§ 563.84 - Transfer and repurchase of government securities.

(a) A savings association shall not issue repurchase agreement obligations in denominations under $100,000 with a maturity of 90 days or more evidencing an indebtedness arising from a transfer of direct obligations of, or obligations that are fully guaranteed as to principal and interest by, the United States or any agency thereof that the savings association is obligated to repurchase, unless such obligations are issued to financial institutions the accounts or deposits of which are insured by the Federal Deposit Insurance Corporation or to a broker or dealer registered with the Securities and Exchange Commission.

(b) Any repurchase agreement obligation under $100,000 with a maturity of less than 90 days shall meet the following requirements.

(1) Legend. Each repurchase agreement and all advertisements and offering documents relating to repurchase agreements shall state, on their face, in plainly legible form, the following legend:

(2) Prohibited representations. A savings association issuing repurchase agreements shall not use in its agreements, advertisements, or offering documents the terms “guaranteed,” “no risk,” “account,” “deposit,” “withdraw” or other terms which imply that the repurchase agreement is insured or guaranteed by the United States government, an agency of the United States government, or any third party; or the term “fund” or other terms which imply that the repurchase agreement is an interest in an investment company.

(3) Security interest. The interest of a repurchase agreement purchaser in the security or securities underlying the repurchase agreement shall constitute a perfected security interest under applicable state law.

(4) Value of collateral. The market value of the security or securities underlying a repurchase agreement shall be at least equal to the principal amount of the issuing savings association's repurchase agreement obligation as of a date certain in each succeeding month of the original or renewed term of the repurchase agreement.

(5) Disclosure. A savings association issuing repurchase agreements to the public shall provide each prospective repurchase agreement purchaser with an offering document which shall contain full and accurate disclosure of all material information regarding the repurchase agreement and the issuing savings association. Any material change in any of the material representations set forth in the offering document shall be reflected in a revised offering document that shall be provided to purchasers before any renewal or automatic renewal of a repurchase agreement may be effected. A savings association that has a regulatory capital deficiency under paragraph (b)(7) of this section shall be subject to the requirements of part 563g of this chapter, except that the following financial statements may be substituted for those required to be included in an offering circular required under part 563g of this chapter:

(i) The savings association's audited statements of condition and operations for its last fiscal year prepared in accordance with the requirements of § 563c.1 of this chapter;

(ii) On a comparative basis, the savings association's latest unaudited statement of condition for the quarter ending within 135 days of any sale, renewal, or automatic renewal of a repurchase agreement, and an unaudited statement of operations for the period then ended, prepared in accordance with the requirements of § 563c.1 of this chapter; and

(iii) The savings association's latest monthly financial report filed with the Office.

(6) Renewal; notice of applicable interest rates. The maximum term of a repurchase agreement shall be 89 days. Unless otherwise provided for by the terms of a repurchase agreement, automatic renewals effected within an 89-day period from the date of execution, renewal, or automatic renewal of a repurchase agreement shall not be deemed to constitute renewals or automatic renewals under paragraph (b) of this section. Repurchase agreements may be automatically renewed for any period not exceeding 89 days for each automatic renewal pursuant only to the written agreement between the purchaser and the issuing savings association that the repurchase agreement may be automatically renewed at the option of the issuing savings association in the absence of the oral or written instruction of the purchaser that the repurchase agreement shall not be renewed. Savings associations which provide for the automatic renewal of repurchase agreements shall provide and notify each retail repurchase agreement purchaser of a means to determine the current rates of interest. Repurchase agreements may not be automatically renewed by a savings association which has a regulatory capital deficiency under paragraph (b)(7) of this section.

(7) Eligibility requirements. A savings association that issues or has outstanding repurchase agreements issued pursuant to paragraph (b) of this section shall calculate its total capital on a monthly basis in accordance with part 567 of this chapter. A savings association that does not have total capital equal to the sum of one percent of all liabilities of the savings association, plus an amount equal to 20 percent of the savings association's assets classified under § 563.160 of this part, shall not issue or renew repurchase agreements under paragraph (b) of this section unless it meets the following additional requirements:

(i) Within 45 days after the determination of a regulatory capital deficiency under paragraph (b)(7) of this section, the savings association shall file with the OTS pursuant to § 516.1 of this chapter and shall continue to file thereafter on a current basis for as long as the regulatory capital deficiency shall exist, the following:

(A) Three copies of an opinion of independent legal counsel that the interest of repurchase agreement purchasers in the security or securities underlying the repurchase agreements constitutes a perfected security interest under applicable state law; and

(B) The offering document required under paragraph (b)(5) of this section.

(ii) Within 45 days after the determination of a regulatory capital deficiency under paragraph (b)(7) of this section, and thereafter on a date certain in each succeeding week of the original or renewed term of the repurchase agreement for as long as the regulatory capital deficiency shall exist, the market value of the savings association's security or securities underlying a repurchase agreement shall be at least equal to 105 percent of the principal amount of the issuing savings association's repurchase agreement obligation, plus accrued interest.

(iii) A savings association which has a regulatory capital deficiency under paragraph (b)(7) of this section shall not renew an outstanding repurchase agreement unless it provides the purchaser with the disclosure document required under paragraph (b)(5) of this section and the purchaser thereafter affirmatively elects to renew the repurchase agreement.