Legal and Regulatory:
Economic Growth And Regulatory Paperwork Reduction
Act of 1996 Subtitle B -- Streamlining Government Regulations
[This summary was prepared by Law Department Staff, and does not
necessarily reflect the views of the Comptroller or the OCC. Questions and
comments may be directed to the Legislative and Regulatory Activities Division
of the Office of the Comptroller of the Currency (202) 874-5090.]
Chapter 1 -- Eliminating Unnecessary Regulatory
Requirements and Procedures
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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