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5000 - Statements of Policy
{{6-30-99 p.5391}}
POLICY STATEMENT OF OFFICE OF THE COMPTROLLER OF THE CURRENCY, BOARD
OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM, FEDERAL DEPOSIT INSURANCE
CORPORATION, AND OFFICE OF THRIFT SUPERVISION CONCERNING BRANCH CLOSING
NOTICES AND POLICIES
Purpose
This policy statement provides guidance to insured depository
institutions concerning requirements that an institution provide prior
notice of any branch closing and establish internal policies for branch
closings. 1
Background
The Federal Deposit Insurance Corporation Improvement Act of 1991
(Pub. L. 102--242, 105 Stat. 2236) (FDICIA) was enacted on December 19,
1991. Section 228 of the FDICIA added a new section 42 to the Federal
Deposit Insurance Act (12 U.S.C.
1831r--1) (FDI Act) that imposes notice requirements on insured
depository institutions that intend to close branches. The provision
became effective on December 19, 1991. Section 42 was amended on
September 29, 1994, by section 106 of the Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (Pub. L. 103--328, 108
Stat. 2338), and on September 30, 1996, by the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (Pub. L. 104--208, 110 Stat.
3009).
The law requires an insured depository institution to submit a
notice of any proposed branch closing to the appropriate federal
banking agency no later than 90 days prior to the date of the proposed
branch closing. The required notice must include a detailed statement
of the reasons for the decision to close the branch and statistical or
other information in support of such reasons.
The law also requires an insured depository institution to notify
its customers of the proposed closing. The institution must mail the
notice to the customers of the branch proposed to be closed at least 90
days prior to the proposed closing. The institution also must post a
notice to customers in a conspicuous manner on the premises of the
branch proposed to be closed at least 30 days prior to the proposed
closing.
An interstate bank (defined in section 42 as a bank that maintains
branches in more than one state) proposing to close a branch located in
a low- or moderate-income area is required to include in its notice to
customers the mailing address of the appropriate federal banking agency
and a statement that comments on the closing may be mailed to the
agency. 2
In those cases, a person from the affected area may submit a written
request relating to the proposed closing to the agency, stating
specific reasons for the request and including a discussion of the
adverse effect the closing may have on the availability of banking
services in the affected area. If the agency determines that the
request is nonfrivolous, then the agency shall convene a meeting of
appropriate individuals, organizations, depository institutions, and
agency representatives as determined by the agency in its discretion,
to explore the feasibility of obtaining adequate alternative facilities
and services for the affected area following the closing of the branch.
Finally, the law requires each institution to adopt policies
regarding closings of branches of the institution.
Applicability
Section 42 of the FDI Act applies to the closing of a
"branch" by an insured depository
institution. 3
The agencies consider a "branch" for purposes of section 42 to be
a traditional brick-and-mortar branch, or any similar banking facility
other than a main office, at which deposits are received or checks paid
or money lent. Notice pursuant to section 42 would not be required for
the closing of non-branch facilities, such as an ATM, remote service
facility, or loan production office, or of a temporary
branch. 4
The law also does not apply to
{{6-30-99 p.5392}}mergers, consolidations, or other
acquisitions, including branch sales, that do not result in any branch
closings. Institutions that are in doubt about the coverage of a
particular closing should consult the appropriate federal banking
agency.
Mergers
An institution must file a branch closing notice whenever it closes
a branch, including when the closing occurs in the context of a merger,
consolidation or other form of
acquisition. 5
Branch closings that occur in the context of transactions subject to
the Bank Merger Act (12 U.S.C.
1828) require a branch closing notice, even if the transaction
received expedited treatment under the Act. The responsibility for
filing the notice lies with the acquiring or resulting institution, but
either party to such a transaction may give the notice. Thus, for
example, the purchaser may give the notice prior to consummation of the
transaction where the purchaser intends to close a branch following
consummation, or the seller may give the notice because it intends to
close a branch at or prior to consummation. In the latter example, if
the transaction were to close ahead of schedule, the purchaser, if
authorized by the appropriate federal banking agency, could operate the
branch to complete compliance with the 90-day requirement without the
need for an additional notice.
Relocations and Consolidations
The law does not apply when a branch is relocated or consolidated
with one or more branches if the relocation or consolidation occurs
within the immediate neighborhood and does not substantially affect the
nature of the business or customers served. For purposes of this policy
statement, a branch relocation is a movement within the same immediate
neighborhood that does not substantially affect the nature of the
business or customers served. Generally, relocations will be found to
have occurred only when short distances are involved: For example,
moves across the street, around the corner, or a block or two away.
Moves of less than 1,000 feet will generally be considered to be
relocations. In less densely populated areas or where neighborhoods
extend farther, and a long move would not significantly affect the
nature of the business or the customers served by the branch, a
relocation may occur over substantially longer
distances. 6
Institutions that are in doubt about whether a relocation or a closing
has occurred should consult the appropriate federal banking agency.
Consolidations of branches are considered relocations for purposes
of this policy statement if the branches are located within the same
neighborhood and the nature of the business or customers served is not
affected. Thus, for example, a consolidation of two branches on the
same block following a merger would not constitute a branch closing.
The same guidelines apply to consolidations as to relocations.
Other
Changes of services at a branch are not considered a branch closing,
provided that the remaining facility constitutes a branch (as defined
herein). 7
Section 42 also does not apply when a branch ceases operation but is
not closed by an institution. Thus, the law does not apply to:
A temporary interruption of service caused by an event
beyond the institution's control (e.g., a natural catastrophe), if the
insured depository institution plans to restore branching services at
the site in a timely manner; 8
Transferring back to the FDIC, pursuant to the terms of an
acquisition agreement, a branch of a failed bank or savings association
operated on an interim basis in connection with the acquisition of all
or part of a failed bank or savings association, so long as
the
{{6-30-99 p.5393}}transfer occurs within the option
period or within an occupancy period, not to exceed 180 days, provided
in the agreement.
A branch that is closed in connection with an emergency
acquisition under sections 11(n), 13(f), or 13(k) of the FDI Act, or
any assistance provided by the FDIC under section 13(c) of the FDI Act.
(12 U.S.C. 1821(n),
1823(f) and
(k), and
1823(c)).
Notice of Branch Closing to the Agency
The law requires an insured depository institution to give notice of
any proposed branch closing to the appropriate federal banking agency
no later than 90 days prior to the date of the proposed branch closing.
The required notice must include the following:
Identification of the branch to be closed;
The proposed date of closing;
A detailed statement of the reasons for the decision to
close the branch; and
Statistical or other information in support of such reasons
consistent with the institution's written policy for branch closings.
If an institution believes certain information included in the
notice is confidential in nature, the institution should prepare such
information separately and request confidential treatment. The agency
will decide whether to treat such information confidentially under the
Freedom of Information Act (5 U.S.C.
552).
If a notice provided to a state supervisory agency pursuant to state
law contains the information outlined above, then the institution may
provide a copy of that notice to the appropriate federal banking agency
in satisfaction of section 42, provided that the notice is filed at
least 90 days prior to the date of the branch closing.
Notice of Branch Closing to Customers
Customer Allocation
The law requires an insured depository institution that proposes to
close a branch to provide notice of the proposed closing to the
customers of the branch. A customer of a branch is a patron of an
institution who has been identified with a particular branch by such
institution through use, in good faith, of a reasonable method for
allocating customers to specific branches. An institution that
allocates customers based on where a customer opened his or her deposit
or loan account will be presumed to have reasonably identified each
customer of a branch. The agencies recognize that use of this means of
allocation, and perhaps others, may result in certain facilities which
technically constitute branches not being assigned any customers, but
believe that this result is permissible so long as the means of
allocation is reasonable; if such a branch is closed, then notification
to the appropriate agency and posting of a notice on the branch
premises will suffice. Finally, an institution need not change its
recordkeeping system in order to make a reasonable determination of who
is a customer of a branch.
Timing
Under section 42, an institution must include a customer notice at
least 90 days in advance of the proposed closing in at least one of the
regular account statements mailed to customers, or in a separate
mailing. If the branch closing occurs after the proposed date of
closing, no additional notice is required to be mailed to customers (or
provided to the appropriate federal banking agency) if the institution
acted in good faith in projecting the date for closing and in
subsequently delaying the closing.
Content
The mailed customer notice should state the location of the branch
to be closed and the proposed date of closing, and either identify
where customers may obtain service following the closing date or
provide a telephone number for customers to call to determine such
alternative sites. If a notice of branch closing provided to customers
pursuant to state law contains this information, then a separate notice
need not be sent, provided that the notice is sent at least 90 days
prior to the closing.
Low- or Moderate-Income Areas Served by Interstate Banks
If the institution is a bank that maintains branches in more than
one state and the branch
{{6-30-99 p.5394}}to be closed is located in a low- or
moderate-income area, 9
the notice shall contain the mailing address of the appropriate federal
banking agency and a statement that comments on the proposed branch
closing may be mailed to that agency. The notice should also state that
the agency does not have the authority to approve or prevent the branch
closing. If the agency receives a written request by a person from the
area in which the branch is located, relating to the proposed closing
and stating specific reasons for the request, including a discussion of
the adverse effect of such closing on the availability of banking
services in the affected area, and if the agency concludes that the
request is nonfrivolous, then the agency shall convene a meeting of
agency representatives, other interested depository institution
regulatory agencies, community leaders, and other appropriate
individuals, organizations, and depository institutions, as determined
by the agency in its discretion. The purpose of the meeting shall be to
explore the feasibility of obtaining adequate alternative facilities
and services for the affected area, including the establishment of a
new branch by another depository institution, the chartering of a new
depository institution, or the establishment of a community development
credit union, following the closing of the branch. In the case of an
institution which will become an interstate bank prior to the closure
of a branch in a low- or moderate-income area, such information must be
included in the notice unless the closure will occur immediately upon
consummation of the transaction that causes the institution to become
interstate. No action by the appropriate federal banking agency under
this provision shall affect the authority of an interstate bank to
close a branch (including the timing of such closing) if the
requirements of sections 42(a) and 42(b) of the FDI Act (regarding
notice to the appropriate federal banking agency and notice to the
institution's customers) have been met by such bank with respect to
the branch being closed.
On-Site Notice
Under section 42, an institution also must post notice to branch
customers in a conspicuous manner on the branch premises at least 30
days prior to the proposed closing. This notice should state the
proposed date of closing and identify where customers may obtain
service following that date or provide a telephone number for customers
to call to determine such alternative sites. An institution may revise
the notice to extend the projected date of closing without triggering a
new 30-day notice period.
Contingent Notices
In some situations, an institution, in its discretion and to
expedite transactions, may mail and post notices to customers of a
proposed branch closing that is contingent upon an event. For example,
in the case of a proposed merger or acquisition, an institution may
notify customers of its intent to close a branch upon approval by the
appropriate federal banking agency of the proposed merger or
acquisition.
Policies for Branch Closings
The law requires all insured depository institutions to adopt
policies for branch closings. Each institution with one or more
branches must adopt such a policy. If an institution currently has no
branches, it must adopt a policy for branch closing when it establishes
its first branch. The policy should be in writing and meet the size and
needs of the institution.
Each branch closing policy adopted pursuant to section 42 should
include factors for determining which branch to close and which
customers to notify, and procedures for providing the notices required
by the statute.
Compliance
The federal banking agencies will examine for compliance with
section 42 of the FDI Act in accordance with each agency's compliance
examination procedures, to determine whether the institution has
adopted a branch closing policy and whether the
institution
{{4-30-01 p.5394.01}}provided the required notices when
it closed a branch. If an institution fails to comply with section 42,
the appropriate federal banking agency may make adverse findings in the
compliance evaluation or take appropriate enforcement action.
By order of the Board of Directors, June 18, 1999.
[Source: 64
Fed. Reg. 34845, June 29, 1999]
[The page following this is 5397.]
1An "insured depository institution" means any bank or
savings association, as defined in section 3 of the FDI Act
(12 U.S.C. 1813), the deposits
of which are insured by the FDIC. Go Back to Text
2Under section 42, this requirement does not apply when a
savings association closes a branch. Go Back to Text
3Insured branches of foreign banks are not considered
"branches" for purposes of section 42 because they are subject to
separate liquidation procedures as specified in 12 CFR 28.22 (federal
branches of foreign banks) and 12 CFR 211.25(f) (state branches of
foreign banks). Go Back to Text
4Consistent with the agencies' original interpretation, the
1996 amendment expressly stated that section 42 of the FDI Act
"shall not apply with respect to automated teller machines."
(Pub. L. 104--208, 110 Stat. 3009.) Go Back to Text
5See "Other" below for certain branches closed in
connection with emergency acquisitions or FDIC assistance or
subsequently transferred back to the FDIC. Go Back to Text
6OCC and OTS regulations specify distances considered
short-distance relocations. See 12 CFR 5.3(1) (national
banks) and 12 CFR 545.95(c) (thrifts). Go Back to Text
7The agencies note that where, after a reduction in services,
the resulting facility no longer qualifies as a branch, section 42
would apply. Thus, notices of branch closing would be required if an
institution were to replace a traditional brick-and-mortar branch with
an ATM. Go Back to Text
8Section 42 would apply, however, if the institution did not
reopen the branch following the incident. Although prior notice would
not be possible in such a case, the institution should notify the
customers of the branch and the appropriate federal banking agency in
the manner specified by section 42 to the extent possible and as soon
as possible after the decision to close the branch has been made. Go Back to Text
9The term "low- or moderate income area" means a census
tract for which the median family income is: (1) Less than 80 percent
of the median family income for the metropolitan statistical area (as
designated by the Director of the Office of Management and Budget) in
which the census tract is located; or (2) in the case of a census tract
that is not located in a metropolitan statistical area, less than 80
percent of the median family income for the state in which the census
tract is located, as determined without taking into account family
income in metropolitan statistical areas in such state,
(12 U.S.C. 1831r--1(d)(4)). Go Back to Text
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