Amendments Implementing Economic Growth and Regulatory Paperwork Reduction Act

DEPARTMENT OF THE TREASURY

12 CFR Parts 560, 563, 574, 575, 583, 584

[No. 96-113]

RIN 1550-AB05

Amendments Implementing Economic Growth and Regulatory Paperwork

Reduction Act

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Interim final rule.

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

this interim final rule to implement provisions of the Economic Growth

and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). Among other

actions, EGRPRA expanded and clarified federal thrifts' lending and

investment authority, amended the Qualified Thrift Lender (QTL) test,

authorized OTS to grant antitying exceptions to savings associations

that conform to those granted to banks by the Board of Governors of the

Federal Reserve System (FRB), and modified OTS's oversight authority

over bank holding companies that own savings associations. Today's

interim final rule implements these statutory changes. OTS is making

today's rule effective immediately to enable thrifts to take advantage

of the expanded flexibility and burden reduction afforded by EGRPRA.

However, OTS will be accepting comment on any issues raised by these

newly implemented regulations for the next sixty days.

DATES: This interim rule is effective on November 27, 1996. Comments

must be received by January 27, 1997.

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. 96-113. 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 A.M. until 4:00 P.M. on

business days.

FOR FURTHER INFORMATION CONTACT: William J. Magrini, Senior Project

Manager, (202) 906-5744, Supervision Policy; Ellen J. Sazzman, Counsel

(Banking and Finance), (202) 906-7133, or Deborah Dakin, Assistant

Chief Counsel, (202) 906-6445, Regulations and Legislation Division,

Chief Counsel's Office. For information about holding company or

branching issues, contact Kevin A. Corcoran, Assistant Chief Counsel,

(202) 906-6962, Business Transactions Division, Chief Counsel's Office,

Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

Summary of Relevant Statutory Changes

Credit card and education lending: Section 2303(b) of the EGRPRA

1 amended section 5 of the Home Owners'' Loan Act (HOLA),2 to

confirm and clarify that federal savings associations may engage in

credit card lending without a percentage of assets investment

limitation, as OTS has long maintained. Section 2303(b) also amended

HOLA section 5 to permit federal thrifts to make education loans

without investment restriction. Previously, education loans were

limited to 5% of a thrift's total assets.3

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\1\ Pub. L. 104-208, tit. 12, 110 Stat. 3009 (September 30,

1996).

\2\ 12 U.S.C. 1464(c)(1).

\3\ 12 U.S.C. 1464(c)(3)(A). Federal thrifts continue to be

authorized to make other consumer loans in an amount up to 35% of

total assets. Credit card loans and education loans do not count

against this 35% cap. 12 U.S.C. 1464(c)(2)(D).

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Commercial lending: Section 2303(c) of EGRPRA also expanded the

small business and agricultural lending authority of federal thrifts.

Federal thrifts have long been authorized to make loans secured by

business or agricultural real estate in amounts up to 400% of

capital,4 and to make additional secured and unsecured loans to

businesses and farms in amounts up to 10% of total assets. 5

EGRPRA left the 400% non-residential real estate lending cap intact,

but increased the 10% of assets limit to 20% of assets, provided that

amounts in excess of 10% of assets may only be used for ``small

business loans'' as that term is defined by the Director of OTS.

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\4\ 12 U.S.C. 1464(c)(2)(B).

\5\ 12 U.S.C. 1464(c)(2)(A).

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Qualified Thrift Lender test: Section 2303(e) and (g) of EGRPRA

amended the QTL test in section 10(m) of the HOLA 6 to provide

that investments in educational, small business, credit card, and

credit card account loans are includable without limit for purposes of

satisfying the QTL test. Under the QTL test, savings associations must

hold ``qualified thrift investments'' equal to at least 65% of their

``portfolio assets'' as defined by statute.7 Before EGRPRA,

``qualified thrift investments'' (QTI) were defined in a manner that

required every savings association to hold a

[[Page 60180]]

substantial percentage of its assets in mortgage loans and mortgage-

related securities. Section 2303 of EGRPRA expanded the definition of

QTI . Small business loans, credit card loans, and education loans now

count as QTI without restriction.8 Consumer loans (other than

credit cards and education loans) now count as QTI in an amount up to

20% of portfolio assets.9

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\6\ 12 U.S.C. 1467a(m).

\7\ Id., and 12 CFR 563.50-563.52.

\8\ Previously, small business loans counted as QTI only if

originated in areas where the credit needs of low and moderate

income persons were not being met. As discussed above, HOLA section

5 now imposes a 20%-of-assets cap on small business loans. HOLA

section 5 does not limit a federal savings association's credit card

and education loans.

\9\ The previous limit was 10% of portfolio assets and included

credit card and educational loans. When computing the new 20% cap,

consumer loans must still be aggregated with certain other

categories of loans and investments that are also subject to the 20%

cap, e.g., loans for the purchase of community service facilities,

home loans sold into the secondary market, Fannie Mae and Freddie

Mac stock, and so forth. 12 U.S.C. 1467a(m)(4)(C) (iii) and (iv).

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Section 2303(e) of EGRPRA also amended the QTL test to give savings

associations the option of substituting compliance with the tax code

``domestic building and loan association'' (DBLA) test for compliance

with the amended QTL requirements. (The DBLA test appears to be much

more stringent than the amended QTL test.)

As a result of the foregoing statutory reforms, savings

associations will now be able to engage in substantial small business,

agricultural, credit card, educational, and other consumer lending and

remain in QTL compliance. In order to implement these changes, section

2303 of EGRPRA requires the Director of OTS to issue regulations

defining the terms ``credit card'' and ``small business.''

Anti-tying exceptions: Section 2216 of EGRPRA amends HOLA section

5(q) 10 to authorize the OTS Director to issue regulations or

orders permitting exceptions to the antitying prohibitions established

in section 5(q) so long as such exceptions are consistent with the

purposes of section 5(q) and conform to exceptions granted by the FRB

to banks pursuant to section 106(b) of the Bank Holding Company Act

(BHCA) Amendments of 1970.11 HOLA section 5(q) prohibits, inter

alia, a savings association from varying the price charged for a

product or service (the tying product) based on whether the customer

obtains an additional product or service (the tied product) offered by

the association or its service corporation or affiliate unless the

additional product or service is a loan, discount, deposit or trust

service (``traditional bank products'). The BHCA contains a similar

anti-tying provision applicable to banks and authorizes the FRB to

grant exemptions by regulation or order for commercial banks and their

affiliates. The FRB has issued various regulatory exceptions in recent

years. Prior to EGRPRA, the HOLA did not grant similar exemptive

authority to the OTS.

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\10\ 12 U.S.C. 1464(q).

\11\ 12 U.S.C. 1972.

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Bank holding companies: Section 2203 of EGRPRA amends HOLA section

10 12 to eliminate OTS supervision of holding companies that

control both a bank and a savings association and are registered as

bank holding companies with the FRB under the BHCA of 1956.13

Previously bank holding companies that controlled a savings association

were supervised by the FRB under the BHCA and also by the OTS under the

Savings and Loan Holding Company Act. Dual holding companies are no

longer required to file periodic holding company reports with OTS and

are no longer subject to OTS examination. OTS, however, will continue

to regulate the subsidiary savings association, and the FRB must

consult with the OTS on certain specified matters including a bank

holding company's acquisition of a savings association, the scope of

examination of a bank holding company that controls a savings

association, and the coordination of some enforcement actions.

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\12\ 12 U.S.C. 1467a.

\13\ 12 U.S.C. 1841 et seq.

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Branching: Section 2303(f) of EGRPRA amended HOLA section 5(r)(1)

14 to give federal thrifts greater flexibility in branching by

allowing federal associations that are not excepted from the

requirements of section 5(r)(1) pursuant to section 5(r)(2) to meet

either the Internal Revenue Service's (IRS's) domestic building and

loan association (DBLA) test 15 or the amended QTL test in order

to establish, retain, or operate out-of-state branches. Previously,

non-excepted federal savings associations were required to qualify

under the IRS DBLA test or at least meet the asset composition

requirement of that test in order to operate out-of-state branches.

Section 2303(f) also clarifies the scope of the exemption from the

foregoing requirements, set forth at section 5(r)(2)(C), when the law

of the state where the branch is located, or is to be located, would

permit establishment of the branch if the association was either a

savings association or savings bank chartered by the state in which its

home office is located. EGRPRA's branching amendments are self-

implementing and do not require any regulatory revisions.

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\14\ 12 U.S.C. 1464(r).

\15\ 26 U.S.C. 7701(a)(19).

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II. Description of Final Interim Rule

Section 560.3 Definitions of credit card, credit card

account.16

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\16\ OTS's lending and investment regulations contain a table

that provides an overview of HOLA's investment authorities. 61 FR

50951, 50973 (September 30, 1996) (to be codified as 12 CFR 560.30).

OTS plans to supplement the table in its subsidiaries and equity

investment rulemaking, which will be published before the end of the

year. The table also needs to be updated to reflect EGRPRA's

amendments to the investment limits of HOLA. Rather than amending

and restating the table twice in several weeks, OTS will restate the

table once in the subsidiaries rulemaking. At that time, the EGRPRA

amendments will be reflected in the table. The changes being made

today, however, are sufficient to authorize savings associations to

begin using the EGRPRA authorities. Savings associations need not

await restatement of the table in Part 560.

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Section 2303 of EGRPRA requires the OTS Director to issue

regulations defining the term ``credit card'' in order to enable

thrifts to apply the newly modified QTL test which permits credit card

loans to be counted as QTI without restriction pursuant to HOLA section

10(m). Defining ``credit card'' and ``credit card account'' will also

give thrifts guidance in exercising their authority to ``invest in,

sell, or otherwise deal in * * * loans made through credit cards or

credit card accounts'' pursuant to HOLA section 5(c). As noted above,

this provision authorizes federal thrifts to engage in credit card

lending without any percentage of assets investment limitation.17

It is a well settled principle of statutory construction that generally

``each part or section [of a statute] should be construed with every

other part or section so as to produce a harmonious whole.'' 18

Accordingly, it is appropriate for OTS to consistently define ``credit

card'' and ``credit card account'' for both section 5(c) and section

10(m) of the HOLA.

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\17\ EGRPRA, section 2303(b), amending HOLA section 5(c), to be

codified at 5 U.S.C. 1464(c)(1)(T).

\18\ 2A Sutherland Statutory Construction section 46.05 (5th ed.

1992).

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According to Black's Law Dictionary, a ``credit card'' is ``[a]ny

card, plate, or other like credit device existing for the purpose of

obtaining money, property, labor or services on credit.'' 19 The

regulatory definition of credit card established in today's interim

rule is based on this plain language definition. OTS seeks comment on

whether a different definition would be more appropriate.

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\19\ Black's Law Dictionary 367 (6th ed. 1990).

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OTS has already received some questions regarding whether

securities backed by credit card accounts and products such as credit

card debt consolidation loans would fall within

[[Page 60181]]

the confines of ``loans made through credit cards or credit card

accounts.'' As for securities backed by credit cards, the HOLA itself

specifies that ``any reference to a loan [herein] * * * includes an

interest in such a loan. * * * '' 20 Thus, the authorization to

invest in ``loans made through credit cards'' encompasses investments

in loan pools that issue securities backed by credit card loans.21

As for credit card debt consolidation loans, OTS believes that, because

these loans are made for the purpose of funding credit card

receivables, they are in economic substance ``credit card loans.''

Today's definition of ``credit card account'' therefore includes credit

card debt consolidation loans and securities backed by credit-card

accounts and receivables.

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\20\ 12 U.S.C. 1464(c)(6)(B).

\21\ Cf. 12 CFR 560.31(c).

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We note that Sec. 560.30 of OTS's regulations, which implements the

statutory credit card authority, permits federal thrifts to engage in

the full range of credit card operations authorized by HOLA, but

provides that OTS reserves the right to establish investment limits on

a case-by-case basis if an institution's concentration in credit-card-

related loans presents a safety and soundness concern.22

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\22\ 12 CFR 560.30, n. 5, 61 FR 50951, 50973 (September 30,

1996).

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Institutions that expand their credit card lending (or their

consumer, small business, or agricultural lending) pursuant to today's

rule must do so in a safe and sound manner. Institutions planning any

significant increase in these types of loans should prepare thorough

business plans, acquire the necessary personnel and expertise, and

establish adequate systems to identify and control risks associated

with these products. OTS will monitor these lending activities,

utilizing off-site surveillance and the on-site examination process.

Section 560.3 Definitions of Small Business, Small Business Loans

Section 2303(g) of EGRPRA requires the OTS Director to issue

regulations defining the term ``small business'' in order to enable

savings associations to apply the newly modified QTL test which permits

small business loans to be counted as QTI without restriction pursuant

to HOLA section 10(m). Section 2303(c) of EGRPRA also directs the OTS

Director to define the term ``small business loans'' in connection with

newly amended HOLA section 5(c) which expands federal thrifts''

commercial lending authority from 10% to 20% of assets so long as the

amount in excess of 10% of assets is used solely for small business

loans. Once again, OTS believes that a consistent definition of small

business for application of both sections of the HOLA is appropriate to

promote a harmonious interpretation of the statute.

In this interim final regulation, OTS is tying its definitions of

small business and small business loans to the eligibility criteria

established by the Small Business Administration (SBA) under section

3(a) of the Small Business Act, 15 U.S.C. 632(a), as implemented by

SBA's regulations at 13 CFR Part 121. Most lenders and small businesses

are already familiar with SBA's size eligibility standards. However,

OTS specifically solicits comment as to whether these SBA standards are

the most appropriate basis for OTS's definition of small business or

small business loans for HOLA purposes. OTS specifically solicits

comment on whether it should, for the sake of simplicity, include a de

minimis safe harbor providing that any loan to a business with annual

sales of less than a specified amount will be deemed a small business

loan, regardless what line of business the borrower conducts.23

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\23\ The SBA Reauthorization Act of 1994, 15 U.S.C. 632(a)(C),

provides that unless specifically authorized by statute, no federal

agency may prescribe a size standard for categorizing a business

concern as a small business unless such size standard is made

subject to public notice and comment, makes certain size

determinations, and is approved by the SBA Administrator. OTS

solicits comment regarding whether EGRPRA section 2303(g)

constitutes a specific authorization within the meaning of 15 U.S.C.

632(a)(C).

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Sections 563.50, 563.51, 563.52 Revisions to the QTL Test.

As discussed above, section 2303 (e) and (g) of EGRPRA amended the

QTL test in a number of ways to give thrifts greater lending

flexibility. Investments in educational loans, small business loans,

and loans made through credit cards and credit card accounts are

includable as QTI without limit. Consumer loans now count as QTI in an

amount up to 20% of portfolio assets.

Rather than codifying these amendments in the existing QTL

regulations, OTS is removing the QTL provisions from its regulations at

12 CFR 563.50-52 and relying directly on the provisions of HOLA section

10(m) to govern this area, except for the two definitions described

above. These definitions will appear at 12 CFR 560.3.

This approach is consistent with OTS's effort to streamline its

regulations and remove duplicative requirements pursuant to section 303

of the Community Development and Regulatory Improvement Act of 1994

(CDRIA).24 The QTL provisions of HOLA section 10(m) are very

detailed, and OTS provides additional QTL guidance in its Thrift

Activities Handbook (Handbook). OTS believes it is unnecessary to

reiterate HOLA's statutory QTL provisions in a regulatory format,

because the combination of HOLA's statutory requirements and relevant

handbook guidance provide adequate direction to the thrift industry and

OTS examination staff with respect to QTL compliance. Thus, the only

regulatory provisions that address QTL will be the two definitions

described above.

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\24\ 12 U.S.C. 4803.

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Section 563.36 Tying Restrictions

Section 2216 of EGRPRA authorizes the OTS Director to issue

regulations or orders permitting exceptions to the anti-tying

prohibitions established in HOLA section 5(q) provided that such

exceptions are not contrary to the purposes of that section and conform

to exceptions granted by the FRB to banks pursuant to section 106(b) of

the BHCA Amendments. The FRB, by regulation, has created four

exceptions from the anti-tying provisions of the BHCA Amendments.

The first FRB regulatory exception provides that a bank holding

company, bank, or nonbank subsidiary thereof, may vary the

consideration charged for a traditional bank product on the condition

or requirement that a customer also obtain a traditional bank product

from an affiliate.25 HOLA section 5(q) excepts this type of

activity for savings associations, savings and loan holding companies,

and their affiliates.26 Accordingly, OTS has determined that a

regulatory exception for traditional bank products would be duplicative

of the HOLA and is unnecessary.

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\25\ 12 CFR 225.7(b)(1) (1996).

\26\ HOLA section 5(q)(1)(A) explicitly provides that the tying

restriction does not apply where the tied product is a traditional

bank product of the savings association, a service corporation, or

an affiliate. Section 10(n) of HOLA makes that anti-tying exclusion

applicable to savings and loan holding companies and affiliates

thereof. In contrast, the BHCA Amendments provide an exception in

the case of traditional bank products offered by the bank, but do

not address traditional bank products offered by bank holding

companies or nonbank affiliates. See, 12 U.S.C. 1972(1)(B).

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The second FRB regulatory exception provides that a bank holding

company, bank or nonbank subsidiary may vary the consideration charged

for securities brokerage services on the condition or requirement that

a customer also obtain a traditional bank product from that

[[Page 60182]]

bank holding company or bank or nonbank subsidiary, or from any

affiliate of such company.\27\ Once again, HOLA section 5(q) does not

prohibit this type of activity under any circumstances for savings

associations, savings and loan holding companies, and their

affiliates.\28\ Accordingly, OTS has determined that it is unnecessary

to adopt this second regulatory exception.

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\27\ 12 CFR 225.7(b)(2) (1996).

\28\ As noted in the discussion of the first FRB exception, a

tying arrangement is not prohibited under HOLA section 5(q) or 10(n)

where the tied product is a traditional bank product. There is no

requirement that the tying product be a traditional bank product.

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The third FRB regulatory exception relates to tying arrangements

that do not involve banks. The exception permits bank holding companies

or nonbank subsidiaries to vary the consideration for any extension of

credit, lease or sale of property of any kind, or service, on the

condition or requirement that the customer obtain some additional

credit, property or service from itself or a nonbank affiliate.\29\

This provision is an exception not from any statutory requirement but

from the FRB's regulation that generally applies the tying restrictions

applicable to banks to bank holding companies and other affiliates. The

language applying tying restrictions to savings and loan holding

companies and their non-thrift affiliates, which appears in HOLA

section 10(n), differs somewhat from the wording of the FRB's tying

regulation for bank holding companies and their nonbank affiliates.

Section 10(n) of the HOLA applies only when a tying arrangement

involves products of a savings and loan holding company or affiliate,

and those of an affiliated savings association. Accordingly, tying

arrangements involving savings and loan holding companies and/or non-

thrift affiliates, but not a savings association, are not restricted

under HOLA section 10(n). Therefore, OTS has determined that there is

no need to adopt a regulatory exception that is comparable to the third

FRB exception.

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\29\ 12 CFR 225.7(b)(3) (1996).

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The fourth FRB regulatory exception permits banks, bank holding

companies, or nonbank affiliates to vary the consideration for any

product or package of products based on a customer's maintenance of a

combined minimum balance in certain products specified by the company

varying the consideration (defined as ``eligible products'), if (i)

that company (if it is a bank) or a bank affiliate of the company

offers deposits, and all such deposits are eligible products, and (ii)

balances in deposits count at least as much as non-deposit products

toward the minimum balance.\30\

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\30\ 12 CFR 225.7(b)(4) (1996).

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This fourth FRB regulatory exception permits banks to offer

discounts to customers maintaining a combined minimum balance in

deposit and non-deposit accounts, including brokerage and mutual fund

accounts. As such, this regulatory ``safe harbor'' authorizes tying

arrangements that are currently prohibited for savings associations,

because the tied products would not necessarily be traditional bank

products. In addition, savings and loan holding companies or affiliates

thereof would be prohibited from offering such arrangements where one

of the products involved was a savings association product (other than

a traditional bank product).

Having reviewed this fourth FRB exception, OTS has determined that

it should promulgate a regulation adopting a comparable ``safe harbor''

for savings associations, savings and loan holding companies, and

affiliates \31\ OTS believes that this exception is not contrary to the

purposes of HOLA section 5(q), because it would not present the anti-

competitive effects which the HOLA's antitying provisions were intended

to eliminate. Rather, this safe harbor would enable savings

associations and their affiliates to offer a greater variety of banking

products and services to their customers and could potentially enhance

competition in the market place. Such an exception would also ensure

parity between savings associations and banks, enabling savings

associations and banks to offer a comparable range of products and

services and further enhance competition among financial institutions

consistent with the purposes of HOLA section 5(q) and the BHCA

Amendments.

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\31\ The exception authority granted to OTS by amended HOLA

section 5(q) is indirectly applicable to savings and loan holding

companies and affiliates, because HOLA section 10(n) provides that,

in connection with transactions involving the products or services

of a savings and loan holding company or affiliate and those of an

affiliated savings association, section 5(q) shall apply to savings

and loan holding companies and their affiliates in the same manner

as if they were a savings association.

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Accordingly OTS is adding a new regulatory antitying exception at

12 CFR 563.36 that conforms to the FRB's ``safe harbor'' for combined

balance discounts. This safe harbor permits savings associations and

their affiliates to offer discounts to customers maintaining certain

combined minimum balance accounts.\32\ In addition to this exception,

OTS may permit other exceptions under HOLA section 5(q) on a case-by-

case basis upon determination that the exception is not contrary to the

purposes of HOLA section 5(q), it conforms to an exception granted by

the FRB, and it is consistent with safe and sound practices.

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\32\ The interim final rule does not require that all products

offered pursuant to the safe harbor must be separately available for

purchase. Although this condition currently appears in the FRB safe

harbor, 12 CFR 225.7(c)(1)(1996), the FRB has specifically proposed

to eliminate this condition. 61 FR at 47264. OTS will reexamine this

issue if the FRB's final rule does not eliminate the condition.

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OTS also solicits comment as to whether the agency should adopt

regulatory revisions parallel to those proposed, but not yet adopted,

by the FRB on September 6, 1996.\33\ The FRB proposal would rescind the

provision in its current regulations that extends the tying

prohibitions to bank holding companies and their nonbank

affiliates.\34\ As noted above, the FRB already permits bank holding

companies and their nonbank affiliates to offer discounts on products

conditioned on a customer's purchase of another product, provided none

of the tied products are those of a bank affiliate. The FRB proposal

would, in effect, rescind this proviso, allowing bank holding companies

to tie their discounts to the purchase of bank products, provided no

anti-trust violations result. The proposal would also enable bank

holding companies and their nonbank affiliates to engage in tying

practices other than discounting. For example, the availability of a

product could be conditioned on the purchase of another product, again

provided no anti-trust violation occurs.

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\33\ See, 61 FR 47242 (September 6, 1996).

\34\ Other aspects of the FRB's proposal need not be discussed

here because they concern practices not prohibited for savings

associations and their affiliates.

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OTS requests comment on whether savings and loan holding companies

and their non-bank affiliates should also be completely exempted from

the tying restrictions. As noted above, the provision of law applying

the tying restriction to savings and loan holding companies is

statutory, not regulatory (as is the case for bank holding companies).

Thus, OTS also requests comment on whether it would have legal

authority to grant a complete exemption from HOLA section 10(n).

Sections 574.1, 574.2, 574.3, 575.2, 583.20, 584.2a Holding Company

Regulatory Revisions

Section 2203 of EGRPRA exempts bank holding companies that control

savings associations from HOLA section 10, thereby eliminating OTS

supervision of holding companies that control both

[[Page 60183]]

a bank and a thrift and are registered as a bank holding company with

the FRB under the BHCA of 1956. OTS is making technical changes to its

acquisition of control and holding company regulations to conform to

EGRPRA's amendments to the Savings and Loan Holding Company Act. OTS

has added an exception to its acquisition of control regulations to

clarify that where a person acquires control of a bank holding company

and the person is required to file a change of control notice with the

FRB, no change of control notice is required to be filed with OTS. In

addition, OTS is making minor revisions to the Mutual Holding Company

regulations to reflect its position that section 2203 of EGRPRA does

not affect OTS's authority to regulate mutual holding companies,

including mutual holding companies that have acquired a bank. OTS has

reached this conclusion for two reasons. First, although section 2203

of EGRPRA excepts bank holding companies from the definition of

``savings and loan holding company'' in section 10 of HOLA, section

10(o) of the HOLA, pertaining to mutual holding companies, refers to

``mutual holding companies'' rather than mutual savings and loan

holding companies. Second, OTS is the chartering authority for federal

mutual holding companies under section 10(o), and section 10(o)

provides for a unique relationship between depositors of the subsidiary

association and the mutual holding company.

III. Administrative Procedure Act

OTS has determined that advance notice and comment ordinarily

mandated by the Administrative Procedure Act (APA), 5 U.S.C. 553(b),

are not required in this interim final rulemaking. The APA authorizes

agencies to waive notice and comment procedures when the agency ``for

good cause finds * * * that notice and public procedure thereon are

impracticable, unnecessary, or contrary to the public interest.'' \35\

OTS for good cause finds that notice and comment procedures for this

rulemaking are impracticable and contrary to the public interest

because they would delay implementation of EGRPRA's expanded lending,

investment, and other authorities for thrifts. In addition, advance

public notice and comment are unnecessary and contrary to the public

interest because the interim rule substantially restates the provisions

of the statute or makes technical revisions to OTS regulations and

reduces regulatory burden.

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\35\ 5 U.S.C. 553(b)(B).

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OTS also has determined that the 30-day delay of effectiveness

provisions of the APA may be waived in this rulemaking. Section 553(d)

of the APA permits waiver of the 30 day delayed effective date

requirement for, inter alia, good cause or where a rule relieves a

restriction. OTS finds that good cause exists for the same reasons

stated above. OTS further finds that the 30-day delayed effective date

requirement may be waived because this interim final rule relieves

various lending, investment, and tying restrictions for thrifts and

merely conforms OTS regulations to EGRPRA's statutory changes.

Accordingly, the interim final rule will be immediately effective

upon publication in the Federal Register. Nevertheless, OTS seeks the

benefit of public comment. Accordingly, OTS invites interested persons

to submit comments during the 60-day comment period. OTS will revise

the interim final rule as appropriate based on these comments.

IV. Paperwork Reduction Act of 1995

This interim final rule does not impose any collections of

information on savings associations. As such, the Paperwork Reduction

Act of 1995 (44 U.S.C. 3501 et seq.) does not apply.

V. Executive Order 12866

OTS has determined that this interim final rule does not constitute

a ``significant regulatory action'' for the purposes of Executive Order

12866.

VI. Regulatory Flexibility Act Analysis

Because no notice of proposed rulemaking is required for this rule,

the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.

do not apply. The interim final rule does not impose any additional

burdens or requirements upon small entities and reduces burdens on all

savings associations. The regulatory amendments implement statutory

changes to the HOLA that relieve various lending, investment, and tying

restrictions on thrifts and otherwise conform OTS regulations to

EGRPRA. Accordingly, a regulatory flexibility analysis is not required.

VII. Unfunded Mandates Act of 1995

OTS has determined that the requirements of this interim final 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, Pub. L. 104-4,

109 Stat. 48 (1995).

VIII. Effective Date

Section 302 of the Riegle Community Development and Regulatory

Improvement Act of 1994 (CDRIA), 12 U.S.C. 4802, requires that new

regulations and amendments to regulations that impose additional

reporting, disclosures, or other new requirements take effect on the

first date of the calendar quarter following publication of the rule

unless, among other things, the agency determines, for good cause, that

the regulations should become effective on a day other than the first

day of the next quarter. OTS believes that an immediate effective date

is appropriate since the interim rule relieves regulatory burden on

savings associations. This immediate effective date will permit savings

associations to begin exercising their expanding lending, investment,

and other authorities pursuant to the amended HOLA. OTS does not

anticipate that the immediate application of the rules will present a

hardship to institutions. Indeed OTS believes that CDRIA does not apply

to this interim rule because it imposes no new burden on thrifts. For

these reasons, OTS has determined that an immediate effective date is

appropriate for this interim final rule.

List of Subjects

12 CFR Part 560

Consumer protection, Investments, Manufactured homes, Mortgages,

Reporting and recordkeeping requirements, Savings associations,

Securities.

12 CFR Part 563

Accounting, Advertising, Crime, Currency, Investments, Reporting

and recordkeeping requirements, Savings associations, Securities,

Surety bonds.

12 CFR Part 574

Administrative practice and procedure, Holding companies, Reporting

and recordkeeping requirements, Savings associations, Securities.

12 CFR Part 575

Administrative practice and procedure, Capital, Holding companies,

Reporting and recordkeeping requirements, Savings associations,

Securities.

12 CFR Part 583

Holding companies, Savings associations.

[[Page 60184]]

12 CFR Part 584

Administrative practice and procedure, holding companies, Reporting

and recordkeeping requirements, Savings associations, Securities.

Accordingly, the Office of Thrift Supervision hereby amends title

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

PART 560--LENDING AND INVESTMENT

1. The authority citation for part 560 is revised to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1701j-3,

1828, 3803, 3806; 42 U.S.C. 4106.

2. Section 560.3 is amended by revising the introductory text and

by adding four definitions in alphabetical order to read as follows:

Sec. 560.3 Definitions.

For purposes of this part and any determination under 12 U.S.C.

1467a:

* * * * *

Credit card is a card, plate or other credit device that allows the

holder to purchase goods or obtain services or cash by charging them to

a previously established line of credit with the issuer of the card,

plate or device.

Credit card account is a credit account established in conjunction

with the issuance of, or the extension of credit through, a credit

card. This term includes loans made to consolidate credit card debt,

including credit card debt held by other lenders, and participation

certificates, securities and similar instruments secured by credit card

receivables.

* * * * *

Small business includes a small business concern or entity as

defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a),

and implemented by the regulations of the Small Business Administration

at 13 CFR Part 121.

Small business loans includes any loan to a small business concern

or entity as defined by section 3(a) of the Small Business Act, 15

U.S.C. 632(a), and implemented by the regulations of the Small Business

Administration at 13 CFR Part 121.

PART 563--OPERATIONS

3. 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.

4. Section 563.36 is added to read as follows:

Sec. 563.36 Tying restriction exception.

(a) Safe harbor for combined-balance discounts. A savings and loan

holding company or any savings association or any affiliate of either

may vary the consideration for any product or package of products based

on a customer's maintaining a combined minimum balance in certain

products specified by the company varying the consideration (eligible

products), if:

(1) That company (if it is a savings association) or a savings

association affiliate of that company (if it is not a savings

association) offers deposits, and all such deposits are eligible

products; and

(2) Balances in deposits count at least as much as non-deposit

products toward the minimum balance.

(b) Limitations on exception. This exception shall terminate upon a

finding by the OTS that the arrangement is resulting in anti-

competitive practices. The eligibility of a savings and loan holding

company or savings association or affiliate of either to operate under

this exception shall terminate upon a finding by the OTS that its

exercise of this authority is resulting in anti-competitive practices.

Secs. 563.50, 563.51, 563.52 [Removed]

5. Sections 563.50, 563.51, and 563.52 are removed.

PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS

6. The authority citation for part 574 continues to read as

follows:

Authority: 12 U.S.C. 1467a, 1817, 1831i.

7. Section 574.1 is revised to read as follows:

Sec. 574.1 Scope of part.

The purpose of this part is to implement the provisions of the

Change in Bank Control Act, 12 U.S.C.1817(j) (``Control Act'), and the

Savings and Loan Holding Company Act, 12 U.S.C. 1467a (``Holding

Company Act''), relating to acquisitions and changes in control of

savings associations that are organized in stock form and savings and

loan holding companies thereof.

Sec. 574.2 [Amended]

8. Section 574.2 is amended by revising paragraph (q)(2)(ii) and by

adding paragraph (q)(3) to read as follows:

Sec. 574.2 Definitions.

* * * * *

(q) * * *

(2) * * *

(ii) Is a testamentary trust; and

(3) A bank holding company that is registered under, and subject

to, the Bank Holding Company Act of 1956, or any company directly or

indirectly controlled by such company (other than a savings

association).

* * * * *

9. Section 574.3 is amended by:

a. In paragraph (c)(1)(ii), removing the period at the end of the

paragraph and adding a semicolon in its place;

b. Redesignating paragraphs (c)(1)(iii) through (c)(1)(vii) as

paragraphs (c)(1)(iv) through (c)(1)(viii);

c. Adding paragraph (c)(1)(iii);

d. Revising paragraph (c)(2)(i);

e. Redesignating paragraphs (c)(2)(iv) and (c)(2)(v) as paragraphs

(c)(2)(v) and (c)(2)(vi) and by adding a new paragraph (c)(2)(iv); and

f. In newly designated paragraph (c)(2)(v), removing the period at

the end of the paragraph and adding ``; and'' in its place.

The additions and revisions read as follows:

Sec. 574.3 Acquisition of control of savings associations.

* * * * *

(c) Exempt transactions. (1) * * *

(iii) Control of a savings association acquired by a bank holding

company that is registered under and subject to, the Bank Holding

Company Act of 1956, or any company controlled by such bank holding

company;

* * * * *

(2) * * *

(i) Transactions which are exempt pursuant to paragraphs

(c)(1)(iii), (c)(1)(iv), (c)(1)(v), and (c)(1)(vi) of this section;

* * * * *

(iv) Transactions for which a change of control notice must be

submitted to the Board of Governors of the Federal Reserve System

pursuant to the Change in Bank Control Act, 12 U.S.C. 1817(j);

* * * * *

PART 575--MUTUAL HOLDING COMPANIES

10. The heading for part 575 is revised as set forth above.

11. The authority citation for part 575 continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.

12. Section 575.2 is amended by revising paragraph (h) to read as

follows:

Sec. 575.2 Definitions.

* * * * *

[[Page 60185]]

(h) The term mutual holding company means a mutual holding company

organized under this part.

* * * * *

PART 583--DEFINITIONS

13. The authority citation for part 583 continues to read as

follows:

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

14. Section 583.20 is amended by revising paragraph (b)(2) and by

adding paragraph (c) to read as follows:

Sec. 583.20 Savings and loan holding company.

* * * * *

(b) * * *

(2) Is a testamentary trust; and

(c) A bank holding company that is registered under, and subject

to, the Bank Holding Company Act of 1956, or any company directly or

indirectly controlled by such company (other than a savings

association).

PART 584--REGULATED ACTIVITIES

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

follows:

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

Sec. 584.2a [Amended]

16. Section 584.2a is amended by removing paragraph (e).

Dated: November 20, 1996.

By the Office of Thrift Supervision.

Nicolas P. Retsinas,

Director.

[FR Doc. 96-30112 Filed 11-26-96; 8:45 am]

BILLING CODE 6720-01-P