Resolution and Receivership Rules

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 360

RIN 3064-AB92

Resolution and Receivership Rules

AGENCY: Federal Deposit Insurance Corporation.

ACTION: Final rule.

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

SUMMARY: As part of the FDIC's systematic review of its regulations and

written policies under section 303(a) of the Riegle Community

Development and Regulatory Improvement Act of 1994 (CDRIA) the FDIC is

making technical amendments to its receivership regulations. The

amendments address least-cost resolutions and the security interests of

Federal Home Loan Banks in FDIC-administered receiverships.

EFFECTIVE DATE: August 13, 1998.

FOR FURTHER INFORMATION CONTACT: Mitchell Glassman, Deputy Director,

Division of Resolutions and Receiverships, (202) 898-6525; Rodney D.

Ray, Counsel, Legal Division, (202) 898-3556; Catherine A. Ribnick,

Counsel, Legal Division, (202) 736-0117, Federal Deposit Insurance

Corporation, 550 17th Street, N.W., Washington, D.C. 20429.

SUPPLEMENTARY INFORMATION:

I. Sections 360.1 and 360.2

Section 13(c)(4)(E)(i) of the Federal Deposit Insurance Act (FDI

Act) (12 U.S.C. 1823(c)(4)(E)(i)) generally prohibits the FDIC from

taking any action after August 31, 1994 with respect to a depository

institution which would, directly or indirectly, have the effect of

increasing losses to any deposit insurance fund by protecting the

institution's uninsured depositors or other creditors. Section 360.1

was promulgated in compliance with a statutory mandate, contained in

section 13(c)(4)(E)(ii) of the FDI Act (12 U.S.C. 1823(c)(4)(E)(ii)),

that the FDIC issue regulations implementing clause (i) not later than

January 1, 1994.

Section 360.2 was originally promulgated by the Federal Home Loan

Bank Board (FHLBB) to, among other reasons, set forth expressly the

rights of Federal Home Loan Banks (Bank or Banks) regarding collateral

securing Bank advances in liquidating receivership estates. The

regulation was subsequently transferred to the FDIC, pursuant to

section 402(a) of the Financial Institutions Reform, Recovery, and

Enforcement Act of 1989 (FIRREA) Pub. L. 101-73, 103 Stat. 183, 357-58

(1989), when the FHLBB and FSLIC were abolished and has remained

substantively unchanged since its transfer to the FDIC.

II. The Proposed Rule

As part of the FDIC's review of its regulations pursuant to section

303(a) of CDRIA, the FDIC previously issued a notice of proposed

rulemaking regarding Secs. 360.1 and 360.2, 62 FR 7725 (February 20,

1997). The proposal consisted of two parts. The first part proposed a

revision to Sec. 360.1, a rule promulgated pursuant to a statutory

directive regarding least-cost resolutions. The second part proposed

removing Sec. 360.2, addressing secured claims of Banks in FDIC-

administered receiverships. The proposed action regarding Sec. 360.2

was premised upon the limited applicability of the regulation to the

security interests of a discrete class of creditors, i.e., the Banks,

in liquidating receivership estates; the statutory protections enjoyed

by the Banks under section 306(d) of the Competitive Equality Banking

Act of 1987 (CEBA), Pub. L. 100-86, 101 Stat. 552, 601-02 (12 U.S.C.

1430(e), footnote 1) and other subsequently enacted federal statutes;

the significant decline in the number of institutions being placed in

liquidating receiverships in recent years; and the FDIC's belief that

matters addressed therein could be addressed, in the future, on a case

by case basis. The FDIC provided a comment period of 60 days from

publication of the notice of proposed rulemaking in the Federal

Register.

Twelve comments were received within the comment period, all of

which addressed the proposed removal of Sec. 360.2. After the receipt

of the comments, additional information was requested and received by

the FDIC from the commenters.

III. Comments on the Proposed Rule

The FDIC received no comments on the proposed amendment to

Sec. 360.1, but all of the commenters favored retention of Sec. 360.2.

Although the commenters' reasons for retaining the regulation varied,

they expressed support for the clarity and certainty the regulation

provides in addressing the security interests of Banks when an insured

depository institution fails and is placed in receivership. They also

expressed concerns that additional measures that the Banks may take to

protect their security interests against the risk of a borrower being

placed in receivership, absent the regulation, may affect the cost or

availability of certain types of credit to borrowers from the Banks.

IV. Retention of Sec. 360.2 and Amendments to Secs. 360.1 and 360.2

Based upon a review of the comments received, the Board of

Directors has decided to retain Sec. 360.2. This decision is based

upon: (1) The concerns over removal of the regulation that have been

expressed by the commenters; (2) the fact that the FDIC has, in the

past, normally satisfied obligations owed to the Banks shortly after

the failure of an institution to obtain a release of the failed

institution's collateral; (3) the regulation is currently in place,

therefore, retaining it maintains the existing status quo; and (4)

there may be operational benefits to retaining the regulation.

As indicated in the FDIC's notice of proposed rulemaking,

Sec. 360.1 is being amended to correct an erroneous statutory reference

in paragraph (b) from ``12 U.S.C. 13(c)(4)(A)'' to ``12 U.S.C.

1823(c)(4)(A)''. In addition, Sec. 360.2 is being amended to add ``the

claim is'' to paragraph (e)(1) to achieve parallel construction with

paragraph (e)(2). Paragraph (e)(2) also is being amended to correct a

typographical error by replacing the word ``by'' with the word ``but'',

as well as to revise the reference to section 306(d) of CEBA to replace

the Public Laws reference with the appropriate United States Code

citation for the paragraph.

Paperwork Reduction Act

No collections of information pursuant to section 3504(h) of the

Paperwork Reduction Act (44 U.S.C. 3501 et seq.) are required by this

notice. Consequently, no information has been submitted to the Office

of Management and Budget for review.

Small Business Regulatory Enforcement Fairness Act

The Office of Management and Budget has determined that the final

rule is not a ``major rule'', as defined in the Small Business

Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 801 et

seq.). SBREFA generally requires an agency to report rules to Congress

and the Comptroller General for review. The reporting requirement is

imposed when the agency issues a final rule. Accordingly, the FDIC will

file the appropriate reports.

Regulatory Flexibility Act

Pursuant to section 605(b) of the Regulatory Flexibility Act (5

U.S.C. 605) the Board of Directors certifies that this rule will not

have a significant economic impact on a substantial number of small

entities. Although the final action differs from the initial proposal,

which was previously

[[Page 37761]]

certified by the Board of Directors, because the FDIC is retaining a

regulation which it had proposed to remove, the final action merely

maintains the existing status quo and makes only non-substantive

technical revisions to the existing sections.

List of Subjects in 12 CFR Part 360

Savings associations.

For the reasons set out in the preamble, part 360 of chapter III of

title 12 of the Code of Federal Regulations is amended as follows:

PART 360--RESOLUTION AND RECEIVERSHIP RULES

1. The authority citation for part 360 continues to read as

follows:

Authority: 12 U.S.C. 1821(d)(11), 1821 (e)(8)(D)(i), 1823(c)(4);

Sec. 401(h), Pub. L. 101-73, 103 Stat. 357.

2 Paragraph (b) of Sec. 360.1 is revised to read as follows:

Sec. 360.1 Least-cost resolution.

* * * * *

(b) Purchase and assumption transactions. Subject to the

requirement of section 13(c)(4)(A) of the FDI Act (12 U.S.C.

1823(c)(4)(A)), paragraph (a) of this section shall not be construed as

prohibiting the FDIC from allowing any person who acquires any assets

or assumes any liabilities of any insured depository institution, for

which the FDIC has been appointed conservator or receiver, to acquire

uninsured deposit liabilities of such institution as long as the

applicable insurance fund does not incur any loss with respect to such

uninsured deposit liabilities in an amount greater than the loss which

would have been incurred with respect to such liabilities if the

institution had been liquidated.

3. Paragraph (e) of Sec. 360.2 is revised to read as follows:

Sec. 360.2 Federal Home Loan banks as secured creditors.

* * * * *

(e) The receiver for a borrower from a Federal Home Loan Bank shall

allow a claim for a prepayment fee by the Bank if, and only if:

(1) The claim is made pursuant to a written contract that provides

for a prepayment fee, provided, however, that such prepayment fee

allowed by the receiver shall not exceed the present value of the loss

attributable to the difference between the contract rate of the secured

borrowing and the reinvestment rate then available to the Bank; and

(2) The indebtedness owed to the Bank by such borrower is secured

by sufficient collateral in which a perfected security interest in

favor of the Bank exists or as to which the Bank's security interest is

entitled to priority under section 306(d) of the Competitive Equality

Banking Act of 1987 (CEBA) (12 U.S.C. 1430(e), footnote (1), or

otherwise so that the aggregate of the outstanding principal on the

advances secured by such collateral, the accrued but unpaid interest

thereon and the prepayment fee applicable to such advances can be paid

in full from the amounts realized from such collateral. For purposes of

this paragraph (e)(2), the adequacy of such collateral shall be

determined as of the date such prepayment fees shall be due and payable

under the terms of the written contract providing therefor.

By order of the Board of Directors.

Dated at Washington, DC, this 7th day of July 1998.

Federal Deposit Insurance Corporation.

James LaPierre,

Deputy Executive Secretary.

[FR Doc. 98-18620 Filed 7-13-98; 8:45 am]

BILLING CODE 6714-01-P