performing duties

for or on behalf of the FDIC in any capacity.

This regulation implements the mandatory bars contained in section

19 of the Completion Act which amends 12 U.S.C. 1822(f)(4)(E). This

part does not in any way modify other applicable rules and regulations

governing employee conduct, ethics, or qualification standards.

Further, there is no need to augment in FDIC regulations the existing

education and experience requirements defined in the U.S. Office of

Personnel Management's (U.S. OPM) Operating Manual for General Schedule

Qualification Standards.

B. Definitions

Section 336.3 contains definitions of terms used throughout this

regulation.

Company: The definition of company expands on that used in section

2(b) of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(b)) to

include firms, societies and joint ventures. These entities are

included to amplify the original definition and for consistency with

the application of the Completion Act to contractors providing services

to the FDIC.

Default on a Material Obligation: The FDIC defines this term to

mean a delinquency of 90 or more days as to payment of principal or

interest, or a combination thereof, on a loan or advance from an

insured depository institution in any amount. As prescribed by the

statute, this regulation requires that all applicants for employment

submit a list and description of defaults on material obligations

incurred by

[[Page 28727]]

themselves or a company under their control during the 5 years

preceding the submission. All defaults are to be listed regardless of

whether or not they have been cured. The Corporation has set no minimum

dollar value to this definition; information regarding the candidate's

conduct in meeting obligations to insured depository institutions is

significant in assessing the fitness and integrity of an individual for

employment with the FDIC. Therefore, all defaults which meet this

definition, regardless of outstanding balances, shall be reported, but

are not automatic bars to employment in themselves.

Pattern or Practice of Defalcation Regarding Obligations: This

definition addresses two situations. The first concerns individuals who

have a history of financial irresponsibility with regard to an open

insured depository institution to such an extent that the FDIC's

employment of such an individual reflects adversely on the FDIC's

integrity and credibility. The second situation concerns individuals

who have wrongfully refused to fulfill obligations to an insured

depository institution.

In the first situation involving financial irresponsibility, a

pattern or practice of defalcation regarding obligations exists when an

employee has defaulted on obligations totalling in excess of $50,000 in

the aggregate. Defaults caused by catastrophic events such as death,

disability or illness, or loss of financial support are not considered

a violation of this standard. Examples are provided in the regulation's

definition to clarify the meaning of ``financial irresponsibility'',

including the example of failing to pay debts which were secured by

uninsured property that was destroyed. Another example of such

financial irresponsibility would be an abuse of credit cards or

incurring excessive debt well beyond the individual's ability to repay.

The second part of this definition addresses individuals who

wrongfully refuse to fulfill duties and obligations to insured

depository institutions. Again, examples are provided, which illustrate

the full scope of ``wrongful refusal to fulfill duties and

obligations''. The examples include misconduct on the part of a

borrower, such as use of false financial statements, misrepresentation

of ability to repay a debt, or concealing assets. Additional examples

focus on findings of misconduct on the part of officers, employees,

contractors or others providing service to an insured depository

institution, or who have committed fraud, embezzlement or similar

misconduct.

Substantial Loss to Federal Deposit Insurance Funds: This

definition incorporates $50,000 as the threshold amount for

establishing a substantial loss. This loss must have inured to one of

the Federal Deposit Insurance Funds (Insurance Funds) maintained by the

FDIC, the Resolution Trust Corporation (RTC), Federal Savings & Loan

Insurance Corporation, or their successors. Two types of losses are

addressed, which are: (1) debts in default for which there remain a

legal obligation to pay; and (2) final judgments, regardless of whether

forgiven in whole or in part in a bankruptcy proceeding.

C. Minimum Standards for Appointment to a Position with the FDIC

All applicants, including former employees of the FDIC who are

reemployed after a break in service of more than 3 days, are subject to

this regulation for any noncompliance with the prohibitions which

occurred either before or after the enactment of the Completion Act.

Applicants are required to submit a certification prior to employment

which addresses each of the statutory prohibitions and are required to

submit information regarding any default during the previous five

years. Investigations are conducted on all new appointees to ascertain

all relevant information regarding the individual's history of

defaults. Regardless of the number of years for which an applicant is

required to submit a written report regarding defaults, any pattern or

practice of defalcation regarding obligations or substantial loss, as

defined in this regulation, is subject to these minimum standards.

Similarly, any felony conviction and any removal from, or prohibition

from participation in the affairs of, any insured depository

institution by a federal banking agency is subject to the prohibitions

of this regulation without time limitation. A felony conviction that

has been pardoned, as opposed to being overturned on appeal, remains a

conviction and is therefore subject to the prohibition mandated by the

Completion Act.

D. Minimum Standards for Employment With the FDIC

The Corporation finds sufficient support in the text of the statute

for applying the terms of the Completion Act prospectively, and

therefore does not require the enforcement of these minimum standards

against incumbent employees of the FDIC under an appointment authorized

by title 5 of the United States Code on or before June 17, 1994, for

noncompliance which occurred prior to that date. However, any final

enforcement action by any appropriate federal banking agency, any final

judgment or any felony conviction which is finalized on or after June

18, 1994, even though the act or omission which is the basis of the

action or judgment occurred prior to June 18, 1994, is subject to the

standards of this regulation. Additionally, eligibility for employment

with the FDIC continues to be based on suitability standards for

federal employment as measured from past and present conduct which

determines whether or not an employee can perform his or her duties

with efficiency and effectiveness.

All employees, regardless of date of first appointment or tenure,

are subject to this regulation for any noncompliance with the standards

that occurs on or after June 18, 1994. Further, any noncompliance with

the standards that first occurred prior to June 18, 1994, which meets

the definitions of causing a substantial loss to the Insurance Funds or

a pattern or practice of defalcation regarding obligations to an

insured depository institution based on financial irresponsibility and

which resulted in indebtedness that remains uncured after June 18,

1994, cannot be excused.

Employees appointed prior to the June 18, 1994 effective date for

section 19 of the Completion Act and who continue without a break in

service of more than 3 days from one type of appointment with the FDIC

to another are not subject to the prohibitions for noncompliance prior

to June 18, 1994. For example, an employee serving on an excepted-

service temporary appointment who may be selected for a competitive-

service time-limited or permanent appointment without a break in

service would not be considered a new applicant for purposes of this

regulation. This regulation applies to all appointments, including co-

operative student hires, experts and consultants, detailees from other

agencies and any other individual appointed to provide service to or on

behalf of the FDIC.

Employees assigned to the RTC were held to comparable minimum

standards of fitness for employment in the Financial Institutions

Reform, Recovery, and Enforcement Act of 1989, Pub. L. 101-73, as

implemented by regulation in 12 CFR Part 1605, which were applied

retroactively by statute. Therefore, unlike incumbent FDIC employees

who were not covered by Pub. L. 101-73 minimum standards, any

noncompliance with the standards by incumbent employees assigned to RTC

[[Page 28728]]

prior to June 18, 1994, remain subject to the Public Law 101-73 minimum

standards, and is not excused.

Noncompliance occurring on or after June 18, 1994, with the

standards contained in this regulation is a basis for removal of the

employee under the authority of the Completion Act.

E. Verification of Compliance

Under the authority provided by 12 U.S.C. 1819 and 1822, the FDIC

conducts background investigations to verify the information certified

by applicants and to determine suitability for employment with the

FDIC. In addition, the FDIC screens the Financial Institution's

Investigative and Enforcement Records System maintained internally by

the FDIC's Division of Supervision regarding records of federal banking

agency enforcement actions. The FDIC also examines its own and other

regulatory records systems for findings of a pattern or practice of

defalcation regarding obligations and/or a substantial loss to the

Insurance Funds as defined in this regulation.

F. Employee Responsibility, Counseling and Distribution of Regulation

Employees are required to familiarize themselves with the

provisions of this regulation. Within ten days of the action or the

discovery of the noncompliance, an employee shall report in writing to

the Ethics Counselor regarding noncompliance with any of the

prohibitions contained in Sec. 336.5(a) (1) through (4) of this

regulation. Also, if the employee receives a letter from the FDIC

demanding payment on an obligation that was initially owed to an

insured depository institution and is now owed to the FDIC, the

employee must notify the Ethics Counselor within 10 days of receipt of

such letter. Employees shall consult with the Ethics Counselor

regarding the impact of this regulation on their continued employment.

The Ethics Counselor shall provide counseling and guidance to employees

regarding the statutes, regulations and Corporation's policies under

this part. The Ethics Counselor shall review all information presented

by the employee and/or the employee's representative relevant to

establishing responsibility for the debt and corrective actions taken.

The employee has a duty to cooperate with the Ethics Counselor in

providing the information that is necessary to the Ethics Counselor's

determination of compliance or noncompliance.

G. Sanctions and Remedial Actions

There is no remedial action for an employee found in noncompliance

with the standards at Sec. 336.5(a)(1) and (2), for felony convictions

and enforcement actions, as an employee is afforded the opportunity to

remedy those findings through other proceedings. Also, there is no

remedial action for an employee found in noncompliance with the

standards of Sec. 336.4(a)(4), as the Corporation's Division of

Depositor and Asset Services provides the opportunity to work out debts

owed to the Insurance Funds. Further, noncompliance with

Sec. 336.5(a)(3) based on wrongful refusal to fulfill duties on

obligations to insured depository institutions cannot be remedied.

However, employees will be provided a reasonable opportunity to remedy

following notification of noncompliance with the prohibitions at

Sec. 336.5(a)(3) based on financial irresponsibility as defined in

336.3(i)(1). Such employees may establish an agreement to resolve the

outstanding indebtedness that satisfies both the insured depository

institution and the FDIC, or otherwise resolve the matter to the

satisfaction of the FDIC. This remedial action provided employees would

not be extended to applicants for employment. Filling a vacancy is not

delayed in order for an applicant to cure his or her debts that are

deemed not in compliance with Sec. 336.4(a)(3) through (4).

Individuals appointed by the President with the advice and consent

of the Senate, which includes both the appointed and ex officio members

of the Board of Directors and the Inspector General, cannot be removed

from their positions under the authority of the FDIC. Therefore, this

regulation does not apply to individuals appointed to or serving on an

acting basis in positions designated by Title 5 of the U.S. Code as

officials of the Federal Executive Schedule. Federal employees who are

serving the FDIC, but are employed by another agency, such as detailees

or employees of the Office of Thrift Supervision or the Office of the

Comptroller of the Currency, may be returned to the employing agency if

found not to be in compliance with the minimum standards.

H. Finality of Determination

Section 336.9 of this regulation tracks the language of the Federal

Deposit Insurance Act, 12 U.S.C. 1822(f)(4)(D)(ii).

List of Subjects in 12 CFR Part 336

Conflict of interests.

For the reasons set out in the preamble, the Board of Directors of

the Federal Deposit Insurance Corporation is revising part 336 of

chapter III of title 12 of the Code of Federal Regulations as follows:

PART 336--FDIC EMPLOYEES

Subpart A--Employee Responsibilities and Conduct

Sec.

336.1 Cross-reference to employee ethical conduct standards and

financial disclosure regulations.

Subpart B--Minimum Standards of Fitness for Employment With the Federal

Deposit Insurance Corporation

336.2 Authority, purpose and scope.

336.3 Definitions.

336.4 Minimum standards for appointment to a position with the

FDIC.

336.5 Minimum standards for employment with the FDIC.

336.6 Verification of compliance.

336.7 Employee responsibility, counseling and distribution of

regulation.

336.8 Sanctions and remedial actions.

336.9 Finality of determination.

Subpart A--Employee Responsibilities and Conduct

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

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.

Subpart B--Minimum Standards of Fitness for Employment With the

Federal Deposit Insurance Corporation

Authority: 12 U.S.C. 1819 (Tenth), 1822(f).

Sec. 336.2 Authority, purpose and scope.

(a) Authority. This part is adopted pursuant to section 12(f) of

the Federal Deposit Insurance Act, 12 U.S.C. 1822, and the rulemaking

authority of the Federal Deposit Insurance Corporation (FDIC) found at

12 U.S.C. 1819. This part is in addition to, and not in lieu of, any

other statutes or regulations which may apply to standards for ethical

conduct or fitness for employment with the FDIC and is consistent with

the

[[Page 28729]]

goals and purposes of 18 U.S.C. 201, 203, 205, 208, and 209.

(b) Purpose. The purpose of this part is to state the minimum

standards of fitness and integrity required of individuals who provide

service to or on behalf of the FDIC and provide procedures for

implementing these requirements.

(c) Scope. (1) This part applies to applicants for employment with

the FDIC under title 5 of the U.S. Code appointing authority in either

the excepted or competitive service, including Special Government

Employees. This part applies to all appointments, regardless of tenure,

including intermittent, temporary, time-limited and permanent

appointments.

(2) In addition, this part applies to all employees of the FDIC who

serve under an appointing authority under chapter 21 of title 5 of the

U.S. Code.

(3) Further, this part applies to 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.

Sec. 336.3 Definitions.

For the purposes of this part:

(a) Company means any corporation, firm, partnership, society,

joint venture, business trust, association or similar organization, or

any other trust unless by its terms it must terminate within twenty-

five years or not later than twenty-one years and ten months after the

death of individuals living on the effective date of the trust, or any

other organization or institution, but shall not include any

corporation the majority of the shares of which are owned by the United

States, any state, or the District of Columbia.

(b) Control means the power to vote, directly or indirectly, 25

percent or more of any class of the voting stock of a company, the

ability to direct in any manner the election of a majority of a

company's directors or trustees, or the ability to exercise a

controlling influence over the company's management and policies. For

purposes of this definition, a general partner of a limited partnership

is presumed to be in control of that partnership. For purposes of this

part, an entity or individual shall be presumed to have control of a

company if the entity or individual directly or indirectly, or acting

in concert with one or more entities or individuals, or through one or

more subsidiaries, owns or controls 25 percent or more of its equity,

or otherwise controls or has power to control its management or

policies.

(c) Default on a material obligation means a loan or advance from

an insured depository institution which is or was delinquent for 90 or

more days as to payment of principal or interest, or any combination

thereof.

(d) Employee means any officer or employee, including a liquidation

graded or temporary employee, providing service to or on behalf of the

FDIC who has been appointed to a position under an authority contained

in title 5 of the U.S. Code. This definition excludes those individuals

designated by title 5 of the U.S. Code as officials in the Federal

Executive Schedule.

(e) Federal banking agency means the Office of the Comptroller of

the Currency, the Office of Thrift Supervision, the Board of Governors

of the Federal Reserve System, or the Federal Deposit Insurance

Corporation, or their successors.

(f) Federal deposit insurance fund means the Bank Insurance Fund,

the Savings Association Insurance Fund, the Federal Savings and Loan

Insurance Corporation (FSLIC) Resolution Fund, or the funds that were

formerly maintained by the Resolution Trust Corporation (RTC), or their

successors, for the benefit of insured depositors.

(g) FDIC means the Federal Deposit Insurance Corporation, in its

receivership and corporate capacities.

(h) Insured depository institution means any bank or savings

association the deposits of which are insured by the FDIC.

(i) Pattern or practice of defalcation regarding obligations means:

(1) A history of financial irresponsibility with regard to debts

owed to insured depository institutions which are in default in excess

of $50,000 in the aggregate. Examples of such financial

irresponsibility include, without limitation:

(i) Failure to pay a debt or debts totalling more than $50,000

secured by an uninsured property which is destroyed; or

(ii) Abuse of credit cards or incurring excessive debt well beyond

the individual's ability to repay resulting in default(s) in excess of

$50,000 in the aggregate.

(2) Wrongful refusal to fulfill duties and obligations to insured

depository institutions. Examples of such wrongful refusal to fulfill

duties and obligations include, without limitation:

(i) Any use of false financial statements;

(ii) Misrepresentation as to the individual's ability to repay

debts;

(iii) Concealing assets from the insured depository institution;

(iv) Any instance of fraud, embezzlement or similar misconduct in

connection with an obligation to the insured depository institution;

and

(v) Any conduct described in any civil or criminal judgment against

an individual for breach of any obligation, contractual or otherwise,

or any duty of loyalty or care that the individual owed to an insured

depository institution.

(3) Defaults shall not be considered a pattern or practice of

defalcation where the defaults are caused by catastrophic events beyond

the control of the employee such as death, disability, illness or loss

of financial support.

(j) Substantial loss to federal deposit insurance funds. (1)

Substantial loss to federal deposit insurance funds means:

(i) A loan or advance from an insured depository institution, which

is now owed to the FDIC, RTC, FSLIC or their successors, or any federal

deposit insurance fund, that is delinquent for ninety (90) or more days

as to payment of principal, interest, or a combination thereof and on

which there remains a legal obligation to pay an amount in excess of

$50,000; or

(ii) A final judgment in excess of $50,000 in favor of any federal

deposit insurance fund, the FDIC, RTC, FSLIC, or their successors

regardless of whether it becomes forgiven in whole or in part in a

bankruptcy proceeding.

(2) For purposes of computing the $50,000 ceiling in paragraphs

(j)(1)(i) and (ii) of this section, all delinquent judgments, loans, or

advances currently owed to the FDIC, RTC, FSLIC or their successors, or

any federal deposit insurance fund, shall be aggregated. In no event

shall delinquent loans or advances from different insured depository

institutions be separately considered.

Sec. 336.4 Minimum standards for appointment to a position with the

FDIC.

(a) No person shall become employed on or after June 18, 1994, by

the FDIC or otherwise perform any service for or on behalf of the FDIC

who has:

(1) Been convicted of any felony;

(2) Been removed from, or prohibited from participating in the

affairs of, any insured depository institution pursuant to any final

enforcement action by any appropriate federal banking agency;

(3) Demonstrated a pattern or practice of defalcation regarding

obligations to insured depository institutions; or

(4) Caused a substantial loss to federal deposit insurance funds.

(b) Prior to an offer of employment, any person applying for

employment with the FDIC shall sign a certification of compliance with

the minimum standards listed in paragraphs (a)(1)

[[Page 28730]]

through (4) of this section. In addition, any person applying for

employment with the FDIC shall provide as an attachment to the

certification any instance in which the applicant, or a company under

the applicant's control, defaulted on a material obligation to an

insured depository institution within the preceding five years.

(c) Incumbent employees who separate from the FDIC and are

subsequently reappointed after a break in service of more than three

days are subject to the minimum standards listed in paragraphs (a)(1)

though (4) of this section. The former employee is required to submit a

new certification statement including attachments, as provided in

paragraph (b) of this section, prior to appointment to the new

position.

Sec. 336.5 Minimum standards for employment with the FDIC.

(a) No person who is employed by the FDIC shall continue in

employment in any manner whatsoever or perform any service for or on

behalf of the FDIC who, beginning June 18, 1994 and thereafter:

(1) Is convicted of any felony;

(2) Is prohibited from participating in the affairs of any insured

depository institution pursuant to any final enforcement action by any

appropriate federal banking agency;

(3) Demonstrates a pattern or practice of defalcation regarding

obligations to insured depository institution(s); or

(4) Causes a substantial loss to federal deposit insurance funds.

(b) Any noncompliance with the standards listed in paragraphs

(a)(1) through (4) of this section is a basis for removal from

employment with the FDIC.

Sec. 336.6 Verfication of compliance.

The FDIC's Division of Administration shall order appropriate

investigations as authorized by 12 U.S.C. 1819 and 1822 on newly

appointed employees, either prior to or following appointment, to

verify compliance with the minimum standards listed under

Sec. 336.4(a)(1) through (4).

Sec. 336.7 Employee responsibility, counseling and distribution of

regulation.

(a) Each employee is responsible for being familiar with and

complying with the provisions of this part.

(b) The Ethics Counselor shall provide a copy of this part to each

new employee within 30 days of initial appointment.

(c) An employee who believes that he or she may not be in

compliance with the minimum standards provided under Sec. 336.5(a)(1)

through (4), or who receives a demand letter from the FDIC for any

reason, shall make a written report of all relevant facts to the Ethics

Counselor within ten (10) business days after the employee discovers

the possible noncompliance, or after the receipt of a demand letter

from the FDIC.

(d) The Ethics Counselor shall provide guidance to employees

regarding the appropriate statutes, regulations and corporate policies

affecting employee's ethical responsibilities and conduct under this

part.

(e) The Ethics Counselor shall provide the Personnel Services

Branch with notice of an employee's noncompliance.

Sec. 336.8 Sanctions and remedial actions.

(a) Any employee found not in compliance with the minimum standards

except as provided in paragraph (b) of this section below shall be

terminated and prohibited from providing further service for or on

behalf of the FDIC in any capacity. No other remedial action is

authorized for sanctions for noncompliance.

(b) Any employee found not in compliance with the minimum standards

under Sec. 336.5(a)(3) based on financial irresponsibility as defined

in Sec. 336.3(i)(1) shall be terminated consistent with applicable

procedures and prohibited from providing future services for or on

behalf of the FDIC in any capacity, unless the employee brings him or

herself into compliance with the minimum standards as provided in

paragraphs (b)(1) and (2) of this section.

(1) Upon written notification by the Corporation of financial

irresponsibility, the employee will be allowed a reasonable period of

time to establish an agreement that satisfies the creditor and the FDIC

as to resolution of outstanding indebtedness or otherwise resolves the

matter to the satisfaction of the FDIC prior to the initiation of a

termination action.

(2) As part of the agreement described in paragraph (b)(1) of this

section, the employee shall provide authority to the creditor to report

any violation by the employee of the terms of the agreement directly to

the FDIC Ethics Counselor.

Sec. 336.9 Finality of determination.

Any determination made by the FDIC pursuant to this part shall be

at the FDIC's sole discretion and shall not be subject to further

review.

By order of the Board of Directors.

Dated at Washington, D.C. this 14th day of May 1996.

Federal Deposit Insurance Corporation.

Robert E. Feldman,

Deputy Executive Secretary.

[FR Doc. 96-14001 Filed 6-5-96; 8:45 am]

BILLING CODE 6714-01-M