Capital Distributions

DEPARTMENT OF THE TREASURY

Office of Thrift Supervision

12 CFR Parts 563, 563b

[No. 99-1]

RIN 1550-AA72

Capital Distributions

AGENCY: Office of Thrift Supervision, Treasury.

ACTION: Final rule.

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SUMMARY: The Office of Thrift Supervision (OTS) is issuing a final rule

revising its capital distribution regulation. Today's rule updates,

simplifies, and streamlines this regulation to reflect OTS's

implementation of the system of prompt corrective action (PCA)

established under the Federal Deposit Insurance Corporation Improvement

Act of 1991 (FDICIA). The final rule also conforms OTS's capital

distribution requirements more closely to those of the other banking

agencies.

EFFECTIVE DATE: April 1, 1999.

FOR FURTHER INFORMATION CONTACT: Edward J. O'Connell, III, Project

Manager, (202) 906-5694; Evelyne Bonhomme, Counsel (Banking and

Finance), (202) 906-7052; Karen Osterloh, Assistant Chief Counsel,

(202) 906-6639, Regulations and Legislation Division, Chief Counsel's

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

D.C. 20552.

SUPPLEMENTARY INFORMATION:

I. Background

On January 7, 1998, the OTS published a proposed rule adding a new

subpart E to part 563 to govern capital distributions by savings

associations.1 The proposal was intended to update,

simplify, and streamline the existing capital distribution rule to

reflect OTS's implementation of the system of prompt corrective action

(PCA) established under the Federal Deposit Insurance Corporation

Improvement Act of 1991 (FDICIA). Consistent with section 303 of the

Community Development and Regulatory Improvement Act of 1994 (CDRIA),

the proposed rule was also designed to conform the OTS capital

distribution regulation to the rules of the other banking agencies, to

the extent possible.

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\1\ 63 FR 1044 (Jan. 7, 1998).

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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 March 9,

1998. Four commenters responded: one federal savings bank, one savings

and loan holding company, one law firm representing a federal savings

bank, and one trade association. Two commenters supported the proposed

rule with certain modifications and clarifications. One commenter, the

savings and loan holding company, opposed the proposed changes. Another

commenter addressed coverage of capital distributions by operating

subsidiaries. The issues raised by the commenters are addressed in the

section-by-section analysis below.

B. Section-by-Section Analysis

Proposed Sec. 563.140--What Does this Subpart Cover?

Section 563.140 of the proposed rule described the scope of the

regulation. Proposed subpart E would apply to all capital distributions

by savings associations. The OTS specifically requested comment on

whether the capital distribution rule should also apply to capital

distributions by operating subsidiaries of savings associations. This

issue is addressed below under Sec. 563.141.

Proposed Sec. 563.141--What is a Capital Distribution?

Proposed Sec. 563.141 defined the term ``capital distribution'' as

a distribution of cash or other property to a savings association's

owners, made on account of their ownership. The proposed definition, at

Sec. 563.141(a), excluded dividends consisting only of a savings

association's shares or rights to purchase shares, and excluded

payments that a mutual savings association is required to make under

the terms of a deposit instrument.

Capital distributions would also include a savings association's

payment to repurchase, redeem, retire, or otherwise acquire any of its

shares or other ownership interests, any payment to repurchase, redeem,

or otherwise acquire debt instruments included in total capital, and

any extension of credit to finance an affiliate's acquisition of those

shares or interests. Proposed Sec. 563.141(b). Additionally, a capital

distribution would include any direct or indirect payment of cash or

other property to owners or affiliates made in connection with a

corporate

[[Page 2806]]

restructuring. Proposed Sec. 563.141(c). Finally, proposed

Sec. 563.141(d) included as a capital distribution, any transaction the

OTS or the Federal Deposit Insurance Corporation (FDIC) determines, by

order or regulation, to be in substance a distribution of capital.

Two commenters addressed this proposed definition. Both responded

to OTS's request for comment on whether the final rule, like OTS's

existing regulation, should state that a capital distribution includes

other distributions charged against the capital accounts of an

association. See current Sec. 563.134(a)(1)(iii). Both commenters

agreed with the OTS's initial conclusion that all distributions

described by this section would be covered under other provisions of

the proposed definition of capital distribution.2 The OTS,

however, has decided to retain this provision based on its review of a

related issue regarding distributions by operating subsidiaries.

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\2\ 63 FR 1044, at 1046.

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In the preamble to the proposed rule, the OTS specifically

requested comment on whether the capital distribution rule should apply

to capital distributions made by operating subsidiaries of savings

associations. One commenter argued that the application of the rule to

operating subsidiaries would make it more difficult for institutions to

raise capital at favorable pricing for the operating subsidiary. The

commenter also noted that, in certain instances, distributions by an

operating subsidiary would have no impact on the capital accounts of

savings associations.

The final rule does not apply to capital distributions by wholly-

owned operating subsidiaries. Rather, the OTS believes that its capital

distribution rule should apply only when a distribution by an operating

subsidiary (or any other subordinate organization) is made to minority

shareholders and consequently affects the capital accounts of an

association. Generally, for reporting purposes, the accounts of a

majority-owned subsidiary are consolidated with those of the parent

savings association. For regulatory capital purposes, where the

consolidated subsidiary is not wholly owned, the balance sheet account

``minority interests in the equity accounts of subsidiaries that are

fully consolidated'' may be included in Tier 1 capital and total

capital if certain conditions are met.3 Distributions by

such consolidated subsidiaries to shareholders other than the savings

association reduce the cited balance sheet account and, therefore,

reduce regulatory capital. Accordingly, final Sec. 563.141(d) states

that a capital distribution includes any distribution charged against

the capital accounts of an association. For example, any distribution

by a subsidiary, as defined under the capital rules at 12 CFR 567.1,

falls under this subsection if the distribution reduces the savings

association's regulatory capital. To ensure that this application of

the regulation does not impose undue regulatory burdens that are not

justified by safety and soundness considerations, these distributions

are not considered capital distributions under the final rule if the

savings association will be well capitalized following the

distribution.4

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\3\ 12 CFR 567.5(a)(1)(iii).

\4\ Of course, OTS may, nonetheless, determine that such a

distribution is, in substance, a distribution of capital under final

Sec. 563.141(e).

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Proposed Sec. 563.142--What Other Definitions Apply to this Subpart?

Proposed Sec. 563.142 included other definitions of terms used in

Subpart E, including ``affiliate,'' ``capital,'' ``net income,''

``retained net income,'' and ``shares.'' No commenter addressed this

section.

The final rule amends the definition of affiliate. The proposed

rule defined affiliate as any company that controls, is controlled by,

or is under common control with another company. The term ``affiliate''

is used twice in the final definition of capital distribution. See

Sec. 563.141 (b) and (c), which provide that a capital distribution

includes any direct payment of cash or property to owners or affiliates

made in connection with a corporate restructuring and includes any

extension of credit to finance an affiliate's acquisition of the

savings association's shares or ownership interests. The OTS does not

believe that direct payments of cash or property or extensions of

credit to a subsidiary that is controlled by the thrift should be

considered to be a capital distribution. The definition of

``affiliate'' at 12 CFR 563.41(b) generally excludes a thrift's

subsidiaries. The OTS believes that this definition is better suited to

the capital distribution rule and has amended the final rule

accordingly.5 This change will also promote the use of

consistent and uniform definitions in OTS regulations.

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\5\ The proposed definition of ``affiliate'' was based on the

Federal Deposit Insurance Act definition. See 12 U.S.C. 1813(w).

However, since the PCA capital distribution restrictions do not use

this term, the OTS is not required to apply this definition in its

rule.

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Proposed Sec. 563.143--Must I File With the OTS?

The current OTS capital distribution regulation requires all

savings associations to file a notice or an application for approval

before making any capital distribution.6 The OTS proposed to

amend existing procedures to exempt certain savings associations from

filing with the OTS.

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\6\ 12 CFR 563.134 (b) and (c).

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Proposed Sec. 563.143(a) described when a savings association must

file an application and obtain prior OTS approval of a proposed capital

distribution. Under this proposed section, a savings association would

be required to file an application if the association is not eligible

for expedited treatment under OTS's application processing rules at 12

CFR 516.3(a), or the total amount of all capital distributions,

including the proposed capital distribution, for the applicable

calendar year would exceed an amount equal to the savings association's

net income for that year to date plus the savings association's

retained net income for the preceding two years (the ``retained net

income standard'').

Proposed Sec. 563.143(b) described when a savings association must

file a notice of a proposed capital distribution. Under the proposed

rule, a savings association would be required to file a notice whenever

an application would not be required under Sec. 563.143(a) and: (1) The

savings association will not be at least adequately capitalized

following the capital distribution; (2) The capital distribution would

reduce the amount of, or retire any part of the savings association's

common or preferred stock, or retire any part of debt instruments such

as notes or debentures included in capital under part 567; (3) The

proposed distribution would violate a prohibition contained in any

applicable statute, regulation, or agreement between the savings

association and the OTS (or the FDIC), or a condition imposed on the

savings association in an OTS-approved application or notice; or (4)

The savings association is a subsidiary of a savings and loan holding

company.

If neither the savings association nor the proposed capital

distribution met any of the criteria listed in Sec. 563.143 (a) or (b),

the savings association would not be required to file a notice or an

application before making a distribution. See proposed Sec. 563.143(c).

Two commenters addressed the proposed retained net income standard.

One commenter claimed that this standard is too stringent because it

would require applications from savings associations that have a large

amount of capital, but low retained earnings in the years preceding the

capital distribution. Another commenter suggested a

[[Page 2807]]

different standard which would require an application whenever a

capital distribution exceeded the association's net income for the year

plus an amount equal to the greater of the retained net income for the

preceding two years or the amount of available capital above the well

capitalized level. The commenter asserted that this change would

provide additional flexibility because it would permit associations

with strong capital positions to provide dividend distributions or

other types of capital distributions through all phases of the economic

and business cycle.

The final rule continues to require an application whenever a

proposed capital distribution exceeds the retained net income standard.

This standard is based on similar requirements currently imposed on

national banks and state member banks. Under 12 U.S.C. 60 and 12 CFR

5.64 (1998), a national bank may not declare a dividend if the total

amount of all dividends (common and preferred), including the proposed

dividend, declared by the national bank in any calendar year exceeds

the total of the national bank's retained net income of that year to

date, combined with its retained net income of the preceding two years,

unless the dividend is approved by the OCC. The Federal Reserve System

regulation at 12 CFR 208.19(b)(1998) imposes a similar requirement on

state member banks. Adoption of the net income standard will bring the

OTS capital distribution regulation into greater uniformity with these

other banking agencies and is, thus, consistent with section 303 of the

CDRIA.

One commenter feared that the OTS would use the retained net income

standard as a benchmark for approving capital distributions. The final

rule does not prohibit capital distributions in excess of this uniform

retained net income standard, but rather merely subjects these

distributions to greater regulatory scrutiny through the application

process. Under the final rule, the OTS may disapprove or deny a capital

distribution if it raises safety and soundness concerns. The OTS will

make this determination on a case-by-case basis. It has not proposed,

and will not use, the retained net income standard as a proxy for a

safety and soundness review.

One commenter recommended that an application and prior OTS

approval should be required whenever an institution would not be at

least adequately capitalized following the distribution and whenever a

proposed distribution would violate a statute or regulation, an

agreement with the OTS or the FDIC, or a condition in an OTS-approved

application. OTS agrees that a notice procedure is not appropriate

under these circumstances. Where a savings association would not be

adequately capitalized following a distribution or where a distribution

would violate an applicable statute, regulation, agreement or

condition, OTS must have a sufficient opportunity to review the

specific facts and circumstances and to affirmatively determine whether

a proposed distribution should, nonetheless, be permitted.7

To ensure that OTS is permitted to fully and adequately make these

determinations, the final rule has been revised to require an

application under these circumstances.

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\7\ For example, the PCA statute provides that OTS may permit

certain repurchases, redemptions, retirements or other acquisitions

of shares or other ownership interests notwithstanding the general

prohibition on distributions by inadequately capitalized

institutions. To do so, however, OTS must have an opportunity to

consult with FDIC and must review the circumstances to determine

whether it should permit the capital distribution under the

statutory exemption authority. I.e., the OTS must determine that the

proposed transaction will be made in connection with the issuance of

additional shares or obligations of the institution in at least an

equivalent amount, and that the proposed distribution will reduce

the institution's financial obligations or otherwise improve the

institution's financial position. 12 U.S.C. 1831o(d)(1)(B).

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One commenter, a savings and loan holding company, asserted that

the proposed regulation inappropriately exempts many adequately

capitalized institutions from any advance notice or application. The

commenter argued that the proposed rule does not provide a sufficient

cushion against losses, could pose an unjustifiable risk to the

insurance fund, and would not permit the OTS to consider trends within

the institution and the long-term consequences of disbursal of capital.

The OTS has modified the final Sec. 563.143(b) to require a notice

when an institution would not be well capitalized following the

distribution. Such advance notice will provide the OTS with the

opportunity to consider whether a proposed distribution by an

adequately capitalized institution raises safety and soundness

concerns. Such safety and soundness concerns may arise, for example,

where the amount of capital held by an adequately capitalized

institution following a distribution would be insufficient to offset

other factors, such as high risk activities conducted by the

institution.

The proposed and final rule require a notice or application

whenever the savings association is a subsidiary of a savings and loan

holding company. This provision implements 12 U.S.C. 1467a(f), which

requires such savings associations to notify OTS at least 30 days

before the proposed declaration of any dividend. Two commenters

objected to this provision, but recognized its statutory basis.

Proposed Sec. 563.144--How Do I File With the OTS?

Proposed Sec. 563.144 prescribed the procedures for filing of

capital distribution notices or applications with the OTS. Proposed

Sec. 563.144(c) would permit a savings association to file schedules of

proposed capital distributions over a specified period not to exceed 12

months. One commenter urged the OTS to clarify that if the agency

objects to one or more capital distributions in the proposed schedule,

the savings association would not be required to refile a notice or

application for the other capital distributions on the schedule.

Section 563.146 has been revised to specifically state that the OTS may

disapprove a notice or deny an application ``in whole or in part.''

Accordingly, under the final rule, the savings association would not be

required to refile its application or notice for the approved

distributions on the schedule.

Proposed Sec. 563.145--May I Combine my Notice or Application With

Other Notices or Applications?

Proposed Sec. 563.145 would allow a savings association to combine

a capital distribution notice or application with any related notice or

application filed with the OTS.

One commenter objected to combined filings, particularly combined

filings by a less than well capitalized association. When a savings

association combines a capital distribution notice or application with

another filing, it must include all relevant information necessary to

support each request. The OTS will review each request under the

applicable review standards for that request. Since combined filings

will not affect the OTS's review of requests, but may reduce the

regulatory burden of filing separate applications, the final rule

continues to permit these filings.

Another commenter argued that the reference to ``related'' notices

or applications was vague and urged the OTS to permit combined filings

without restrictions. As noted above, OTS policy is to minimize burden,

including paperwork burdens associated with applications and notices,

whenever possible. The final rule has been clarified to state that a

savings association may combine filings when the proposed capital

distribution is a part of, or proposed in connection with,

[[Page 2808]]

any other transaction requiring a notice or application under OTS

regulations.

Proposed Sec. 563.146--Will the OTS Permit my Capital Distribution?

Proposed Sec. 563.146 set forth the standards under which the OTS

would disapprove a notice or deny an application for a capital

distribution. Under proposed Sec. 563.146, the OTS could deny a capital

distribution if the savings association would be undercapitalized

following the distribution and the distribution did not fall within the

statutory exemption at 12 U.S.C. 1831o(d)(1)(B). This statutory

exception permits the OTS, in consultation with the FDIC, to approve an

undercapitalized institution's repurchase, redemption, retirement or

acquisition of shares or ownership interests. To be exempt, however,

the distribution must be made in connection with the issuance of

additional shares in at least an equivalent amount, and must either

reduce the institution's financial obligations or otherwise improve its

financial condition.

One commenter urged the OTS to authorize the use of the statutory

exception if the distribution would improve the savings association's

capital position, even though the savings association would not become

adequately capitalized as a result of the distribution. Provided all

other statutory conditions for exemption are met, the statutory

prerequisite that a capital distribution must ``otherwise improve the

institution's financial condition'' does not, on its face, require that

the association be adequately capitalized following the transaction. In

exercising its discretion under the statute, the OTS may consider this

factor. The OTS, however, will make the decision to grant or deny an

exemption on a case-by-case basis.

The OTS has made a minor change to Sec. 563.146 to clarify that the

OTS will review all notices and applications under the review

procedures in 12 CFR 516, subpart A. In light of this clarifying

change, the OTS has also revised the application and notice content

requirements at Sec. 563.144(a) to delete the unnecessary cross-

reference to application review standards at Sec. 516.3(b).

Conditions Imposed in Written Agreements

Existing Sec. 563.134(e)(2) and (3) address the impact of the

capital distribution rule on more stringent and less stringent

provisions or conditions imposed in written agreements between a

savings association and the OTS, or imposed on a savings association in

an OTS-approved application or notice. Specifically, existing

Sec. 563.134(e)(2) states that the capital distribution rule supersedes

less stringent agreements and conditions of approved applications.

Under existing Sec. 563.134(e)(3), a savings association is subject to

agreements and approval conditions that are more stringent than the

capital distribution rule.\8\

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\8\ The savings association may file a written notice with the

OTS requesting relief from the application of the more stringent

condition or agreement. See 12 CFR 563.134(e)(3).

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One commenter argued that these provisions would be helpful in

determining when a proposed distribution would violate a prohibition

contained in an agreement between the savings association and the OTS

(or the FDIC), or a condition in an OTS-approved application. See final

Sec. 563.143(a)(4), which requires an application under these

circumstances. The OTS, however, believes that Sec. 563.134(e)(2) and

(3) do not provide significant useful guidance in interpreting the

regulation. Moreover, because these paragraphs have only a limited

applicability, they have not been included in the final rule.

III. Executive Order 12866

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

not constitute a ``significant regulatory action'' for purposes of

Executive Order 12866.

IV. Regulatory Flexibility Act

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

OTS certifies that this proposed regulation will not have a significant

economic impact on a substantial number of small entities. The final

rule conforms the capital distribution regulation to standards already

in place for all depository institutions, including savings

associations, as a result of PCA and makes other revisions designed to

lower paperwork and other burdens on savings associations.

V. 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. 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. As

discussed in the preamble, the final rule merely conforms the capital

distribution regulation to standards already in place for all

depository institutions as a result of PCA and makes other revisions

designed to lower paperwork and other burdens on savings associations.

Accordingly, this rulemaking is not subject to section 202 of the

Unfunded Mandates Act.

VI. Paperwork Reduction Act

The information collection requirements contained in this final

rule have been submitted to and approved by the Office of Management

and Budget in accordance with the Paperwork Reduction Act of 1995 (44

U.S.C. 3507(d)) under OMB Control No. 1550-0059. Comments on the

collections of information should be sent to the Office of Management

and Budget, Paperwork Reduction Project (1550-0059), Washington, D.C.

20503, with copies to the Regulations & Legislation Division (1550-

0059), Chief Counsel's Office, Office of Thrift Supervision, 1700 G

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

The information collection requirements contained in this rule are

found in 12 CFR 563.143-563.146. The OTS requires this information for

the proper supervision of capital distributions by savings

associations. The likely respondents/recordkeepers are savings

associations.

Respondents/recordkeepers are not required to respond to the

collections of information unless the collection displays a currently

valid OMB control number.

List of Subjects

12 CFR Part 563

Accounting, Advertising, Crime, Currency, Investments, Reporting

and recordkeeping requirements, Savings associations, Securities,

Security bonds.

12 CFR Part 563b

Reporting and recordkeeping requirements, Savings associations,

Securities.

Accordingly, the Office of Thrift Supervision amends chapter V,

title 12 of the Code of Federal Regulations as set forth below.

PART 563--OPERATIONS

1. The authority citation for part 563 is revised to read as

follows:

[[Page 2809]]

Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,

1817, 1820, 1828, 1831o, 3806; 42 U.S.C. 4106.

Sec. 563.134 [Removed]

2. Section 563.134 is removed.

3. Subpart E is revised to read as follows:

Subpart E--Capital Distributions

Sec.

563.140 What does this subpart cover?

563.141 What is a capital distribution?

563.142 What other definitions apply to this subpart?

563.143 Must I file with the OTS?

563.144 How do I file with the OTS?

563.145 May I combine my notice or application with other notices

or applications?

563.146 Will the OTS permit my capital distribution?

Subpart E--Capital Distributions

Sec. 563.140 What does this subpart cover?

This subpart applies to all capital distributions by a savings

association (``you'').

Sec. 563.141 What is a capital distribution?

A capital distribution is:

(a) A distribution of cash or other property to your owners made on

account of their ownership, but excludes:

(1) Any dividend consisting only of your shares or rights to

purchase your shares; or

(2) If you are a mutual savings association, any payment that you

are required to make under the terms of a deposit instrument and any

other amount paid on deposits that the OTS determines is not a

distribution for the purposes of this section;

(b) Your payment to repurchase, redeem, retire or otherwise acquire

any of your shares or other ownership interests, any payment to

repurchase, redeem, retire, or otherwise acquire debt instruments

included in your total capital under Sec. 567.5 of this chapter, and

any extension of credit to finance an affiliate's acquisition of your

shares or interests;

(c) Any direct or indirect payment of cash or other property to

owners or affiliates made in connection with a corporate restructuring.

This includes your payment of cash or property to shareholders of

another association or to shareholders of its holding company to

acquire ownership in that association, other than by a distribution of

shares;

(d) Any other distribution charged against your capital accounts if

you would not be well capitalized, as set forth in Sec. 565.4(b)(1) of

this chapter, following the distribution; and

(e) Any transaction that the OTS or the Corporation determines, by

order or regulation, to be in substance a distribution of capital.

Sec. 563.142 What other definitions apply to this subpart?

The following definitions apply to this subpart:

Affiliate means an affiliate, as defined under Sec. 563.41(b) of

this part.

Capital means total capital, as defined under Sec. 567.5(c) of this

chapter.

Net income means your net income computed in accordance with

generally accepted accounting principles.

Retained net income means your net income for a specified period

less total capital distributions declared in that period.

Shares means common and preferred stock, and any options, warrants,

or other rights for the acquisition of such stock. The term ``share''

also includes convertible securities upon their conversion into common

or preferred stock. The term does not include convertible debt

securities prior to their conversion into common or preferred stock or

other securities that are not equity securities at the time of a

capital distribution.

Sec. 563.143 Must I file with the OTS?

Whether and what you must file with the OTS depends on whether you

and your proposed capital distribution fall within certain criteria.

(a) Application required.

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If: Then you:

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(1) You are not eligible for expedited Must file an application with the OTS.

treatment under Sec. 516.3(a) of

this chapter.

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(2) The total amount of all of your Must file an application with the OTS.

capital distributions (including the

proposed capital distribution) for

the applicable calendar year exceeds

your net income for that year to date

plus your retained net income for the

preceding two years.

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(3) You would not be at least Must file an application with the OTS.

adequately capitalized, as set forth

in Sec. 565.4(b)(2) of this chapter,

following the distribution.

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(4) Your proposed capital distribution Must file an application with the OTS.

would violate a prohibition contained

in any applicable statute,

regulation, or agreement between you

and the OTS (or the Corporation), or

violate a condition imposed on you in

an OTS-approved application or notice.

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(b) Notice required.

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If you are not required to file an

application under paragraph (a) of Then you:

this section, but:

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(1) You would not be well capitalized, Must file a notice with the OTS.

as set forth under Sec. 565.4(b)(1),

following the distribution.

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(2) Your proposed capital distribution Must file a notice with the OTS.

would reduce the amount of or retire

any part of your common or preferred

stock or retire any part of debt

instruments such as notes or

debentures included in capital under

part 567 of this chapter (other than

regular payments required under a

debt instrument approved under Sec.

563.81).

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(3) You are a subsidiary of a savings Must file a notice with the OTS.

and loan holding company.

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[[Page 2810]]

(c) No prior notice required.

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If neither you nor your proposed Then you do not need to file a notice or an application with the OTS

capital distribution meet any of the before making a capital distribution.

criteria listed in paragraphs (a) and

(b) of this section.

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Sec. 563.144 How do I file with the OTS?

(a) Contents. Your notice or application must:

(1) Be in narrative form.

(2) Include all relevant information concerning the proposed

capital distribution, including the amount, timing, and type of

distribution.

(3) Demonstrate compliance with Sec. 563.146.

(b) Schedules. Your notice or application may include a schedule

proposing capital distributions over a specified period, not to exceed

12 months.

(c) Timing. You must file your notice or application at least 30

days before the proposed declaration of dividend or approval of the

proposed capital distribution by your board of directors.

Sec. 563.145 May I combine my notice or application with other notices

or applications?

You may combine the notice or application required under

Sec. 563.143 with any other notice or application, if the capital

distribution is a part of, or is proposed in connection with, another

transaction requiring a notice or application under this chapter. If

you submit a combined filing, you must:

(a) State that the related notice or application is intended to

serve as a notice or application under this subpart; and

(b) Submit the notice or application in a timely manner.

Sec. 563.146 Will the OTS permit my capital distribution?

The OTS will review your notice or application under the review

procedures in 12 CFR part 516, subpart A. The OTS may disapprove your

notice or deny your application filed under Sec. 563.143, in whole or

in part, if the OTS makes any of the following determinations.

(a) You will be undercapitalized, significantly undercapitalized,

or critically undercapitalized as set forth in Sec. 565.4(b) of this

chapter, following the capital distribution. If so, the OTS will

determine if your capital distribution is permitted under 12 U.S.C.

1831o(d)(1)(B).

(b) Your proposed capital distribution raises safety or soundness

concerns.

(c) Your proposed capital distribution violates a prohibition

contained in any statute, regulation, agreement between you and the OTS

(or the Corporation), or a condition imposed on you in an OTS-approved

application or notice. If so, the OTS will determine whether it may

permit your capital distribution notwithstanding the prohibition or

condition.

PART 563b--CONVERSIONS FROM MUTUAL TO STOCK FORM

4. The authority citation for part 563b continues to read as

follows:

Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901; 15

U.S.C. 78c, 78l, 78m, 78n, 78w.

Sec. 563b.3 [Amended]

5. Section 563b.3(g)(2) is amended by removing the phrase

``Sec. 563.134'', and by adding in lieu thereof the phrase

``Secs. 563.140-563.146''.

Dated: January 8, 1999.

By the Office of Thrift Supervision.

Ellen Seidman,

Director.

[FR Doc. 99-1040 Filed 1-15-99; 8:45 am]

BILLING CODE 6720-01-P