Legal and Regulatory:
Economic Growth And Regulatory Paperwork Reduction Act of 1996
Subtitle B -- Streamlining Government Regulations

Sec. 2201. Elimination of Redundant Approval Requirement for Oakar Transactions.

This section eliminates any implication that the "Oakar Amendment," section 5(d)(3) of the Federal Deposit Insurance Act (FDI Act) (12 U.S.C. 1815(d)(3)), requires a separate approval for Oakar transactions (including acquisitions, assumptions of liabilities, and transfers of assets) involving a BIF-insured institution and a SAIF-insured institution. As a practical matter, however, these transactions still are subject to the requirements of the Oakar Amendment and to the approval requirements of the Bank Merger Act (12 U.S.C. 1828(c)).

Sec. 2203. Elimination of Duplicative Requirements Imposed Upon Bank Holding Companies.

[NOTE: This section number is a drafting error. It should be "Sec. 2202," with the following section numbers renumbered accordingly.]
Prior to the enactment of the Regulatory Paperwork Reduction Act, a company that controlled both a bank and a savings association was both a bank holding company and a savings and loan holding company, and therefore had two umbrella regulators -- the Fed under the Bank Holding Company Act (BHC Act) and the Office of Thrift Supervision (OTS) under the Home Owners' Loan Act (HOLA). This section generally exempts these holding companies from OTS regulation and retains Fed regulation. In addition, this section requires the Fed and the OTS to cooperate in enforcement actions against these holding companies.

Sec. 2204. Elimination of the Per Branch Capital Requirement For National Banks And State Member Banks

This section eliminates the per branch capital requirement in section 5155(h) of the Revised Statutes (12 U.S.C. 36(h)), which required national banks to maintain capital for their branches as if each branch were a separately chartered bank. (Because section 9 of the Federal Reserve Act (FRA) requires State member banks to operate branches on the same terms and conditions and subject to the same limitations and restrictions as national banks, this branch capital standard also applied to State member banks.) Modern bank capital requirements made this requirement obsolete.

Sec. 2205. Elimination of Branch Application Requirements For Automatic Teller Machines (ATMs).

[NOTE: Probably should read "Automated."]
The term "branch" is defined in section 5155 of the National Bank Act (12 U.S.C. 36) and section 3(o) of the FDI Act (12 U.S.C. 1813(o)) to include an office where deposits are received, checks paid, or money lent. Opening a branch or moving it to a different location requires the bank to file an application with, and obtain the approval of, the appropriate Federal banking agency. Section 2205 removes ATMs or remote service units from the definition of "branch," thereby removing them from prior approval requirements and geographic restrictions, as well as any other requirements applicable to "branches."

Sec. 2206. Elimination of Requirement for Approval of Investments in Bank Premises For Well Capitalized and Well Managed Banks.

Section 2206 amends section 24A of the FRA (12 U.S.C. 371d) to require national and State member banks to obtain the prior approval of the appropriate Federal regulator before investing in bank premises unless: (1) the aggregate amount of the investment is less than or equal to the bank's capital stock; or (2) the aggregate amount of the investment is less than or equal to 150 percent of the bank's capital and surplus, and the bank is well capitalized and has a CAMEL rating of 1 or 2, provided that the bank provides the appropriate Federal regulator with notice 30 days after this investment. Prior to this amendment, section 24A required a national bank or State member bank to receive prior regulatory approval for an investment in bank premises in an amount that exceeded the bank's capital stock.

Sec. 2207. Elimination of Approval Requirement For Divestitures.

This section repeals section 2(g)(3) of the BHC Act (12 U.S.C. 1841(g)(3)), which required a bank holding company to obtain the Fed's agreement that the sale of a subsidiary was a true sale (i.e., a relinquishment of control) whenever an affiliate financed the sale or an officer or director interlock existed.

Sec. 2208. Streamlined Nonbanking Acquisitions by Well Capitalized and Well Managed Banking Organizations.

Under section 4(j) of the BHC Act (12 U.S.C. 1843(j)), a bank holding company must submit a written notice to the Fed at least 60 days before engaging, directly or indirectly, in a nonbanking activity authorized under section 4(c)(8). Section 4(c)(8) authorizes holding companies to engage in activities that are closely related to banking or managing or controlling banks. The processing period begins to run from the date the Fed receives a complete notice, and may be extended under certain circumstances. In acting on a notice to engage in section 4(c)(8) activities, the Fed is required by both sections 4(c)(8) and 4(j) to consider whether the benefits of the proposed activity (such as greater convenience, increased competition, or gains in efficiency) outweigh the potential adverse effects (such as undue concentration of resources, decreased or unfair competition, conflicts of interest, or unsound banking practices) (public benefits test). Section 4(c)(8) also requires that proposals to engage in permissible activities are subject to public notice and, as amended by section 2612 of the Regulatory Paperwork Reduction Act, an opportunity for a hearing only in the case of an acquisition of a savings association.

Section 2208 amends section 4(j) of the BHC Act to permit a well capitalized and well managed bank holding company, that controls predominantly well capitalized and well managed depository institutions, to engage de novo in any permissible 4(c)(8) activity or acquire any company engaged in permissible 4(c)(8) activities (except for an insured depository institution, i.e., a savings association) under expedited procedures. To be eligible for the expedited procedures, the book value of the assets acquired may not exceed 10 percent of the holding company's consolidated risk-weighted assets and the consideration paid may not exceed 15 percent of Tier 1 capital. The Fed may adjust these percentages. In addition, no administrative enforcement action may have been commenced or be pending nor may any cease and desist order pursuant to section 8 of the FDI Act have been issued or be pending against the holding company or any of its depository institution subsidiaries during the prior 12 months.

While all qualifying holding companies engaging in section 4(c)(8) activities under the expedited procedures must provide notice to the Fed, the notice provisions differ. First, to engage de novo directly or through a subsidiary in activities that the Fed has already approved by regulation, the bank holding company must provide notice within 10 days after commencing the activity. Second, to engage in activities that the Fed has permitted by order or to acquire the shares or assets of an existing company, the bank holding company must provide notice at least 12 business days prior to commencing the activity, during which time the Fed may require the full 60-day notice procedure.

Unless a notice is subject to the full 60-day notice procedure under 4(j), the Fed apparently will not apply the public benefits test, which includes the consideration of anticompetitive effects.

This section also adds new definitions to the BHC Act, including "lead insured depository institution," "well managed," "well capitalized," and "adequately capitalized."

Sec. 2209. Elimination of Unnecessary Filing for Officer and Director Appointments.

This section eliminates the requirement enacted in section 914 of FIRREA (12 U.S.C. 1831i) (914 notice) that insured institutions and holding companies chartered within the past two years or that had undergone a change in control within the past two years notify their Federal banking regulators 30 days before hiring new directors or senior executive officers. It retains the 914 notice requirement for undercapitalized and troubled institutions, and applies the 914 notice requirement to other institutions if the agency, in connection with a review of a plan required under prompt corrective action or otherwise, determines that prior notice is appropriate. Section 2209 also increases from 30 days to 90 days the period in which regulators may disapprove an officer or director based on a 914 notice.

Sec. 2210. Amendments to the Depository Institution Management Interlocks Act.

Among other things, the Depository Institution Management Interlocks Act (DIMIA) (12 U.S.C. 3201 et seq.) prohibits management interlocks between large institutions located anywhere in the country. Section 2210 increases the asset-size test used to prohibit interlocks involving large institutions: banks with assets of up to $2.5 billion (increased from $1 billion) now can have interlocking management with nonaffiliated institutions with assets of up to $1.5 billion (increased from $500 million) anywhere in the country. In addition, this section grants the agencies the discretion to increase these amounts annually to reflect inflation or changes in market conditions.

Section 2210 also allows grandfathered interlocks to continue indefinitely, and restores the authority of the Federal banking agencies that existed prior to the enactment of the Riegle Community Development and Regulatory Improvement Act of 1994 (CDRI Act) to grant exemptions from DIMIA, with the additional requirement that the exempted service must not result in a monopoly or substantial lessening of competition.

Sec. 2211. Elimination of Recordkeeping and Reporting Requirements For Officers.

This section exempts from the insider lending restrictions of section 22(h) of the FRA (12 U.S.C. 375b) company-wide benefit or compensation plans that are widely available to employees of the bank and that do not give preference to any officer, director or principal shareholder (or any related interest) over other employees of the bank. In addition, section 2211 allows the Fed to exempt, by regulation, the prohibition on preferential loans to executive officers and directors of affiliates who do not have the authority to participate in the major policy making functions of the bank, provided that the assets of these affiliates do not exceed 10 percent of the consolidated assets of the holding company and the affiliate is not controlled by another company.

Sec. 2212. Repayment of Treasury Loan.

The Federal Financial Institutions Examination Council (FFIEC) was established in 1989 to monitor State procedures for licensing and regulating real estate appraisers (12 U.S.C. 3331 et seq.). The subcommittee is funded by a maximum $25 registry fee levied on each appraiser and a $5 million loan from the Treasury. This section requires the FFIEC to repay this $5 million loan to the Treasury by September 30, 1998.

Sec. 2213. Branch Closures.

Section 42 of the FDI Act (12 U.S.C. 1831r-1) requires every insured institution to file with its regulator a 90-day prior notice when it intends to close a branch. This notice must provide a statement of the reasons for the closing along with supporting statistics or other relevant facts. The bank must post conspicuous notice for 30 days and mail customers notice in a statement or separate mailing at least 90 days before closing. Section 42 of the FDI Act also requires regulators to convene a meeting with community representatives when a non-frivolous protest is lodged over an interstate bank branch closure in a low- or moderate-income area.

Section 2213 exempts from the requirements of this section of the FDI Act: (1) ATMs (see also section 2205 which exempts ATMs from the definition of branch), (2) branch relocations or consolidations within the immediate neighborhood which do not substantially affect the nature of the business or customers served, and (3) branches closed in connection with an emergency acquisition or any assistance provided by the Federal Deposit Insurance Corporation (FDIC) pursuant to section 13(c) of the FDI Act.

Sec. 2214. Foreign Banks.

Examination of Branches and Agencies by the Fed - Under the International Banking Act (IBA), the Fed may examine foreign banks' United States branches, agencies, and affiliates and also must assess foreign banks for the cost of these examinations. There is a moratorium until July 25, 1997, however, on the requirement that the Fed must impose examination costs. The IBA also requires that all branches and agencies of foreign banks must have an annual on-site examination.

Subsection (a) of section 2214 amends section 7(c) of the IBA (12 U.S.C. 3105(c)) to require the Fed to take all reasonable measures to reduce burden and avoid unnecessary duplication of examinations of branches and agencies of foreign banks. This subsection also replaces the annual requirement for an on-site examination of a branch or agency with a requirement that these branches and agencies must be examined as frequently as would a national bank or a State bank by the appropriate Federal banking agency. As a result, branches or agencies that satisfy the asset test imposed on domestic banks may be examined on an 18-month cycle rather than a 12-month basis. In addition, this subsection eliminates the requirement that foreign banks must pay for Fed examinations under the IBA and replaces it with a requirement that the Fed will assess foreign banks examination fees only to the same extent that fees are collected by the Fed for examination of any State member bank. (The Fed currently does not charge State member banks for examinations.) This section did not, however, repeal the three-year moratorium which prohibits the Fed from charging examination fees under the IBA until July 25, 1997.

Establishment of Foreign Bank Offices in the United States - Under the IBA, a foreign bank must receive the prior approval of the Fed before it may establish a branch, agency or other affiliate in the United States. Subsection (b) amends section 7(d) of the IBA (12 U.S.C. 3105(d)) to authorize the Fed to impose any condition on its approval of a foreign bank branch, agency, or affiliate in the United States. (Previously, the conditions had to be consistent with the Fed's standards for approval.)

This subsection also permits the Fed to approve an application of a foreign bank if the Fed is unable to find that the bank is subject to comprehensive consolidated supervision or regulation in its home country if: (1) the country is actively working to establish arrangements for the consolidated supervision of the bank and (2) all other factors are consistent with approval. In granting this exception, the Fed must consider whether the foreign bank has adopted and implemented procedures to combat money laundering, and whether the bank's home country is developing a legal regime to address, or participating in multilateral efforts to combat, money laundering. In addition, this subsection permits the Fed, after consulting with the State supervisor or the Comptroller of the Currency (OCC), to impose additional conditions or restrictions on operations. The Fed must coordinate with the State supervisor or the OCC in implementing these conditions.

Finally, subsection (b) establishes a statutory 180-day period for the Fed to approve or deny an application to establish a branch or agency in the United States. The Fed may extend this period for up to an additional 180 days, and the foreign bank may waive the time limit altogether.

Termination of Foreign Branches - Section 7(e) of the IBA (12 U.S.C. 3105(e)) authorizes the Fed, if it makes certain determinations, to issue termination orders for State offices of a foreign bank, after a notice and a hearing. If the Fed terminates the operations of a State office because it finds that the foreign bank is not subject to consolidated comprehensive supervision or regulation by its home country regulator, this provision also requires the Fed to find that the appropriate authorities in the home country are not making demonstrable progress in establishing comprehensive consolidated supervision before issuing a termination order on this basis.

Sec. 2215. Disposition of Foreclosed Assets.

Section 4(c)(2) of the BHC Act (12 U.S.C. 1843(c)(2)) requires a bank holding company and its subsidiaries to dispose of stock acquired in satisfaction of a debt previously contracted within two years. Prior to the enactment of section 2215, the Fed could only grant bank holding companies one year extensions for a total period of five years, if in the Fed's judgement the extensions would not be detrimental to the public interest. Section 2215 permits the Fed to grant an initial extension of five years. The Fed also may grant an additional five year extension (for a total of up to 10 years) if the holding company made a good faith effort to dispose of the stock within the initial five year period or if disposal within the initial five year period would have been detrimental to the company. This change makes the BHC Act consistent with regulatory treatment of stock held by national banks DPC.

Sec. 2216. Exemption Authority for Antitying Provision.

This section amends section 106(b) of the Bank Holding Company Act Amendments of 1970 (12 U.S.C. 1972(1)) to permit the Fed to exempt bank holding companies that control nonbank banks, trust banks, credit card banks, Edge Act and agreement corporations, and industrial loan companies from the anti-tying provisions of the BHC Act. In addition, this section amends section 5(q) of HOLA (12 U.S.C. 1464(q)) to permit the OTS to make exceptions to HOLA's anti-tying provisions if the exceptions would not be contrary to the purpose of the anti-tying provisions and would conform with the anti-tying exceptions granted by the Fed.

Sec. 2217. FDIC Approval of New State Bank powers.

With certain exceptions, section 24 of the FDI Act (12 U.S.C. 1831a) generally prohibits insured State banks and their subsidiaries from engaging as principal in any activity that is not permissible for a national bank and its subsidiaries, respectively, unless the FDIC has determined the activity poses no significant risk to the insurance fund and the State bank is in compliance with applicable capital requirements. This section requires the FDIC to make a decision within 60 days of receipt of a complete application of a State bank to engage in an activity, either directly or indirectly through a subsidiary, that requires FDIC approval. However, the FDIC may extend this period for an additional 30-days.

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