OCC 2000-11
OCC Bulletin  

Subject:      Home Mortgage Disclosure Act                  
Description:  Exemption Threshold for Depository Institutions 
              under Regulation C

Date:         March 30, 2000

TO:  Chief Executive Officers of All National Banks, Department
     and Division Heads, and All Examining Personne

The attached final rule was published in the Federal Register on
March 10, 2000.  The final rule became effective on March 11,
2000.

The final rule adds a new regulation (12 CFR 5.39) to implement
the financial subsidiary provisions of the Gramm-Leach-Bliley Act
(GLBA), revises the OCC's existing operating subsidiary rule at
12 CFR 5.34, revises the OCC's rule at 12 CFR 5.36 to provide a
notice process for national banks making non-controlling
investments, and makes technical changes to several additional
sections of 12 CFR Part 5.

Financial Subsidiaries

New section 5.39 governs national bank activities conducted
through a financial subsidiary.  This new regulation:

* Permits a national bank that is well capitalized, well managed,
  and has a rating of at least "satisfactory" in its most recent
  Community Reinvestment Act examination to acquire control of,
  or hold an interest in, a financial subsidiary.

* Authorizes a financial subsidiary to engage in specified
  activities that are financial in nature and in activities that
  are incidental to financial activities.

* Allows a national bank to obtain OCC approval to control or
  invest in a financial subsidiary through the bank's choice of
  streamlined alternative filing procedures.  A national bank may
  file either a certification with subsequent notice or a
  combined certification and notice.

* Requires a national bank that establishes or maintains a
  financial subsidiary to comply with a number of safeguards,
  including requirements to:

  -    Deduct the aggregate amount of its outstanding equity
       investment, including retained earnings, in its financial
       subsidiaries from the assets and tangible equity of the bank
       and deduct such investment from its total risk-based capital,
       with the deduction taken equally from Tier 1 and Tier 2 
       capital;
  -    Have reasonable policies and procedures to preserve the
       separate corporate identity and limited liability of the bank
       and the financial subsidiaries of the bank; and
  -    Have procedures for identifying and managing financial and
       operational risks within the bank and the financial subsidiary
       that adequately protect the bank from such risks.

* Incorporates the provisions from the GLBA that authorize the
  OCC to take remedial actions in the event that a national bank
  or, in some cases, the depository institution affiliates of a
  national bank, fail to continue to meet certain qualification
  requirements.

* Provides that the aggregated consolidated total assets of all
  financial subsidiaries of the bank may not exceed the lesser of
  45 percent of the consolidated total assets of the parent bank
  or $50 billion.  Additionally, if the bank is one of the 100
  largest insured banks it must have outstanding "eligible debt"
  that is rated in one of the three highest investment grade
  rating categories by a nationally recognized statistical rating
  organization.

Operating Subsidiaries

The final rule revises the OCC's operating subsidiary regulation
(12 CFR 5.34) to conform to changes made by the GLBA and to
streamline procedures for banks that engage in activities through
operating subsidiaries.  Consistent with the GLBA, the final rule
authorizes operating subsidiaries to engage in bank-permissible
activities, subject to the same terms and conditions as apply to
the parent national bank.  It expands the list of activities
subject to after-the-fact notice procedures to include other
activities that the OCC has found to be a part of, or incidental
to, the business of banking and consolidates and moves the
activities formerly listed in the expedited processing list into
the notice category.

Non-Controlling Investments

The final rule provides a streamlined after-the fact notice
process for banks making non-controlling investments in
enterprises engaging in specified activities.  Under the final
rule, which amends 12 CFR 5.36, a national bank may make certain
non-controlling investments, directly or through its operating
subsidiary, in an enterprise by filing a written notice with the
appropriate OCC district office no later than 10 days after
making the investment.  The notice procedure applies if the
activity conducted by the enterprise is on the list of notice
activities in 12 CFR 5.34(e)(5)(v), or if it is substantively the
same as an activity that has been previously approved for a
national bank (or its operating subsidiary) in published OCC
precedent approving a non-controlling investment, and is
conducted on the same terms and conditions that apply to the
activity approved in that precedent.

For further information, contact Stuart Feldstein, assistant
director, or Karl Betz, attorney, Legislative and Regulatory
Activities Division, at (202) 874-5090.




_____________________________________
Julie L. Williams
First Senior Deputy Comptroller and Chief Counsel

Attachment: 65 FR 12905

       [http://www.occ.treas.gov/fr/fedregister/65fr12905.pdf]