Application Processing

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 516, 543, 545, 552, 556, 563

[No. 97-121]

RIN 1550-AA83

Application Processing

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: As a part of its on-going effort to review and streamline its

regulations, the Office of Thrift Supervision (OTS) is issuing a final

rule revising its comment procedures for specified applications and

notices (collectively, applications). In addition to reorganizing the

regulation, the OTS has expanded the comment period on these

applications, set forth the information that a comment should contain,

and replaced existing provisions requiring the OTS to conduct an oral

argument on applications under certain circumstances, with provisions

for informal and formal meetings. Under the final rule, the OTS will

conduct an informal meeting ordinarily upon the request of a commenter,

but also on its own initiative. Thereafter, upon the request of any

participant to an informal meeting, the OTS will conduct a formal

meeting. The OTS may also conduct a formal meeting on any application

on its own initiative.

EFFECTIVE DATE: January 1, 1998.

FOR FURTHER INFORMATION CONTACT:

Catherine Shepard, Senior Attorney, Regulations and Legislation

Division, (202) 906-7275, Kevin Corcoran, Assistant Chief Counsel,

Business Transactions Division, (202) 906-6962, Office of Chief

Counsel; or Diana L. Garmus, Director, Corporate Activities Division,

(202) 906-5683, Office of Thrift Supervision, 1700 G Street NW.,

Washington, DC 20552.

SUPPLEMENTARY INFORMATION:

I. Background

OTS regulations governing applications for permission to organize a

federal stock or mutual savings association, to establish or relocate a

branch office of a federal savings association, and to engage in a

transaction that is subject to the Bank Merger Act require applicants

to follow the public comment and review procedures at existing

Sec. 543.2 (e) and (f).

Currently, Sec. 543.2 provides an opportunity for the public to

submit communications in favor or in protest of applications, and

permits the applicant to respond to any protest. When a protest is

timely submitted, meets specified criteria and includes a request for

oral argument, or if an applicant timely requests an oral argument, the

regulation requires the OTS to conduct an oral argument on the merits

of the application. The OTS may also hold an oral argument in the

absence of any protests, if it determines that these additional

proceedings are desirable.

On April 9, 1997, the OTS published a notice of proposed rulemaking

revising these procedures.\1\ In addition to reorganizing the

regulations, the OTS proposed to amend its existing procedures to

expand the comment period on applications, prescribe the information

that comments must contain in order to be considered when the OTS

evaluates applications, and replace existing provisions that require

the OTS to conduct an oral argument on applications under certain

circumstances, with provisions for discretionary conferences. The OTS

believed that these changes would make the application processing

procedures easier to understand and apply. Additionally, the OTS

concluded that the discretionary conference procedures would align OTS

regulations more closely with those of the other federal banking

agencies in accordance with section 303 of the Community Development

and Regulatory Improvement Act of 1994.

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\1\ 62 FR 17110 (April 9, 1997).

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II. Summary of Comments and Description of Final Rule

A. General Discussion of the Comments

The public comment period on the proposed rule closed on June 9,

1997. Eight commenters responded to the proposal: four community

advocacy groups, two trade associations, one federal savings

association, and one professional records and information management

association.

As a general matter, the four community advocacy groups opposed the

elimination of mandatory oral arguments and supported the extension of

the public comment period. Conversely, the trade associations and the

federal savings association supported the proposed conference

procedures and opposed the extension of the public comment period. The

information management association expressed unqualified support for

the proposal. Specific comments are discussed where appropriate in the

section by section analysis below.

B. Section by Section Analysis

The final rule adds new Subparts C and D to part 516. The new

subparts use plain language drafting techniques promoted by the Vice

President's National Performance Review Initiative and new guidance in

the Federal Register Document Drafting Handbook (January 1997 edition).

The primary goal of plain language drafting is to make regulations more

readily understandable. Plain language drafting emphasizes the use of

informative headings (often written as a question), non-technical

language (including the use of ``you'') and sentences in the active

voice.

Although commenters did not have the opportunity to comment on the

plain language format prior to its use in this final rule, the OTS

believes that the benefits of the format justify its use. Moreover, the

use of the plain language format has not altered the substance of the

regulation. The OTS welcomes comments on the plain language format, and

suggestions on how to improve this format. The OTS is committed to

converting more of its regulations to the plain language format in

order to reduce regulatory burden. The recently issued OTS final rule

on subsidiaries uses this plain English drafting format. See 12 CFR

Part 559 (1997).

Subpart C--Comment Procedures

Section 516.100--What Does This Subpart Do?

Section 516.100 of the final rule provides that Part 516, Subpart C

contains the procedures governing the submission of public comments on

certain types of applications or notices pending before the OTS.

Subpart C applies whenever a regulation incorporates the procedures, or

where otherwise required by the OTS. This section is based on

Sec. 516.5(a)(1) of the proposed rule.

Section 516.110--Who May Submit a Written Comment?

Section 516.110 provides that any person may submit a written

comment supporting or opposing an application. This provision is also

based on proposed Sec. 516.5(a)(1).

Section 516.120--What Information Should I Include in My Comment?

Under the existing rules, a protest is considered ``substantial''

if it is submitted in writing within the

[[Page 64139]]

comment period, and states a reason for the protest that is consistent

with one of the regulatory bases for denying an application. To be a

substantial protest, a comment must include the specific information

required at existing Sec. 543.2(e)(2) and (4). Under the current rules,

the term ``substantial'' serves a purely ministerial purpose--a means

of separating comments that contain the required information (and,

thus, may serve as the basis for a request for an oral argument) from

those that do not.\2\

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\2\ The existing oral argument procedures and the new meeting

procedures are discussed below.

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The proposed rule at Sec. 516.5(a)(3) described the information

that a comment must contain in order to be considered by the OTS. Under

the proposed rule, the comment was required to recite all relevant

facts, including any economic or financial data supporting the

commenter's position. Comments opposing an application were required to

address at least one of the bases for denial of the application as set

forth in the relevant regulations, recite relevant facts and supporting

data addressing these relevant bases, and address any adverse effects

on the commenter or community that may result from approval of the

application.

One commenter supported this proposed provision, noting that it

provides important guidance to the public. Another commenter argued

that the comment content criteria give the OTS too much discretion to

reject comments that do not meet the technical content requirements.

Commenters argued that these requirements should not be construed in an

overly burdensome way.

The OTS will review and consider all comments it receives

regardless of whether the comment meets all of the regulatory criteria.

The sole intent of the proposed content requirements was to guide

commenters in providing information that would assist the OTS in

understanding the basis for the comment. While the OTS will accept and

consider all comments, including those that do not meet all of the

content criteria, commenters are encouraged to include all relevant

information and arguments.

The OTS has revised the comment content provisions at Sec. 516.120

to emphasize that the OTS will not reject a comment that does not meet

all of the content criteria, and has made other changes to enhance the

rule's clarity. Under the final rule, a comment should recite relevant

facts, including any demographic, economic, or financial data,

supporting the commenter's position. If the commenter opposes an

application, the comment should also address at least one of the

relevant regulatory reasons for which the OTS may deny an application,

recite any relevant facts and supporting data addressing these reasons,

and address how the approval of the application could harm the

commenter or any community.

If a commenter wishes to request an informal meeting under the

revised procedures discussed in detail below, the commenter must file a

request for the meeting with the comment. To ensure that the OTS will

have sufficient notice of the questions to be discussed at the informal

meeting, requests should describe the nature of the issues or facts to

be discussed and the reasons why written submissions are insufficient

to adequately address these facts or issues. See final Sec. 516.120(b).

Section 516.130--Where Do I File My Comment?

Section 516.130 provides that public commenter must file its

comment with the OTS office(s) set forth at Sec. 516.1(c). If an

informal meeting is requested, the commenter must simultaneously send a

copy of the request to the applicant. This provision was not included

in the proposed rule, but has been added to improve the clarity of the

final rule.

Section 516.140--Where Do I File My Comment?

Under the current rules, a commenter must file a comment within 10

days of the publication of a public notice of the filing of the

application. This time period may extended to 17 days after

publication, if a request for extension is filed within the 10-day

period. Proposed Sec. 516.5(a)(2) replaced the existing 10-day comment

period with a 25-day comment period.

Three commenters supported the proposed 25-day comment period,

noting that this is a clearly defined period and gives all prospective

commenters an adequate time to submit appropriate comments. Two

commenters urged the OTS to lengthen the comment period to 30 days

arguing that a 30-day comment period is used by the Office of the

Comptroller of the Currency (OCC), the Federal Reserve Board (FRB), and

the OTS in merger and acquisition applications. Two commenters thought

that the comment period should be shorter. One argued that 15 days is

sufficient. Another argued that the OTS should provide a 17-day comment

period, at least for applications involving associations that have an

``outstanding'' or ``satisfactory'' rating under the community

Reinvestment Act (CRA) and that are eligible for expedited treatment.

The OTS is adopting the proposed 25-day comment period. The OTS

continues to believe that this expanded time period, without an

automatic extension, is more workable and less confusing. The OTS

cannot adopt a 30-day comment period without substantially revising

other application processing requirements. In accordance with section

410 of the Competitive Equality Banking Act of 1987, Sec. 516.2(c)(1)

requires the OTS to request additional information, deem an application

complete, or decline to process an application within 30 days of

receipt of an application. The OTS believes it is necessary to have at

least five days to review comments within this 30-day review period.

Under the proposed rule, the 25-day comment period would have begun

on the date that the notice of application is published, a date that

may precede the filing of the application. One commenter argued that

the comment period should start on the day the application is submitted

to the OTS. The commenter noted that this change would give community

groups access to the application for the full comment period. The OTS

agrees that commenters should have access to the application for the

full comment period. Accordingly, under the final rule at

Sec. 516.140(a), the comment period begins on the date that the

application is filed.

Under the proposed rule at Sec. 516.5(a)(2), the OTS would grant

extensions of the 25-day comment period on a case-by-case basis. The

OTS would consider a late-filed comment if the OTS determined that the

comment addressed a significant regulatory concern and, within the 25-

day comment period, the commenter demonstrated good cause why it was

unable to submit a timely comment. The length of any extension would be

determined on a case-by-case basis.

Commenters generally supported this provision. However, several

commenters urged the OTS to define good cause to include specified

circumstances, to set specific time frames for extensions and to make

other changes. One commenter objected that the unlimited discretion

accorded to the OTS under the proposed extension provision would create

procedural confusion.

The final rule continues to provide the OTS with maximum

flexibility to address the unique circumstances of each extension

request. For example, one commenter may need only an additional 24

hours to copy or mail documents. Another commenter may be

[[Page 64140]]

awaiting pertinent public data and may require a longer opportunity to

obtain and analyze the data. Accordingly, the final regulation at

Sec. 516.140 does not prescribe the duration of the extension period or

the circumstances that would constitute good cause. Rather, the OTS

will make these determinations on a case-by-case basis.

One commenter suggested that the OTS should encourage applicants

and commenters to make joint requests for extensions of the comment

period. One of the underlying purposes of the comment procedures is to

promote dialogue and collaboration among the parties. Since joint

extension requests will advance voluntary resolution of conflicts, the

OTS encourages and generally will grant all jointly filed extension

requests.

Under the existing procedures at Sec. 543.2(e)(3), applicants may

file an answer to any protest within 10 days after the last date for

filing of comments. The proposed rule eliminated this provision.

Instead, the OTS stated that it would generally provide an appropriate

opportunity to respond by forwarding the comments to the applicant and

requesting a response.

Two commenters noted that the OTS failed to set a deadline for the

applicant's response. One commenter suggested that OTS should provide

at least 10 days for response. The other suggested that the OTS adopt

the FRB practice of requiring applicants to respond within eight

business days.

It is unnecessary to establish a regulatory deadline for an

applicant's response to comments. The OTS will continue to require

applicants to respond to issues raised in comments the same way that it

resolves other issues raised in applications. The OTS will, where

appropriate, request the applicant to respond within 30 days to the

issues raised in the application. See existing Sec. 516.2(c).

Section 516.150--Will I Have Additional Opportunities to Discuss the

Applications?

Under the existing rules at Sec. 543.2(f), the OTS must conduct an

oral argument if the applicant or anyone filing a substantial protest

makes a timely request for the argument or if the OTS considers an oral

argument desirable. The proposed rule would have replaced the mandatory

oral argument provisions. Proposed Sec. 516.5(b)(1) would have required

additional proceedings only where the OTS determined that the

proceedings would assist in the disposition of the application or would

assist in the resolution of any issues raised by the application.

Rather than an oral argument, the proposed rule permitted the OTS to

arrange a conference between the applicant, commenters, and others. The

proposed rule did not prescribe procedures for the conference. Instead,

the proposed rule permitted the OTS to select the procedures

appropriate to the application on a case-by-case basis.

Three commenters supported the conference procedures contained in

the proposed rule. These commenters concluded that the conference

procedures were more efficient and flexible than the current oral

argument procedures.

Four community group commenters opposed the deletion of the

mandatory oral argument. These commenters asserted that oral arguments:

(1) Do not unduly delay the application process; (2) are conducive to

fully informed decision making by the OTS; (3) are not hard to

understand or apply; (4) ensure that consumer issues are adequately

considered; and (5) promote dialogue and exchange between the

association and commenters.\3\

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\3\ In the proposed rule, the OTS noted that the discretionary

conference procedures would be more consistent with the rules of the

other federal banking agencies. One commenter argued that this

rationale is not convincing since the other banking regulators often

have supplemental procedures for gathering information. The only

such procedure cited by the commenter, however, was the OCC's policy

of conducting expedited CRA examinations upon request. The OTS has

addressed these targeted examinations below at Section II.D.3.

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The OTS continues to believe that formal oral arguments before a

presiding officer are not necessary or productive in most cases.\4\

More often, comments can best be resolved in a less formal setting,

such as a meeting or a telephone call. Accordingly, the final rule

states that the OTS generally will conduct an informal meeting on

applications upon the request of any commenter. Additionally, if an

informal meeting fails to facilitate the resolution of issues to the

satisfaction of any participant in an informal meeting, the final rule

provides that the OTS will conduct a formal meeting before a presiding

officer upon the filing of a request. The OTS may also conduct a formal

meeting on any application on its own initiative. The new OTS informal

and formal meeting procedures are based upon the OCC's related rule

governing meetings and hearings at 12 CFR 5.11.

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\4\ Two commenters argued that the OTS's proposed deletion of

the mandatory oral hearing requirement was inconsistent with

congressional intent expressed in section 2612 of the Economic

Growth and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). This

section specifically requires the FRB to hold a hearing where a bank

holding company seeks to acquire a thrift. EGRPRA, however, does not

provide a similar legal right when a bank holding company acquires a

commercial bank. The commenters argued that EGRPRA's retention of

hearings in thrift acquisitions reflects Congress' view that the

agency should provide hearings in all applications involving savings

associations. The OTS disagrees. The hearing requirement in section

2612 of EGRPRA, by its own terms, is limited to specified

proceedings before another regulatory agency. There is no

legislative history in EGRPRA mandating a broader application. If

Congress intended to require hearings whenever a savings association

is involved in any application proceeding before any banking

regulator, the OTS believes that Congress would have manifested this

intent more clearly.

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Thus, the final rule at Sec. 516.150 states that the OTS may

provide a commenter with additional opportunities to discuss the

application in informal or formal meetings. The new procedures are

contained in a new subpart D to part 516. The sections of this new part

are discussed below.

Subpart D--Meeting Procedures

Section 516.160--What Does This Subpart Do?

Subpart D establishes the procedures governing informal and formal

meetings. It applies whenever a regulation incorporates the procedures

in the subpart, or when otherwise required by OTS.

Section 516.170--What Procedures Govern Informal Meetings on

Applications?

Section 516.170 establishes the OTS informal meeting procedures.

Under Sec. 516.170(a), the OTS may arrange an informal meeting to

clarify and narrow the issues and to facilitate the resolution of the

issues. If a commenter has filed a written request containing the

information described at Sec. 516.120(b), the OTS will arrange a

meeting. The OTS may also arrange a meeting upon its own initiative.

The purpose of the informal meeting is to promote dialogue and to seek

to achieve the voluntary resolution of issues. The OTS will inform the

applicant and commenters requesting a meeting of its decision on a

request for a meeting, or its decision to hold a meeting on its own

initiative. See final Sec. 516.170(b).

One commenter suggested that the final rule should require the OTS

to announce its decision on the informal meeting before the expiration

of applicable approval time frames specified in Secs. 516.2 and 516.3.

The purpose of the informal meeting is to address and resolve issues

relevant to the disposition of the application. An informal meeting

would, thus, be pointless if it is held after approval time frames

lapse and the application is deemed approved. Because the announcement

of the decision on a

[[Page 64141]]

meeting obviously must precede the approval of the application, the OTS

has not added the suggested provision.\5\

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\5\ Where an application is subject to a completeness review

under Sec. 516.2(c), the OTS will generally advise applicants and

commenters of the informal meeting before deeming the application

complete.

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The OTS will invite the applicant and the commenter filing the

request to the informal meeting. The OTS may also invite any other

interested persons to attend. The OTS will inform meeting participants

of the date, time, location and format for the meeting a reasonable

time in advance of the meeting. See final Sec. 516.170(c). The OTS may

select any format for the meeting. See final Sec. 516.170(d). An

informal meeting may encompass an array of forums including, but not

limited to, an informal telephone conference call or a face-to-face

meeting.

One commenter suggested that any announcement of additional

proceedings should identify all persons invited to the conference and

the substance of the comments received. The commenter asserted that

this procedure would allow the applicant to prepare for, and to contact

appropriate persons before the conference. The OTS does not follow a

specific format for informing participants of the informal meeting.

Rather, the OTS will advise participants using an appropriate method

for the meeting. For example, if the OTS determines that an issue may

be resolved in a telephone conference, the OTS would not necessarily

issue a written notice. Instead, the OTS might place an advance

telephone call informing the participants of the date and time of the

conference call. By contrast, where another type of meeting is

selected, the notice may include some or all of the elements identified

by the commenter.

The OTS anticipates that informal meetings will be adequate to

facilitate the resolution of issues in most proceedings. However, the

OTS recognizes that it may encounter situations where formal meetings

may be necessary. Accordingly, the final rule recognizes that an

informal meeting may progress to a formal meeting before a presiding

officer under Sec. 516.180. Accordingly, within three days after the

informal hearing, any participant in the informal meeting may request

the OTS to hold a formal meeting. See final Sec. 516.170(e). The

participant making the request should describe the nature of the issues

or facts to be presented and the reasons why a formal meeting is

necessary to make an adequate presentation of the facts or issues. The

request must be filed with the OTS and copies must be sent to other

participants in the informal meeting.

Section 516.180--What Procedures Govern Formal Meetings on

Applications?

If a participant in the informal meeting files a request for a

formal meeting under Sec. 516.170(e), the OTS will grant the request.

Additionally, the OTS may hold a formal meeting on its own initiative,

if it determines that written submissions and informal meetings are

insufficient to adequately present issues or facts to the OTS, or that

a formal meeting would otherwise benefit the decisionmaking process.

The OTS may limit the issues considered at the formal meeting to issues

it deems relevant or material. See final Sec. 516.180(a).

The OTS anticipates that most formal meetings will follow an

informal meeting. Accordingly, the OTS will not grant a request for a

formal meeting, unless an informal meeting has been conducted under

Sec. 516.170. However, there may be occasions where the informal

meeting may be unnecessary. Under these or other circumstances, the OTS

may elect to use its authority to conduct a formal meeting on its own

initiative.

The OTS will announce formal meetings by issuing a Notice of Formal

Meeting. The Notice will state the subject and date of the filing, the

time and place of the formal meeting, and the issues to be addressed.

The OTS will send the Notice to the applicant and any commenter

requesting a formal meeting. The OTS may invite other interested

persons to participate in the formal meeting by sending the Notice to

such persons. See final Sec. 516.180(b).

Paragraph (c) addresses who may participate in a formal meeting. A

person receiving a Notice must notify the OTS of its intent to

participate in the formal meeting within ten days after the OTS issues

the Notice. At least five days before the formal meeting, all

participants must provide the names of their witnesses and copies of

their proposed exhibits to the OTS, the applicant and any other person

designated by the OTS.

Section 516.180 (d) and (e) govern the conduct of the formal

meeting. Under Sec. 516.180(e), the OTS will appoint a presiding

officer to conduct a formal meeting. The presiding officer is

responsible for all procedural questions not governed by Sec. 516.180.

Subject to the rulings of the presiding officer, the participants may

make opening statements and present witnesses, material and data. All

presenters of documentary material must furnish copies of the material

to the OTS and to each other participant. The OTS will arrange for a

transcript of the formal meeting. Each participant must bear the cost

of the transcript that it requests for its use. See final

Sec. 516.180(d). Section 516.180(e)(2) provides that certain rules

governing the conduct of formal meetings and presentation of evidence

do not apply to formal meetings held under Sec. 516.180.

The rule does not address such procedural issues as whether the

formal meeting will be public or private. Two commenters advocated the

addition of a provision mandating public hearings whenever a public

meeting is requested. These commenters noted that public hearings

provide opportunities for all citizens to offer their views, including

senior citizens, public housing residents and others. These commenters

also noted that this change would align OTS procedures more closely to

those of the other banking agencies.

Commenters have always had the ability to request public hearings

on issues involving the application, and the OTS has had the discretion

whether or not to hold such hearings.\6\ The ability of members of the

public to request public hearings, and the OTS's discretion to hold

public hearings, is not affected by this final rule. The final rule

would continue to permit the agency to hold a public formal meeting.

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\6\ See Op. Chief Counsel (November 24, 1993).

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Section Sec. 516.190--Will a Meeting Affect Application Processing Time

Frames?

The proposed rule at Sec. 516.5(b)(2) stated that if the OTS timely

notifies the applicant that it intends to hold a conference, the OTS

would temporarily suspend applicable time periods for automatic

approval of the application. Two commenters supported this provision.

The final rule at Sec. 516.190 adopts the proposed rule with minor

editorial changes. The final rule provides for suspension of

application processing time frames if the OTS has arranged an informal

or formal meeting. The time periods will resume when the OTS determines

that a record has been developed that sufficiently supports a

determination on the issues raised in the comments.

C. Conforming Amendments to Related Provisions

The proposed rule included conforming amendments to Secs. 543.2,

545.92, 545.95, 552.2-1, 552.2-2 and 556.5. Commenters had the

following comments on these conforming changes.

[[Page 64142]]

1. Duplicative Publication Requirements

One commenter observed that the publication of notice provisions in

proposed Secs. 543.2(d)(1), 545.92(d)(1), 552.2-1(a)(1) and 563.22(e)

are unnecessarily duplicative. The commenter urged the OTS to

consolidate these provisions into a single regulation under Part 516.

The commenter noted that this approach would streamline the OTS

regulations and more closely conform OTS regulations to the procedural

regulations of the other banking agencies.

The OTS agrees that the cited publication requirements are

unnecessarily duplicative and has consolidated Secs. 543.2(d)(1),

545.92(d)(1), 552.2-1(a)(1) and 563.22(e)(1) into a new subpart under

Part 516. New Subpart B uses the same plain language drafting

techniques as used in Subparts C and D.

The proposed rules would have required an applicant to publish the

notice of the filing of the application no earlier than three days

before and no later than the date of the filing of the application. See

proposed Secs. 543.2(d)(1), 545.92(d)(1) and 552.2-1(a)(1). Various

commenters suggested that this three-day publication requirement should

be modified to require publication as soon as possible after filing of

the application, or extended to require publication within 7, 10, or 30

days of the filing of the application.

The OTS has concluded that the proposed three day requirement may

be too onerous under certain circumstances, such as where local

newspapers are published on a weekly basis. Unfortunately, uniformity

with the other bank regulatory agencies on this issue is impossible,

since each bank regulatory agency has established different publication

requirements.\7\ Nonetheless, the OTS has decided to adopt the FRB's

practice of requiring the filing of the application within seven days

after the publication of the newspaper notice. See final Sec. 516.60.

This change does not affect the 30-day comment period. As noted above,

the final rule has been revised so that the comment period begins on

the date that the application is filed rather than the date of the

newspaper notice. See final Sec. 516.140(a).

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\7\ The OCC requires publication on the date of filing or as

soon as possible thereafter. 12 CFR 5.8(a). The FDIC generally

requires publication no earlier than 30 days before filing, and no

later than the date of filing. 12 CFR 303.6(f)(1)(ii). The FRB

generally requires filing within seven days of publication. 12 CFR

262.3(b).

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2. Posting Requirement

Section 545.95 addresses changes of permanent locations and

redesignations of home and branch offices by federal associations. The

current rule requires an applicant to post a notice of the application

for 17 days from the date of the publication of the newspaper notice--a

period that is equal to the extended comment period under current

application processing procedures. The proposal would have required the

applicant to post a notice of an application for 25 days from the date

of first publication. This time period would more closely track the 25-

day revised comment period.

One commenter argued that Sec. 545.95 unnecessarily duplicates the

Federal Deposit Insurance Act (``FDIA'') provisions on branch closures,

which require posting for 30 days and sending customer notices 90 days

before closure.\8\ See FDIA Section 42 (12 U.S.C. 1831r-1). The

purposes of the two posting requirements differ. The posting

requirement under Sec. 545.95 is intended to allow customers the

opportunity to comment on a proposed application to change an office

location or redesignate a home or branch office. The FDIA posting

requirement, on the other hand, is intended to provide notice to

customers of the proposed date of closing of a branch and to identify

where customers may obtain services following that date. Since the

purposes of the two notices differ, both requirements will continue to

be applicable. However, the OTS would not object if an institution were

to combine the two notices, provided the combined notice clearly

complies with the notification, posting and timing requirements under

Sec. 545.95 and the FDIA. Any combined posting should indicate that

consummation of the transaction is contingent on OTS review.

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\8\ This commenter also questions whether the posting

requirement has any applicability for short distance relocations.

The posting requirement at Sec. 545.95(b)(1)(ii) does not apply to

short distance relocations. See existing Sec. 545.95(c).

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3. Branching by Federal Savings Associations

The OTS policy statement on branching by federal savings

associations is found at Sec. 556.5. The OTS proposed to revise this

section to include a cross citation indicating that the procedures for

commenting on applications are set forth in Part 516 and Part 563e.

A commenter asserted that the proposed amendment was confusing and

suggested the deletion of the cross-reference to Part 563e. The OTS

modified this reference to specifically cite the applicable regulations

at 12 CFR 563e.29 (c) and (d).

D. Related Issues

1. Availability of Applications

Two commenters offered a number of suggestions designed to improve

the availability of OTS information on applications. The OTS has been

working on this issue for some time. The agency began publishing a list

of pending applications on its web site on August 12, 1997. The list is

updated daily and is available at http://www.ots.treas.gov under

``Public Information'' and ``Industry Data.'' Additionally, major new

applications are highlighted under the ``Significant New Applications''

page.

2. Publication of OTS Decisions on Applications

One commenter urged the OTS to publish its decisions on

applications. The commenter noted that this change would conform the

OTS practices to those of the FRB which publishes its decisions in the

Federal Reserve Bulletin.

While the OTS will not publish the text of its decisions, it

intends to continue its current practice of simultaneously informing

the applicant and any commenters of the disposition of an application.

In addition, the OTS intends to modify its web site to indicate whether

applications have been granted or denied. If a commenter or any other

member of the public wishes to obtain a copy of the public portion of

an OTS decision, it may do so by contacting the OTS's Information

Services Division.

3. Targeted CRA Exams

One commenter suggested that OTS should implement the OCC's policy

of conducting targeted CRA examinations when CRA issues are raised by a

commenter and the issues were not addressed in the last examination.

The OTS conducts regular CRA examinations on a set cycle. In most

cases, the OTS has a timely assessment of CRA performance available in

connection with processing an application. Where an applicant's CRA

record is not current, however, the OTS may conduct a targeted CRA

review to obtain the information necessary to access performance.

III. Executive Order 12866

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

not constitute a ``significant regulatory

[[Page 64143]]

action'' for the purposes of Executive Order 12866.

IV. Regulatory Flexibility Act Analysis

The OTS certified that the proposed rule would not have a

significant economic impact on a substantial number of small entities

under section 605(b) of the Regulatory Flexibility Act. One commenter

disagreed with this certification. The commenter argued that the

proposal would make it substantially more difficult for small

communities to comment on applications because these communities rarely

have CRA expertise.

The OTS disagrees. The final rule should make it easier for small

entities, including small communities, to comment on applications. The

final rule provides guidance as to the content of the comments to be

filed and expands the time period for the receipt of such comments.

Thus, the final rule should provide small entities with a greater

opportunity to file comments. Moreover, the rule permits commenters to

participate in informal and formal meetings with the applicant and the

OTS.

Accordingly, pursuant to section 605(b) of the Regulatory

Flexibility Act, the OTS certifies that this final rule will not have a

significant economic impact on a substantial number of small entities.

The final rule will enable the OTS to process applications received

from all applicants, including small savings associations and other

small entities, more expeditiously. It also allows all entities,

including small entities, a longer period in which to submit comments

on applications.

V. Paperwork Reduction Act of 1995

The information collection requirements contained in this rule are

found at 12 CFR 516.50-80, 516.100-190, 543.2, 545.92, 545.95, 552.2-1,

and 563.22. All of the collections of information, except those found

in Secs. 516.50-80 and Secs. 516.100-190, have been previously approved

by the Office of Management and Budget and the burden under them

remains unchanged under this rule (OMB Control Nos. 1550-0005, 1550-

0006, and 1550-0016). The requirements in new Secs. 516.50-80 and

Secs. 516.100-190 were previously found in several of the sections

mentioned above. New Secs. 516.50-80 and Secs. 516.100-190 do not add

any additional burden and the new citations will be added to the

approved packages under OMB Control Nos. 1550-0005, 1550-0006, and

1550-0016 by Paperwork Reduction Act Change Worksheet.

Respondents/recordkeepers are not required to respond to the

collections of information unless the collection displays a currently

valid OMB control number.

VI. Unfunded Mandates Act of 1995

Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law

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. This final rule simplifies

existing procedures and should reduce regulatory burden. The OTS has

determined that the final 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.

VII. Effective Date

Section 553(d) of the Administrative Procedure Act (``APA'')

requires an agency to publish a substantive rule at least 30 days

before its effective date. Section 553(d)(1) of the APA, however,

permits an agency to waive the normal 30-day delay in effective date

for good cause or when a rule relieves a restriction.

The final rule is exempt from the 30-day delayed effective date

requirement. Initially, we note that the 30-day delayed effective date

requirement applies only to substantive rulemaking. Today's rule is

primarily a procedural rule that regulates the manner in which

applicants and commenters present their viewpoints on pending

applications to the OTS. Moreover, to the extent that the rule may have

any impact on the rights or interest of any party, the rule relieves

restrictions by streamlining the public comment process.

List of Subjects

12 CFR Part 516

Administrative practice and procedure, Reporting and recordkeeping

requirements, Savings associations.

12 CFR Part 543

Reporting and recordkeeping requirements, Savings associations.

12 CFR Part 545

Accounting, Consumer protection, Credit, Electronic funds

transfers, Investments, 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, Investments, Reporting

and recordkeeping requirements, Savings associations, Securities,

Surety bonds.

Accordingly, the Office of Thrift Supervision amends title 12,

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

PART 516--APPLICATION PROCESSING GUIDELINES AND PROCEDURES

1. The authority citation for part 516 is revised to read as

follows:

Authority: 5 U.S.C. 552, 559; 12 U.S.C. 1462a, 1463, 1464, 2901

et seq.

2. Existing Secs. 516.1, 516.2 and 516.3 are redesignated as

subpart A, and the subpart heading is added to read as follows:

Subpart A--Application Processing Guidelines

Sec. 516.2 [Amended]

3. Section 516.2(c)(6) is removed and reserved.

4. Subpart B, consisting of Secs. 516.50 through 516.80, is added

to read as follows:

Subpart B--Publication Requirements

Sec.

516.50 Who must publish a public notice of an application?

516.60 When must I publish the public notice?

516.70 Where must I publish the public notice?

516.80 What language must I use in my publication?

Subpart B--Publication Requirements

Sec. 516.50 Who must publish a public notice of an application?

This subpart applies whenever an OTS regulation requires an

applicant (``you'') to follow the public notice procedures in this

subpart.

[[Page 64144]]

Sec. 516.60 When must I publish the public notice?

You must publish a public notice of the application no earlier than

seven days before and no later than the date of filing of the

application.

Sec. 516.70 Where must I publish the public notice?

You must publish the notice in a newspaper having a general

circulation in the following communities:

(a) The community in which your home office(s) are located, or if

you are filing an application for permission to organize, the community

in which your home office will be located; and

(b) If you are filing a branch application, the community to be

served by the branch office.

Sec. 516.80 What language must I use in my publication?

(a) English. You must publish the notice in a newspaper printed in

the English language.

(b) Other than English. If the OTS determines that the primary

language of a significant number of adult residents of the community is

a language other than English, the OTS may require that you

simultaneously publish additional notice(s) in the community in the

appropriate language(s).

5. Subpart C, consisting of Secs. 516.100 through 516.150, is added

to read as follows:

Subpart C--Comment Procedures

Sec.

516.100 What does this subpart do?

516.110 Who may submit a written comment?

516.120 What information should I include in my comment?

516.130 Where do I file my comment?

516.140 When do I file my comment?

516.150 Will I have additional opportunities to discuss the

application?

Subpart C--Comment Procedures

Sec. 516.100 What does this subpart do?

This subpart contains the procedures governing the submission of

public comments on certain types of applications or notices

(``applications'') pending before the OTS. It applies whenever a

regulation incorporates the procedures in this subpart, or where

otherwise required by the OTS.

Sec. 516.110 Who may submit a written comment?

Any person (``you'') may submit a written comment supporting or

opposing an application.

Sec. 516.120 What information should I include in my comment?

(a) Your comment should recite relevant facts, including any

demographic, economic, or financial data, supporting your position. If

you file a comment opposing an application, your comment should also:

(1) Address at least one of the reasons a relevant regulation lists

as to why the OTS may deny an application;

(2) Recite any relevant facts and supporting data addressing these

reasons; and

(3) Address how the approval of the application could harm you or

any community.

(b) If you wish to request an informal meeting under Sec. 516.170,

you must file a request with your comment. You should describe the

nature of the issues or facts to be discussed and the reasons why

written submissions are insufficient to adequately address these facts

or issues.

Sec. 516.130 Where do I file my comment?

You must file your comment with the OTS office(s) set forth at

Sec. 516.1(c). If you request an informal meeting under Sec. 516.170,

you must simultaneously send a copy of the request to the applicant.

Sec. 516.140 When do I file my comment?

(a) General. Except as provided in paragraph (b) of this section,

you must file a written comment with the OTS within 25 days after the

application is filed with the OTS.

(b) Late-filed comments. The OTS will consider your late-filed

comment if:

(1) Within the comment period, you demonstrate to the OTS good

cause why you could not submit a timely comment; and

(2) The OTS concludes that your comment addresses a significant

regulatory concern and will assist in disposing of the application.

Sec. 516.150 Will I have additional opportunities to discuss the

application?

The OTS may provide you with additional opportunities to discuss

the application in informal or formal meetings under subpart D of this

part.

6. Subpart D, consisting of Secs. 516.160 through 516.190, is added

to read as follows:

Subpart D--Meeting Procedures

516.160 What does this subpart do?

516.170 What procedures govern informal meetings on applications?

516.180 What procedures govern formal meetings on applications?

516.190 Will a meeting affect application processing time frames?

Subpart D--Meeting Procedures

Sec. 516.160 What does this subpart do?

This subpart contains informal and formal meeting procedures. It

applies whenever a regulation incorporates the procedures in this

subpart, or when otherwise required by the OTS.

Sec. 516.170 What procedures govern informal meetings on applications?

(a) When will the OTS arrange an informal meeting? The OTS may

arrange an informal meeting with the applicant, commenters, or any

other interested persons to clarify and narrow the issues and to

facilitate the resolution of the issues. If a commenter has filed a

written request for an informal meeting containing the information

described at Sec. 516.120(b), the OTS will arrange an informal meeting.

The OTS also may arrange an informal meeting on its own initiative.

(b) What action will the OTS take on an informal meeting request?

The OTS will inform the applicant and commenters requesting an informal

meeting of the OTS decision on a request for an informal meeting, or of

its decision to hold an informal meeting on its own initiative.

(c) How will the OTS inform the informal meeting participants of

the date, time, location and format for the informal meeting? The OTS

will invite the applicant and the commenter filing the request for the

informal meeting. The OTS may also invite any other interested persons

to attend. The OTS will inform the participants of the date, time,

location, and format for the informal meeting a reasonable time in

advance of the informal meeting.

(d) What procedures will govern the conduct of the informal

meeting? The OTS may hold informal meetings in any format, including a

telephone conference or face-to-face meeting.

(e) Will there be an additional opportunity to discuss the

application? Within three days after the informal meeting, any

participant in the informal meeting may request the OTS to hold a

formal meeting under Sec. 516.180. The participant should describe the

nature of the issues or facts to be presented and the reasons why a

formal meeting is necessary to make an adequate presentation of the

facts or issues. The participant must file the request with the OTS and

send copies of the request to other participants in the informal

meeting.

Sec. 516.180 What procedures govern formal meetings on applications?

(a) When will the OTS hold a formal meeting? The OTS will not grant

a request for a formal meeting unless an informal meeting has been

conducted under Sec. 516.170. The OTS will grant all requests for a

formal meeting filed under Sec. 516.170(e). The OTS may also

[[Page 64145]]

hold a formal meeting on its own initiative, if it determines that

written submissions and informal meetings are insufficient to

adequately present issues or facts to the OTS, or that a formal meeting

would otherwise benefit the decisionmaking process. The OTS may limit

the issues considered at the formal meeting to issues that the OTS

deems relevant or material.

(b) How will the OTS announce the formal meeting? The OTS will

issue a Notice of Formal Meeting that will state the subject and date

of the filing, the time and place of the formal meeting and the issues

to be addressed. The OTS will send the Notice to the applicant and any

person requesting a formal meeting under Sec. 516.170(e). The OTS may

also invite other interested persons to participate in the formal

meeting by sending the Notice to such persons.

(c) Who may participate in the formal meeting? A person receiving a

Notice must notify the OTS of its intent to participate within ten days

after the OTS issues the Notice. At least five days before the formal

meeting, all participants in the formal meeting must provide the names

of their witnesses and copies of proposed exhibits to the OTS, the

applicant, and any other person designated by the OTS.

(d) Will the formal meeting be transcribed? The OTS will arrange

for a transcript. Each participant must bear the cost of any copies of

the transcript it requests for its use.

(e) What procedures govern the conduct of the formal meeting? (1)

The OTS will appoint a presiding officer to conduct the formal meeting.

The presiding officer is responsible for all procedural questions not

governed by this section. Subject to the rulings of the presiding

officer, a participant may make opening statements and present

witnesses, material and data. If a participant presents documentary

material, it must furnish copies of the material to the OTS and to each

other participant. The OTS may keep the formal meeting record open for

additional information for up to 14 days following the receipt of the

transcript.

(2) The Administrative Procedure Act (5 U.S.C. 551 et seq.), the

Federal Rules of Evidence (28 U.S.C. Appendix), the Federal Rules of

Civil Procedure (28 U.S.C. Rule 1 et seq.) and the OTS Rules of

Practice and Procedure in Adjudicatory Proceedings (12 CFR part 509) do

not apply to formal meetings under this section.

Sec. 516.190 Will a meeting affect application processing time frames?

If the OTS has arranged a meeting, it will suspend applicable

application processing time frames, including the time frames for

deeming an application complete and the applicable approval time frames

specified in Sec. 516.2 or 516.3. The time period will resume when the

OTS determines that a record has been developed that sufficiently

supports a determination on the issues raised in the comments.

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

MUTUAL ASSOCIATIONS

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

follows:

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

seq.

8. In Sec. 543.2, paragraph (c) is removed and reserved and

paragraphs (d)(1), (d)(3), (d)(4), (e), (f) and (h)(1) are revised to

read as follows:

Sec. 543.2 Application for permission to organize.

* * * * *

(d) * * *

(1) The applicant must publish a public notice of the application

to organize in accordance with the procedures specified in subpart B of

part 516 of this chapter.

* * * * *

(3) The OTS shall give notice of the application to the State

official who supervises savings associations in the State in which the

new association is to be located.

(4) Any person may inspect the application and all related

communications at the Regional Office during regular business hours,

unless such information is exempt from public disclosure.

(e) Submission of comments. Commenters may submit comments on the

application in accordance with the procedures specified in subpart C of

part 516 of this chapter.

(f) Meetings. The OTS may arrange informal or formal meetings in

accordance with the procedures specified in subpart D of part 516 of

this chapter.

* * * * *

(h) * * *

(1) Applications for permission to organize an interim Federal

savings association are not subject to paragraphs (d), (e), (f) or

(g)(2) of this section.

* * * * *

PART 545--OPERATIONS

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

follows:

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

10. In Sec. 545.92, paragraphs (d), (e) heading, (e)(2) and (f) are

revised, and paragraphs (i) and (j) are removed to read as follows:

Sec. 545.92 Branch offices.

* * * * *

(d) Processing of applications/notices. Processing of applications

and notices shall be subject to the following procedures:

(1) Publication. (i) A federal savings association must publish a

public notice of the branch application or notice in accordance with

the procedures specified in subpart B of part 516 of this chapter.

(ii) Promptly after publication of the public notice, the savings

association shall transmit copies of the public notice and publisher's

affidavit of publication to the OTS.

(iii) The application or notice and all related communications may

be inspected by any person at the Regional Office during regular

business hours, unless such information is exempt from public

disclosure.

(2) Submission of application or notice. A Federal savings

association must comply with Sec. 556.5 of this chapter and shall file

the application required under Sec. 516.3(b)(2) of this chapter or the

notice required under Sec. 516.3(a) of this chapter within three days

after the publication of the public notice under paragraph (d)(1) of

this section.

(3) Submission of comments. Commenters may submit comments on the

application or notice in accordance with the procedures specified in

subpart C of part 516 of this chapter.

(4) Meetings. The OTS may arrange informal or formal meetings in

accordance with the procedures specified in subpart D of part 516 of

this chapter.

(e) Approval of branch application.

* * * * *

(2) An application shall be deemed to be approved 30 days after

notification that the application is complete, unless the OTS suspends

the applicable processing time frames under Sec. 516.190 of this

chapter, or the OTS objects to the application on the grounds set forth

under paragraph (e)(1) of this section.

(f) Approval of branch notice. A notice filed by a Federal savings

association that qualifies for expedited treatment shall be deemed to

be approved 30 days after its filing with the OTS, unless the OTS

suspends the applicable processing time frames under Sec. 516.190 of

this chapter; the OTS objects to the application on the grounds set

forth in paragraph (e)(1) of this section; or the OTS determines to

[[Page 64146]]

process the filing as an application under Sec. 516.3(a)(3) of this

chapter. If the OTS suspends the applicable processing time frames, the

savings association may not open a branch until the OTS provides a

notification of its approval.

* * * * *

11. In Sec. 545.95, paragraph (a) and paragraph (b)(1)(ii) are

revised to read as follows:

Sec. 545.95 Change of office location and redesignation of offices.

(a) Eligibility. A Federal savings association may change the

permanent location of its home office or any approved branch office, or

redesignate a home or branch office subject to the appropriate

expedited or standard treatment procedures for establishing a branch

office set forth in Sec. 545.92 of this part.

(b) * * *

(1) * * *

(ii) The applicant shall post notice of the application for 25 days

from the date of first publication in a prominent location in the

office to be closed or redesignated.

* * * * *

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

STOCK ASSOCIATIONS

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

follows:

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

13. Section 552.2-1 is amended by revising paragraph (a) to read as

follows:

Sec. 552.2-1 Procedure for organization of Federal stock association.

(a) Application for permission to organize. Applications for

permission to organize a Federal stock association are subject to this

section and to Sec. 543.3 of this chapter. Recommendations by employees

of the OTS regarding applications for permission to organize are

privileged, confidential, and subject to Sec. 510.5 (b) and (c) of this

chapter. The processing of an application under this section shall be

subject to the following procedures:

(1) Publication. (i) The applicant shall publish a public notice of

the application to organize in accordance with the procedures specified

in subpart B of part 516 of this chapter.

(ii) Promptly after publication of the public notice, the applicant

shall transmit copies of the public notice and publisher's affidavit of

publication to the OTS in the same manner as the original filing.

(iii) Any person may inspect the application and all related

communications at the Regional Office during regular business hours,

unless such information is exempt from public disclosure.

(2) Notification to interested parties. The OTS shall give notice

of the application to the State official who supervises savings

associations in the State in which the new association is to be

located.

(3) Submission of comments. Commenters may submit comments on the

application in accordance with the procedures specified in subpart C of

part 516 of this chapter.

(4) Meetings. The OTS may arrange informal or formal meetings in

accordance with the procedures specified in subpart D of part 516 of

this chapter.

* * * * *

14. Section 552.2-2 is amended by revising paragraph (a) to read as

follows:

Sec. 552.2-2 Procedures for organization of interim Federal stock

association.

(a) Applications for permission to organize an interim Federal

savings association are not subject to subparts B, C and D of part 516

of this chapter or Sec. 552.2-1(b)(3) of this part.

* * * * *

PART 556--STATEMENTS OF POLICY

15. 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.

16. Section 556.5 is amended by revising paragraph (c)(4) to read

as follows:

Sec. 556.5 Branching by Federal savings associations.

* * * * *

(c) * * *

(4) Comment procedures. Comments on applications for branches must

be submitted in writing and factually documented. Comment procedures

are set forth in subpart C of part 516 of this chapter, Sec. 563e.29

(c) and (d) of this chapter, the OTS Application Processing Handbook,

and other supervisory guidance issued by the OTS.

* * * * *

PART 563--OPERATIONS

17. 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. 4012a, 4104a, 4104b, 4106, 4128.

18. Section 563.22 is amended by revising paragraphs (e)(1), (e)(4)

and (f)(3) to read as follows:

Sec. 563.22 Merger, consolidation, purchase or sale of assets, or

assumption of liabilities.

* * * * *

(e)(1) Unless the OTS finds that it must act immediately in order

to prevent the probable default of one of the savings associations

involved, the applicant must publish a public notice of the application

in accordance with the procedures specified in subpart B of part 516 of

this chapter. In addition to initial publication, the applicant must

publish on a weekly basis during the period allowed for furnishing

reports under paragraph (e)(2) of this section.

* * * * *

(4) Commenters may submit comments on the application in accordance

with the procedures set forth in subpart C of part 516 of this chapter,

except that comments may be submitted at any time during the period

described in paragraph (e)(2) of this section. The OTS may arrange

informal or formal meetings in accordance with the procedures set forth

in subpart D of part 516 of this chapter.

* * * * *

(f) * * *

(3) The OTS suspends the applicable processing time frames under

Sec. 516.190 of this chapter;

* * * * *

Dated: November 26, 1997.

By the Office of Thrift Supervision.

Ellen Seidman,

Director.

[FR Doc. 97-31612 Filed 12-3-97; 8:45 am]

BILLING CODE 6720-01-M