[Federal Register Volume 63, Number 168 (Monday, August 31, 1998)]
[Rules and Regulations]
[Pages 46159-46160]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23281]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 544
[No. 98-89]
RIN 1550-AB17
Charter and Bylaws; One Member, One Vote
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of Thrift Supervision (OTS) is amending its
regulations on federal mutual savings association charters. The
amendment expands the range of votes a federal mutual savings
association may allow a member to cast on issues requiring action by
the members of the association from the current 50 to 1000 votes to one
to 1000 votes per member. This amendment adds flexibility to the
federal mutual charter, and allows a federal mutual savings association
to adopt a charter providing for ``one member, one vote.''
EFFECTIVE DATE: August 31, 1998.
FOR FURTHER INFORMATION CONTACT: Diana L. Garmus, Director, Corporate
Activities Division (202/906-5683); David A. Permut, Counsel (Banking
and Finance) (202/906-7505) or Kevin A. Corcoran, Assistant Chief
Counsel for Business Transactions (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
Various depository institutions have expressed interest in
converting to a federal mutual savings association charter,1
but requested the right to retain existing voting procedures following
the conversion. Several credit unions with membership voting rights of
one vote per member, for example, have asked to retain their current
voting provisions upon their conversions to federal charter. On April
14, 1998, the OTS issued a Notice of Proposed Rulemaking (``NPR'') that
would provide such flexibility for mutual financial institutions,
including credit unions, that wish to convert to the federal mutual
charter.2
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\1\ Section 2(5) of the Home Owners' Loan Act defines federal
savings associations to include federal savings associations and
federal savings banks. Accordingly, references to federal savings
associations include federal savings banks.
\2\ 63 FR 18149 (April 14, 1998).
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The OTS has long taken the position that depository institutions
should be free to operate under whatever charter best suits their
business needs, consistent with safety and soundness. Federal savings
associations may operate under a stock charter or mutual charter.
Within each charter, the OTS permits variations. For example, Federal
mutual savings associations have varying voting provisions (e.g., 50
votes per member, 400 votes per member or 1000 votes per member), often
based upon the rules in effect when they obtained their charters. The
NPR proposed to permit federal mutual associations to expand the
permissible range of votes allowed per member from one to 1000, rather
than the current range of 50 to 1000.
II. Summary of Comments and Description of Final Rule
The public comment period on the NPR closed on June 15, 1998. Three
commenters, all trade associations, responded to the proposal. Two were
in favor of the proposal and one opposed it. The favorable comments
agreed that the proposal would add flexibility to the federal mutual
charter and would put credit unions on an equal footing with state
chartered mutuals that convert to a federal charter. One commenter
pointed out that adoption of the amendment would remove one of the
perceived barriers to the conversion of a credit union to a federal
mutual association.
The trade association opposing the amendment argued that the one
member, one vote provisions are unique characteristics of credit
unions, which should be maintained. In addition, the commenter noted
that the proposed rule would jeopardize the one member, one vote
principle because a converted institution could easily amend its
charter, without OTS approval following the conversion. This trade
association questioned the timing of the proposal and argued that the
rule should be delayed until Congress had an opportunity to respond to
the February 25, 1998 Supreme Court ruling overturning the National
Credit Union Administration's (``NCUA'') actions permitting multiple
common bonds for credit unions.3 The trade association also
asserted the board of directors and management of credit unions may
seek to convert to federal association charter solely for their own
personal enrichment. As a result, the trade association urged the OTS
to require a converting credit union to wait a
[[Page 46160]]
minimum of seven years after conversion to federal mutual form before
it may convert to federal stock form.
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\3\ National Credit Union Administration v. First National Bank
& Trust Co., 118 S.Ct. 927 (1998).
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The OTS is aware of no reason why credit unions should be the only
type of depository institution to permit a one vote per member
arrangement. In response to the comment that the one member, one vote
principle is jeopardized by the ease of later amending the federal
charter, the OTS believes that members of a federal mutual association
should continue to have the right to change the number of votes per
member if they wish.
Further, the OTS is aware of no reason to delay its regulation.
Legislation has been enacted in response to the Supreme Court
ruling.4 In addition, the OTS has seen no mass influx of
credit unions seeking to become federal thrifts. Only seven credit
unions have applied to convert to a federal mutual charter in the last
eighteen months. (During the same period of time, ten commercial banks
applied to convert to federal savings associations.)
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\4\ On August 7, 1998 the President signed Pub. L. 105-219 which
mitigated the impact of the Supreme Court decision by allowing
occupation-based credit unions to accept members from unrelated
companies with fewer than 3000 employees.
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Finally, the OTS believes that restricting converting credit unions
from converting to stock for a number of years is beyond the scope of
the proposal and would be more appropriately raised in response to
planned revisions to the Part 563b mutual to stock conversion
regulations.
The OTS is adopting the amendment as proposed. The amendment will
permit mutual depository institutions that are converting to federal
savings associations to retain the one vote per member provision in
their current charters, and will permit other converting institutions,
as well as existing federal mutual savings associations, to adopt a one
vote per member provision.
The Final Rule will amend 12 CFR 544.2(b)(4) to permit federally
chartered mutual savings associations to set the number of votes per
member within the range of 1 to 1,000, rather than the current range of
50 to 1,000. New federal mutual savings associations may include this
provision in their initial federal thrift charter. Existing federal
mutual associations may amend their charters under the prescribed
regulatory procedures.5 Specifically, an institution must:
(i) Obtain a board of directors' resolution adopting the amendment,
(ii) obtain a favorable vote by the members, and (iii) notify the OTS
of the adoption at least 30 days prior to the effective date of the
proposed amendment. Unless the OTS notifies the institution of its
objection to the proposed amendment within that 30 days, the amendment
is automatically approved.
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\5\ 12 CFR 544.2(b) (1998).
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III. Executive Order 12866
The Director of the OTS has determined that this final rule does
not constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
IV. Regulatory Flexibility Act Analysis
Under Section 605(b) of the Regulatory Flexibility Act, the OTS
certifies that this proposal will not have a significant economic
impact on a substantial number of small entities. Small entities
utilizing the regulation may be able to retain their existing
membership rights, which will simplify the process of converting to a
federal charter and reduce regulatory burden.
V. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
federal mandate that may result in expenditures by state, local, and
tribal governments, in the aggregate, or by the private sector, or $100
million or more in any one year. If a budgetary impact statement is
required, Section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. The OTS has determined that
the proposed rule will not result in expenditures by state, local, or
tribal governments or by the private sector of $100 million or more.
Accordingly, this rulemaking is not subject to Section 202 of the
Unfunded Mandates Act.
VI. Effective Date
The OTS has determined that there is good cause to dispense with a
30-day delayed effective date under 5 U.S.C. 553(d)(3). The amendment
permits federal mutual savings associations and depository institutions
converting their charters to federal mutual savings association charter
to add flexibility to existing voting arrangements or retain current
voting rights. The OTS believes the change does not have an adverse
impact on savings associations because it reduces regulatory burden.
Moreover, the substantive change to the regulations has already been
made available to requesting converting depository institutions on a
case-by-case basis. OTS-regulated institutions will not require
additional time to adjust their policies or practices to comply with
the rule.
The OTS has also determined, for the reasons stated in the
preceding paragraph, that good cause exists to adopt an effective date
that is before date that would otherwise be required by section 302 of
CDRIA (i.e., the first day of the calendar quarter after the date of
publication).
List of Subjects in 12 CFR Part 544
Bylaws, Charters, Reporting and recordkeeping requirements, Savings
associations.
Accordingly, the Office of Thrift Supervision proposes to amend
chapter V, title 12, Code of Federal Regulations, as set forth below.
PART 544--CHARTER AND BYLAWS
1. The authority citation for part 544 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
2. Section 544.2 is amended by revising the last sentence of
paragraph (b)(4) to read as follows:
Sec. 544.2 Charter amendments.
* * * * *
(b) * * *
(4) * * * [Fill in a number from 1 to 1000.]
* * * * *
Dated: August 25, 1998.
By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-23281 Filed 8-28-98; 8:45 am]
BILLING CODE 6720-01-P
