[Federal Register Volume 61, Number 220 (Wednesday, November 13, 1996)]
[Proposed Rules]
[Pages 58144-58145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28989]
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Proposed Rules
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 61, No. 220 / Wednesday, November 13, 1996 /
Proposed Rules
[[Page 58144]]
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 575
[No. 96-105]
RIN 1550-AB04
Mutual Savings and Loan Holding Companies
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Advance notice of proposed rulemaking.
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SUMMARY: The Office of Thrift Supervision (OTS), is issuing this
advance notice of proposed rulemaking to solicit comments on amending
the regulations regarding Mutual Savings and Loan Holding Companies to
permit the establishment of a mutual holding company (``MHC'')
structure that includes an intermediate stock holding company. The OTS
will consider the comments received in determining whether to proceed
with the development of a proposed rule to permit the formation of
intermediate stock holding companies by MHCS. The OTS solicits comments
on the specific questions set forth below and on all aspects of
permitting MHCs to form intermediate holding companies.
DATES: Comments must be received on or before December 13, 1996.
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. 96-105. 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: James H. Underwood, Special Counsel
(202/906-7354), Dwight C. Smith, Deputy Chief Counsel (202/906-6990),
Business Transactions Division, Chief Counsel's Office; Gary Masters,
Financial Analyst (202/906-6729), Corporate Activities Division, Office
of Thrift Supervision, 1700 G Street, NW., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION: The OTS has received several inquiries from
MHCs and mutual savings associations contemplating conversion to stock
and reorganization into MHC form concerning whether an MHC can form an
intermediate state-chartered stock holding company to hold the stock of
its insured savings association subsidiary. The MHC would hold at least
a majority of the stock of the intermediate holding company. The
intermediate holding company could issue a minority of its shares of
stock to the public and would hold 100% of the stock of the insured
savings association subsidiary. The intermediate holding company would
be a state-chartered corporation, unlike the MHC, which has a federal
charter.
Under current mutual holding company regulations (12 CFR part 575),
a mutual savings association may reorganize into a MHC by forming a
stock savings association which assumes the liabilities and assets of
the mutual savings association and issues at least a majority of its
stock to the MHC. Depositors of the mutual association continue to
maintain a deposit-creditor relationship with the stock savings
association subsidiary while retaining their other indicia of
ownership, eq., voting rights, liquidation rights, with the MHC. The
stock savings association subsidiary may issue up to 49 percent of its
shares to the public.
In a previous legal opinion, the OTS' staff declined to concur with
a request to permit the formation of a multi-tier mutual holding
company structure. Upon further consideration of this issue, the OTS
has determined to solicit comments from the public on whether Section
10(o) of the Home Owners Loan Act and the regulations promulgated
thereunder should be read to permit the formation of a multi-tier
mutual holding company structure, and if so, what restrictions should
apply to such a structure.
Entities interested in forming multi-tier MHCs have indicated that
the primary purpose is to permit the intermediate stock holding
company, which would issue shares to minority stock holders, to engage
in a stock repurchase program without the potential negative tax
consequences that would ensue if such a program were engaged in by the
insured savings association subsidiary. Under the current MHC
regulations, 12 CFR 575.11(c), a savings association subsidiary is
permitted to engage in a stock repurchase program subject to certain
restrictions. It is the OTS' current view that the current repurchase
restrictions at Sec. 575.11(c) would apply to the intermediate holding
company.
Entities seeking to form a multi-tier mutual holding company
structure also have suggested other reasons for its creation: the
presence of an intermediate stock holding company would facilitate
acquisitions; and the intermediate holding company may have greater
powers than the MHC.
Questions on Which Comment is Sought
The OTS is hereby requesting comment during a 30-day comment period
on the following questions and issues:
(1) Assuming the mutual holding company statute and the OTS'
implementing regulations can be read to permit the formation of an
intermediate stock holding company, should that holding company be
subject to the same activities limitations as a MHC or may it be
treated as a unitary savings and loan holding company?
(2) The MHC regulations impose various restrictions and limitations
on the MHC and the savings association subsidiary of the MHC. These
limitations include restrictions on pledges of the subsidiary savings
association's stock by a MHC, waiver of dividends, and limitations on
indemnification and employment contracts. It is not clear that these
restrictions would be directly applicable to the intermediate stock
holding company. Should these restrictions be applicable to an
intermediate stock holding company in the same manner in which they are
applicable to the MHC? Commenters should discuss any reasons for not
applying the restrictions and the consequences of such.
(3) Should the intermediate stock holding company be required to
obtain the approval of the OTS prior to issuing any debt or equity
security to any person other than its parent MHC? Should a subsidiary
stock thrift be able to issue minority voting stock or other
[[Page 58145]]
classes of securities? If so, under what circumstances? How should any
such stock be treated in a conversion of the MHC to stock form?
(4) The OTS is the sole chartering authority for MHCs that are
subject to part 575. Since both the parent MHC and the savings
association subsidiary of an intermediate holding company are chartered
by the OTS as special limited purpose corporations, to what extent
should the charter and bylaws (and any amendments) of the intermediate
holding company be subject to review and approval by the OTS? Should
the OTS require that provisions of the intermediate company's charter
be consistent with the Federal MHC charter?
(5) The savings association subsidiary of a MHC is subject to
various restrictions on stock issuances, including a requirement that
all stock issuances generally be structured in a manner that is similar
to a stock conversion offering under 12 CFR part 563b. Should these
restrictions also be applicable to the intermediate holding company? If
not, why not? Should all other provisions of 12 CFR part 575 governing
minority stock issuances be applicable to minority stock issuances by
intermediate holding companies? If not, why not?
(6) What are the consequences to the MHC of permitting the
intermediate holding company to retain capital generated by the savings
association subsidiary?
(7) Other than permitting stock repurchases and, perhaps,
facilitating acquisitions and expanding the powers in the MHC
structure, are there other reasons for creating a multi-tier structure?
Commenters should identify any additional potential benefits of a
multi-tier holding company structure and address any necessary
regulatory changes that would facilitate the use of the multi-tier
structure consistent with the MHC statute.
Dated: November 1, 1996.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 96-28989 Filed 11-12-96; 8:45 am]
BILLING CODE 6720-01-P
