Corporate Governance

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

proposing amendments to its corporate governance regulations and policy

statements to update, reorganize and substantially streamline them.

This proposal follows a detailed review of each pertinent regulation

and policy statement in the Code of Federal Regulations (CFR) to

determine whether it is necessary, imposes the least possible burden

consistent with safety and soundness and is written in a clear and

straightforward manner. Today's proposal is being made pursuant to the

Regulatory Reinvention Initiative of the Vice President's National

Performance Review and section 303 of the Riegle Community Development

and Regulatory Improvement Act of 1994.

DATES: Comments must be received on or before August 26, 1996.

ADDRESSES: Send comments to Manager, Dissemination Branch, Records

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

Street, NW., Washington, D.C. 20552, Attention Docket No. 96-49. 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 9:00 P.M. until 4:00 P.M. on

business days.

FOR FURTHER INFORMATION CONTACT: David Permut, Counsel (Banking and

Finance), Business Transactions Division, (202) 906-7505; or Mary Jo

Johnson, Project Manager, Supervision Policy (202) 906-5739; or Valerie

J. Lithotomos, Counsel (Banking and Finance), Regulations and

Legislation Division, (202) 906-6439, Chief Counsel's Office, 1700 G

Street NW., Washington, D.C. 20552.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Background of the Proposal

II. Objectives

A. Reduce Compliance Costs by Removing Unnecessary Regulations

B. Provide Maximum Corporate Governance Flexibility for Savings

Associations

C. Provide Clear Regulatory Guidance for Frequently Recurring

Questions

D. Move the Charter and Model Bylaws Into Application Processing

Regulatory Handbook

III. Historical Overview of Current Corporate Governance Regulations

IV. Section-by-Section Analysis of the Proposal

V. Proposed Disposition of Corporate Governance Regulations

VI. Request for Comment

VII. Executive Order 12866

VIII. Regulatory Flexibility Act Analysis

IX. Unfunded Mandates Act of 1995

X. Paperwork Reduction Act

I. Background of the Proposal

In a comprehensive review of the agency's regulations in the spring

of 1995, OTS identified numerous obsolete or redundant regulations that

could quickly be repealed. On December 27, 1995, OTS published a final

rule in the Federal Register repealing eight percent of its

regulations.1 As part of its review, OTS also identified several

key areas in its regulations for a more intensive, systematic

regulatory burden review. Certain areas--lending and investment

authority, corporate governance, subsidiaries and equity investments,

and conflicts of interest, corporate opportunity and hazard insurance--

were chosen for intensive review because they are vital to the thrift

industry, had not been developed on an interagency basis,2 and had

not been substantially reviewed or amended in recent years.

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\1\ 60 FR 66866 (December 27, 1995).

\2\ Interagency regulations are being reviewed through the

Federal Financial Institutions Examination Counsel.

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Earlier this year, OTS proposed a comprehensive streamlining of its

lending and investment regulations.3 Proposals regarding

subsidiaries and equity investments and conflicts of interest,

corporate opportunity and hazard insurance will be issued in the near

future.

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\3\ 61 FR 1162 (January 17, 1996).

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Today's proposal presents the results of the review of the charter

and bylaw regulations (corporate governance). If adopted in final form,

today's proposal will reduce the number of charter and bylaw

regulations and policy statements from 33 to 24, a reduction of 27

percent. In addition, deletion of the charter and model bylaws from the

CFR will remove 13.5 pages of CFR text. This information will be moved

to the Application Processing Regulatory Handbook (Handbook).

This proposal was developed in consultation with those who use the

regulations on a daily basis: OTS regional staff and representatives of

the thrift industry. OTS sought specific comments from the thrift

industry through a focus group composed of representatives of seven

savings associations and an industry trade association.

II. Objectives

The overarching goal of OTS' reinvention initiative is to reduce

regulatory burden on savings associations to the greatest extent

possible consistent with statutory requirements and safety and

soundness. In the context of corporate governance, we believe maximum

burden reduction can be achieved by pursuing four specific objectives.

A. Reduce Compliance Costs by Removing Unnecessary Regulations

The first objective of the OTS proposal is to remove unnecessary,

duplicative or outdated regulations affecting the corporate governance

of Federal thrift institutions. As described in more detail in the

Background section below, the corporate governance regulations have not

been thoroughly updated for many years. By eliminating unnecessary

regulations, OTS hopes to reduce regulatory compliance costs.

Examples of regulations, or subsections thereof, proposed to be

removed are Sec. 544.2(b)(4) (Mutual capital certificates), Sec. 544.3

(Adoption of

[[Page 32714]]

a new Federal charter by a Federal savings association),

Sec. 544.5(b)(17) (Emergency preparedness), Sec. 544.8 (Old and new

charters), Sec. 544.9 (Charter B associations), Sec. 552.1

(Definitions), Sec. 552.2 (Corporate titles), Sec. 552.2-5 (Conversion

from Federal mutual to Federal stock), Sec. 552.4(b)(3) (Charter

amendments), Sec. 552.6-2(a) (Requirement that the President shall be a

director and CEO), and Sec. 552.8 (Savings deposits). All of the above

regulations, or portions thereof, are being removed because they are

redundant, outdated or unnecessary.

Several other sections will have changes made to certain sentences

or phrases within the section, such as the removal of the need for

preliminary OTS approval of proposed charter amendments in Secs. 544.1,

Section 9; 552.3, Section 8; and 575.9, Section 8; and elimination of

the need for certification by management of the legality of proposed

charter and bylaw amendments in Secs. 544.2(a)(2)(i), 544.5(c),

552.4(a)(2)(i), and 552.5(b)(1).

B. Provide Maximum Corporate Governance Flexibility for Savings

Associations

OTS is committed to ensuring that Federal savings associations

operate under state-of-the-art corporate governance procedures.

Wherever possible, consistent with safety and soundness and fairness to

shareholders and members, we are seeking to move toward greater

flexibility. Specific amendments proposed to provide greater

flexibility include:

Amending Secs. 544.5(b)(1) and 552.6(a) to provide more

flexibility for the site of shareholder meetings.

Modifying Secs. 544.5(b)(5) and 552.6(f)(1) to allow

proxies to be gathered telephonically or electronically.

Expanding the list of preapproved charter amendments in

Secs. 544.2 and 552.4 to enable institutions to adopt supermajority

voting provisions, to eliminate cumulative voting, and, for mutuals to

increase the maximum permissible number of votes per member to up to

1000.

Replacing the current requirement in Secs. 544.2,

544.5(c)(2), 552.4 and 552.5(b) that institutions give OTS advance

notice of their intent to adopt preapproved charter and bylaws

amendments with an after-the-fact notice.

Authorize associations to hold their annual shareholders

meeting 150 days after the close of their fiscal year, instead of the

current 120 days (Secs. 544.5(b)(1) and 552.6(a)).

Revising Sec. 544.5(b)(16) to recognize the ``sitting''

board of directors rather than the ``authorized'' board of directors

when determining voting requirements in certain instances.

Exempt wholly-owned stock associations from various

requirements such as staggered terms for members of their boards of

directors (Sec. 552.6-1(b)), notice of shareholder meetings

(Sec. 552.6(b)), and compilation of shareholder voting lists

(Sec. 552.6(d)).

Permit shareholder actions to be taken by unanimous

written consent in lieu of a formal shareholders meeting

(Sec. 552.6(h)).

OTS is continuing to review the laws of various states, and the

corporate governance approaches followed by the other federal agencies

that charter depository institutions, for additional innovative

corporate governance ideas. We welcome further suggestions from

commenters.

In particular, OTS requests comment on whether there are aspects of

the corporate governance structure applicable to national banks that

would be beneficial for Federal thrifts. The corporate governance

regulations applicable to Federal thrifts tend to be more detailed than

those applicable to national banks. To fill in the details, national

banks are permitted to elect to follow the corporate governance laws of

the state where the bank's home office is located, the laws of the

state where the bank's holding company is chartered, Delaware law, or

the Model Business Corporation Act. The body of law that a national

bank elects to follow applies only to the extent not inconsistent with

the corporate governance provisions of the National Bank Act and

implementing regulations.

Federal savings associations may benefit from the detail provided

in OTS's corporate governance regulations. Absence of detail in the

area of corporate governance can lead to confusion, delay, and

potential shareholder litigation. Accordingly, OTS's objective has been

to provide savings associations with a comprehensive set of clear,

modern, and flexible corporate governance rules. Institutions may apply

on a case-by-case basis for permission to adopt non-standard charter

and bylaw provisions.

Nevertheless, savings associations may benefit from the additional

option of following state law in lieu of OTS corporate governance

regulations--except for those regulations that OTS designated as vital

to safety and soundness or other fundamental policy objectives. OTS

requests comment on whether this type of state law election would offer

benefits to savings associations and, if so, a description of those

benefits.

C. Provide Clear Regulatory Guidance for Frequently Recurring Questions

A third objective is to clarify certain issues that frequently

arise regarding the corporate governance regulations. This will reduce

the number of instances when institutions incur delay or expense

seeking clarification of ambiguous or incomplete regulatory language.

Accordingly, OTS proposes to amend:

Section 544.5(b)(3) and (4) to indicate what rules govern

adjourned shareholder meetings;

Sections 544.5(b)(10) and 552.6-1(f) to add a cross

reference to a definition indicating what constitutes ``cause'' for

removal of a director;

Section 544.5(b)(6) to extend privacy rights for

confidential portions of an institution's books and records, now

provided for Federal stock institutions at Sec. 552.11(d), to Federal

mutual associations;

Section 544.5(b)(13) to give guidance on the procedures

governing when an institution substitutes a new director nominee for a

nominee that dies or becomes incapacitated; and

Section 552.6(d) to give guidance on how stock held in the

name of fiduciaries should be reflected on voting lists.

D. Move the Charters and Model Bylaws Into Application Processing

Regulation Handbook

OTS is proposing to move the charters for Federal stock and mutual

savings associations, found at Secs. 544.1, 552.3 and 575.9, to the

Handbook. We are also proposing to move the model bylaws, found in

appendices to Parts 544 and 552, to the Handbook. The Office of the

Comptroller of the Currency (OCC) and the National Credit Union

Administration (NCUA) follow a similar practice.

Placing the savings association charters and bylaws in the Handbook

may offer two advantages. First, by eliminating nonessential items from

the regulations, the regulations may become easier to use. Second, OTS

would have more flexibility to update and modernize the charters and

bylaws from time to time, because notice and comment rulemaking would

not be required to effect changes. We recognize, however, that making

changes without notice and comment rulemaking could also be viewed as a

disadvantage. Moreover, placing the charters and bylaws in the Handbook

may make them less accessible.

[[Page 32715]]

Accordingly, we request specific comment on this proposed change.

III. Historical Overview of Current Corporate Governance

Regulations

Before 1982, the corporate governance of Federal savings

associations was primarily concerned with Federal mutual savings and

loan associations, the only type of corporate charter available from

the chartering authority, the Federal Home Loan Bank Board (FHLBB),

predecessor to OTS. The Home Owners' Loan Act (HOLA) 4 only

permitted the chartering of Federal mutual savings and loan

associations.5

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\4\ 12 U.S.C. 1461-1470.

\5\ Section 5(a) of the HOLA, 12 U.S.C. 1464(a), contains the

statutory authority for the OTS to issue charters for Federal thrift

institutions.

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In 1982, Congress enacted the Garn-St Germain Depository

Institutions Act (DIA),6 which broadened the types of charters and

organizational options available to Federal savings associations. The

DIA authorized the creation of new Federally chartered stock

institutions, either as Federal savings banks or Federal savings and

loan associations, and permitted state-chartered savings banks to

convert to a Federal charter without requiring them to surrender their

FDIC insurance in favor of FSLIC insurance of accounts.

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\6\ Pub. L. 97-320, 96 Stat. 1469, October 15, 1982.

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In response to the DIA, the FHLBB amended its corporate governance

regulations (1983 Rulemaking) 7 to create a single Federal mutual

charter and a single Federal stock charter. The same basic charter was

available both to savings banks and to savings and loan associations,

with minor differences. Before the 1983 Rulemaking, Federally-chartered

thrifts had operated under a plethora of charters, including Charter S,

Charter T, Charter B, Charter B (Revised), Charter N, Charter N

(Revised), Charter L and Charter K (Revised). Some Federal associations

continue to operate under those charters. It is important to note that

today's proposed rulemaking does not require any institution to change

its current charter. After adoption of a final regulation, institutions

may retain their existing charters or amend their charters to conform

to the new provisions.

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\7\ 48 FR 44174 (September 28, 1983).

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In 1985, the FHLBB concluded that with the new structural options

available to Federal savings associations, a number of important

matters regarding the corporate governance of those associations were

either not adequately addressed, not covered in codified form or were

distributed in a piecemeal fashion throughout the regulations. The

FHLBB conducted an extensive review of the Model Business Corporation

Act, the corporate codes of Delaware, California, New York and Florida,

then presented a proposal for updating the corporate governance

regulations. Because the proposal was extensive, it was broken into

four parts,8 published over a two year period, with comments

sought on all sections before a final regulation was to be promulgated.

Only one section, however, the proposal on revisions to Receiverships

and Conservatorships, was enacted in final form before the priorities

of the FHLBB and external circumstances changed. The savings and loan

crisis had begun and the extensive revisions to corporate governance

were set aside for future consideration.

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\8\ Part I-50 FR 38832 (September 13, 1985); Part II-50 FR 52482

(December 24, 1985); and Part III and IV-52 FR 25870 (July 9, 1987).

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In 1989, the FHLBB's regulatory and chartering authority was

assumed by the newly established OTS. A number of the corporate

governance issues were ultimately addressed in the form of legal

opinions or approved amendments to charters and bylaws. These changes,

however, were confined to considerably more narrow subject areas than

the FHLBB proposal envisioned.

Thus, today's proposal, if adopted in final form, will be the first

major update of the corporate governance regulations in over a decade.

IV. Section-by-Section Analysis of the Proposal

A. Part 544--Charter and Bylaws

Section 544.1 Federal Mutual Charter

This section contains the required charter for Federal mutual

associations. As indicated above, OTS proposes to move this charter (as

well as the charter for stock associations and the model bylaws for

both) from the regulations to the Handbook. Thus, OTS proposes to amend

Sec. 544.1 to reference the Handbook. OTS also proposes to update the

charter.

So that the reader can understand what is being proposed, we have

set forth the changes proposed for the charter in the regulatory text,

and discuss them below.9

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\9\ For drafting purposes, the changes to the charter have been

designated as Alternative Two in the regulatory text.

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Section 1. Corporate Title. Section 1 establishes the corporate

title of the Federal association. The words ``hereby chartered'' will

be removed as unnecessary verbiage.

Section 6. Members. This section identifies the association's

members and describes their rights. OTS proposes to streamline this

section by moving the third and fourth sentences to introductory

instructions in the Handbook or, if the charter is retained in

Sec. 544.1, to the introductory paragraph of the regulation. These two

sentences instruct institutions that wish to adopt the charter, but are

currently operating under old charters conferring membership rights on

borrowers, to grandfather the membership rights of their existing

borrowers.

The sixth sentence of section 6, dealing with proxies, will be

removed because it already appears in the bylaws. The seventh and

eighth sentences, dealing with quorums, will be moved to the bylaws

because matters regarding member meetings are more fully addressed

there.

Section 7. Directors. This section provides that a Federal mutual

association may have from 5 to 15 directors. To further streamline the

charter, bracketed references to ``trustees'' will be removed, and a

single sentence will be added to the introductory instructions

indicating that institutions may substitute the term ``trustee'' for

the term ``director'' where appropriate. Similar changes will be made

throughout the charter and the model bylaws for mutual associations.

The third and fifth sentences (providing that directors shall be

members of the association and requiring staggered terms for directors)

will be moved to the bylaw section dealing with directors. The fourth

sentence (regarding vacancies on the board) will be moved to the bylaw

section on resignations, removals and (newly added) vacancies. The last

sentence, in brackets, will also be moved to the bylaw section on

directors. This sentence authorizes state savings banks that convert to

Federal mutual associations to grandfather their existing provisions

for electing directors for a limited period of time. OTS believes each

of these matters is more appropriately addressed in the bylaws, where

related issues are already addressed. Presenting related requirements

in a single place should make the charter and bylaws more user

friendly.

Section 9. Amendment of charter. Section 9 describes the procedures

for amending the association's charter. References to Secs. 544.2 or

544.3 will be removed as unnecessary verbiage. Section 9 will also be

revised to reflect the fact that ``preapproved'' charter amendments

(Sec. 544.2) will now be truly preapproved. Institutions will no longer

be required to submit these amendments to OTS for ``preliminary''

approval. (See discussion of Sec. 544.2 below.)

[[Page 32716]]

Finally, the signature blocks of the charter will be modified to

include a date to clarify when a charter is effective.

Section 544.2 Charter Amendments

Paragraphs (a) and (b) describe the filing requirements for

amending Federal mutual charters. OTS is proposing to remove, from

paragraphs (a)(2)(i) and (ii), the requirement that institutions

certify that amendments they propose are permissible under all

applicable laws. This certification is unnecessary because the legality

of a proposed amendment is reviewed by OTS staff as part of the

application process and its deletion will also reduce regulatory

burden. In addition, paragraph (b) will be revised to indicate that

preapproved charter amendments will no longer require advance

submissions to OTS. Instead, preapproved amendments will be deemed

approved when adopted by the institution and must simply be filed with

OTS within 30 days after adoption.

A new preapproved charter amendment will be added to Sec. 544.2

that authorizes Federal mutual associations to amend their charters to

raise the cap on the maximum number of votes any member can cast up to

1,000. Mutual charters generally authorize depositors to cast one vote

for every $100 of deposits, subject to a cap that has historically

tracked the limit on deposit insurance. Thus, 1,000 votes is the

standard cap under the current mutual charter (Sec. 544.1). However,

many institutions operate under charters adopted before the cap was

raised to 1,000. Making the 1,000 cap a preapproved amendment will

enable institutions to update their cap without filing an application

and paying an application fee. This is the most frequently requested

amendment for Federal mutual associations.

OTS also proposes to remove from Sec. 544.2 an obsolete preapproved

amendment authorizing institutions to issue Mutual Capital Certificates

(MCCs). Institutions generally no longer issue MCCs.10 Elimination

of outdated matter such as this should make the regulations less

confusing and easier to use.

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\10\ An institution could still choose to issue MCCs after

Sec. 544.2 is modified, provided the institution makes any necessary

amendments to its charter and bylaws (which would no longer be

preapproved) and follows the procedures specified at 12 CFR 563.74.

Paragraph (d) of Sec. 563.74 will be amended to reflect removal of

the preapproved amendment for MCCs.

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Paragraph 544.2(c) details the procedures an institution must

follow when it wants OTS to reissue its charter to reflect amendments

to the charter. The wording of this section will be conformed to the

wording of the corresponding stock charter section at Sec. 552.4(d). No

substantive change will result. Paragraph (c) is also being amended to

remove the delegation of authority to the Chief Counsel to execute

reissued charters. This change is being proposed as part of a

continuing effort to remove delegations from the regulations. Delegated

authority to execute reissued charters will be preserved via an

internal OTS document.

Section 544.3 Adoption of a New Federal Charter by a Federal Savings

Association

This section details the procedures that a Federal mutual savings

and loan association would use to amend its charter to read in the form

of a Federal mutual savings bank, or vice versa. This section has

become obsolete. Today, the charters for both types of institution are

identical, except for a possible difference in corporate title. A

simple corporate title change can be used to redesignate an institution

as a ``savings bank'' or ``savings and loan association.'' Thus,

Sec. 544.3 is being repealed. Corresponding changes will be made to

Secs. 543.1(b) and 543.14.

Section 544.5 Federal Mutual Savings Association Bylaws

This section describes the requirements for the bylaws of a Federal

mutual association. A nonsubstantive change will be made to paragraph

(a) to conform its language regarding procedures for bylaw amendments

to similar language that appears later in Sec. 544.5(b)(16).

Paragraph (b)(1) contains the annual meeting requirements for

Federal mutual associations. This paragraph will be amended to allow

meetings not only at the main office, but also at any other convenient

place the board of directors may designate, and to permit the

association to hold its annual meeting within 150 days of the end of

the association's fiscal year. The current requirement is 120 days.

Both changes will provide additional flexibility for Federal mutual

associations.

Paragraph (b)(2) addresses special meetings of members. It

provides, inter alia, that the holders of ten percent or more of a

mutual association's voting capital may call a special meeting.

Institutions frequently ask for clarification of the meaning of

``voting capital,'' since the term is no longer defined by the HOLA.

OTS proposes to clarify that voting capital means all FDIC-insured

deposits held by a savings association.

Paragraphs (b) (3) and (4), which discuss notice requirements for

meetings of members and the fixing of the record date for determining

what members are entitled to vote, respectively, will be amended to

indicate the circumstances under which adjournment of a meeting of

members will require the issuance of new notices and the fixing of a

new record date. These are also frequently asked questions.

OTS is also proposing a new paragraph (b)(5), to be titled ``Member

Quorum.'' 11 This paragraph will contain certain quorum provisions

currently found in the charter (as discussed above), as well as

clarification of what items of business may be considered at a meeting

held after adjournment. The agency believes that quorum issues are more

appropriately addressed in the bylaws, where other rules governing

member meetings already appear.

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\11\ All subsequent paragraphs will be renumbered accordingly.

However, only those paragraphs being substantively changed are

discussed below.

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Current paragraph (b)(5), on voting by proxy, will become (b)(6)

and will be amended to permit proxies to be given telephonically or

electronically as long as the holder uses a procedure for verifying the

identity of the member.12 Telephonic and electronic proxies enable

institutions to gather proxies and conduct corporate business more

rapidly and have become an accepted part of corporate democracy. In

addition, in response to frequent questions, OTS proposes to describe

voting procedures applicable to joint accounts and accounts held by

fiduciaries on behalf of others.

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\12\ One example of a verification procedure is for the

institution receiving the proxy by facsimile to compare the

signature on the proxy to a signature that the institution has on

file.

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Current paragraph (b)(6), which references Sec. 545.131 regarding

communication with other members, will become (b)(7). In addition, the

paragraph will be amended to reflect the relocation of Sec. 545.131 to

Part 544, and will extend the privacy rights now guaranteed to

depositors of Federal stock institutions (Sec. 552.11(d)) to the

depositors of Federal mutual institutions. The privacy rights of the

members of mutual institutions will not prevent the internal use of

member information by those institutions.

Current paragraph (b)(7), regarding the number of directors, will

become (b)(8). In addition, the paragraph will be amended to clarify

that the bylaws must specify the precise number of directors (rather

than a range). This number is

[[Page 32717]]

chosen by the institution within the range specified in the charter and

may be changed by the institution from time to time by amending its

bylaws. Paragraph (b)(8) will also contain three provisions being moved

from section seven of the charter. One provision requires that

directors be members of their association; a second provision requires

that directors serve staggered terms; and a third provision permits

state savings banks that convert to Federal mutual associations to

grandfather their method of electing directors for a limited time.

Current paragraph (b)(9), which addresses the duties of officers,

employees and agents and their indemnification, will become (b)(10). In

addition, a sentence on the removal of officers will be added to answer

a frequently asked question. The sentence will state: ``Any officer may

be removed by the board of directors with or without cause, but such

removal, other than for cause, shall be without prejudice to the

contractual rights, if any, of the person so removed.''

Current paragraph (b)(10), on the resignation or removal of

directors, will become (b)(11). A cross reference to the definition of

``cause,'' which appears elsewhere in the regulations, will be added in

response to a frequently asked question concerning the circumstances

under which shareholders can remove directors for ``cause''. Paragraph

(b)(11) will also be expanded to authorize boards of directors to fill

vacancies under the current flexible rules that now apply to stock

associations.

Current paragraph (b)(13), discussing procedures for nominating

directors, will become (b)(14) and will be expanded to clarify the

requirement that the names of nominees be posted at least 15 days

before an election, under certain circumstances. New language will

confirm that this requirement does not apply to a nominee substituted

as a result of death or other incapacity of another nominee. From time

to time, institutions have sought clarification on this issue.

Current paragraph (b)(16), which sets forth procedures for amending

the bylaws, will become (b)(17) and will be amended to make it easier

for a board that fails to meet its quorum requirement solely due to

vacancies on the board to amend its bylaws. The new language will

specify that, in the absence of a quorum due solely to vacancies, the

affirmative vote of a majority of the sitting board may amend the

bylaws.

Current paragraph (b)(17), on miscellaneous topics, will become

(b)(18) and will be amended to remove the reference to provisions

regarding ``emergency preparedness.'' Emergency preparedness provisions

are no longer part of the model bylaws.

Paragraphs (c)(1) and (c)(2) discuss the filing procedures for

bylaw amendments. OTS proposes to remove the requirement that

applications for bylaw amendments contain certifications that the

proposed amendments comport with all laws. As noted above when

discussing charter amendments, the certification requirement is

unnecessary because the legality of proposed amendments are reviewed by

OTS staff as part of the application process and its deletion will also

reduce regulatory burden. In addition, consistent with the proposal to

move the model bylaws out of the regulations, paragraph (c)(1) will be

revised to indicate that the model bylaws can be found in the Handbook

available from OTS. The current appendix to part 544, which contains

the model bylaws, will be removed.

Paragraph (c)(2) will also be revised to indicate that the model

bylaws, if adopted verbatim, are approved when adopted and must simply

be filed with OTS within 30 days after adoption. This change is

proposed because OTS has determined that over 90 percent of the bylaws

applications filed in recent years are for standard provisions that do

not require agency review.

Paragraph (d), which addresses the effective date of all other

bylaw amendments, will be amended to comport with a similar provision

for Federal stock associations. The provision is intended to clarify

the circumstances under which an amendment may be rejected by OTS, by

cross referencing the current standards which appear in paragraph

(c)(1).

Section 544.8 References to Old and New Charters; Rules Applicable to

Trustees of Federal Mutual Savings Banks

OTS proposes to remove this section, which indicates that trustees

will be treated as if they are directors for purposes of the

regulations. The same point will be made in the introductory

instructions to the charter and model bylaws. It does not need to be

repeated here.

Section 544.9 Obsolete Charter Provision for Charter B Associations.

This section provides that institutions that still operate under

the old Charter B are not bound by section 10 of that charter. Section

10 of Charter B purports to limit the authority of an institution to

invest in consumer loans and corporate debt securities. OTS proposes to

move Sec. 544.9, which affects very few institutions, from the

regulations into Handbook guidance.

Section 544.8 Communication Between Members of a Federal Mutual

Savings Association (Proposed)

OTS proposes to move the rules governing communications between

members of Federal mutual associations, which now appear in

Sec. 545.131, to part 544. This is where users of the regulations would

most likely look for guidance on such matters. Accordingly, current

Sec. 545.131 will become new Sec. 544.8.

Appendix to Part 544

As indicated above, OTS proposes to eliminate the appendix to part

544, which contains the model bylaws. Instead, these bylaws will be

moved to the Handbook, with changes being made to conform the model

bylaws to the amendments to the bylaws regulations described above.

B. Part 552--Incorporation, Organization, and Conversion of Federal

Stock Associations

Section 552.2 Corporate Title

OTS proposes to remove this section, which merely reminds

institutions that Sec. 543.1 regarding corporate titles for Federal

associations applies to Federal stock associations. There is no need

for this provision. Current Sec. 543.1, as currently written, clearly

governs corporate titles for all Federal associations.

Section 552.2-5 Conversion From Federal Mutual to Federal Stock

Charter

This section authorizes Federal mutual associations to convert to

Federal stock associations and provides for issuance of a stock charter

upon completion of the conversion. These matters are also covered, in

greater detail, by OTS conversion regulations. OTS, therefore, proposes

to remove this section.

Section 552.3 Charters for Federal Stock Associations

This section contains the required charter for Federal stock

associations. For the reasons indicated above in the discussion of

Sec. 544.1, OTS proposes to move the stock charter out of the

regulations and into the Handbook. Section 552.3 will thus be revised

to reference the charter as it appears in the Handbook. OTS proposes to

update the Federal stock charter with the following changes:

Section 2. Office. This section describes the location of the home

office of the Federal stock association. The

[[Page 32718]]

word ``in'' will be deleted and replaced by the word ``at.'' This is a

purely technical amendment.

Section 5. Capital stock. Section 5 describes the rules governing

the capital stock of a Federal stock association, including the types

of stock it may issue, the consideration to be paid, and voting rights.

Several changes are proposed. First, the charter will be amended to

permit the issuance of ``no par'' stock. The decision whether stock

should have a stated par value is a matter of internal corporate

governance that raises no supervisory or safety and soundness issues.

Second, the final sentence of the first paragraph will be revised

to reflect more current accounting terminology. The term ``retained

earnings'' will be substituted for ``surplus,'' and the phrase ``common

stock or paid-in capital accounts'' will be substituted for ``stated

capital.''

Third, the second paragraph will be revised to clarify that Federal

stock associations may issue stock to officers, directors, and

controlling persons in connection with its initial organization,

without a shareholder vote.

Fourth, the second sentence of the third paragraph will be revised

to clarify that a Federal stock charter may be amended to eliminate

cumulative voting.

Section 7. Directors. This section specifies that the number of

directors of a stock association shall be fixed in the bylaws and shall

not be fewer than five nor more than fifteen. However, provision is

made for the Director of OTS to approve a larger or smaller board of

directors. OTS proposes a technical amendment to this section that will

specify that approval of a larger or smaller board can be given either

by the Director ``or his or her delegate.''

Section 8. Amendment of charter. Section 8 describes the procedure

for amending an association's charter. This section is being revised to

indicate that preapproved charter amendments will be effective once

they have been approved by the association's board of directors and

shareholders, without any need for ``preliminary approval'' or any

other form of approval from OTS. (See discussion below of Sec. 552.4.)

In addition, OTS proposes to elaborate on the general rule that charter

amendments require approval by only a majority of the votes eligible to

be cast at a shareholders' meeting. Clarifying language will be added

indicating that this general rule does not apply in those instances

where an association's charter specifies that a supermajority vote is

required. (See discussion of Sec. 552.4 below.)

Finally, the signature blocks of the charter will be modified to

include a date to clarify when a charter is effective.

Section 552.4 Charter Amendments

Paragraphs (a) and (b) set forth the filing requirements for

amendments to Federal stock charters. In paragraph (a), OTS is

proposing to make the same changes regarding certification requirements

as discussed above in connection with the corresponding provisions for

mutual associations (Sec. 544.2(a)). Thus, stock associations will no

longer be required to certify that proposed amendments comport with all

applicable laws.

Paragraph (b) sets forth a list of preapproved charter amendments.

OTS proposes to add descriptive titles to each of the preapproved

amendments. The titles will correspond to the titles to similar

preapproved charter provisions for Federal mutual associations.

Paragraph (b) will also be revised to indicate that preapproved charter

amendments are approved when adopted and must simply be filed with OTS

within 30 days after adoption.

Paragraph (b)(3), which contains a preapproved amendment for

institutions that wish to change from a Federal stock savings and loan

association charter to a Federal stock savings bank charter, will be

removed for the same reasons described above with regard to

Sec. 544.3.13

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

\13\ Subsequent paragraphs will be renumbered accordingly.

However, only those paragraphs being substantively changed are

discussed below.

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

Current paragraph (b)(4), which permits changes to the authorized

number of shares and the par or stated value of such shares, will

become (b)(3). Additional nonsubstantive changes will be made to

clarify the language of this provision.

Current paragraph (b)(5), which permits institutions to modify

section 5 of the charter so as to authorize the issuance of preferred

stock, will become (b)(4) and will include the same changes to section

5 of the charter as were discussed above. In addition, the reference to

the Resolution Trust Corporation will be deleted, because that agency

no longer exists.

A new preapproved charter amendment will be added, as new paragraph

(b)(6), to authorize institutions to prohibit cumulative voting for

directors. The standard charter for Federal stock associations provides

for cumulative voting for directors. Federal associations frequently

apply to amend their charters to prohibit cumulative voting, and OTS

routinely approves these applications. Adding this provision to the

list of preapproved amendments will save associations that wish to make

this change the time and expense of an application.

Paragraph (c) states OTS policy on antitakeover provisions in

charter amendments. OTS proposes to expand this provision to state the

two basic standards OTS uses when reviewing proposed antitakeover

amendments. First, the proposed amendment must be consistent with

applicable statutes, regulations and OTS policies. Second, such

amendments must be adopted by a percentage of the shareholder vote at

least equal to the highest percentage that would be required to take

any action under the antitakeover provision. These are not new

standards; OTS already employs them when reviewing antitakeover

amendments. Stating these standards in the regulations will enable

institutions to present applications that conform to OTS requirements,

thereby saving them time and expense.

Section 552.5 Bylaws

This section presents the requirements for the bylaws of a Federal

stock association. A technical amendment will be made to paragraph (a)

to confirm that shareholder votes to approve bylaw amendments must

occur ``at a legal meeting'' of shareholders.

Paragraph (b) discusses the application and notice procedures

applicable to bylaw amendments. This paragraph will be amended to

remove the requirement that associations certify that bylaw amendments

comport with applicable law. Revisions will also be made to indicate

that the model bylaws, if adopted verbatim, are approved when adopted

and must simply be filed with OTS within 30 days after adoption.

Paragraph (b) will also indicate that the model bylaws are in the

Handbook and are available from any Regional Office.

OTS proposes to add a new paragraph (d) confirming that the

authority of a Federal stock association to engage in any transaction

is determined by the association's charter and bylaws in effect at the

time of the transaction. Subsequent amendments do not retroactively

affect this determination. A similar regulatory provision is already in

effect for Federal mutual associations (Sec. 544.6).

Section 552.6 Shareholders

This section contains certain corporate governance requirements

regarding shareholder meetings. Paragraph (a), which contains rules

regarding the time and place of shareholder meetings, will be amended

in two respects. First, the requirement

[[Page 32719]]

that shareholders meetings be held in the state of an association's

principal place of business is being removed. Instead, associations

will be able to hold shareholder meetings at any convenient place the

board of directors designates. Second, the time frame within which an

association must hold its annual shareholders meeting will be extended

from 120 to 150 days of the end of the association's fiscal year. These

are the same changes being proposed for Federal mutual associations

(Sec. 544.5(b)(1)).

Paragraph (b) states the notice requirements for shareholder

meetings. This paragraph will be amended to waive the shareholder

notice requirements for wholly-owned institutions.

Paragraph (d)(1), which addresses access to shareholder lists, will

be revised to clarify that shareholder lists are available only to

shareholders ``of record'' and their agents, and that the lists must

contain the names of beneficial owners that are furnished to the

association under the rules of the Securities and Exchange Commission.

In addition, the paragraph will be amended to waive its application to

wholly-owned institutions.

Paragraph (e), regarding shareholder quorum requirements, will be

amended to confirm that, whenever a quorum is present, the affirmative

vote of the majority of shares entitled to vote at a shareholders

meeting shall constitute an act of the shareholders, absent a

supermajority voting requirement.

Paragraph (f), which addresses proxies, will be amended in the same

manner as the Federal mutual bylaws at Sec. 544.5(b)(6) to allow

proxies to be gathered electronically or telephonically. In addition,

in response to frequent questions, paragraph (f) will be expanded to

describe voting procedures applicable to stock held by fiduciaries on

behalf of others and stock held jointly.

A new paragraph (h) will also be added confirming that, if an

association's bylaws so provide, shareholder action may be taken by

unanimous written consent in lieu of a shareholder meeting. At times,

this may allow associations to obtain shareholder approval more rapidly

and with less expense.

Section 552.6-1 Board of Directors

This section addresses corporate governance matters involving

directors. Paragraph (a) will be amended to provide that Directors need

not be stockholders unless the bylaws so require.

Paragraph (b) sets forth the number and term of directors. This

paragraph will be amended to clarify that the bylaws of a Federal stock

association must specify an exact number of positions on an

association's board of directors, not simply a range. The number is

selected by the institution within a range prescribed in the charter.

OTS also proposes to amend paragraph (b) to exempt wholly-owned stock

associations from the requirement that their directors be elected to

staggered terms.

Paragraph (c), regarding regular meetings of the board, will be

expanded to confirm that the board of directors has authority to

determine the place, frequency, time, and notice procedures for its

meetings. These matters need not be specified in the bylaws.

Paragraph (e), which covers director vacancies, will be amended to

clarify that a director appointed to fill a vacancy may serve ``only''

until the next election of directors. This is not a substantive change.

The word ``only'' is being added for emphasis and clarity.

Paragraph (f), concerning removal of directors, will be retitled

``Resignation or removal of directors'' to conform to the title for the

same provision for Federal mutual associations. In addition, the

paragraph will be amended to confirm, as is already the case, that

shareholders may remove a director in the midst of his or her term

``only'' for cause. A cross reference to the existing regulatory

definition of ``cause'' will also be added to answer a frequently asked

question.

Paragraph (k), on age limitations for directors, will be revised to

indicate that any age limitation provision must conform to applicable

Federal law, rules, or regulations, such as the Age Discrimination in

Employment Act.

Section 552.6-2 Officers

This section addresses corporate governance matters involving

officers. Paragraph (a) will be amended to remove the requirement that

the president always be a director and that either the president or the

chair of the board of directors always be the chief executive officer.

In paragraph (b), which addresses removal of officers, the cross

reference to OTS employment contract regulation will be updated.

Paragraph (c), on age limitations for officers, will be revised to

indicate that any age limitation on service by officers must conform to

applicable Federal law, rules, or regulations, such as the Age

Discrimination in Employment Act.

Section 552.8 Savings Deposits

This section contains instructions to Federal stock associations

regarding the types of savings deposits they may accept, preservation

of those accounts when a former mutual association adopts a stock

charter, rights of account holders in the event of liquidation, and

forms of certificates to use for accounts. OTS proposes to remove this

section from the regulations. The provisions of this section are either

self evident or covered by other statutes and regulations and general

contract law. Under the conversion regulations, all converting mutual

institutions are required to notify their accountholders that all the

rights they enjoyed as accountholders, except voting and ownership of

the institution, carry over to the converting association.

Section 552.11 Books and Records

This section describes a Federal stock association's obligations

with respect to books and records. Paragraph (b) will be amended to

make clear that shareholders' inspection rights extend only to

nonconfidential portions of an institution's books and records.

Appendix to Part 552

As indicated above, OTS proposes to move the model bylaws for

Federal stock associations, which currently appear in the appendix to

Part 552, into the Handbook. Changes will be made to conform the model

bylaws to the amendments to the bylaws regulations described above. In

addition, OTS proposes to modify the model bylaws to indicate that

procedures other than Robert's Rules of Order may be used for

shareholder meetings, as long as the board of directors adopts

alternative written procedures.

C. Part 575--Mutual Savings and Loan Holding Companies

Section 575.9 Charters and Bylaws for Mutual Holding Companies and

Their Savings Association Subsidiaries

This section describes the required charter and bylaws for Federal

mutual holding companies. Paragraph (a)(1) contains the prescribed

charter. This paragraph will be amended to indicate that the charter

will appear in the Handbook and will be available from any Regional

Office. In addition, the following changes will be made to the charter:

Section 1. Corporate Title. Section 1 contains the corporate title

of the Federal mutual holding company. The words ``hereby chartered''

will be deleted as unnecessary verbiage.

[[Page 32720]]

Section 5. Members. This section identifies the mutual holding

company's members and defines their rights. The sixth, seventh, and

eighth sentences of this section, addressing proxies and quorums, will

be removed because these matters either are covered or will be covered

(once today's amendments are made) by the bylaw requirements applicable

to mutual holding companies. As a result of this change, proxy and

quorum issues will be addressed in a single place in the corporate

documents of mutual holding companies.

Section 6. Directors. This section provides that a Federal mutual

holding company may have from 5 to 15 directors. In addition to

technical changes made to conform the wording of this section to the

corresponding section of the charter for Federal mutual associations,

OTS also proposes to remove the requirement that directors be members

of the association and the requirement that the terms of directors be

staggered.

Section 8. Amendment of charter. Section 8 describes the procedures

for amending the mutual holding company's charter. These procedures

will be streamlined to indicate that preapproved charter amendments are

effective once approved by members of the mutual holding company. Other

amendments will continue to require advance OTS approval.

Paragraph (a)(2) of Sec. 575.9 provides that mutual holding

companies may adopt the same preapproved charter amendments as are

specified for mutual savings associations, subject to certain specified

exclusions. Paragraph (a)(2) will be updated to conform to the changes

being proposed for the list of preapproved charter amendments for

mutual associations.

Paragraph (a)(4) specifies that Federal mutual holding companies

shall be subject to the same rules regarding bylaws as apply to Federal

mutual associations, with certain exceptions. This paragraph will be

amended to indicate that the model bylaws may be found in the Handbook,

available from OTS Regional Offices.

A technical amendment will be made to paragraph (a)(5), which

requires mutual holding companies to make their charter and bylaws

available to members. The cross reference to Sec. 545.131 will be

changed to reflect the proposed movement of this section to Part 544.

D. Miscellaneous Technical Changes

Section 543.1(b) Title Change

This section prescribes the rules for corporate titles for Federal

savings associations. This section will be amended to delete cross

references to sections being removed by this proposal.

Section 543.14 Continuity of Existence

This section, which confirms that the corporate existence of

converting associations continues, notwithstanding the conversion, will

be amended to delete a cross reference to a section being removed by

this proposal.

Section 556.1 Directors

This section, which describes OTS policy on the number of directors

necessary for a quorum and the directors' power to fill vacancies, will

be removed because both subjects are thoroughly covered by the bylaws

regulations.

Section 556.17 Effect of Loan Participation on Status of Borrowing

Members

This section provides guidance regarding various issues that arise

when determining the identity of the borrowing members of a Federal

mutual savings association. For example, this section indicates that

sale of a whole loan by a savings association to a third party

terminates the borrower's membership rights in the association. OTS

proposes to move this policy statement from the regulations into

Handbook guidance.

V. Proposed Disposition of Corporate Governance Regulations

The following chart displays the changes being proposed for OTS's

corporate governance regulations.

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

Original provision Comment

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

Sec. 543.1(b)......................... Amended to delete references.

Sec. 543.14........................... Amended to delete references.

Sec. 544.1............................ Amended and moved to Handbook.

Sec. 544.1, Section 6................. Moved portion to Sec. 544.5 for clarification.

Sec. 544.1, Section 7................. Moved portion to Sec. 544.5 for clarification.

Sec. 544.1, Section 9................. Removed need for preliminary approval.

Sec. 544.2(a)(2)...................... Eliminated need for management certification.

Sec. 544.2(b)......................... Eliminated need for prior notice requirement.

Sec. 544.2(b)(4)...................... Removed existing paragraph and added new preapproved amendment.

Sec. 544.2(c)......................... Removed delegation.

Sec. 544.3............................ Removed.

Sec. 544.5(a)......................... Revised for clarification.

Sec. 544.5(b) (1) and (2)............. Amended for flexibility; changed annual meeting date.

Sec. 544.5(b) (3) and (4)............. Adjournment provisions added.

Sec. 544.5(b) (5) through (17)........ Redesignated (b) (6) to (18)

Sec. 544.5(b)(6)...................... Amended to add privacy rights.

Sec. 544.5(b)(10)..................... Amended to add guidance on vacancies.

Sec. 544.5(b)(13)..................... Amended to add guidance on nominee substitution.

Sec. 544.5(b)(16)..................... Revised for clarification.

Sec. 544.5(b)(17)..................... Removed.

Sec. 544.5(c)......................... Eliminated need for management certification.

Sec. 544.5(c)(1)...................... Eliminated need for prior notice requirement.

Sec. 544.5(d)......................... Reduced filing requirement.

Sec. 544.8............................ Removed.

Sec. 544.9............................ Removed.

Part 544 Appendix...................... Conformed to proposed changes and moved to Handbook.

Sec. 545.131.......................... Moved to Part 544.

Sec. 552.1............................ Removed.

Sec. 552.2............................ Removed.

Sec. 552.2-5.......................... Removed.

Sec. 552.3............................ Amended and moved to Handbook.

[[Page 32721]]

Sec. 552.3 Section 8.................. Removed need for preliminary approval.

Sec. 552.4(a)(2)...................... Eliminated need for management certification.

Sec. 552.4(b)......................... Eliminated need for prior notice requirement.

Sec. 552.4(b)(3)...................... Removed.

Sec. 552.4(b) (4) through (6)......... Redesignated (b) (3) to (5).

New Sec. 552.4(b)(6).................. Add new preapproved amendment.

Sec. 552.4(c)......................... Amended for clarification.

Sec. 552.5(b)......................... Eliminated need for management certification.

Sec. 552.5(b)(1)(ii).................. Eliminated need for prior notice requirement.

Sec. 552.5(c)......................... Reduced filing requirement.

Sec. 552.6(a)......................... Amended for flexibility; changed annual meeting date.

Sec. 552.6(b)......................... Amended shareholder meeting requirements.

Sec. 552.6(d)......................... Amended to add guidance on voting lists.

Sec. 552.6(e)......................... Amended to add guidance on certain voting requirements.

Sec. 552.6(f)(1)...................... Amended for flexibility.

New Sec. 552.6(f)(4).................. Added section on shares held by others.

New Sec. 552.6(h)..................... Added section on informal action.

Sec. 552.6-1(a)....................... Amended for flexibility.

Sec. 552.6-1(b)....................... Removed necessity for staggered board of directors if wholly owned. Also amended to specify number of

directors.

Sec. 552.6-1(f)....................... Amended to clarify where ``cause'' is defined.

Sec. 552.6-1(k)....................... Amended to add guidance.

Sec. 552.6-2(a)....................... Amended to remove provision requiring president to be a director.

Sec. 552.8............................ Removed.

Part 552 Appendix...................... Conformed to proposed changes and moved to Handbook.

Sec. 556.1............................ Removed.

Sec. 556.17........................... Moved to Handbook.

Sec. 563.74(d)........................ Amended to conform to earlier change.

Sec. 575.9............................ Amended and moved to Handbook.

Sec. 575.9 Section 8.................. Removed need for preliminary approval.

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

VI. Request for Comment

OTS invites comment on all aspects of the proposal. Specific areas

that OTS requests for comments are as follows:

--Whether to move the charters and model bylaws from the regulations to

OTS's Handbook.

--Whether OTS should exempt associations that are wholly-owned from the

requirement that the board of directors be elected in staggered

elections; also whether a staggered board of directors should be

required if the association is not wholly owned.

--Whether OTS should adopt a practice similar to the OCC of permitting

institutions to elect to adopt, en bloc, the corporate governance

procedures authorized by any of the following: the laws of the state

where the main office of the bank is located, the laws of the state

where the bank's holding company, if any, is located, Delaware General

Corporation Law, or The Model Business Corporation Act. As indicated

above, any such election would likely be subject to certain exclusions,

as is the case for national banks, for Federal laws considered vital to

safety and soundness or other important policy objectives. Commenters

supporting the election option are asked to specify how the option

would benefit savings associations.

VII. Executive Order 12866

The Director of OTS has determined that this proposed rule does not

constitute a ``significant regulatory action'' for the purposes of

Executive Order 12866.

VIII. Regulatory Flexibility Act Analysis

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

IX. Unfunded Mandates Act of 1995

Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.

104-4 (Unfunded Mandates Act), requires that an agency prepare a

budgetary impact statement before promulgating a rule that includes a

federal mandate that may result in expenditure by state, local, and

tribal governments, in the aggregate, or by the private sector, of $100

million or more in any one year. If a budgetary impact statement is

required, Section 205 of the Unfunded Mandates Act also requires an

agency to identify and consider a reasonable number of regulatory

alternatives before promulgating a rule. As discussed in the preamble,

this proposed rule reduces regulatory burden and updates, reorganizes

and substantially streamlines corporate governance regulations and

policy statements. OTS has determined that the proposed rule will not

result in expenditures by state, local, or tribal governments or by the

private sector of $100 million or more. Accordingly, this rulemaking is

not subject to section 202 of the Unfunded Mandates Act.

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.

X. Paperwork Reduction Act

This proposed regulation changes the timing of the submission of a

notice to OTS when an institution proposes to amend its charter or

bylaws with OTS preapproved amendments. Currently, this notice is

required before the institution adopts the amendment. Under the

proposal, the institution will file the notice after adopting the

preapproved amendment. The reporting burden for this notice remains

unchanged.

Comments are invited on (i) whether the existing approved

collections of

[[Page 32722]]

information (OMB Control Nos. 1550-0017 and 1550-0018) are necessary

for the proper performance of the functions of the agency, including

whether the information shall have practical utility, (ii) the accuracy

of the estimate of the burden of the collection of information, (iii)

ways to enhance the quality of the information collected, (iv) ways to

minimize the burden of the collection of information on respondents,

including the use of automated collection techniques or other forms of

information technology.

List of Subjects

12 CFR Parts 543 and 544

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 563

Accounting, Advertising, Crime, Currency, Flood insurance,

Investments, Mortgages, Reporting and recordkeeping requirements,

Savings associations, Securities, Surety bonds.

12 CFR Part 575

Administrative practice and procedure, Capital, Holding companies,

Reporting and recordkeeping requirements, Savings associations,

Securities.

Accordingly, the Office of Thrift Supervision proposes to amend

chapter V, title 12, Code of Federal Regulations, as set forth below.

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. 543.1 [Amended]

2. Section 543.1 is amended in paragraph (b) by removing the phrase

``, only pursuant to a charter change under Sec. 544.3 or Sec. 552.4 of

this chapter''.

Sec. 543.14 [Amended]

3. Section 543.14 is amended by removing the phrase ``or under

Sec. 544.3 of this chapter''.

PART 544--CHARTER AND BYLAWS

4. The authority citation for part 544 continues to read as

follows:

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

seq.

ALTERNATIVE ONE

5. Section 544.1 is revised to read as follows:

Sec. 544.1 Federal mutual charter.

The Federal mutual charter may be found in the Application

Processing Regulatory Handbook, available from any Regional Office of

OTS. (See Sec. 516.1(b) of this chapter.) Each Federal mutual

association's charter, including any amendments thereto, constitutes

conditions imposed in writing by the agency in connection with the

granting of an application and a written agreement entered into with

the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

5a. Section 544.1 is amended by:

a. Revising the introductory text preceding the Federal Mutual

Charter;

b. Removing in section 1 of the Federal Mutual Charter the phrase

``hereby chartered'';

c. Transferring the third and fourth sentences of section 6 of the

charter, appearing in brackets, to the end of the introductory text of

Sec. 544.1 and by removing the brackets;

d. Removing the last three sentences of section 6 of the charter;

e. Removing the third, fourth, and fifth sentences of the first

paragraph, and all of the second paragraph of section 7 of the charter;

f. Removing the word ``[Trustees]'' in the heading and the words

``[trustee]'' and ``[trustees]'' where they appear in the text of

section 7 of the charter; and

g. Revising section 9 of the charter.

The revisions read as follows:

Sec. 544.1 Federal mutual charter.

A Federal mutual savings association shall have a charter in the

following form, which may include any of the additional provisions set

forth in Sec. 544.2, if such provisions are specifically requested. A

charter for a Federal mutual savings bank shall substitute the term

``savings bank'' for ``association.'' The term ``trustees'' may be

substituted for the term ``directors.''

* * * * *

Section 9. Amendment of charter. Adoption of any preapproved

charter amendment shall be effective after such preapproved

amendment has been approved by the members at a legal meeting. Any

other amendment, addition, change, or repeal of this charter must be

approved by the Office prior to approval by the members at a legal

meeting. Any amendment, addition, alteration, change, or repeal so

acted upon and approved shall be effective upon filing with the

Office in accordance with regulatory procedures.

Attest:----------------------------------------------------------------

Secretary of the Association

By:--------------------------------------------------------------------

President or Chief Executive Officer of the Association

Attest:----------------------------------------------------------------

Secretary of the Office of Thrift Supervision

By:--------------------------------------------------------------------

Director of the Office of Thrift Supervision

Effective Date:--------------------------------------------------------

6. Section 544.2 is amended by:

a. Removing in paragraphs (a)(2)(i) and (a)(2)(ii), the phrase

``along with a certification that the proposed'' and by adding in lieu

thereof the phrase, ``provided such'';

b. Removing the phrase ``filing with the OTS'' in the third

sentence of paragraph (b), and by adding in lieu thereof the phrase

``adoption, if adopted without change and filed with OTS, within 30

days after adoption'';

c. Revising paragraph (b)(4); and

d. Removing the word ``shall'' in the second sentence of paragraph

(c), and by adding in lieu thereof the phrase ``should be filed in

accordance with Sec. 516.1(c) of this chapter and'' and by removing the

last sentence of paragraph (c).

The revisions read as follows:

Sec. 544.2 Charter amendments.

* * * * *

(b) * * *

(4) Maximum number of votes. A Federal mutual savings association

may amend its charter by substituting (__________) votes per member in

section 6. [Fill in a number from 50 to 1000.]

* * * * *

Sec. 544.3 [Removed]

7. Section 544.3 is removed.

8. Section 544.5 is amended by:

a. Adding, between the words ``majority'' and ``of'' in the second

sentence of paragraph (a), the phrase ``of the votes cast by the

members at a legal meeting or a majority'', and by adding two new

sentences at the end of paragraph (a);

b. Removing the words ``[trustee]'' and ``[trustees]'' wherever

they appear in paragraph (b);

c. Revising the second sentence of paragraph (b)(1);

d. Adding a sentence at the end of paragraph (b)(2);

[[Page 32723]]

e. Adding a sentence at the end of paragraph (b)(3);

f. Adding a sentence at the end of paragraph (b)(4);

g. Redesignating paragraphs (b)(5) through (b)(17) as paragraphs

(b)(6) through (b)(18), respectively;

h. Adding a new paragraph (b)(5);

i. Adding to newly designated paragraph (b)(6), a sentence between

the first and second sentences, and three new sentences at the end;

j. Revising newly designated paragraph (b)(7);

k. Revising newly designated paragraph (b)(8);

l. Adding after the word ``treasurer'' in newly designated

paragraph (b)(10)(i), the words ``or comptroller'';

m. Adding a sentence at the end of newly designated paragraph

(b)(10)(ii);

n. Revising newly designated paragraph (b)(11);

o. Adding, between the words ``secretary'' and ``and'' in the

second sentence of newly designated paragraph (b)(14), the phrase ``,

except in the case of a nominee substituted as a result of death or

other incapacity,'';

p. Removing, in the first sentence of newly designated paragraph

(b)(17), the phrase ``pursuant to Sec. 544.5 of the Office's

regulations, as long as any such amendment'', and by adding in lieu

thereof the word ``that'', and by adding a sentence at the end of

paragraph (b)(17);

q. Removing, in newly designated paragraph (b)(18), the phrase

``emergency preparedness,'';

r. Removing in paragraph (c)(1) introductory text, the phrase

``along with a certification that the proposed'', and by adding in lieu

thereof the phrase ``, provided such'';

s. Removing, in the concluding text of paragraph (c)(1), the phrase

``shall be deemed to comply with the requirements of this section'',

and by adding in lieu thereof the phrase ``, if adopted without change,

and filed within 30 days after adoption, are effective upon adoption'';

t. Amending the heading of paragraph (c)(2) by removing the word

``Notice'', and by adding in lieu thereof the word ``Filing'', and by

removing, in paragraph (c)(2), the phrase ``together with a

certification'', and by adding in lieu thereof the word ``provided'';

and

u. Removing, in the second sentence of paragraph (d), the phrase

``raises a significant issue of law or policy'', and by adding in lieu

thereof the phrase ``requires an application to be filed pursuant to

paragraph (c)(1) of this section'',.

The additions and revisions read as follows:

Sec. 544.5 Federal mutual savings association bylaws.

(a) * * * The bylaws for a Federal mutual savings bank may

substitute the term ``savings bank'' for ``association.'' The term

``trustees'' may be substituted for the term ``directors.''

(b) * * *

(1) * * * Such meeting shall be held, as designated by its board of

directors, at a location within the state that constitutes the

principal place of business of the association, or at any other

convenient place the board of directors may designate, and at a date

and time within 150 days after the end of the association's fiscal

year. * * *

(2) * * * For purposes of this section, ``voting capital'' means

FDIC-insured deposits.

(3) * * * When any meeting is adjourned for 30 days or more, notice

of the adjournment and reconvening of the meeting shall be given as in

the case of the original meeting.

(4) * * * The same determination shall apply to any adjourned

meeting.

(5) Member quorum. Any number of members present and voting,

represented in person or by proxy, at a regular or special meeting of

the members shall constitute a quorum. A majority of all votes cast at

any meeting of the members shall determine any question. At any

adjourned meeting any business may be transacted which might have been

transacted at the meeting as originally called. Members present at a

duly constituted meeting may continue to transact business until

adjournment.

(6) * * * Proxies may be given telephonically or electronically as

long as the holder uses a procedure for verifying the identity of the

member. * * * Accounts held by an administrator, executor, guardian,

conservator or receiver may be voted in person or by proxy by such

person. Accounts held by a trustee may be voted by such trustee either

in person or by proxy, in accordance with the terms of the trust

agreement, but no trustee shall be entitled to vote accounts without a

transfer of such accounts into the trustee name. Joint accounts shall

be entitled to no more than 1,000 votes, split as the joint owners may

agree, in writing.

(7) Communications between members. Provisions relating to

communications between members shall be consistent with Sec. 544.8 of

the Office's regulations. No member, however, shall have the right to

inspect or copy any portion of any books or records of a Federal mutual

savings association containing:

(i) A list of depositors in or borrowers from such association;

(ii) Their addresses;

(iii) Individual deposit or loan balances or records; or

(iv) Any data from which such information could be reasonably

constructed.

(8) Number of directors, membership. The bylaws shall set forth a

specific number of directors, not a range. The number of directors

shall be not fewer than five nor more than fifteen, unless a higher or

lower number has been authorized by the Director of the Office or his

or her designee. Each director of the association shall be a member of

the association. Directors shall be elected for periods of three years

and until their successors are elected and qualified, but provision

shall be made for the election of approximately one-third of the board

each year. [State-chartered savings banks converting to Federal savings

banks may include alternative provisions for the election and term of

office of directors so long as such provisions are authorized by the

Office, and provide for compliance with the standard provisions of this

section no later than six years after the conversion to a Federal

savings association.]

* * * * *

(10) * * *

(ii) * * * Any officer may be removed by the board of directors

with or without cause, but such removal, other than for cause, shall be

without prejudice to the contractual rights, if any, of the person so

removed.

* * * * *

(11) Vacancies, resignation or removal of directors. Members of the

association shall elect directors by ballot: Provided, that in the

event of a vacancy on the board, the board of directors may, by their

affirmative vote, fill such vacancy, even if the remaining directors

constitute less than a quorum. A director elected to fill a vacancy

shall be elected to serve only until the next election of directors by

the members. The bylaws shall set out the procedure for the resignation

of a director, which shall be by written notice or by any other

procedure established in the bylaws. Directors may be removed only for

cause as defined in Sec. 563.39 of this chapter, by a vote of the

holders of a majority of the shares then entitled to vote at an

election of directors.

* * * * *

(17) * * * When an association fails to meet its quorum

requirement, solely due to vacancies on the board, the bylaws may be

amended by an affirmative vote of a majority of the sitting board.

* * * * *

[[Page 32724]]

Secs. 544.8 and 544.9 [Removed]

9. Sections 544.8 and 544.9 are removed.

ALTERNATIVE ONE

10. The Appendix to Part 544 is revised to read as follows:

Appendix to Part 544--Model Bylaws for Mutual Savings Associations

The Federal mutual bylaws may be found in the Application

Processing Regulatory Handbook, available from any Regional Office

of OTS (see Sec. 516.1(b) of this chapter). Each Federal mutual

association's bylaws, including any amendments thereto, constitutes

conditions imposed in writing by the agency in connection with the

granting of an application and a written agreement entered into with

the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

10a. The Appendix to Part 544 is amended by:

a. Removing section 18;

b. Removing the words ``[trustee]'', ``[trustees]'', and

``[Trustees]'' wherever they appear in the appendix;

c. Adding introductory text between the heading of the appendix and

Section 1;

d. Amending the first sentence of Section 1 by removing the phrase

``at (insert date and time within 120 days'', and by adding in lieu

thereof the phrase ``or at any other convenient place the board of

directors may designate, at (insert date and time within 150 days'';

e. Amending Section 2 by adding a sentence between the second and

third sentences and by revising the last sentence;

f. Amending Section 3 by removing paragraph (b) and the paragraph

designation (a), by removing the word ``annual'' wherever it appears in

Section 3, and by adding a sentence at the end of Section 3;

g. Adding a sentence at the end of Section 4;

h. Redesignating Sections 5 through 17 as Sections 6 through 18,

respectively, and adding a new Section 5;

i. Adding to newly designated Section 6, a sentence between the

first and second sentences, and three new sentences at the end;

j. Adding new text at the end of newly designated Section 7;

k. Revising newly designated Section 8;

l. Amending newly designated Section 10 by adding the phrase ``or

comptroller'' in the first sentence of the first paragraph, between the

word ``treasurer'' and the colon and at the end of the sentence, and by

adding a sentence at the end of the first paragraph;

m. Amending newly designated Section 11 by revising the heading,

adding two sentences at the beginning of the first paragraph following

the heading, and adding the phrase ``as defined in the regulations in

Sec. 563.39 of this chapter'' after the word ``cause'' in the second

paragraph;

n. Amending newly designated Section 14 by adding the phrase ``,

except in the case of a nominee substituted as a result of death or

other incapacity'' at the end of the second and third sentences;

o. Amending newly designated Section 17 by adding a new sentence at

the end of the section; and

p. Amending newly designated Section 18 by adding one sentence of

introductory text preceding paragraph (a), and by removing the phrase

``of at least ____________________ (must be in accordance with ERISA)''

in paragraph (b).

The additions and revisions read as follows:

Appendix to Part 544--Model Bylaws for Mutual Savings Associations

The bylaws for a Federal mutual savings bank may substitute the

term ``savings bank'' for ``association.'' The term ``trustees'' may

be substituted for the term ``directors.''

* * * * *

2. * * * For purposes of this section, ``capital'' means FDIC-

insured deposits. Annual and special meetings shall be conducted in

accordance with the most current edition of Robert's Rules of Order

or any other set of procedures agreed to by the board of directors.

3. * * * When any meeting is adjourned for 30 days or more,

notice of the adjournment shall be given as in the case of the

original meeting.

4. * * * The same determination shall apply to any adjourned

meeting.

5. Member quorum. Any number of members present and voting,

represented in person or by proxy, at a regular or special meeting

of the members shall constitute a quorum. A majority of all votes

cast at any meeting of the members shall determine any question. At

any adjourned meeting any business may be transacted which might

have been transacted at the meeting as originally called. Members

present at a duly constituted meeting may continue to transact

business until adjournment.

6. * * * Proxies may be given telephonically or electronically

as long as the holder uses a procedure for verifying the identity of

the member. * * * Accounts held by an administrator, executor,

guardian, conservator or receiver may be voted in person or by proxy

by such person. Accounts held by a trustee may be voted by such

trustee either in person or by proxy, in accordance with the terms

of the trust agreement, but no trustee shall be entitled to vote

accounts without a transfer of such accounts into the trustee name.

Joint accounts shall be entitled to no more than 1,000 votes, split

as the joint owners may agree, in writing.

7. * * * No member, however, shall have the right to inspect or

copy any portion of any books or records of a Federal mutual savings

association containing:

(i) A list of depositors in or borrowers from such association;

(ii) Their addresses;

(iii) Individual deposit or loan balances or records; or

(iv) Any data from which such information could be reasonably

constructed.

8. Number of directors, membership. The number of directors

shall be ________ [not fewer than five nor more than fifteen],

except where authorized by the Director of the Office or his or her

designee. Each director of the association shall be a member of the

association. Directors shall be elected for periods of three years

and until their successors are elected and qualified, but provision

shall be made for the election of approximately one-third of the

board each year. [State-chartered savings banks converting to

Federal savings banks may include alternative provisions for the

election and term of office of directors so long as such provisions

are authorized by the Office, and provide for compliance with the

standard provisions of this section no later than six years after

the conversion to a Federal savings association.]

* * * * *

10. * * * Any officer may be removed by the board of directors

with or without cause, but such removal, other than for cause, shall

be without prejudice to the contractual rights, if any, of the

person so removed.

* * * * *

11. Vacancies, resignation, or removal of directors. Members of

the association shall elect directors by ballot: Provided, that in

the event of a vacancy on the board, the board of directors may, by

their affirmative vote, fill such vacancy, even if the remaining

directors constitute less than a quorum. A director elected to fill

a vacancy shall be elected to serve only until the next election of

directors by the members. * * *

* * * * *

17. * * * When an association fails to meet its quorum

requirement, solely due to vacancies on the board, the bylaws may be

amended by an affirmative vote of a majority of the sitting board.

18. Age limitations. [Bylaws on age limitations must comply with

all Federal laws, such as the Age Discrimination in Employment Act

and the Employee Retirement Income Security Act.] (a) * * *

* * * * *

PART 545--OPERATIONS

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

follows:

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

Sec. 545.131 [Redesignated as Sec. 544.8]

12. Section 545.131 is redesignated as Sec. 544.8.

[[Page 32725]]

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

STOCK ASSOCIATIONS

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

follows:

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

Secs. 552.1 and 552.2 [Removed]

14. Sections 552.1 and 552.2 are removed.

Sec. 552.2-5 [Removed]

15. Section 552.2-5 is removed.

ALTERNATIVE ONE

16. Section 552.3 is revised to read as follows:

Sec. 552.3 Charters for Federal stock associations.

The Federal stock charter may be found in the Application

Processing Regulatory Handbook, available from any Regional Office of

OTS. (see Sec. 516.1(b) of this chapter.) Each Federal stock

association's charter, including any amendments thereto, constitutes

conditions imposed in writing by the agency in connection with the

granting of an application and a written agreement entered into with

the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

16a. Section 552.3 is amended in the Federal Stock Charter by:

a. Removing, in Section 2, the word ``in'', and by adding in lieu

thereof the word ``at'';

b. Amending Section 5 by adding between the words ``or'' and

``stated'' appearing in brackets in the first sentence, the phrase ``if

no par is specified then shares shall have a'', by revising the last

sentence in the first paragraph;

c. Amending Section 5 by removing in the first sentence of the

second paragraph the phrases ``issuable in'' and ``common stock'', and

by adding in lieu thereof the phrases ``issued in the initial

organization of the association or'' and ``capital stock'',

respectively;

d. Amending Section 5 by adding the phrase ``, unless the charter

otherwise provides that there shall be no such cumulative voting'' at

the end of the second sentence in the third paragraph;

e. Amending Section 7 by adding the phrase ``, or his or her

delegate'' at the end of the last sentence; and

f. Revising Section 8.

The revisions read as follows:

Sec. 552.3 Charters for Federal stock associations.

* * * * *

Federal Stock Charter

* * * * *

Section 5. * * * In the case of a stock dividend, that part of

the retained earnings of the association that is transferred to

common stock or paid-in capital accounts upon the issuance of shares

as a stock dividend shall be deemed to be the consideration for

their issuance.

* * * * *

Section 8. Amendment of charter. Except as provided in Section

5, no amendment, addition, alteration, change or repeal of this

charter shall be made, unless such is first proposed by the board of

directors of the association, then approved by the Office, provided

that preapproved charter amendments shall be effective after such

preapproved amendment has been approved by the board of directors

and by the shareholders at a legal meeting. Amendments shall be

approved by the shareholders by a majority of the votes eligible to

be cast at a legal meeting, unless a higher vote is otherwise

required. Any amendment, addition, alteration, change, or repeal so

acted upon shall be effective upon filing with the Office in

accordance with regulatory procedures.

Attest:----------------------------------------------------------------

Secretary of the Association

By:--------------------------------------------------------------------

President or Chief Executive Officer of the Association

Attest:----------------------------------------------------------------

Secretary of the Office of Thrift Supervision

By:--------------------------------------------------------------------

Director of the Office of Thrift Supervision

Effective Date:--------------------------------------------------------

17. Section 552.4 is amended by:

a. Removing at the end of paragraph (a)(1) the semicolon and the

word ``and'', and by adding in lieu thereof a period;

b. Removing in paragraph (a)(2)(i) the phrase ``with a

certification that the proposed'' and in paragraph (a)(2)(ii) the

phrase ``, together with a certification that the'', and by adding in

both places the phrase ``, provided such'';

c. Removing the phrase ``filing with the OTS'' in the second

sentence of paragraph (b) introductory text, and by adding in lieu

thereof the phrase ``adoption, if adopted without change and filed with

OTS, within 30 days after adoption'';

d. Adding headings to paragraphs (b)(1) and (b)(2);

e. Removing paragraph (b)(3);

f. Redesignating paragraph (b)(4) as paragraph (b)(3) and revising

it;

g. Redesignating paragraph (b)(5) as paragraph (b)(4) and adding a

paragraph heading, and revising the introductory text;

h. Amending newly redesignated paragraph (b)(4) in Section 5 by

adding between the words ``or'' and ``stated'' appearing in brackets in

the first sentence, the phrase ``if no par value is specified the'',

and by revising the last sentence in the first paragraph;

i. Amending paragraph (b)(4) in Section 5 by removing in the first

sentence of the second paragraph the phrase ``issuable in'' and by

adding in lieu thereof the phrase ``issued in the initial organization

of the association or'';

j. Amending paragraph (b)(4) in Section 5 by adding the phrase ``,

unless the charter otherwise provides that there shall be no such

cumulative voting'' in the introductory text of the third paragraph

between the words ``directors:'' and ``Provided'';

k. Amending paragraph (b)(4) in paragraph (ii) of the third

paragraph of Section 5 by removing the phrase ``, the Federal Deposit

Insurance Corporation, or the Resolution Trust Corporation'', and by

adding in lieu thereof the phrase ``or the Federal Deposit Insurance

Corporation'';

l. Amending paragraph (b)(4) in paragraph A. of the fourth

paragraph by adding the phrase ``, unless the charter otherwise

provides that there shall be no such cumulative voting'' at the end of

the second sentence;

m. Redesignating paragraph (b)(6) as paragraph (b)(5), adding a

heading, and removing the phrase ``Amend the charter of a Federal stock

association'', and by adding in lieu thereof the phrase ``A Federal

stock association may amend its charter'';

n. Adding a new paragraph (b)(6);

o. Adding a heading to paragraph (b)(8); and

p. Amending paragraph (c) by removing the word ``preliminary''

wherever it appears, and by adding a second sentence.

The additions and revisions read as follows:

Sec. 552.4 Charter amendments.

* * * * *

(b) * * *

(1) Title change. * * *

(2) Home office. * * *

(3) Number of shares of stock and par value. A Federal stock

association may amend Section 5 of its charter to change the number of

authorized shares of stock, the number of shares within each class of

stock, and the par or stated value of such shares.

(4) Capital stock. A Federal stock association may amend its

charter by revising Section 5 to read as follows:

Section 5. * * * In the case of a stock dividend, that part of

the retained earnings of the association that is transferred to

common stock or paid-in capital accounts upon the issuance of shares

as a stock dividend shall be deemed to be the consideration for

their issuance.

* * * * *

[[Page 32726]]

(5) Limitations on subsequent issuances. * * *

(6) Cumulative voting. A Federal stock association may amend its

charter by substituting the following sentence for the second sentence

in the third paragraph of Section 5: ``Each holder of shares of common

stock shall be entitled to one vote for each share held by such holder

and there shall be no right to cumulate votes in an election of

directors.''

* * * * *

(8) Antitakeover provisions following conversion. * * *

(c) * * * Any such provision must be consistent with applicable

statutes, regulations, and OTS policies; and Provided Further, that any

such provision having the effect of rendering more difficult a change

in control of the association which requires for any corporate action

(other than the removal of directors) the affirmative vote of a larger

percentage of shareholders than is required by this part, shall not be

effective unless adopted by a percentage of shareholder vote at least

equal to the highest percentage that would be required to take any

action under such provision.

* * * * *

18. Section 552.5 is amended by:

a. Revising the second sentence of paragraph (a);

b. Removing, in paragraphs (b)(1) introductory text and (b)(2), the

phrase ``together with a certification'', and by adding in lieu thereof

the word ``provided'';

c. Removing, in the concluding text of paragraph (b)(1), the phrase

``shall be deemed to comply with the requirements of this section'',

and by adding in lieu thereof the phrase'', if adopted without change,

and filed within 30 days after adoption, are effective upon adoption'';

d. Amending the heading of paragraph (b)(2) by removing the word

``Notice'', and by adding in lieu thereof the word ``Filing''; and

e. Adding paragraph (d).

The additions and revisions read as follows:

Sec. 552.5 Bylaws.

(a) * * * Bylaws may be adopted, amended or repealed by either a

majority of the votes cast by the shareholders at a legal meeting or a

majority of the board of directors. * * *

* * * * *

(d) Effect of subsequent charter or bylaw change. Notwithstanding

any subsequent change to its charter or bylaws, the authority of a

Federal stock association to engage in any transaction shall be

determined only by the association's charter or bylaws then in effect,

unless otherwise provided by Federal law or regulation.

19. Section 552.6 is amended by:

a. Removing in paragraph (a) the number ``120'', and by adding in

lieu thereof the number ``150'', and by adding the phrase ``, or at any

other convenient place the board of directors may designate'' at the

end of the paragraph;

b. Adding a sentence at the end of paragraph (b);

c. Revising paragraph (d)(1);

d. Adding a sentence at the end of paragraph (e);

e. Adding two sentences after the first sentence in paragraph

(f)(1);

f. Adding paragraph (f)(4); and

g. Adding paragraph (h).

The additions and revisions read as follows:

Sec. 552.6 Shareholders.

* * * * *

(b) * * * Notwithstanding anything in this section, however, a

Federal stock association that is wholly owned shall not be subject to

the stockholder notice requirement.

* * * * *

(d) Voting lists. (1) At least 20 days before each meeting of the

shareholders, the officer or agent having charge of the stock transfer

books for the shares of the association shall make a complete list of

the stockholders of record entitled to vote at such meeting, or any

adjournments thereof, including the names of beneficial owners

furnished to the association pursuant to the rules of the Securities

Exchange Commission, arranged in alphabetical order, with the address

and the number of shares held by each. This list of shareholders shall

be kept on file at the home office of the association and shall be

subject to inspection by any stockholder of record or the stockholder's

agent during the entire time of the meeting. The original stock

transfer book shall constitute prima facie evidence of the shareholders

entitled to examine such list or transfer books or to vote at any

meeting of shareholders. Notwithstanding anything in this section,

however, a Federal stock association that is wholly owned shall not be

subject to the voting list requirements.

* * * * *

(e) * * * If a quorum is present, the affirmative vote of the

majority of the shares represented at the meeting and entitled to vote

on the subject matter shall be the act of the stockholders, unless the

vote of a greater number of stockholders voting together or voting by

classes is required by law or the charter.

(f) Shareholder voting (1) * * * Proxies may be given

telephonically or electronically as long as the holder uses a procedure

for verifying the identity of the stockholder. Notwithstanding part 569

of this chapter, a proxy may designate as holder a corporation,

partnership, company as defined in part 574 of this chapter, or other

person. * * *

* * * * *

(4) Shares held by others. Shares held by an administrator,

executor, guardian, conservator or receiver may be voted in person or

by proxy by such person. Stock standing in the name of a trustee may be

voted by such trustee either in person or by proxy, but only in

accordance with the terms of the trust agreement.

* * * * *

(h) Informal action by stockholders. If the bylaws of the

association so provide, any action required to be taken at a meeting of

the stockholders, or any other action that may be taken at a meeting of

the stockholders, may be taken without a meeting if consent in writing

has been given by all the stockholders entitled to vote with respect to

the subject matter.

20. Section 552.6-1 is amended by:

a. Adding a sentence at the end of paragraph (a);

b. Revising paragraph (b);

c. Adding a sentence at the end of paragraph (c);

d. Adding the word ``only'' in paragraph (e) between the words

``serve'' and ``until'' in the second sentence;

e. Revising the heading of paragraph (f), adding the word ``only''

between the words ``removed'' and ``for'' and the words ``as defined in

Sec. 563.39 of this chapter,'' after the word ``cause'' in the first

sentence of paragraph (f)(1), and adding a sentence at the end of

paragraph (f)(1); and

f. Adding a sentence at the end of paragraph (k).

The additions and revisions read as follows:

Sec. 552.6-1 Board of directors.

(a) * * * Directors need not be stockholders unless the bylaws so

require.

(b) Number and term. The bylaws shall set forth a specific number

of directors, not a range. The number of directors shall be not fewer

than five nor more than fifteen, unless a higher or lower number has

been authorized by the Director of the Office or his or her delegate.

The directors shall be divided

[[Page 32727]]

into three classes as nearly equal in number as possible. The members

of each class shall be elected for a term of three years and until

their successors are elected and qualified. One class shall be elected

by ballot annually, except in the case of a converting or newly

chartered association where all directors shall be elected at the first

election of directors for terms which shall be staggered in length from

one to three years. Notwithstanding anything in this section, however,

a Federal stock association that is wholly owned shall not be subject

to the staggered board requirement.

(c) * * * The board of directors shall determine the place,

frequency, time and procedure for notice of such meetings.

* * * * *

(f) Removal or resignation of directors. (1) * * * Associations may

provide for procedures regarding resignations in the bylaws.

* * * * *

(k) * * * [Bylaws on age limitations must comply with all Federal

laws, such as the Age Discrimination in Employment Act and the Employee

Retirement Income Security Act.]

21. Section 552.6-2 is amended by:

a. Adding in paragraph (a) the phrase ``or comptroller'' after the

word ``treasurer'' in the first and fifth sentences, and by removing

the third and fourth sentences; and

b. Adding a sentence at the end of paragraph (c).

The additions read as follows:

Sec. 552.6-2 Officers.

* * * * *

(c) * * * [Bylaws on age limitations must comply with all Federal

laws, such as the Age Discrimination in Employment Act and the Employee

Retirement Income Security Act.]

Sec. 552.8 [Removed]

22. Section 552.8 is removed.

Sec. 552.11 [Amended]

23. Section 552.11 is amended by adding the phrase

``nonconfidential portions of'' in paragraph (b) introductory text

between the words ``times,'' and ``its'' in the first sentence.

ALTERNATIVE ONE

24. The Appendix to part 552 is revised to read as follows:

Appendix to Part 552--Model Bylaws for Stock Associations

The Federal stock bylaws may be found in the Application

Processing Regulatory Handbook, available from any Regional Office

of OTS. (See Sec. 516.1(b) of this chapter.) Each Federal stock

association's bylaws, including any amendments thereto, constitutes

conditions imposed in writing by the agency in connection with the

granting of an application and a written agreement entered into with

the agency within the meaning of 12 U.S.C. 1818(b).

ALTERNATIVE TWO

24a. The Appendix to Part 552 is amended:

a. In Article II, Section 1, by removing the phrase ``place in the

State in which the principal place of business of the association is

located'', and by adding in lieu thereof the phrase ``convenient

place'';

b. In Article II, Section 2, by removing the number ``120''

wherever it appears, and by adding in lieu thereof the number ``150'';

c. In Article II, Section 4, by adding at the end of the first

sentence the phrase ``or the board of directors adopts another

procedure for the conduct of meetings'';

d. In Article II, Section 5, by removing the number ``10'' in the

first sentence, and by adding in lieu thereof the number ``20'';

e. In Article II, Section 7, by removing the word ``shareholders''

in the first sentence and adding the phrase ``stockholders of record''

in lieu thereof, adding at the end of the first sentence the phrase ``,

including the names of beneficial owners furnished pursuant to the

rules of the Securities and Exchange Commission'', removing in the

second and third sentences the words ``any shareholder'' and adding in

lieu thereof the phrase ``any stockholders of record or the

stockholder's agent'', and removing in the fourth sentence the phrase

``shareholders entitled'' and adding in lieu thereof the phrase

``stockholders of record entitled'';

f. In Article II, Section 8, by adding a sentence at the end;

g. In Article II, Section 9, by adding a sentence after the first

sentence;

h. In Article III, Section 3, by adding two sentences at the end;

i. In Article III, Section 11, by adding in the second sentence,

the word ``only'' between the words ``serve'' and ``until'';

j. In Article III, Section 14, by adding in the first sentence, the

word ``only'' between the words ``removed'' and ``for'' and the words

``as defined in the regulations in Sec. 563.39 of this chapter'' after

the word ``cause'';

k. In Article V, Section 1, by adding, in first, and fifth

sentences, the phrase ``or comptroller'' after the word ``treasurer''

each place it appears, and removing the third and fourth sentences; and

l. In Article XI, by adding a sentence at the end.

The additions read as follows:

Appendix to Part 552--Model Bylaws for Stock Associations

* * * * *

Article II--Shareholders

* * * * *

Section 8. Quorum. * * * If a quorum is present, the affirmative

vote of the majority of the shares represented at the meeting and

entitled to vote on the subject matter shall be the act of the

stockholders, unless the vote of a greater number of stockholders

voting together or voting by classes is required by law or the

charter.

Section 9. Proxies. * * * Proxies may be given telephonically or

electronically as long as the holder uses a procedure for verifying

the identity of the stockholder. * * *

* * * * *

Article III--Board of Directors

* * * * *

Section 3. Regular Meetings. * * * Directors may participate in

a meeting by means of a conference telephone or similar

communications device through which all persons participating can

hear each other at the same time. Participation by such means shall

constitute presence in person for all purposes.

* * * * *

Article XI--Amendments

* * * When an association fails to meet its quorum requirement,

solely due to vacancies on the board, then the affirmative vote of a

majority of the sitting board will be required to amend the bylaws.

PART 556--STATEMENTS OF POLICY

25. 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. 556.1, 556.17 [Removed]

26. Sections 556.1 and 556.17 are removed.

PART 563--OPERATIONS

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

follows:

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

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

28. Section 563.74 is amended by revising paragraph (d) to read as

follows:

Sec. 563.74 Mutual capital certificates.

* * * * *

(d) Charter amendment. No application for approval of the issuance

of mutual capital certificates pursuant to this section may be filed

unless the mutual association amends its charter to authorize issuance,

or as may otherwise be required by applicable law.

* * * * *

[[Page 32728]]

PART 575--MUTUAL SAVINGS AND LOAN HOLDING COMPANIES

29. The authority citation for part 575 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.

ALTERNATIVE ONE

30. Section 575.9(a)(1) is revised to read as follows:

Sec. 575.9 Charters and bylaws for mutual holding companies and their

savings association subsidiaries.

(a) * * * (1) Charter. The Federal mutual holding company charter

may be found in the Application Processing Regulatory Handbook,

available from any Regional Office of OTS. (See Sec. 516.1(b) of this

chapter). Each Federal mutual holding company's charter, including any

amendments thereto, constitutes conditions imposed in writing by the

agency in connection with the granting of an application and a written

agreement entered into with the agency within the meaning of 12 U.S.C.

1818(b).

* * * * *

ALTERNATIVE TWO

30a. Section 575.9 is amended by:

a. Removing, in Section 1 of the Charter in paragraph (a)(1), the

phrase ``hereby chartered'';

b. Removing, in Section 5 of the Charter in paragraph (a)(1), the

sixth, seventh, and eighth sentences in the last paragraph;

c. Removing, in Section 6 of the Charter in paragraph (a)(1), the

word ``OTS'' in the second sentence, and by adding in lieu thereof the

phrase ``the Director of the Office or his or her delegate'', and by

removing the third, fourth and fifth sentences;

d. Revising Section 8 of the Charter in paragraph (a)(1);

e. Removing in paragraph (a)(2) the phrase ``references to

`association' in the text of the mutual capital certificate charter

provision in Sec. 544.2(b)(4) shall be replaced with references to the

`Mutual Company','' and

f. Removing the number ``545.131'' in paragraph (a)(5), and by

adding in lieu thereof the number ``544.8''.

The revisions read as follows:

Sec. 575.9 Charters and bylaws for mutual holding companies and their

savings association subsidiaries.

(a) Charters and bylaws for mutual holding companies--(1) Charters.

* * *

CHARTER

* * * * *

Section 8. Amendment. Adoption of any preapproved charter

amendment shall be effective after such preapproved amendment has

been approved by the members at a legal meeting. Any other

amendment, addition, change, or repeal of this charter must be

approved by the Office prior to approval by the members at a legal

meeting. Any amendment, addition, alteration, change, or repeal so

acted upon and approved shall be effective upon filing with the

Office in accordance with regulatory procedures.

Attest:----------------------------------------------------------------

Secretary of the Association

By:--------------------------------------------------------------------

President or Chief Executive Officer of the Association

Attest:----------------------------------------------------------------

Secretary of the Office of Thrift Supervision

By:--------------------------------------------------------------------

Director of the Office of Thrift Supervision

Effective Date:--------------------------------------------------------

* * * * *

Dated: May 31, 1996.

By the Office of Thrift Supervision.

Jonathan L. Fiechter,

Acting Director.

[FR Doc. 96-14441 Filed 6-24-96; 8:45 am]

BILLING CODE 6720-01-P