[Federal Register Volume 61, Number 230 (Wednesday, November 27, 1996)]
[Rules and Regulations]
[Pages 60179-60185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30112]
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DEPARTMENT OF THE TREASURY
12 CFR Parts 560, 563, 574, 575, 583, 584
[No. 96-113]
RIN 1550-AB05
Amendments Implementing Economic Growth and Regulatory Paperwork
Reduction Act
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Interim final rule.
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SUMMARY: The Office of Thrift Supervision (OTS or Office) is issuing
this interim final rule to implement provisions of the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (EGRPRA). Among other
actions, EGRPRA expanded and clarified federal thrifts' lending and
investment authority, amended the Qualified Thrift Lender (QTL) test,
authorized OTS to grant antitying exceptions to savings associations
that conform to those granted to banks by the Board of Governors of the
Federal Reserve System (FRB), and modified OTS's oversight authority
over bank holding companies that own savings associations. Today's
interim final rule implements these statutory changes. OTS is making
today's rule effective immediately to enable thrifts to take advantage
of the expanded flexibility and burden reduction afforded by EGRPRA.
However, OTS will be accepting comment on any issues raised by these
newly implemented regulations for the next sixty days.
DATES: This interim rule is effective on November 27, 1996. Comments
must be received by January 27, 1997.
ADDRESSES: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, NW., Washington, D.C. 20552. Attention Docket No. 96-113. These
submissions may be hand-delivered to 1700 G Street, NW., from 9:00 A.M.
to 5:00 P.M. on business days; they may be sent by facsimile
transmission to FAX Number (202) 906-7755. Comments will be available
for inspection at 1700 G Street, NW., from 9:00 A.M. until 4:00 P.M. on
business days.
FOR FURTHER INFORMATION CONTACT: William J. Magrini, Senior Project
Manager, (202) 906-5744, Supervision Policy; Ellen J. Sazzman, Counsel
(Banking and Finance), (202) 906-7133, or Deborah Dakin, Assistant
Chief Counsel, (202) 906-6445, Regulations and Legislation Division,
Chief Counsel's Office. For information about holding company or
branching issues, contact Kevin A. Corcoran, Assistant Chief Counsel,
(202) 906-6962, Business Transactions Division, Chief Counsel's Office,
Office of Thrift Supervision, 1700 G Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
I. Background
Summary of Relevant Statutory Changes
Credit card and education lending: Section 2303(b) of the EGRPRA
1 amended section 5 of the Home Owners'' Loan Act (HOLA),2 to
confirm and clarify that federal savings associations may engage in
credit card lending without a percentage of assets investment
limitation, as OTS has long maintained. Section 2303(b) also amended
HOLA section 5 to permit federal thrifts to make education loans
without investment restriction. Previously, education loans were
limited to 5% of a thrift's total assets.3
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\1\ Pub. L. 104-208, tit. 12, 110 Stat. 3009 (September 30,
1996).
\2\ 12 U.S.C. 1464(c)(1).
\3\ 12 U.S.C. 1464(c)(3)(A). Federal thrifts continue to be
authorized to make other consumer loans in an amount up to 35% of
total assets. Credit card loans and education loans do not count
against this 35% cap. 12 U.S.C. 1464(c)(2)(D).
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Commercial lending: Section 2303(c) of EGRPRA also expanded the
small business and agricultural lending authority of federal thrifts.
Federal thrifts have long been authorized to make loans secured by
business or agricultural real estate in amounts up to 400% of
capital,4 and to make additional secured and unsecured loans to
businesses and farms in amounts up to 10% of total assets. 5
EGRPRA left the 400% non-residential real estate lending cap intact,
but increased the 10% of assets limit to 20% of assets, provided that
amounts in excess of 10% of assets may only be used for ``small
business loans'' as that term is defined by the Director of OTS.
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\4\ 12 U.S.C. 1464(c)(2)(B).
\5\ 12 U.S.C. 1464(c)(2)(A).
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Qualified Thrift Lender test: Section 2303(e) and (g) of EGRPRA
amended the QTL test in section 10(m) of the HOLA 6 to provide
that investments in educational, small business, credit card, and
credit card account loans are includable without limit for purposes of
satisfying the QTL test. Under the QTL test, savings associations must
hold ``qualified thrift investments'' equal to at least 65% of their
``portfolio assets'' as defined by statute.7 Before EGRPRA,
``qualified thrift investments'' (QTI) were defined in a manner that
required every savings association to hold a
[[Page 60180]]
substantial percentage of its assets in mortgage loans and mortgage-
related securities. Section 2303 of EGRPRA expanded the definition of
QTI . Small business loans, credit card loans, and education loans now
count as QTI without restriction.8 Consumer loans (other than
credit cards and education loans) now count as QTI in an amount up to
20% of portfolio assets.9
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\6\ 12 U.S.C. 1467a(m).
\7\ Id., and 12 CFR 563.50-563.52.
\8\ Previously, small business loans counted as QTI only if
originated in areas where the credit needs of low and moderate
income persons were not being met. As discussed above, HOLA section
5 now imposes a 20%-of-assets cap on small business loans. HOLA
section 5 does not limit a federal savings association's credit card
and education loans.
\9\ The previous limit was 10% of portfolio assets and included
credit card and educational loans. When computing the new 20% cap,
consumer loans must still be aggregated with certain other
categories of loans and investments that are also subject to the 20%
cap, e.g., loans for the purchase of community service facilities,
home loans sold into the secondary market, Fannie Mae and Freddie
Mac stock, and so forth. 12 U.S.C. 1467a(m)(4)(C) (iii) and (iv).
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Section 2303(e) of EGRPRA also amended the QTL test to give savings
associations the option of substituting compliance with the tax code
``domestic building and loan association'' (DBLA) test for compliance
with the amended QTL requirements. (The DBLA test appears to be much
more stringent than the amended QTL test.)
As a result of the foregoing statutory reforms, savings
associations will now be able to engage in substantial small business,
agricultural, credit card, educational, and other consumer lending and
remain in QTL compliance. In order to implement these changes, section
2303 of EGRPRA requires the Director of OTS to issue regulations
defining the terms ``credit card'' and ``small business.''
Anti-tying exceptions: Section 2216 of EGRPRA amends HOLA section
5(q) 10 to authorize the OTS Director to issue regulations or
orders permitting exceptions to the antitying prohibitions established
in section 5(q) so long as such exceptions are consistent with the
purposes of section 5(q) and conform to exceptions granted by the FRB
to banks pursuant to section 106(b) of the Bank Holding Company Act
(BHCA) Amendments of 1970.11 HOLA section 5(q) prohibits, inter
alia, a savings association from varying the price charged for a
product or service (the tying product) based on whether the customer
obtains an additional product or service (the tied product) offered by
the association or its service corporation or affiliate unless the
additional product or service is a loan, discount, deposit or trust
service (``traditional bank products'). The BHCA contains a similar
anti-tying provision applicable to banks and authorizes the FRB to
grant exemptions by regulation or order for commercial banks and their
affiliates. The FRB has issued various regulatory exceptions in recent
years. Prior to EGRPRA, the HOLA did not grant similar exemptive
authority to the OTS.
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\10\ 12 U.S.C. 1464(q).
\11\ 12 U.S.C. 1972.
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Bank holding companies: Section 2203 of EGRPRA amends HOLA section
10 12 to eliminate OTS supervision of holding companies that
control both a bank and a savings association and are registered as
bank holding companies with the FRB under the BHCA of 1956.13
Previously bank holding companies that controlled a savings association
were supervised by the FRB under the BHCA and also by the OTS under the
Savings and Loan Holding Company Act. Dual holding companies are no
longer required to file periodic holding company reports with OTS and
are no longer subject to OTS examination. OTS, however, will continue
to regulate the subsidiary savings association, and the FRB must
consult with the OTS on certain specified matters including a bank
holding company's acquisition of a savings association, the scope of
examination of a bank holding company that controls a savings
association, and the coordination of some enforcement actions.
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\12\ 12 U.S.C. 1467a.
\13\ 12 U.S.C. 1841 et seq.
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Branching: Section 2303(f) of EGRPRA amended HOLA section 5(r)(1)
14 to give federal thrifts greater flexibility in branching by
allowing federal associations that are not excepted from the
requirements of section 5(r)(1) pursuant to section 5(r)(2) to meet
either the Internal Revenue Service's (IRS's) domestic building and
loan association (DBLA) test 15 or the amended QTL test in order
to establish, retain, or operate out-of-state branches. Previously,
non-excepted federal savings associations were required to qualify
under the IRS DBLA test or at least meet the asset composition
requirement of that test in order to operate out-of-state branches.
Section 2303(f) also clarifies the scope of the exemption from the
foregoing requirements, set forth at section 5(r)(2)(C), when the law
of the state where the branch is located, or is to be located, would
permit establishment of the branch if the association was either a
savings association or savings bank chartered by the state in which its
home office is located. EGRPRA's branching amendments are self-
implementing and do not require any regulatory revisions.
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\14\ 12 U.S.C. 1464(r).
\15\ 26 U.S.C. 7701(a)(19).
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II. Description of Final Interim Rule
Section 560.3 Definitions of credit card, credit card
account.16
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\16\ OTS's lending and investment regulations contain a table
that provides an overview of HOLA's investment authorities. 61 FR
50951, 50973 (September 30, 1996) (to be codified as 12 CFR 560.30).
OTS plans to supplement the table in its subsidiaries and equity
investment rulemaking, which will be published before the end of the
year. The table also needs to be updated to reflect EGRPRA's
amendments to the investment limits of HOLA. Rather than amending
and restating the table twice in several weeks, OTS will restate the
table once in the subsidiaries rulemaking. At that time, the EGRPRA
amendments will be reflected in the table. The changes being made
today, however, are sufficient to authorize savings associations to
begin using the EGRPRA authorities. Savings associations need not
await restatement of the table in Part 560.
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Section 2303 of EGRPRA requires the OTS Director to issue
regulations defining the term ``credit card'' in order to enable
thrifts to apply the newly modified QTL test which permits credit card
loans to be counted as QTI without restriction pursuant to HOLA section
10(m). Defining ``credit card'' and ``credit card account'' will also
give thrifts guidance in exercising their authority to ``invest in,
sell, or otherwise deal in * * * loans made through credit cards or
credit card accounts'' pursuant to HOLA section 5(c). As noted above,
this provision authorizes federal thrifts to engage in credit card
lending without any percentage of assets investment limitation.17
It is a well settled principle of statutory construction that generally
``each part or section [of a statute] should be construed with every
other part or section so as to produce a harmonious whole.'' 18
Accordingly, it is appropriate for OTS to consistently define ``credit
card'' and ``credit card account'' for both section 5(c) and section
10(m) of the HOLA.
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\17\ EGRPRA, section 2303(b), amending HOLA section 5(c), to be
codified at 5 U.S.C. 1464(c)(1)(T).
\18\ 2A Sutherland Statutory Construction section 46.05 (5th ed.
1992).
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According to Black's Law Dictionary, a ``credit card'' is ``[a]ny
card, plate, or other like credit device existing for the purpose of
obtaining money, property, labor or services on credit.'' 19 The
regulatory definition of credit card established in today's interim
rule is based on this plain language definition. OTS seeks comment on
whether a different definition would be more appropriate.
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\19\ Black's Law Dictionary 367 (6th ed. 1990).
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OTS has already received some questions regarding whether
securities backed by credit card accounts and products such as credit
card debt consolidation loans would fall within
[[Page 60181]]
the confines of ``loans made through credit cards or credit card
accounts.'' As for securities backed by credit cards, the HOLA itself
specifies that ``any reference to a loan [herein] * * * includes an
interest in such a loan. * * * '' 20 Thus, the authorization to
invest in ``loans made through credit cards'' encompasses investments
in loan pools that issue securities backed by credit card loans.21
As for credit card debt consolidation loans, OTS believes that, because
these loans are made for the purpose of funding credit card
receivables, they are in economic substance ``credit card loans.''
Today's definition of ``credit card account'' therefore includes credit
card debt consolidation loans and securities backed by credit-card
accounts and receivables.
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\20\ 12 U.S.C. 1464(c)(6)(B).
\21\ Cf. 12 CFR 560.31(c).
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We note that Sec. 560.30 of OTS's regulations, which implements the
statutory credit card authority, permits federal thrifts to engage in
the full range of credit card operations authorized by HOLA, but
provides that OTS reserves the right to establish investment limits on
a case-by-case basis if an institution's concentration in credit-card-
related loans presents a safety and soundness concern.22
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\22\ 12 CFR 560.30, n. 5, 61 FR 50951, 50973 (September 30,
1996).
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Institutions that expand their credit card lending (or their
consumer, small business, or agricultural lending) pursuant to today's
rule must do so in a safe and sound manner. Institutions planning any
significant increase in these types of loans should prepare thorough
business plans, acquire the necessary personnel and expertise, and
establish adequate systems to identify and control risks associated
with these products. OTS will monitor these lending activities,
utilizing off-site surveillance and the on-site examination process.
Section 560.3 Definitions of Small Business, Small Business Loans
Section 2303(g) of EGRPRA requires the OTS Director to issue
regulations defining the term ``small business'' in order to enable
savings associations to apply the newly modified QTL test which permits
small business loans to be counted as QTI without restriction pursuant
to HOLA section 10(m). Section 2303(c) of EGRPRA also directs the OTS
Director to define the term ``small business loans'' in connection with
newly amended HOLA section 5(c) which expands federal thrifts''
commercial lending authority from 10% to 20% of assets so long as the
amount in excess of 10% of assets is used solely for small business
loans. Once again, OTS believes that a consistent definition of small
business for application of both sections of the HOLA is appropriate to
promote a harmonious interpretation of the statute.
In this interim final regulation, OTS is tying its definitions of
small business and small business loans to the eligibility criteria
established by the Small Business Administration (SBA) under section
3(a) of the Small Business Act, 15 U.S.C. 632(a), as implemented by
SBA's regulations at 13 CFR Part 121. Most lenders and small businesses
are already familiar with SBA's size eligibility standards. However,
OTS specifically solicits comment as to whether these SBA standards are
the most appropriate basis for OTS's definition of small business or
small business loans for HOLA purposes. OTS specifically solicits
comment on whether it should, for the sake of simplicity, include a de
minimis safe harbor providing that any loan to a business with annual
sales of less than a specified amount will be deemed a small business
loan, regardless what line of business the borrower conducts.23
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\23\ The SBA Reauthorization Act of 1994, 15 U.S.C. 632(a)(C),
provides that unless specifically authorized by statute, no federal
agency may prescribe a size standard for categorizing a business
concern as a small business unless such size standard is made
subject to public notice and comment, makes certain size
determinations, and is approved by the SBA Administrator. OTS
solicits comment regarding whether EGRPRA section 2303(g)
constitutes a specific authorization within the meaning of 15 U.S.C.
632(a)(C).
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Sections 563.50, 563.51, 563.52 Revisions to the QTL Test.
As discussed above, section 2303 (e) and (g) of EGRPRA amended the
QTL test in a number of ways to give thrifts greater lending
flexibility. Investments in educational loans, small business loans,
and loans made through credit cards and credit card accounts are
includable as QTI without limit. Consumer loans now count as QTI in an
amount up to 20% of portfolio assets.
Rather than codifying these amendments in the existing QTL
regulations, OTS is removing the QTL provisions from its regulations at
12 CFR 563.50-52 and relying directly on the provisions of HOLA section
10(m) to govern this area, except for the two definitions described
above. These definitions will appear at 12 CFR 560.3.
This approach is consistent with OTS's effort to streamline its
regulations and remove duplicative requirements pursuant to section 303
of the Community Development and Regulatory Improvement Act of 1994
(CDRIA).24 The QTL provisions of HOLA section 10(m) are very
detailed, and OTS provides additional QTL guidance in its Thrift
Activities Handbook (Handbook). OTS believes it is unnecessary to
reiterate HOLA's statutory QTL provisions in a regulatory format,
because the combination of HOLA's statutory requirements and relevant
handbook guidance provide adequate direction to the thrift industry and
OTS examination staff with respect to QTL compliance. Thus, the only
regulatory provisions that address QTL will be the two definitions
described above.
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\24\ 12 U.S.C. 4803.
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Section 563.36 Tying Restrictions
Section 2216 of EGRPRA authorizes the OTS Director to issue
regulations or orders permitting exceptions to the anti-tying
prohibitions established in HOLA section 5(q) provided that such
exceptions are not contrary to the purposes of that section and conform
to exceptions granted by the FRB to banks pursuant to section 106(b) of
the BHCA Amendments. The FRB, by regulation, has created four
exceptions from the anti-tying provisions of the BHCA Amendments.
The first FRB regulatory exception provides that a bank holding
company, bank, or nonbank subsidiary thereof, may vary the
consideration charged for a traditional bank product on the condition
or requirement that a customer also obtain a traditional bank product
from an affiliate.25 HOLA section 5(q) excepts this type of
activity for savings associations, savings and loan holding companies,
and their affiliates.26 Accordingly, OTS has determined that a
regulatory exception for traditional bank products would be duplicative
of the HOLA and is unnecessary.
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\25\ 12 CFR 225.7(b)(1) (1996).
\26\ HOLA section 5(q)(1)(A) explicitly provides that the tying
restriction does not apply where the tied product is a traditional
bank product of the savings association, a service corporation, or
an affiliate. Section 10(n) of HOLA makes that anti-tying exclusion
applicable to savings and loan holding companies and affiliates
thereof. In contrast, the BHCA Amendments provide an exception in
the case of traditional bank products offered by the bank, but do
not address traditional bank products offered by bank holding
companies or nonbank affiliates. See, 12 U.S.C. 1972(1)(B).
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The second FRB regulatory exception provides that a bank holding
company, bank or nonbank subsidiary may vary the consideration charged
for securities brokerage services on the condition or requirement that
a customer also obtain a traditional bank product from that
[[Page 60182]]
bank holding company or bank or nonbank subsidiary, or from any
affiliate of such company.\27\ Once again, HOLA section 5(q) does not
prohibit this type of activity under any circumstances for savings
associations, savings and loan holding companies, and their
affiliates.\28\ Accordingly, OTS has determined that it is unnecessary
to adopt this second regulatory exception.
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\27\ 12 CFR 225.7(b)(2) (1996).
\28\ As noted in the discussion of the first FRB exception, a
tying arrangement is not prohibited under HOLA section 5(q) or 10(n)
where the tied product is a traditional bank product. There is no
requirement that the tying product be a traditional bank product.
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The third FRB regulatory exception relates to tying arrangements
that do not involve banks. The exception permits bank holding companies
or nonbank subsidiaries to vary the consideration for any extension of
credit, lease or sale of property of any kind, or service, on the
condition or requirement that the customer obtain some additional
credit, property or service from itself or a nonbank affiliate.\29\
This provision is an exception not from any statutory requirement but
from the FRB's regulation that generally applies the tying restrictions
applicable to banks to bank holding companies and other affiliates. The
language applying tying restrictions to savings and loan holding
companies and their non-thrift affiliates, which appears in HOLA
section 10(n), differs somewhat from the wording of the FRB's tying
regulation for bank holding companies and their nonbank affiliates.
Section 10(n) of the HOLA applies only when a tying arrangement
involves products of a savings and loan holding company or affiliate,
and those of an affiliated savings association. Accordingly, tying
arrangements involving savings and loan holding companies and/or non-
thrift affiliates, but not a savings association, are not restricted
under HOLA section 10(n). Therefore, OTS has determined that there is
no need to adopt a regulatory exception that is comparable to the third
FRB exception.
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\29\ 12 CFR 225.7(b)(3) (1996).
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The fourth FRB regulatory exception permits banks, bank holding
companies, or nonbank affiliates to vary the consideration for any
product or package of products based on a customer's maintenance of a
combined minimum balance in certain products specified by the company
varying the consideration (defined as ``eligible products'), if (i)
that company (if it is a bank) or a bank affiliate of the company
offers deposits, and all such deposits are eligible products, and (ii)
balances in deposits count at least as much as non-deposit products
toward the minimum balance.\30\
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\30\ 12 CFR 225.7(b)(4) (1996).
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This fourth FRB regulatory exception permits banks to offer
discounts to customers maintaining a combined minimum balance in
deposit and non-deposit accounts, including brokerage and mutual fund
accounts. As such, this regulatory ``safe harbor'' authorizes tying
arrangements that are currently prohibited for savings associations,
because the tied products would not necessarily be traditional bank
products. In addition, savings and loan holding companies or affiliates
thereof would be prohibited from offering such arrangements where one
of the products involved was a savings association product (other than
a traditional bank product).
Having reviewed this fourth FRB exception, OTS has determined that
it should promulgate a regulation adopting a comparable ``safe harbor''
for savings associations, savings and loan holding companies, and
affiliates \31\ OTS believes that this exception is not contrary to the
purposes of HOLA section 5(q), because it would not present the anti-
competitive effects which the HOLA's antitying provisions were intended
to eliminate. Rather, this safe harbor would enable savings
associations and their affiliates to offer a greater variety of banking
products and services to their customers and could potentially enhance
competition in the market place. Such an exception would also ensure
parity between savings associations and banks, enabling savings
associations and banks to offer a comparable range of products and
services and further enhance competition among financial institutions
consistent with the purposes of HOLA section 5(q) and the BHCA
Amendments.
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\31\ The exception authority granted to OTS by amended HOLA
section 5(q) is indirectly applicable to savings and loan holding
companies and affiliates, because HOLA section 10(n) provides that,
in connection with transactions involving the products or services
of a savings and loan holding company or affiliate and those of an
affiliated savings association, section 5(q) shall apply to savings
and loan holding companies and their affiliates in the same manner
as if they were a savings association.
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Accordingly OTS is adding a new regulatory antitying exception at
12 CFR 563.36 that conforms to the FRB's ``safe harbor'' for combined
balance discounts. This safe harbor permits savings associations and
their affiliates to offer discounts to customers maintaining certain
combined minimum balance accounts.\32\ In addition to this exception,
OTS may permit other exceptions under HOLA section 5(q) on a case-by-
case basis upon determination that the exception is not contrary to the
purposes of HOLA section 5(q), it conforms to an exception granted by
the FRB, and it is consistent with safe and sound practices.
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\32\ The interim final rule does not require that all products
offered pursuant to the safe harbor must be separately available for
purchase. Although this condition currently appears in the FRB safe
harbor, 12 CFR 225.7(c)(1)(1996), the FRB has specifically proposed
to eliminate this condition. 61 FR at 47264. OTS will reexamine this
issue if the FRB's final rule does not eliminate the condition.
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OTS also solicits comment as to whether the agency should adopt
regulatory revisions parallel to those proposed, but not yet adopted,
by the FRB on September 6, 1996.\33\ The FRB proposal would rescind the
provision in its current regulations that extends the tying
prohibitions to bank holding companies and their nonbank
affiliates.\34\ As noted above, the FRB already permits bank holding
companies and their nonbank affiliates to offer discounts on products
conditioned on a customer's purchase of another product, provided none
of the tied products are those of a bank affiliate. The FRB proposal
would, in effect, rescind this proviso, allowing bank holding companies
to tie their discounts to the purchase of bank products, provided no
anti-trust violations result. The proposal would also enable bank
holding companies and their nonbank affiliates to engage in tying
practices other than discounting. For example, the availability of a
product could be conditioned on the purchase of another product, again
provided no anti-trust violation occurs.
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\33\ See, 61 FR 47242 (September 6, 1996).
\34\ Other aspects of the FRB's proposal need not be discussed
here because they concern practices not prohibited for savings
associations and their affiliates.
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OTS requests comment on whether savings and loan holding companies
and their non-bank affiliates should also be completely exempted from
the tying restrictions. As noted above, the provision of law applying
the tying restriction to savings and loan holding companies is
statutory, not regulatory (as is the case for bank holding companies).
Thus, OTS also requests comment on whether it would have legal
authority to grant a complete exemption from HOLA section 10(n).
Sections 574.1, 574.2, 574.3, 575.2, 583.20, 584.2a Holding Company
Regulatory Revisions
Section 2203 of EGRPRA exempts bank holding companies that control
savings associations from HOLA section 10, thereby eliminating OTS
supervision of holding companies that control both
[[Page 60183]]
a bank and a thrift and are registered as a bank holding company with
the FRB under the BHCA of 1956. OTS is making technical changes to its
acquisition of control and holding company regulations to conform to
EGRPRA's amendments to the Savings and Loan Holding Company Act. OTS
has added an exception to its acquisition of control regulations to
clarify that where a person acquires control of a bank holding company
and the person is required to file a change of control notice with the
FRB, no change of control notice is required to be filed with OTS. In
addition, OTS is making minor revisions to the Mutual Holding Company
regulations to reflect its position that section 2203 of EGRPRA does
not affect OTS's authority to regulate mutual holding companies,
including mutual holding companies that have acquired a bank. OTS has
reached this conclusion for two reasons. First, although section 2203
of EGRPRA excepts bank holding companies from the definition of
``savings and loan holding company'' in section 10 of HOLA, section
10(o) of the HOLA, pertaining to mutual holding companies, refers to
``mutual holding companies'' rather than mutual savings and loan
holding companies. Second, OTS is the chartering authority for federal
mutual holding companies under section 10(o), and section 10(o)
provides for a unique relationship between depositors of the subsidiary
association and the mutual holding company.
III. Administrative Procedure Act
OTS has determined that advance notice and comment ordinarily
mandated by the Administrative Procedure Act (APA), 5 U.S.C. 553(b),
are not required in this interim final rulemaking. The APA authorizes
agencies to waive notice and comment procedures when the agency ``for
good cause finds * * * that notice and public procedure thereon are
impracticable, unnecessary, or contrary to the public interest.'' \35\
OTS for good cause finds that notice and comment procedures for this
rulemaking are impracticable and contrary to the public interest
because they would delay implementation of EGRPRA's expanded lending,
investment, and other authorities for thrifts. In addition, advance
public notice and comment are unnecessary and contrary to the public
interest because the interim rule substantially restates the provisions
of the statute or makes technical revisions to OTS regulations and
reduces regulatory burden.
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\35\ 5 U.S.C. 553(b)(B).
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OTS also has determined that the 30-day delay of effectiveness
provisions of the APA may be waived in this rulemaking. Section 553(d)
of the APA permits waiver of the 30 day delayed effective date
requirement for, inter alia, good cause or where a rule relieves a
restriction. OTS finds that good cause exists for the same reasons
stated above. OTS further finds that the 30-day delayed effective date
requirement may be waived because this interim final rule relieves
various lending, investment, and tying restrictions for thrifts and
merely conforms OTS regulations to EGRPRA's statutory changes.
Accordingly, the interim final rule will be immediately effective
upon publication in the Federal Register. Nevertheless, OTS seeks the
benefit of public comment. Accordingly, OTS invites interested persons
to submit comments during the 60-day comment period. OTS will revise
the interim final rule as appropriate based on these comments.
IV. Paperwork Reduction Act of 1995
This interim final rule does not impose any collections of
information on savings associations. As such, the Paperwork Reduction
Act of 1995 (44 U.S.C. 3501 et seq.) does not apply.
V. Executive Order 12866
OTS has determined that this interim final rule does not constitute
a ``significant regulatory action'' for the purposes of Executive Order
12866.
VI. Regulatory Flexibility Act Analysis
Because no notice of proposed rulemaking is required for this rule,
the provisions of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.
do not apply. The interim final rule does not impose any additional
burdens or requirements upon small entities and reduces burdens on all
savings associations. The regulatory amendments implement statutory
changes to the HOLA that relieve various lending, investment, and tying
restrictions on thrifts and otherwise conform OTS regulations to
EGRPRA. Accordingly, a regulatory flexibility analysis is not required.
VII. Unfunded Mandates Act of 1995
OTS has determined that the requirements of this interim final rule
will not result in expenditures by State, local, and tribal
governments, or by the private sector, of more than $100 million in any
one year. Accordingly, a budgetary impact statement is not required
under section 202 of the Unfunded Mandates Act of 1995, Pub. L. 104-4,
109 Stat. 48 (1995).
VIII. Effective Date
Section 302 of the Riegle Community Development and Regulatory
Improvement Act of 1994 (CDRIA), 12 U.S.C. 4802, requires that new
regulations and amendments to regulations that impose additional
reporting, disclosures, or other new requirements take effect on the
first date of the calendar quarter following publication of the rule
unless, among other things, the agency determines, for good cause, that
the regulations should become effective on a day other than the first
day of the next quarter. OTS believes that an immediate effective date
is appropriate since the interim rule relieves regulatory burden on
savings associations. This immediate effective date will permit savings
associations to begin exercising their expanding lending, investment,
and other authorities pursuant to the amended HOLA. OTS does not
anticipate that the immediate application of the rules will present a
hardship to institutions. Indeed OTS believes that CDRIA does not apply
to this interim rule because it imposes no new burden on thrifts. For
these reasons, OTS has determined that an immediate effective date is
appropriate for this interim final rule.
List of Subjects
12 CFR Part 560
Consumer protection, Investments, Manufactured homes, Mortgages,
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 563
Accounting, Advertising, Crime, Currency, Investments, Reporting
and recordkeeping requirements, Savings associations, Securities,
Surety bonds.
12 CFR Part 574
Administrative practice and procedure, Holding companies, Reporting
and recordkeeping requirements, Savings associations, Securities.
12 CFR Part 575
Administrative practice and procedure, Capital, Holding companies,
Reporting and recordkeeping requirements, Savings associations,
Securities.
12 CFR Part 583
Holding companies, Savings associations.
[[Page 60184]]
12 CFR Part 584
Administrative practice and procedure, holding companies, Reporting
and recordkeeping requirements, Savings associations, Securities.
Accordingly, the Office of Thrift Supervision hereby amends title
12, chapter V of the Code of Federal Regulations as set forth below.
PART 560--LENDING AND INVESTMENT
1. The authority citation for part 560 is revised to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1701j-3,
1828, 3803, 3806; 42 U.S.C. 4106.
2. Section 560.3 is amended by revising the introductory text and
by adding four definitions in alphabetical order to read as follows:
Sec. 560.3 Definitions.
For purposes of this part and any determination under 12 U.S.C.
1467a:
* * * * *
Credit card is a card, plate or other credit device that allows the
holder to purchase goods or obtain services or cash by charging them to
a previously established line of credit with the issuer of the card,
plate or device.
Credit card account is a credit account established in conjunction
with the issuance of, or the extension of credit through, a credit
card. This term includes loans made to consolidate credit card debt,
including credit card debt held by other lenders, and participation
certificates, securities and similar instruments secured by credit card
receivables.
* * * * *
Small business includes a small business concern or entity as
defined by section 3(a) of the Small Business Act, 15 U.S.C. 632(a),
and implemented by the regulations of the Small Business Administration
at 13 CFR Part 121.
Small business loans includes any loan to a small business concern
or entity as defined by section 3(a) of the Small Business Act, 15
U.S.C. 632(a), and implemented by the regulations of the Small Business
Administration at 13 CFR Part 121.
PART 563--OPERATIONS
3. The authority citation for part 563 continues to read as
follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1828, 3806.
4. Section 563.36 is added to read as follows:
Sec. 563.36 Tying restriction exception.
(a) Safe harbor for combined-balance discounts. A savings and loan
holding company or any savings association or any affiliate of either
may vary the consideration for any product or package of products based
on a customer's maintaining a combined minimum balance in certain
products specified by the company varying the consideration (eligible
products), if:
(1) That company (if it is a savings association) or a savings
association affiliate of that company (if it is not a savings
association) offers deposits, and all such deposits are eligible
products; and
(2) Balances in deposits count at least as much as non-deposit
products toward the minimum balance.
(b) Limitations on exception. This exception shall terminate upon a
finding by the OTS that the arrangement is resulting in anti-
competitive practices. The eligibility of a savings and loan holding
company or savings association or affiliate of either to operate under
this exception shall terminate upon a finding by the OTS that its
exercise of this authority is resulting in anti-competitive practices.
Secs. 563.50, 563.51, 563.52 [Removed]
5. Sections 563.50, 563.51, and 563.52 are removed.
PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS
6. The authority citation for part 574 continues to read as
follows:
Authority: 12 U.S.C. 1467a, 1817, 1831i.
7. Section 574.1 is revised to read as follows:
Sec. 574.1 Scope of part.
The purpose of this part is to implement the provisions of the
Change in Bank Control Act, 12 U.S.C.1817(j) (``Control Act'), and the
Savings and Loan Holding Company Act, 12 U.S.C. 1467a (``Holding
Company Act''), relating to acquisitions and changes in control of
savings associations that are organized in stock form and savings and
loan holding companies thereof.
Sec. 574.2 [Amended]
8. Section 574.2 is amended by revising paragraph (q)(2)(ii) and by
adding paragraph (q)(3) to read as follows:
Sec. 574.2 Definitions.
* * * * *
(q) * * *
(2) * * *
(ii) Is a testamentary trust; and
(3) A bank holding company that is registered under, and subject
to, the Bank Holding Company Act of 1956, or any company directly or
indirectly controlled by such company (other than a savings
association).
* * * * *
9. Section 574.3 is amended by:
a. In paragraph (c)(1)(ii), removing the period at the end of the
paragraph and adding a semicolon in its place;
b. Redesignating paragraphs (c)(1)(iii) through (c)(1)(vii) as
paragraphs (c)(1)(iv) through (c)(1)(viii);
c. Adding paragraph (c)(1)(iii);
d. Revising paragraph (c)(2)(i);
e. Redesignating paragraphs (c)(2)(iv) and (c)(2)(v) as paragraphs
(c)(2)(v) and (c)(2)(vi) and by adding a new paragraph (c)(2)(iv); and
f. In newly designated paragraph (c)(2)(v), removing the period at
the end of the paragraph and adding ``; and'' in its place.
The additions and revisions read as follows:
Sec. 574.3 Acquisition of control of savings associations.
* * * * *
(c) Exempt transactions. (1) * * *
(iii) Control of a savings association acquired by a bank holding
company that is registered under and subject to, the Bank Holding
Company Act of 1956, or any company controlled by such bank holding
company;
* * * * *
(2) * * *
(i) Transactions which are exempt pursuant to paragraphs
(c)(1)(iii), (c)(1)(iv), (c)(1)(v), and (c)(1)(vi) of this section;
* * * * *
(iv) Transactions for which a change of control notice must be
submitted to the Board of Governors of the Federal Reserve System
pursuant to the Change in Bank Control Act, 12 U.S.C. 1817(j);
* * * * *
PART 575--MUTUAL HOLDING COMPANIES
10. The heading for part 575 is revised as set forth above.
11. The authority citation for part 575 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1828, 2901.
12. Section 575.2 is amended by revising paragraph (h) to read as
follows:
Sec. 575.2 Definitions.
* * * * *
[[Page 60185]]
(h) The term mutual holding company means a mutual holding company
organized under this part.
* * * * *
PART 583--DEFINITIONS
13. The authority citation for part 583 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.
14. Section 583.20 is amended by revising paragraph (b)(2) and by
adding paragraph (c) to read as follows:
Sec. 583.20 Savings and loan holding company.
* * * * *
(b) * * *
(2) Is a testamentary trust; and
(c) A bank holding company that is registered under, and subject
to, the Bank Holding Company Act of 1956, or any company directly or
indirectly controlled by such company (other than a savings
association).
PART 584--REGULATED ACTIVITIES
15. The authority citation for part 584 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 1468.
Sec. 584.2a [Amended]
16. Section 584.2a is amended by removing paragraph (e).
Dated: November 20, 1996.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-30112 Filed 11-26-96; 8:45 am]
BILLING CODE 6720-01-P
