[Federal Register Volume 59, Number 228 (Tuesday, November 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-28934]
[[Page Unknown]]
[Federal Register: November 29, 1994]
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Part II
Department of the Treasury
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Office of the Comptroller of the Currency
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12 CFR Part 5
Rules, Policies, and Procedures for Corporate Activities; Proposed Rule
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 5
[Docket No. 94-18]
RIN 1557-AB27
Rules, Policies, and Procedures for Corporate Activities
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
proposing to revise its rules governing corporate applications and
notices. This proposal is another component of the OCC's Regulation
Review Program to update and streamline OCC regulations and to reduce
unnecessary regulatory costs and other burdens. The proposal would
extensively revise and reorganize the OCC's rules for national bank
corporate activities. The purpose of the proposal is to modernize and
clarify the rules, reduce regulatory burden in connection with national
bank corporate activities, and, consistent with statutory requirements,
impose regulatory requirements only where needed to address safety and
soundness concerns or accomplish other statutory responsibilities of
the OCC.
DATES: Comments must be received by January 30, 1995.
ADDRESSES: Comments should be directed to: Communications Division, 250
E Street, SW, Washington, DC 20219, Attention: Docket No. 94-18.
Comments will be available for public inspection and photocopying at
the same location.
FOR FURTHER INFORMATION CONTACT: Stuart E. Feldstein, Senior Attorney,
Legislative and Regulatory Activities, (202) 874-5090; Laurie P. Sears,
Attorney, Legislative and Regulatory, (202) 874-5090; Jerome Edelstein,
Senior Counsel, Bank Activities and Structure, (202) 874-5300; Cheryl
A. Martin, Senior Licensing Policy and Systems Analyst, Licensing
Policy and Systems Division, (202) 874- 5060.
SUPPLEMENTARY INFORMATION:
Background
Summary of Regulation Review Program
The OCC is proposing comprehensive revisions to 12 CFR part 5 as an
important component of its Regulation Review Program. The goal of the
Program is to review all of the OCC's rules and to eliminate provisions
that do not contribute significantly to maintaining the safety and
soundness of national banks or to accomplishing the OCC's other
statutory responsibilities. Another goal is to improve clarity and to
better communicate the standards that the rules intend to convey.
The proposed revisions to part 5 reduce regulatory burden on
national banks by eliminating many regulatory requirements that are
neither essential to maintaining the safety and soundness of national
banks nor needed to accomplish the OCC's statutory responsibilities.
The proposed revisions also simplify and clarify the OCC's corporate
application procedures and standards.
Discussion
The proposed revisions modernize the rules in part 5 and further
the goals of the OCC's Regulation Review Program. In order to make part
5 more accessible and comprehensive, the proposal restructures many
sections and updates others by incorporating interpretive rulings and
significant OCC interpretive positions.
More importantly, the proposal incorporates a major OCC initiative
that fundamentally restructures its basic approach to the corporate
application process. The proposal provides for a new expedited review
procedure for many types of applications submitted by healthy, well-
managed banks which should entail low levels of risk. This new approach
will enable the OCC to focus its resources on applications that do not
fall within the new expedited review procedure and are therefore more
likely to present the greatest risk to safety and soundness or
compliance concerns--either because of the nature of the activity the
bank proposes to conduct, or the particular bank proposing to undertake
the activity.
The proposal also relocates provisions relating to applications of
Federal branches and agencies, Secs. 5.23, 5.25, 5.41, and 5.43, to
part 28 to consolidate all of the regulations concerning Federal
branches and agencies and international activities of national banks in
one international regulation. The OCC will make a final decision on the
proper placement of those provisions during its review of 12 CFR parts
20 and 28. If the OCC relocates these provisions relating to
applications of Federal branches and agencies the OCC will include new
sections in part 5 directing readers to their locations.
The OCC invites comment on the advisability of relocating these
provisions.
The discussion below identifies and explains significant proposed
changes to part 5. The OCC requests general comments on all aspects of
the proposed regulation as well as specific comments on major changes
in the rules.
The OCC also welcomes any additional comments relevant to this
proposal. A derivation table comparing the sections of proposed part 5
to those of the current part 5 follows this section of the preamble.
Scope (Sec. 5.1)
The proposal clarifies the purpose of part 5 by eliminating
unnecessary language. Information in current Sec. 5.1(b) concerning
filings for corporate activities and other transactions is transferred
to more appropriate sections--Sec. 5.3--Definitions, and Sec. 5.4--
Filing required.
Rules of General Applicability (Sec. 5.2)
The proposal consolidates some rules of general applicability for
part 5 in this section rather than repeating them throughout the part.
The proposal also relocates the definitions to a separate section,
Sec. 5.3.
The proposal transfers the information regarding denials to
Sec. 5.13--Decisions. The proposal moves the reference to the
``Comptroller's Manual for Corporate Activities'' (Manual), currently
located in Sec. 5.14--Forms, to this section, highlighting the Manual
as an additional source of guidance.
Delegations (Current Sec. 5.3)
The proposal removes the current Sec. 5.3--Delegations. The
Comptroller is given the authority to delegate in 12 U.S.C. 4a and does
so, as appropriate, by order. A regulatory delegation is not necessary.
Definitions (Proposed Sec. 5.3)
The proposal moves definitions currently located throughout the
part to a separate section. The proposal adds new definitions to
clarify the part generally, and updates existing definitions to make
them more accurate and precise.
The proposal includes a new definition, ``eligible bank,'' that is
the basis for a new system of expedited approvals. Specifically,
``eligible banks'' submitting filings for branches, corporate
reorganizations, operating subsidiaries to engage in certain
activities, bank service corporations, changes in permanent capital,
fiduciary powers, and various office relocations will qualify to use
the expedited approval process.
Under the proposal, an ``eligible bank'' is a national bank that is
well capitalized, has rating of 1 or 2 under the Uniform Financial
Institutions Rating System (CAMEL), has a Community Reinvestment Act
(CRA) rating of ``Outstanding'' or ``Satisfactory,'' and is not subject
to a cease and desist order, consent order, formal written agreement or
Prompt Corrective Action directive, (or, if subject to any such order,
agreement or directive, is informed in writing by the OCC that the bank
may be treated as an ``eligible bank'' for purposes of this part).
The OCC requests comment on whether the components of the
definition of ``eligible bank'' are the appropriate criteria for this
purpose.
The proposal adds a new definition, ``short-distance relocation,''
used in connection with both branch and main office relocations. The
proposal also includes a definition for ``capital and surplus'' that
conforms to the definition the OCC proposes to use in other OCC
regulations. See 59 FR 6593, Feb. 11, 1994.
Filings Required (Sec. 5.4)
The proposal clarifies the basic filing requirements and refers to
12 CFR 4.1a for appropriate addresses. Instructions on filings for
multinational banks are transferred from current Sec. 5.1 to this
section. Under the proposal, upon the applicant's request, the OCC may
accept the application forms submitted by the applicant to another
Federal agency if it covers the proposed action and contains
substantially the same information that the OCC would require. In such
case, the OCC may require supplemental information. The proposal also
advises applicants that copies of sample corporate application forms
are available in the Manual.
The proposal also removes the requirement in certain sections that
applications must be hand delivered, or mailed, return receipt
requested.
Fees (Sec. 5.5)
The proposal removes unnecessary information from this section,
such as procedures for determining the fee schedule. Readers are
referred to 12 CFR 8.8, regarding the Comptroller of the Currency's
fees.
In association with the proposed expedited approvals for eligible
banks and other revisions of part 5, the OCC anticipates making
adjustments to its fee structure.
Pre-Filing Meetings (Sec. 5.6)
This section currently is reserved, and the proposal removes it.
Investigation, Evaluation, and Required Information (Sec. 5.7)
The proposal clarifies and condenses the relevant information and
incorporates the fee provision pertaining to investigations currently
located in Sec. 5.5(c).
Public Notice (Sec. 5.8)
The proposal clarifies the current general public notice
requirement that an applicant publish a public notice in a newspaper
widely available in each area in which the applicant proposes to engage
in a new or expanded activity. If one newspaper is widely available in
the multiple areas that an applicant proposes to engage in a new or
expanded activity, the applicant need only publish a notice in that one
newspaper. This public notice requirement applies to filings to charter
a national bank, establish a branch, relocate a branch, and relocate a
main office. Certain other sections are subject to statutory public
notice requirements.
In any case presenting significant and novel policy, supervisory,
or legal issues, the OCC may require a public notice process for
applications for which the OCC does not generally require public
notice. The OCC may also determine that public notice in addition to
the notice otherwise required is needed. In these situations, the OCC
will determine the form and extent of the public notice (e.g.,
publication in an appropriate newspaper, in the Federal Register, or
the OCC ``Weekly Bulletin''). The OCC will determine what is
appropriate based on the type of filing and the issue presented in
order to provide effective public notice without creating undue delay.
The proposal also adds several provisions that reduce regulatory
burden. For example, the proposal allows the publication of a single
notice to serve as sufficient notice for two or more filings. The
proposal also permits the OCC to accept a notice published by an
applicant for another banking agency in lieu of the public notice
requirements of part 5, provided that the scope and content of the
other public notice are comparable to what the OCC otherwise would have
required. Finally, the proposal removes an unnecessary paragraph
regarding notification of state banking officials.
Public Availability (Sec. 5.9)
The proposal condenses this section to reflect the current OCC
practice for granting requests for information on particular filings.
Requests for public information should be in writing. The OCC may deem
information confidential and withhold it from the public file on its
own accord or upon the request of the applicant or person submitting
the information.
Written Comments and Hearing Requests (Sec. 5.10)
The proposal reorganizes this section, removes unnecessary or
repetitive information, and clarifies the essential material. The
proposal amends and transfers the paragraph regarding transcripts to
Sec. 5.11--Hearings.
The paragraph on comments and extensions of the comment period has
been consolidated in paragraph (b) of this section. The proposal
clearly establishes the period of time during which interested parties
may submit comments and be assured that the OCC will consider their
comments in deciding an application. As a general rule, the OCC
considers any comment it receives prior to making its decision.
The proposal includes a provision allowing the OCC to extend the
comment period if the applicant fails to file all required supporting
data in time to permit review by interested persons, if any person
requesting an extension of time provides adequate justification, or if
the OCC determines that other extenuating circumstances exist. The
proposal removes the provision in the current regulation, Sec. 5.10(c),
that automatically grants a 14-day extension of the comment period to
individuals whose request for a hearing has been denied.
Hearings (Sec. 5.11)
The proposal reorganizes and streamlines this section. The
pertinent background information regarding hearings that the proposal
removes from this section can be found in the Manual. Under the
proposal the person requesting a hearing would no longer bear the cost
of the hearing room or the OCC's transcripts. The person requesting the
hearing would continue to assume the cost of one copy of the transcript
for his or her use. Although the proposal contains no statement
concerning the waiver of this cost, the OCC's position is unchanged;
requests for waivers of this cost will be considered on a case-by-case
basis. The proposal also transfers the paragraph regarding hearing
transcripts from Sec. 5.10 to this section. Finally, it clarifies that
hearings under this section are not subject to formal adjudicatory
requirements or the Federal Rules of Evidence.
Computation of Time (Sec. 5.12)
The proposal makes no substantive changes to this section.
Decisions (Sec. 5.13)
The proposal reorganizes and clarifies the various types of OCC
decisions on filings. The proposal simplifies the section by discussing
in discrete paragraphs the various options available to the OCC in
addition to ordinary approval (i.e., conditional approval, expedited
approval, and denials). It also clarifies that in making a decision on
any application under this part, the OCC may consider the activities,
resources, or condition of affiliates of the applicant when they
reflect on or affect the applicant.
The proposal explains that the OCC grants eligible banks expedited
approval for certain filings and clarifies the circumstances under
which the OCC may determine that an eligible bank may not be granted
expedited approval. The OCC may decide not to process an application
under the expedited approval procedures if the OCC concludes that the
filing or an adverse public comment received prior to the OCC's
decision presents significant supervisory, CRA (if applicable), or
compliance concerns, or raises significant legal or policy issues.
Adverse comments that do not raise those concerns, or that are
frivolous, filed for competitive reasons, filed primarily to delay
action on the filing, or that raise negative CRA issues that already
have been resolved between the commenter and the applicant will not
prevent an eligible bank's application from processing under the
expedited approval process.
The proposal sets forth the circumstances under which the OCC will
reconsider a decision it has made on a filing and consolidates the
paragraph regarding OCC reconsideration of applications. Persons
seeking review of a final determination by the OCC may also appeal to
the OCC Ombudsman using the procedures detailed in Banking Circular
272.
The proposal adds a provision explaining that the OCC does not
generally grant a national bank an extension of time to commence a
corporate activity once approved by the OCC. It also expands upon the
provision regarding the OCC's power to nullify or void a decision.
Under the revised provision, the OCC may nullify any decision if there
is a material misrepresentation or omission in the underlying filing.
Also, the OCC may nullify any decision on a filing that is contrary to
law, regulation, or OCC policy, or that was granted due to a clerical
or administrative error or a material mistake of law or fact.
Forms (Sec. 5.14)
The proposal removes this section because the proposal transfers
this information to revised Sec. 5.2.
Organizing a Bank (Sec. 5.20)
The proposal clarifies, streamlines, and reorganizes this section
to provide better continuity, eliminate repetition, and focus on issues
important to charter applications. It also incorporates and
consolidates current provisions regarding national banks that limit
their activities to special purposes, such as national banks limited to
trust powers and bankers' banks, presently found in Secs. 5.22 and
5.27, respectively.
The proposal adds a ``licensing'' paragraph to summarize the basic
requirements for obtaining a national bank charter from the OCC. The
proposal amends the ``scope'' paragraph to describe the contents of the
section. It adds a ``definitions'' paragraph, with some definitions
based on current provisions and some new definitions to assist the
reader. In particular, the definition of ``bankers' bank'' is revised
to reflect changes to that definition contained in the Riegle Community
Development and Regulatory Improvement Act of 1994 (the Riegle Act).
The proposal also streamlines the ``policy'' paragraph to provide
appropriate guidance without unnecessary repetition.
The proposal maintains the OCC's right, as a condition of charter
approval, to object to and preclude the hiring of any officer for two
years following a bank's commencement of business. It also clarifies
that, consistent with the OCC's practice, this right extends to
national bank directors. The OCC reiterates its view that it does not
believe that Congress in enacting section 914 of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA)
intended to displace or supersede the OCC's longstanding authority
under the National Bank Act's chartering provisions to require prior
review of proposed changes in officers and directors for two years as a
condition to granting a charter.
In response to section 308 of FIRREA the proposal specifically
states that the OCC approves proposals to establish minority
institutions that have a reasonable chance of success and that will be
operated in a safe and sound manner. This provision demonstrates that
the OCC proactively promotes and encourages creation of new minority
depository institutions.
The proposal removes the list of additional factors, derived from
12 U.S.C. 1816 (regarding insurance of accounts by the Federal Deposit
Insurance Corporation (FDIC)), to be considered in deciding an
application for a charter. Consideration of these factors by the OCC is
no longer a legal requirement and is, therefore, discretionary.
Because the rules of general applicability in subpart A of part 5
describe the various types of decisions that the OCC may reach, and the
grounds for denial and notification, the proposal removes similar
language from this section.
In the paragraph on bankers' banks, the proposal clarifies that the
OCC may waive certain requirements, but not specific statutory
requirements for bankers' banks.
Organization of an Interim National Bank (Sec. 5.21)
The proposal removes this section and incorporates the relevant
information into Sec. 5.33--Business combinations, thus placing the
interim bank rules together with the rules for the business
combinations in which interims are used.
Organization of a National Bank Limited to Trust Powers (Sec. 5.22)
The proposal removes this section and incorporates any necessary
information from this section in Sec. 5.20.
Establishment of an Initial Federal Branch (Including a Limited Federal
Branch) and a Federal Agency of a Foreign Bank (Sec. 5.23)
The proposal relocates to 12 CFR part 28 provisions relating to
applications of Federal branches and agencies.
Conversion (Sec. 5.24)
The proposal reorganizes and streamlines this section. It clarifies
the types of entities that may convert to national bank charters under
12 U.S.C. 35, encompassing state banks (including ``state banks'' as
defined in 12 U.S.C. 214(a)) and Federal thrifts, and includes
procedures for conversion from a national bank charter to another form
of charter.
The proposal provides explicit procedures for converting to a
national bank charter. The proposal explains that institutions
converting to a national bank charter must identify all subsidiaries
that the institution will retain following the conversion and provide
information and analysis of the activities of the subsidiaries as would
be required under Sec. 5.34--Operating subsidiaries. The proposal also
requires institutions to identify nonconforming assets, subsidiaries,
and activities, and to describe plans for their retention or
divestiture. The proposal also amends the section to clarify that the
OCC can approve retention of nonconforming assets and related
activities.
The proposal uses more specific and precise language than the
current rule in order to clarify requirements. It changes the
references from ``state law'' to ``applicable state law'' to recognize
that state law does not apply to the conversion of a Federal savings
association to a national bank. In the current part 5, the term
``bank'' is used in a generic sense. The proposal uses the specific
terms for the financial institution referenced (i.e., ``state bank,''
``Federal savings association'') to indicate more accurately the type
of entity involved in the conversions described in this section. Also,
for the purpose of a national bank converting to a state bank, the
proposal refers specifically to ``a state bank within the meaning of 12
U.S.C. 214(a).'' The law at 12 U.S.C. 214a governs the conversion of a
national bank to a state bank. The proposal also provides that a bank's
status as a national bank is terminated upon completion of the
requirements of 12 U.S.C. 214a and upon receipt by the appropriate
district office of the bank's national bank charter (or a copy thereof)
in connection with the consummation of the transaction.
The proposal adds a new provision to allow for the conversion of a
national bank to a Federal savings association under the same
requirements and procedures that govern a national bank's conversion to
a state bank or state thrift charter as set forth in 12 U.S.C. 214a and
214c. For this purpose, references in those sections to the ``law of
the state'' and ``any state authority'' mean ``laws and regulations
governing Federal savings associations'' and ``Office of Thrift
Supervision,'' respectively. This change provides parallel treatment
for all types of charter conversions and recognizes that a national
bank can shift to a thrift charter through multi-step transactions such
as a combination with an interim or newly established thrift. The
regulation, however, does not address issues that arise as a result of
the insurance conversion moratorium or the ability of a national bank
insured by the Bank Insurance Fund to convert into a savings
association or to be acquired by an interim savings association insured
by the Savings Association Insurance Fund.
The proposal removes the specific list of factors that the OCC
considers in assessing its supervisory concerns with a charter
conversion because the list is unnecessary in light of the denial
criteria contained in subpart A of part 5. The proposal also adds a
reference to the significance of outstanding supervisory sanctions on
an application for conversion.
Application for Conversion of a Branch or Agency Operated by a Foreign
Bank or a Commercial Lending Company Controlled by a Foreign Bank into
a Federal Branch or a Federal Agency (Sec. 5.25)
The proposal relocates provisions relating to applications of
Federal branches and agencies to part 28.
Fiduciary Powers (Sec. 5.26)
The proposal reorganizes this section and states in a clear and
succinct manner the OCC's policies and procedures for allowing a
national bank to exercise fiduciary powers. To exercise fiduciary
powers, a national bank must submit an application and obtain prior
approval from the OCC. An eligible bank's application is deemed
approved by the OCC as of the 30th day following the OCC's receipt of
the filing unless the OCC notifies the applicant that the bank is not
eligible for expedited approval under the standards of Sec. 5.13(a)(2).
The proposal sets forth those circumstances in which a separate
application for fiduciary powers under the procedures of Sec. 5.26 is
required. A separate application to exercise fiduciary powers is not
required when: (1) one or more national banks merge or consolidate with
a national bank with fiduciary powers, (2) a national bank with
fiduciary powers merges or consolidates with a state bank without
fiduciary powers, or (3) an applicant applies for a charter for a
national bank limited to fiduciary activities.
Organization of a National Bankers' Bank (Sec. 5.27)
The proposal moves this section into Sec. 5.20 to consolidate the
information regarding organization of national banks into one section.
Establishment, Acquisition and Relocation of Branches (Sec. 5.30)
The proposal restructures this section to improve clarity and
provide less burdensome procedures. The ``scope'' paragraph makes clear
that Sec. 5.30 applies to both the establishment of new branches and
the relocation of existing branches. It also clarifies that the
procedures for branches established as a result of acquisitions are
located in this section, while the standards for such acquisitions are
found in Sec. 5.33--Business combinations.
The proposal incorporates into this section the pertinent
provisions of Sec. 5.31, concerning the establishment of an ``automatic
teller machine'' (ATM). In keeping with the OCC's goal of simplifying
the regulatory text, where appropriate, the proposal adopts the
recognized term ATM, rather than the term ``customer-bank
communications terminal'' (CBCT), which is used in the current
regulation.
The proposal revises the definition of ``branch'' to reflect case
law by incorporating the concept that a facility, to be considered a
branch, must be ``established'' by a national bank. Specifically, the
regulation provides that an ATM, or other unstaffed facility, that is
``not owned or rented'' by the bank is not ``established'' by the bank
and, thus, is not a branch of the bank. The OCC will consider what
constitutes ``establishment'' in other contexts on a case-by-case
basis.
The proposal also incorporates case law and OCC precedent that a
bank-owned facility that does not provide a means to attract customers
to the bank is not a branch. An example is a facility where members of
the public have no in-person contact such as a back office facility
that receives deposits only through the mail. Another such facility is
one that does not provide services to attract bank customers because
the facility is generally available to customers of other banks who may
receive substantially similar services pertaining to their accounts at
other banks on substantially similar terms. This definition could
include an ATM that, because of its linkage to a network, is generally
accessible by customers of other banks on a comparable basis.
The proposal clarifies the ability of a national bank to submit a
single application when requesting approval for multiple ATM branches,
other branches that are not permanently staffed (e.g., drop boxes), and
messenger service branches that will serve the same general geographic
area. Similarly, the proposal requires only one application when a
national bank jointly establishes a branch with other depository
institutions. In that case, the bank that submits the application must
act as the agent for all national banks in the group.
The proposal expedites approval of branch applications. Under a new
provision that makes expedited approval available for eligible banks,
applications are approved as of the seventh day after the close of the
comment period, unless the OCC notifies the applicant prior to that
time that the filing is not eligible for expedited treatment under the
standards of Sec. 5.13(a)(2). The approval follows seven days after the
close of the comment period to allow the OCC time to consider comments
received. In addition, applications to engage in a short-distance
relocation of a branch are accelerated by using a ten-day comment
period, rather than a 30-day period.
The OCC requests comment on whether it would be appropriate to use
a shortened comment period or another form of expedited processing with
respect to other types of branch applications.
The OCC specifically requests comment on whether some form of
streamlined approach would be appropriate for the establishment of
temporary branch facilities, such as those that may only open for a
limited number of days each semester at an institution of higher
education, or in circumstances where facilities are not subject to
state-imposed approval requirements.
The proposal also clarifies that a public notice of an application
for a mobile branch must be published in each area where the branch
will be operated, but that specific sites need not be identified. The
proposal removes the current requirement that the applicant indicate
its intentions to vary the lending policies, procedures, or services at
a proposed branch location. Instead, the OCC will request this
information in connection with the application form.
The proposal also amends this section to incorporate the new
standards and requirements of the Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 (Riegle-Neal Act) that apply when a
national bank establishes a de novo branch in a state other than the
bank's home state or a state in which the bank already has a branch.
These requirements generally include compliance with certain non-
discriminatory state filing requirements and applicable community
reinvestment laws. The OCC also may only approve an application to
establish such a de novo branch if the bank establishing the branch is
adequately capitalized and adequately managed.
The OCC may approve an application to establish a de novo branch
under the Riegle-Neal Act only if the state in which the bank proposes
to establish the branch expressly permits such transactions.
Business Combinations (Sec. 5.33)
The proposal substantially reorganizes, condenses, and simplifies
this section. The proposal uses the term ``business combination,''
rather than ``merger,'' in order to avoid confusion on specific
transactions. The pertinent information regarding interim banks from
current Secs. 5.20 and 5.21 is incorporated into Sec. 5.33. The
proposal also clarifies that the section covers transactions involving
uninsured institutions.
The proposal provides for expedited approval of certain corporate
reorganizations. Under the proposal, holding companies may merge
certain subsidiary banks under an expedited approval process. Expedited
review is also provided for the merger of an eligible bank with an
interim bank in connection with the bank's creation of a new holding
company.
The proposal replaces the discussion of the Quick Check Merger
Screen with a reference to the expedited competitive analysis available
in the Manual. The proposal also revises the ``adequacy of disclosure''
paragraph by removing the requirement that unregistered banks prepare
proxy and information statements in conformance with the detailed rules
of the Securities Exchange Commission for registered corporations.
Proxy and information statements used by unregistered banks remain
subject to securities law antifraud standards.
Finally, the proposal adopts the procedures of 12 U.S.C. 214a,
214c, 215, and 215a as procedures for combinations between national
banks and Federal savings associations, with appropriate exceptions to
conform the style of the Federal thrift acquisition regulation with the
rest of Sec. 5.33 and part 5. In addition, similar to the treatment of
conversions, references in Secs. 214a or 214c to the ``law of the
state'' and ``any state authority'' mean ``the laws and regulations
governing Federal savings associations,'' and ``Office of Thrift
Supervision,'' respectively.
The proposal also revises this section to reflect certain
provisions of the Riegle-Neal Act regarding interstate business
combinations. These provisions will be effective in states that elect
by statute to permit interstate business combinations. Even if a state
does not adopt a statute permitting an interstate business combination,
a business combination involving the acquisition of all or
substantially all of a bank through a merger, consolidation, or
purchase and assumption transaction will be permissible in all states
as of June 1, 1997, except if a state adopts a statute prior to that
date expressly prohibiting these combinations. However, a business
combination involving the acquisition of a branch, without also
acquiring the bank must be permitted by state law even if the
transaction is to occur after June 1, 1997.
In reviewing an application for an interstate business combination
under the Riegle-Neal Act, the OCC must consider, among other things,
compliance with state requirements relating to the minimum number of
years that a bank to be acquired must be in existence, state filing
requirements, applicable community reinvestment laws, the
capitalization of each bank involved, and management of the resulting
bank. In addition, the OCC may not approve a combination that, upon
consummation, results in a bank that exceeds certain limits on the
amount of deposits held by its depositors. Business combinations
involving banks in default or in danger of default or with respect to
which the FDIC provides assistance under section 13(c) of the Federal
Deposit Insurance Act, 12 U.S.C. 1823(c), are not subject to certain of
these requirements including, among others, minimum age laws and
deposit limits. Such transactions can occur notwithstanding adoption by
a state of a statute expressly prohibiting interstate branching.
Under the Riegle-Neal Act, the resulting national bank may, subject
to OCC approval, retain and operate as a main office or a branch, any
office that any bank involved in an interstate merger transaction was
operating as a main office or a branch immediately before the merger
transaction. A resulting national bank also may, following consummation
of the transaction, establish, acquire, or operate additional branches
at any location where any bank involved in the transaction could have
established, acquired, or operated a branch under applicable Federal or
state law if such bank had not been a party to the transaction.
Operating Subsidiaries (Sec. 5.34)
In order to minimize regulatory burden with respect to low-risk
activities, the proposal establishes three categories of procedures to
establish or acquire an operating subsidiary or to commence a new
activity in an operating subsidiary. The proposal includes an after-
the-fact notice procedure, an expedited review procedure for eligible
banks, and a standard application review procedure for other
situations.
A national bank may establish an operating subsidiary that
qualifies for the after-the-fact notice procedure without prior OCC
approval. The bank must file a notice with the OCC within ten days
after establishing or acquiring the subsidiary, or commencing a new
activity in a subsidiary. To be eligible for the notice procedure, the
national bank that owns the subsidiary must be ``adequately
capitalized'' and must not have been deemed to be in ``troubled
condition'' for purposes of Sec. 5.51. Further, the subsidiary's
activities must be among those listed in Sec. 5.34(e)(3)(ii).
To be eligible for the expedited procedure, an application must be
filed by an ``eligible bank'' as defined by this part and must pertain
to activities listed in Sec. 5.34(e)(2)(ii).
The OCC invites comment on the list of activities deemed qualified
for expedited approval or notice procedure.
The OCC also seeks comment on whether it should amend the section
to state that a national bank must possess fiduciary powers as a
precondition to providing investment advice, either in the bank or
through an operating subsidiary.
The proposal also provides that an operating subsidiary approved
under the notice or expedited application process must conduct its
activities in conformity with applicable OCC guidance. Activities or
banks that do not qualify for either the notice or expedited
application process are handled under a standard application process.
The proposal revises current Sec. 5.34(d)(2)(i) to provide that,
unless otherwise provided by statute, regulation, or as determined by
the OCC, all provisions of Federal banking laws and regulations
applicable to the operations of the parent bank apply to the operations
of the bank's operating subsidiaries. This revised standard allows the
OCC to determine on a case-by-case basis whether an activity deemed to
be within the business of banking or incidental to banking may be
conducted in an operating subsidiary to an extent or in a manner
different from the way the activity is conducted at the parent bank
level. This might include activities that the parent bank is not
allowed to conduct because of a specific restriction that applies to
the parent bank but not necessarily to its subsidiaries.
In approving operating subsidiary applications, the OCC will assure
that the activities proposed to be conducted will not endanger the
safety and soundness of the parent bank. The OCC of course retains
authority to impose appropriate conditions in connection with approvals
of operating subsidiary applications. Depending upon the activity in
question, and as needed in order to protect the safety and soundness of
the parent bank and prevent risks of conflicts of interest, the OCC
will impose conditions that limit transactions between the subsidiary
and its parent bank, limit the amount of funds that may be invested in
the subsidiary by the parent, require that the subsidiary's capital not
be included when computing the bank's capital, apply special safeguards
on transactions between the bank and third parties that transact
business with the operating subsidiary, or implement other measures, as
appropriate.
The proposal reduces the required ownership percentage for an
operating subsidiary from 80 percent to a majority of the subsidiary's
voting stock. This reduction provides more flexibility for the
operating subsidiary structure, while maintaining the requirement that
the parent bank control its operating subsidiary.
The OCC is soliciting comment on whether the rule on operating
subsidiaries should include forms of control other than majority
ownership of corporate stock, and interests in entities other than
corporations, including limited liability companies.
The proposal also explicitly states that entities in which a bank's
investment is made pursuant to specified authorization in an individual
statute or other OCC regulation, and shares held as debt previously
contracted, are not operating subsidiaries, and, accordingly, are not
within the scope of this section.
The proposal also removes a paragraph regarding conditions imposed
in writing. This information is provided in subpart A with the other
rules of general applicability.
Bank Service Corporations (Sec. 5.35)
The proposed Sec. 5.35 reduces the general application approval
requirements, provides greater clarity, and eliminates repetition. The
proposal defines terms in this section, rather than referring to the
statutory definitions as in the current regulation. The proposal
changes the basis for computing the investment limits from the current
``paid-in'' and ``unimpaired capital and unimpaired surplus'' to a new
definition of ``capital and surplus'' that can be derived from a
national bank's Consolidated Report of Condition and Income (Call
Report).
In order to minimize regulatory burden with respect to low-risk
activities, implement changes resulting from the Riegle Act and conform
with the new procedures proposed for national bank operating
subsidiaries, the proposal establishes different categories of
procedures for national banks seeking to make investments in bank
service corporations. The proposal leaves intact a category of
activities for which no approval is required and a category of
activities that requires the filing of an application with, and
approval from, the Federal Reserve Board. In addition, the proposal
seeks to streamline investments in bank service corporations conducting
activities that are permissible for the parent bank by establishing an
after-the-fact notice procedure, and an expedited review procedure. The
proposal retains the standard application procedure for other
situations.
Under the after-the-fact notice procedure, a national bank that
seeks to invest in a bank service corporation that will engage only in
those activities listed in Sec. 5.34(e)(3)(ii) need only provide notice
to the appropriate district office within ten days after the
investment. To be eligible for the notice procedure, the bank that
proposes to invest in the bank service corporation must be ``adequately
capitalized,'' and must not have been notified that it is in ``troubled
condition'' as that term is used in Sec. 5.51.
Under the expedited review procedure, an application filed by a
national bank that seeks to invest in a bank service corporation
engaged in those activities listed in Sec. 5.34(e)(2)(ii) is deemed
approved by the OCC 30 days after the filing unless notified otherwise
by the OCC prior to that date. To be eligible for the expedited review
process, a bank must be an ``eligible bank'' as defined in Sec. 5.3(f).
An investment made under the after-the-fact notice procedure or the
expedited approval procedure is subject to the condition that the bank
service corporation conduct its activities in accordance with guidance
issued by the OCC. A national bank that seeks to invest in a bank
service corporation, and does not fall within one of the aforementioned
approval procedures, must submit a notice to the OCC. The investment is
deemed approved within 60 days of filing, unless the OCC notifies the
applicant otherwise.
Other Equity Investments (Sec. 5.36)
The proposal restructures this section and clarifies the types of
equity investments covered. It removes two types of equity investments
specified in the current regulation: (1) an agricultural credit
corporation, and (2) a savings association to be acquired under section
13 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1823.
Instead, the proposal covers investments authorized by statutes enacted
after February 12, 1990, that are not covered by other OCC regulations.
The proposal also replaces the term ``notification'' with the more
appropriate term ``application.'' The proposal maintains the 30-day
timeframe for approval of other equity investments but simplifies the
language to correspond to other similar provisions.
In light of the proposed changes to this and other sections, the
usefulness of this section is questionable, and the OCC requests
comments on whether the section should be removed.
Investment in Bank Premises (Sec. 5.37)
The proposal transfers certain provisions currently located in 12
CFR part 7, clarifies the circumstances under which OCC approval is
required for national bank investment in bank premises in excess of the
bank's capital stock, and describes the procedures for submitting an
application for OCC review. The proposal also provides that,
notwithstanding the capital stock limitation, an eligible bank may
provide an after-the-fact notice for aggregate investments in bank
premises up to 20 percent of the bank's ``capital and surplus'' as
defined in Sec. 5.3(d).
Change in Location of Main Office (Sec. 5.40)
The proposal changes the title of the section to parallel the
relevant statutory language. It reorganizes the section and adds new
provisions to streamline the procedure for a change in the location of
a national bank's main office.
The proposal establishes an expedited approval process for main
office relocations other than those to an authorized branch location
within the limits of the same city, town, or village. Under this
procedure, an application by an eligible bank is deemed approved by the
OCC as of the seventh day after the close of the comment period, unless
the OCC notifies the applicant that the bank is not eligible for
expedited approval under the standards of Sec. 5.13(a)(2). In addition,
an application to engage in a short-distance relocation of a main
office is subject to an accelerated ten-day comment period, rather than
the 30-day period.
The proposal removes a reference to specific application forms. An
applicant should contact the appropriate district office or consult the
Manual for application forms.
The proposal transfers all provisions relating to branch
relocations to Sec. 5.30. It also removes the provision concerning
community delineation because the Manual will address this material.
Change in Relocation of Federal Branches and Agencies (Sec. 5.41)
The proposal relocates provisions relating to applications of
Federal branches and agencies to 12 CFR part 28.
Change of Corporate Title (Sec. 5.42)
The proposal rearranges this section for greater clarity and
specifically alerts banks to the restrictions in 18 U.S.C. 709
regarding the use of certain titles.
Change in Designation of Initial Federal Branch or Federal Agency to
any Other Federal Branch or Federal Agency (Sec. 5.43)
The proposal relocates provisions relating to applications of
Federal branches and agencies to part 28.
Competitive Factor Reports to Other Agencies (Sec. 5.44)
This section is currently reserved, and the proposal removes it.
Comment Letters on Holding Company Acquisitions to Board of Governors
of the Federal Reserve System (Sec. 5.45)
This section is currently reserved, and the proposal removes it.
Changes in Permanent Capital (Sec. 5.46)
The proposal restructures and streamlines this section to better
address the fundamental requirements for a change to a national bank's
permanent capital. The proposal changes the title from ``Changes in
equity capital'' to the more accurate ``Changes in permanent capital.''
The OCC believes that a general list of transactions, as in the
current regulation, does not provide sufficient flexibility in
determining whether an application is required for a specific
transaction. Thus, consistent with the intent of 12 U.S.C. 59, the
proposal emphasizes that it is necessary to look to the effect of the
transaction to determine whether an application is required. A list of
transactions for which applications are generally required will be
located in the Manual.
The proposal provides new definitions in order to simplify the
section. The proposal defines the term ``permanent capital'' to mean
the same thing as ``capital'' in 12 U.S.C. 59 (i.e., the sum of capital
stock and capital surplus).
The proposal substantially changes the ``office policy'' paragraph.
It condenses the policy discussion and transfers information presently
located in the ``office policy'' paragraph to the appropriate
substantive section.
The proposal no longer requires letters of intent, preliminary
approval, and notification of changes in par value (unless related to
selling stock for consideration other than cash). By dividing the
relevant information by subject matter, the proposal clarifies the
procedures by which a national bank may make a change in its permanent
capital. It draws a clear distinction between procedures for an
increase and for a decrease in permanent capital.
The proposal also facilitates increases in permanent capital by
clarifying that most increases in permanent capital do not require OCC
approval. Generally, national banks need only file a letter of
notification with the OCC after the sale or completion of the
transaction. The proposal also provides an expedited approval process
for eligible banks.
Subordinated Debt as Capital (Sec. 5.47)
Revisions to this section are being made as part of the OCC's
comprehensive revisions to 12 C.F.R. part 16. The text of the proposal
incorporates those changes.
Voluntary Liquidation (Sec. 5.48)
The proposal reorganizes and simplifies this section. It clarifies
that a national bank preparing to go into voluntary liquidation must
file a notice with the OCC once the shareholders have voted to
voluntarily liquidate pursuant to 12 U.S.C. 182. The bank must also
publish a public notice pursuant to that statute.
The proposal reduces the burden of dissolving shell banks remaining
after whole-bank purchase and assumptions involving transactions
between affiliated or non-affiliated banks, provided the acquiring bank
is adequately capitalized.
Change in Bank Control (Sec. 5.50)
The proposal substantially reorganizes, clarifies and simplifies
this section. In conjunction with the reorganization, the proposal
removes some paragraphs that were repetitive or confusing. The proposal
also incorporates a number of interpretations that the OCC has issued
regarding Sec. 5.50.
The proposal applies the standards of the Change in Bank Control
Act (CBCA), 12 U.S.C. 1817(j), to insured and uninsured national banks.
The OCC applies CBCA-type standards to uninsured national banks using
its authority to prescribe rules and regulations to carry out its
responsibilities with regard to national banks, 12 U.S.C. 93a. One of
these responsibilities is maintaining the safety and soundness of
national banks. A change in bank control may bring about substantial
safety and soundness concerns, so the OCC believes it should regulate
and supervise any change in bank control for both insured and uninsured
national banks. The OCC currently uses special conditions in charters,
when appropriate on a case-by-case basis, to exert influence over
subsequent bank change in control.
The OCC requests comments regarding the application of the CBCA-
type standards to uninsured banks.
The proposal codifies the OCC's longstanding position that a person
who has acquired control conclusively or presumptively, after filing
proper notices, does not need to file subsequent notices unless
otherwise notified in writing by the OCC. It clarifies the distinction
between those transactions exempt from the CBCA altogether and those
exempt from the prior notice requirement. For those exempt from the
prior notice requirement, the proposal extends from 30 to 90 days the
time period to file a notice with the OCC. The proposal also exempts an
acquiror from prior notice requirements when acquisition of control is
due to the actions of third parties and is not within the acquiror's
control.
The proposal clarifies the scope of the debt previously contracted
exception consistent with current OCC practice. Current OCC practice
requires the acquiror of a defaulted loan secured by a controlling
interest in bank stock to file a notice prior to acquiring the
defaulted loan unless the bank stock is not the anticipated source of
repayment.
The proposal also defines key terms to clarify the scope of the
regulation. It includes a definition for ``acting in concert,'' and
defines ``acquisition'' to include an increase in percentage ownership
of a bank resulting from a redemption of voting securities. The term
``person'' includes voting trusts and voting agreements. The proposal
defines ``voting securities'' to include securities immediately
convertible into voting securities at the option of the holder.
The proposal stipulates that a notice is required when a person
acquires the power, directly or indirectly, to direct management
policies. The proposal clarifies that if, at the same time, two or more
persons, not acting in concert, each propose to acquire equal
percentages of ten percent of more of a class of national bank's voting
securities, and either the acquisitions are of a class of securities
subject to the registration requirements of the Securities Exchange
Act, 15 U.S.C. 78l, or immediately after the transaction no other
shareholder of the national bank would own or have the power to vote a
greater percentage of the class, each of the acquiring persons must
either file a notice with the appropriate district office or rebut the
presumption of control.
The proposal specifies that the OCC may waive information otherwise
required in a notice if the waiver is in the public interest. Also, the
circumstances under which the OCC may waive or shorten the public
comment period are clarified.
The trigger for the timing of the public announcement is changed
from ``after the application is technically complete'' to ``when the
application is filed.'' This benefits interested parties by notifying
them of an application at an earlier date.
The proposal adds the effect of a proposed transaction on the
Federal deposit insurance fund to the list of factors considered by the
OCC in reviewing a notice. The proposal also clarifies the notice
requirement to explain that the OCC will mail a notice of disapproval
within three days of the decision to disapprove. The proposal amends
the provision regarding the release of information. The OCC will
release basic information about the transaction unless the OCC
determines that it would not be in the public interest. The proposal
also adds a new section reflecting the stock loan reporting
requirements in section 205 of the Federal Deposit Insurance
Corporation Improvement Act (FDICIA), 12 U.S.C. 1817(j)(9).
Change in Directors or Senior Executive Officers (Sec. 5.51)
The proposal amends this section which was promulgated in 1993 in
accordance with section 914 of FIRREA, 12 U.S.C. 1831i. See 58 FR
27443, May 10, 1993. The preamble of that final rule contained a
request for comment on whether acquisitions of a national bank by a
newly established bank holding company should be treated as a change in
control for purposes of this section. Two comments were received.
This proposal addresses that issue. The proposal adds to the
changes in control that trigger the notice requirements, acquisitions
of control by companies that have been regulated pursuant to the Bank
Holding Company Act, 12 U.S.C. 1841 et seq., for less than two years.
It provides for certain exceptions to reduce unnecessary regulatory
burden. The proposal also addresses agency appeal issues.
Section 914 applies specifically to insured depository institutions
and the OCC also proposes to apply standards similar to section 914 to
uninsured depository institutions under its authority to prescribe
rules and regulations, 12 U.S.C. 93a.
The OCC is responsible for maintaining the safety and soundness of
all national banks, both insured and uninsured. A change in a director
or senior executive officer may bring about safety and soundness
concerns, and therefore, the OCC believes it should regulate and
supervise the change for both insured and uninsured national banks. The
proposal also makes additional ``housekeeping-type'' changes to conform
Sec. 5.51 to the rest of part 5.
The OCC invites comments regarding the application of standards
similar to those of section 914 to uninsured national banks.
Change of Address (Sec. 5.52)
The proposal adds this section to require a national bank that
changes its mailing address to inform the OCC in a timely manner.
Dividends--Subpart E
The proposal organizes the information in the current Secs. 5.61
and 5.62 into a new subpart to better communicate the standards and
procedures underlying a national bank's payment of dividends.
Authority, Scope, and Rules of General Applicability (Sec. 5.60)
The proposal consolidates the ``law'' paragraphs of Secs. 5.61 and
5.62 to provide a basic authority paragraph and removes language
repeating the statute.
The proposal adds a new paragraph to clarify the scope of the
subpart. It specifies that the dividend section applies to the
declaration and payment of all dividends by a national bank, including
dividends paid in stock or property.
Definitions (Sec. 5.61)
The proposal adds four new definitions of key terms. The proposal
interprets 12 U.S.C. 56 to prohibit any dividend out of permanent
capital. ``Permanent capital'' is defined in Sec. 5.46 as the total of
capital stock and capital surplus. This definition excludes undivided
profits.
The proposal does not define ``undivided profits'' and ``net
income'' because these terms are common bank accounting terms and can
be derived from Call Report instructions. The proposal defines
``retained net income'' in order to exclude prior dividends from net
income when determining dividend paying capacity under 12 U.S.C. 60.
Date of Declaration of Dividend (Sec. 5.62)
The proposal clarifies that the date of declaration is controlling
for purposes of determining compliance.
Capital Limitation Under 12 U.S.C. 56 (Sec. 5.63)
The proposal explains that the prohibition in 12 U.S.C. 56
regarding the withdrawal of capital by dividend or otherwise means that
dividends can be paid only from undivided profits and not from
permanent capital. (Distributions out of permanent capital constitute
changes in permanent capital subject to Sec. 5.46.)
The proposal incorporates the current OCC interpretation regarding
the applicability of 12 U.S.C. 56 to dividends on preferred stock.
Although 12 U.S.C. 56 does not apply to dividends on preferred stock,
if the bank's undivided profits will not cover the proposed dividend on
preferred stock, the proposed dividend is a reduction in capital
subject to 12 U.S.C. 59 and Sec. 5.46.
The proposal removes the provisions regarding bad debt to conform
to changes in the Riegle Act.
Earnings Limitation Under 12 U.S.C. 60 (Sec. 5.64)
The proposal clarifies that a bank may declare dividends as
frequently as it deems prudent. It explains that special dividends are
treated the same as quarterly and semiannual dividends for the purpose
of the requirement that a bank make transfers to its surplus fund. The
proposal also expands the scope of the ten percent surplus fund
transfer requirement by measuring surplus against capital stock instead
of ``common capital.'' The provision uses the term ``capital stock'' to
maintain uniform components of the definition of capital.
The provision concerning the earnings limitation clarifies that the
restrictions in 12 U.S.C. 60(b) are based on net income. The proposal
uses ``net income,'' instead of ``net profits'' to reflect changes in
the Riegle Act. The proposal also removes the prior approval
requirement for ``surplus surplus.''
Restrictions on Undercapitalized Institutions (Sec. 5.65)
The proposal adds this section to conform to the Prompt Corrective
Action (see 12 CFR part 6) restriction concerning capital distributions
by undercapitalized institutions.
Dividends Payable in Property Other Than Cash (Sec. 5.66)
The proposal incorporates Interpretive Ruling 7.6120 (12 CFR
7.6120) on dividends in kind into this section in order to consolidate
all OCC rulings concerning dividends in one part.
Fractional Shares (Sec. 5.67)
The proposal also incorporates Interpretive Ruling 7.6040 (12 CFR
7.6040) on fractional shares into this section in order to consolidate
all OCC rulings concerning dividends in one part.
The OCC welcomes comments on any aspect of the proposed regulation,
particularly, those issues specifically noted in this preamble.
Derivation Table
[This table directs readers to the provision(s) of the current regulation, if any, upon which the proposed
provision is based]
----------------------------------------------------------------------------------------------------------------
Revised provision Original provision Comments
----------------------------------------------------------------------------------------------------------------
Sec. 5.1.......................... Sec. 5.1.......................... Modified.
Sec. 5.2(a)....................... Sec. 5.2(a)....................... Modified.
(b)........................... Sec. 5.2(b)....................... No change.
(c)........................... Sec. 5.14......................... Modified.
Sec. 5.3.......................... Removed.
Sec. 5.3(a)....................... .................................. Added.
(b)........................... Sec. 5.2(e)....................... Significant change.
(c)........................... .................................. Added.
(d)........................... .................................. Added.
(e)........................... .................................. Added.
(f)........................... .................................. Added.
(g)........................... .................................. Added.
(h)........................... Sec. 5.2(d)....................... Modified.
(i)........................... .................................. Added.
(j)........................... .................................. Added.
Sec. 5.4(a)....................... Sec. 5.4.......................... Significant change.
(b)........................... Sec. 5.4.......................... Modified.
(c)........................... .................................. Added.
(d)........................... Sec. 5.4.......................... Significant change.
Sec. 5.5.......................... Sec. 5.5.......................... Significant change.
Sec. 5.6.......................... Removed.
Sec. 5.7(a)....................... Sec. 5.7.......................... Modified.
(b)........................... Sec. 5.5(c)....................... No change.
Sec. 5.8(a)....................... Sec. 5.8(a)....................... Modified.
(b)........................... Sec. 5.8(a)....................... Modified.
(c)........................... Sec. 5.8(a)....................... Modified.
(d)........................... .................................. Added.
(e)........................... .................................. Added.
(f)........................... .................................. Added.
Sec. 5.9(a)....................... Sec. 5.9(b)....................... Significant change.
(b)........................... Sec. 5.9(a)....................... Significant change.
(c)........................... Sec. 5.9(a)....................... Significant change.
Sec. 5.10(a)...................... Sec. 5.10(a)...................... Modified.
(b)........................... Sec. 5.10(a)...................... Significant change.
(c)........................... Sec. 5.10(b)...................... Significant change.
(d)........................... Sec. 5.10(c)...................... Modified.
(e)........................... Sec. 5.10(c)...................... Modified.
Sec. 5.11(a)(1)................... Sec. 5.11(a)...................... Modified.
(a)(2)........................ Sec. 5.11(d)...................... Modified.
(b)........................... Sec. 5.11(c)...................... Modified.
(c)........................... Sec. 5.10(b)(5)................... Modified.
(d)(1)........................ Sec. 5.11(e)(1)................... Modified.
(d)(2)........................ Sec. 5.11(e)(3)................... Modified.
(d)(3)........................ .................................. Added.
(e)........................... Sec. 5.11(f)..................... Modified.
Sec. 5.12......................... Sec. 5.12......................... No change.
Sec. 5.13(a)...................... Sec. 5.13(b)...................... Significant change.
(a)(1)........................ .................................. Added.
(a)(2)........................ .................................. Added.
(b)........................... Sec. 5.13(c)...................... Significant change.
(c)........................... Sec. 5.13(a)...................... Significant change.
(d)........................... Sec. 5.13(a)...................... Modified.
(e)........................... Sec. 5.13(d)...................... Significant change.
(f)........................... .................................. Added.
(g)........................... Sec. 5.13(e)...................... Significant change.
Sec. 5.14......................... Removed.
Sec. 5.20(a)...................... Sec. 5.20(b)...................... Significant change.
(b)........................... .................................. Added.
(c)........................... Secs. 5.20(a), 5.21(a), Significant change.
5.22(a)(2), 5.27(b).
(d)(1)........................ Sec. 5.27(c)...................... Modified.
(d)(2)-(6).................... .................................. Added.
(e)(1)........................ Secs. 5.20(b), (d)(4)(v).......... Significant change.
(e)(2)........................ Sec. 5.20(b)...................... No change.
(f)(1)........................ Sec. 5.20(d)...................... Significant change.
(f)(2)........................ Sec. 5.20(c)...................... Significant change.
(f)(3)........................ Secs. 5.20(d), (d)(1), (d)(1)(ii). Significant change.
(g)(1)........................ Sec. 5.20(d)(2)(i)................ Modified.
(g)(2)........................ Sec. 5.20(d)(3)(ii)............... Modified.
(g)(3)(i)..................... Sec. 5.20(d)(2)(ii)............... No change.
(g)(3)(ii).................... Sec. 5.20(d)(2)(iii).............. No change.
(g)(3)(iii)................... Sec. 5.20(d)(2)(iv)............... No change.
(g)(4)(i)..................... Sec. 5.20(d)(4)(iii)(A)........... Modified.
(g)(4)(ii).................... Sec. 5.20(d)(4)(iii)(C)........... Modified.
(g)(5)........................ Sec. 5.20(d)(1)(iv), (d)(2)(iii).. Significant change.
(h)(1)........................ Sec. 5.20(d)(3), (d)(1)(i)........ Significant change.
(h)(2)........................ Sec. 5.20(d)(3)(i)................ Significant change.
(h)(3)(i)..................... Sec. 5.20(d)(3)(ii)(A)............ Modified.
(h)(3)(ii).................... Sec. 5.20(d)(3)(ii)(C)............ Significant change.
(h)(4)........................ Sec. 5.20(d)(3)(iii).............. Significant change.
(h)(5)(i)..................... Sec. 5.20(d)(3)(iv), (d)(3)(iv)(A) Significant change.
(h)(5)(ii).................... Sec. 5.20(b), (d)(3)(iv).......... Significant change.
(h)(5)(iii)................... Sec. 5.20(d)(3)(iv)(B)............ Modified.
(h)(6)........................ Sec. 5.20(d)(3)(v), (d)(3)(v)(A).. Modified.
(i)(1)........................ Sec. 5.21(d)...................... Significant change.
(i)(2)........................ .................................. Added.
(i)(3)........................ Sec. 5.20(d)(1)(iii).............. Significant change.
(i)(4)........................ Sec. 5.20(d)(1)(iii).............. Significant change.
(i)(5)(i)..................... Sec. 5.20(f)...................... Modified.
(i)(5)(ii).................... Sec. 5.20(d)(4)(ii)............... Modified.
(i)(5)(iii)................... Sec. 5.20(g)...................... Modified.
(j)(1)........................ Sec. 5.27(e)(1)................... Modified.
(j)(2)........................ Sec. 5.27(e)(2)................... Modified.
(j)(3)........................ Sec. 5.27(d)...................... Significant change.
(k)........................... Sec. 5.22(a)(2)................... Significant change.
Sec. 5.22......................... Transferred in part to Sec. 5.20.
Sec. 5.23......................... Transferred to part 28 (decision
pending).
Sec. 5.24(a)...................... Sec. 5.24(a)...................... Modified.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)(1)........................ Sec. 5.24(c)(1)................... Significant change.
(d)(2)(i)..................... Sec. 5.24(c)(2)................... Significant change.
(d)(2)(ii).................... .................................. Added.
(d)(2)(iii)................... Sec. 5.24(c)(4)................... Modified.
(d)(2)(iv).................... Sec. 5.24(c)(4)................... Modified.
(d)(3)........................ Sec. 5.24(b)...................... No change.
(e)(1)........................ Sec. 5.24(d)(1)................... Significant change.
(e)(2)........................ Sec. 5.24(d)(2)................... Significant change.
(e)(3)........................ .................................. Added.
(f)........................... .................................. Added.
Sec. 5.25......................... Transferred to part 28 (decision
pending).
Sec. 5.26(a)...................... Sec. 5.26(a)...................... No change.
(b)........................... .................................. Added.
(c)........................... Sec. 5.26(b)...................... Significant change.
(d)........................... Sec. 5.26(d)...................... Significant change.
(e)(1)........................ Sec. 5.26(e)...................... Significant change.
(e)(2)........................ Sec. 5.26(e)...................... Significant change.
(e)(3)........................ .................................. Added.
(e)(4)........................ Sec. 5.26(f)...................... Significant change.
(e)(5)........................ .................................. Added.
(e)(6)........................ Sec. 5.26(h)...................... Modified.
Sec. 5.27......................... Transferred to part 28 (decision
pending).
Sec. 5.30(a)...................... Sec. 5.30(a)...................... Modified.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)(1)........................ Sec. 5.30(b), Sec. 5.31(b)........ Significant change.
(d)(2)........................ .................................. Added.
(e)........................... Sec. 5.30(c), Sec. 5.31(c)........ Modified.
(f)(1)........................ .................................. Added.
(f)(2)........................ .................................. Added.
(f)(3)........................ Sec. 5.30(g), Sec. 5.31(j)........ No change.
(f)(4)........................ .................................. Added.
(g)........................... .................................. Added.
(h)(1)........................ .................................. Added.
(h)(2)........................ Sec. 5.31(e)...................... Significant change.
(i)........................... Sec. 5.30(f)...................... Modified.
(j)........................... .................................. Added.
Sec. 5.31......................... Incorporated into Sec. 5.30.
Sec. 5.32......................... Transferred to Part 28 (decision
pending).
Sec. 5.33(a)...................... Sec. 5.33(a)...................... Significant change.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)(1)........................ .................................. Added.
(d)(2)........................ Sec. 5.21(a)...................... Significant change.
(d)(3)........................ .................................. Added.
(e)(1)........................ Sec. 5.33(b)(2)................... Significant change.
(e)(1)(i)..................... Sec. 5.33(b)(3), (b)(2)(i), Significant change.
(b)(4)(i), (b)(4)(iv).
(e)(1)(ii).................... Sec. 5.33(b)(2)(iii), (b)(2)(iv).. Significant change.
(e)(1)(iii)................... Sec. 5.33(b)(2)(ii), (b)(5)....... Significant change.
(e)(1)(iv).................... Sec. 5.33(b)(5)................... Significant change.
(e)(1)(v)..................... Sec. 5.33(b)(6)(ii)............... Significant change.
(e)(2)........................ .................................. Added.
(e)(3)........................ .................................. Added.
(e)(4)(i)..................... .................................. Added.
(e)(4)(ii).................... Sec. 5.21(f)...................... Significant change.
(e)(4)(iii)................... Sec. 5.21(g)...................... Modified.
(e)(4)(iv).................... Sec. 5.21(h)...................... Significant change.
(e)(5)........................ Sec. 5.33(b)(8)................... Significant change.
(e)(6)........................ .................................. Added.
(e)(7)........................ .................................. Added.
(f)(1)........................ .................................. Added.
(f)(2)........................ Sec. 5.21(c)...................... Modified.
(f)(3)........................ .................................. Added.
(g)(1)........................ Sec. 5.33(c)(1)................... Significant change.
(g)(2)........................ Sec. 5.33(c)(2)................... Significant change.
(g)(3)(i)..................... Sec. 5.33(h)(1)................... Significant change.
(g)(3)(ii).................... Sec. 5.33(h)(2)................... Modified.
(g)(3)(iii)................... Sec. 5.33(h)(3)................... Significant change.
(h)........................... .................................. Added.
(i)........................... .................................. Added.
Sec. 5.34(a)...................... Sec. 5.34(a)...................... Modified.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)(1)........................ Sec. 5.34(c), (d)................. Significant change.
(d)(2)........................ Sec. 5.34(c), (d)................. Significant change.
(d)(3)........................ Sec. 5.34(d)(3)................... Modified.
(e)(1)(i)..................... Sec. 5.34(d)(1)(i)................ Modified.
(e)(1)(ii).................... Sec. 5.34(b)...................... Modified.
(e)(1)(iii)................... Sec. 5.34(d)(1)(iii).............. Significant change.
(e)(2)........................ .................................. Added.
(e)(3)........................ .................................. Added.
(e)(4)........................ .................................. Added.
Sec. 5.35(a)...................... Sec. 5.35(a)...................... Modified.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)(1)-(4).................... Sec. 5.35(c)...................... Modified.
(e)(1)........................ Sec. 5.35(e)(1)................... Significant change.
(e)(2)........................ .................................. Added.
(e)(3)........................ .................................. Added.
(e)(4)........................ Sec. 5.35(e)(1)(i)(D)............. Modified.
(e)(5)........................ Sec. 5.35(e)(1)(i)(B)............. Modified.
(e)(6)........................ Sec. 5.35(b)...................... Modified.
(f)(1)........................ Sec. 5.35(e)...................... Significant change.
(g)........................... Sec. 5.35(f)...................... Modified.
(h)(1)........................ Sec. 5.35(e)(1)(ii)(A)............ Modified.
(h)(2)........................ .................................. Added.
Sec. 5.36(a)...................... Sec. 5.36(a)...................... No change.
(b)........................... .................................. Added.
(c)........................... Sec. 5.36(d)(1)................... Significant change.
(d)(1)........................ Sec. 5.36(d)(1)................... Significant change.
(d)(2)........................ Sec. 5.36(b)...................... No change.
(d)(3)........................ Sec. 5.36(d)(1), (d)(2)........... Significant change.
Sec. 5.37......................... 12 CFR Secs. 7.3005, 7.3010, Significant change.
7.3100.
Sec. 5.40(a)...................... Sec. 5.40(a)...................... Modified.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)(1)........................ Sec. 5.40(d)(1)................... No change.
(d)(2)........................ Sec. 5.40(d)(2), (d)(3)........... Significant change.
(d)(3)........................ Sec. 5.40(d)(3)................... Modified.
(d)(4)........................ Sec. 5.40(d)(4)................... Significant change.
(d)(5)........................ .................................. Added.
(d)(6)........................ Sec. 5.40(c)...................... Significant change.
(e)........................... Sec. 5.40(h)...................... Modified.
Sec. 5.41......................... Transferred to Part 28 (decision
pending).
Sec. 5.42(a)...................... Sec. 5.42(a)...................... Modified.
(b)........................... .................................. Added.
(c)........................... Sec. 5.42(c)...................... Modified.
(d)(1)........................ Sec. 5.42(d)...................... Modified.
(d)(2)........................ Sec. 5.42(e)...................... Significant change.
(d)(3)........................ Sec. 5.42(d)...................... Modified.
(d)(4)........................ Sec. 5.42(b)...................... Modified.
Sec. 5.43......................... Transferred to Part 28 (decision
pending).
Sec. 5.44......................... Removed.
Sec. 5.45......................... Removed.
Sec. 5.46(a)...................... Sec. 5.46(a)...................... No change.
(b)........................... .................................. Added.
(c)........................... .................................. Added.
(d)........................... Sec. 5.46(b)...................... No change.
(e)(1)........................ .................................. Added.
(e)(2)........................ .................................. Added.
(e)(3)........................ .................................. Added.
(e)(4)........................ .................................. Added.
(e)(5)........................ .................................. Added.
(f)........................... Sec. 5.46(f)...................... Significant change.
(g)........................... Sec. 5.46(f)(2), (f)(3)........... Significant change.
(h)........................... Sec. 5.46(f)(5), (f)(6)........... Significant change.
(i)(1)........................ Sec. 5.46(g)(1)................... Significant change.
(i)(2)........................ Sec. 5.46(f)(1)(i)................ Significant change.
(i)(3)........................ Sec. 5.46(g)(4)................... Significant change.
(j)........................... Sec. 5.46(g)(2)................... Modified.
(k)........................... Sec. 5.46(c)...................... Significant change.
(l)........................... Sec. 5.46(d)...................... Significant change.
Sec. 5.47......................... .................................. Revised with Part 16.
Sec. 5.48(a)...................... Sec. 5.48(a)...................... No change.
(b)........................... .................................. Added.
(c)........................... Sec. 5.48(b)...................... Modified.
(d)........................... .................................. Added.
(e)(1)........................ Sec. 5.48(c)...................... Significant change.
(e)(2)........................ Sec. 5.48(e)...................... Modified.
(e)(3)........................ Sec. 5.48(f)...................... Modified.
(f)(1)........................ .................................. Added.
(f)(2)........................ .................................. Added.
(g)........................... Sec. 5.48(d)...................... Modified.
Sec. 5.50(a)...................... Sec. 5.50(a)...................... Significant change.
(b)........................... .................................. Added.
(c)(1)........................ .................................. Added.
(c)(2)(i)..................... Sec. 5.50(f)(1)................... Modified.
(c)(2)(ii).................... Sec. 5.50(f)(2)(ii)............... Significant change.
(c)(2)(iii)................... Sec. 5.50(f)(4)................... No change.
(c)(2)(iv).................... Sec. 5.50(f)(5)................... No change.
(c)(2)(v)..................... Sec. 5.50(f)(6)................... No change.
(c)(2)(vi).................... Sec. 5.50(f)(7)................... No change.
(c)(3)........................ Sec. 5.50(g)(4)................... Significant change.
(d)(1)........................ .................................. Added.
(d)(2)........................ .................................. Added.
(d)(3)........................ Sec. 5.50(d)(ftnt 1).............. Modified.
(d)(4)........................ .................................. Added.
(d)(5)........................ Sec. 5.50(d)(1)(ftnt 2)........... Modified.
(d)(6)........................ Sec. 5.50(c)...................... Modified.
(e)(1)........................ Sec. 5.50(g)(1)(i)................ Significant change.
(e)(2)........................ Sec. 5.50(g)(3)(iii).............. Significant change.
(e)(3)........................ Sec. 5.50(g)(5)................... Modified.
(f)(1)........................ Sec. 5.50(b)...................... Significant change.
(f)(2)........................ Sec. 5.50(d)(1)................... Significant change.
(f)(2)(i)..................... Sec. 5.50(d)(1)................... Significant change.
(f)(2)(ii).................... Sec. 5.50(d)(1)(i), (d)(1)(ii).... Modified.
(f)(2)(iii)................... Sec. 5.50(d)(2)................... No change.
(f)(2)(iv).................... Sec. 5.50(d)(1), (d)(3)........... Significant change.
(f)(2)(v)..................... Sec. 5.50(d)(3)................... Significant change.
(f)(3)(i)..................... Sec. 5.50(e)(2)................... Modified.
(f)(3)(i)(A), (B)............. Sec. 5.50(g)(2)................... Modified.
(f)(3)(ii)(A)................. Sec. 5.50(g)(1)(v)................ Significant change.
(f)(3)(ii)(B)................. Sec. 5.50(h)(1)................... Significant change.
(f)(3)(ii)(C)................. .................................. Added.
(f)(3)(iii)................... Sec. 5.50(g)(1)(v)................ Significant change.
(f)(4)........................ Sec. 5.50(g)(1)(iii), (g)(1)(iv).. Significant change.
(f)(5)........................ Sec. 5.50(g)(1)(iv)............... Significant change.
(g)(1)........................ Sec. 5.50(h)(1)................... Significant change.
(g)(2)........................ Sec. 5.50(h)(2)................... Significant change.
(h)........................... .................................. Added.
Sec. 5.51(a)...................... Sec. 5.51(a)...................... No change.
(b)........................... .................................. Added.
(c)(1)........................ Sec. 5.51(c)(1)................... No change.
(c)(2)........................ Sec. 5.51(c)(2)................... Modified.
(c)(3)........................ Sec. 5.51(c)(3)................... No change.
(c)(4)........................ Sec. 5.51(c)(4)................... No change.
(c)(5)........................ Sec. 5.51(c)(5)................... No change.
(c)(6)........................ Sec. 5.51(c)(6)................... No change.
(d)(1)........................ Sec. 5.51(d)(1)................... No change.
(d)(2)........................ Sec. 5.51(d)(2)................... No change.
(d)(3)........................ .................................. Added.
(d)(4)........................ Sec. 5.51(d)(3)................... No change.
(e)(1)........................ Sec. 5.51(e)(1)................... Modified.
(e)(2)........................ Sec. 5.51(e)(2)................... No change.
(e)(3)........................ Sec. 5.51(e)(3)................... No change.
(e)(4)........................ Sec. 5.51(e)(4)................... Modified.
(e)(5)........................ Sec. 5.51(e)(5)................... No change.
(e)(6)........................ Sec. 5.51(e)(6)................... No change.
(e)(7)........................ Sec. 5.51(e)(7)................... No change.
(e)(8)........................ Sec. 5.51(e)(8)................... No change.
(e)(9)........................ Sec. 5.51(b)...................... Modified.
(f)(1)........................ Sec. 5.51(f)(1)................... No change.
(f)(2)........................ Sec. 5.51(f)(2)................... No change.
(f)(3)........................ Sec. 5.51(f)(3)................... No change.
(f)(4)........................ Sec. 5.51(f)(4)................... No change.
Sec. 5.52......................... .................................. Added.
Sec. 5.60(a)...................... Secs. 5.61(a), 5.62(a)............ Significant change.
(b)........................... .................................. Added.
(c)........................... Secs. 5.61(b), 5.62(b)............ Significant change.
Sec. 5.61(a)...................... .................................. Added.
(b)........................... .................................. Added.
Sec. 5.62......................... .................................. Added.
Sec. 5.63(a)...................... Sec. 5.61(a)...................... Significant change.
(b)........................... Sec. 5.61(b)...................... Significant change.
Sec. 5.64(a)...................... Sec. 5.62(a)(1)................... Significant change.
(b)........................... Sec. 5.62(a)(2)................... Modified.
(c)........................... Sec. 5.61(d)(3)................... Significant change.
(c)(1)........................ Sec. 5.61(d)(3)(i)................ Modified.
(c)(2)........................ Sec. 5.61(d)(3)(ii)............... No change.
Sec. 5.65......................... .................................. Added.
Sec. 5.66......................... 12 CFR Sec. 7.6120................ Significant change.
Sec. 5.67......................... 12 CFR Sec. 7.6040................ Significant change
----------------------------------------------------------------------------------------------------------------
Regulatory Flexibility Act
It is hereby certified that this regulation will not have a
significant economic impact on a substantial number of small entities.
Accordingly, a regulatory flexibility analysis is not required. This
regulation will reduce the regulatory burden on national banks,
regardless of size, by simplifying and clarifying existing regulatory
requirements.
Executive Order 12866
The OCC has determined that this proposal is not a significant
regulatory action under Executive Order 12866.
List of Subjects in 12 CFR Part 5
Administrative practice and procedure, National banks, Reporting
and recordkeeping requirements, Securities.
Authority and Issuance
For the reasons set out in the preamble, chapter I of title 12 of
the Code of Federal Regulations is proposed to be amended as set forth
below:
1. Part 5 is revised to read as follows:
PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES
Sec.
5.1 Scope.
Subpart A--Rules of General Applicability
5.2 Rules of general applicability.
5.3 Definitions.
5.4 Filing required.
5.5 Fees.
5.7 Investigation and required information.
5.8 Public notice.
5.9 Public availability.
5.10 Comments and requests for hearings.
5.11 Hearings.
5.12 Computation of time.
5.13 Decisions.
Subpart B--Initial Activities
5.20 Organizing a bank.
5.24 Conversion.
5.26 Fiduciary powers.
Subpart C--Expansion of Activities
5.30 Establishment, acquisition and relocation of a branch.
5.33 Business combinations.
5.34 Operating subsidiaries.
5.35 Bank service corporations.
5.36 Other equity investments.
5.37 Investment in bank premises.
Subpart D--Other Changes in Activities and Operations
5.40 Change in location of main office.
5.42 Change of corporate title.
5.46 Changes in permanent capital.
5.47 Subordinated debt as capital.
5.48 Voluntary liquidation.
5.50 Change in bank control.
5.51 Changes in directors and senior executive officers.
5.52 Change of address.
Subpart E--Payment of Dividends
5.60 Authority, scope, and exceptions to rules of general
applicability.
5.61 Definitions.
5.62 Date of declaration of dividend.
5.63 Capital limitation under 12 U.S.C. 56.
5.64 Earnings limitation under 12 U.S.C. 60.
5.65 Restrictions on undercapitalized institutions.
5.66 Dividends payable in property other than cash.
5.67 Fractional shares.
Authority: 12 U.S.C. 1 et seq., 93a; 18 U.S.C. 1001.
Sec. 5.1 Scope.
This part establishes rules, policies and procedures of the Office
of the Comptroller of the Currency (OCC) for corporate activities and
transactions involving national banks. It contains information on rules
of general and specific applicability, where and how to file, and
requirements and policies applicable to filings.
Subpart A--Rules of General Applicability
Sec. 5.2 Rules of general applicability.
(a) General. The rules in this subpart apply to all filings under
this part unless otherwise stated.
(b) Exceptions. The OCC may adopt materially different procedures
for a particular filing or class of filings, after providing notice of
the change to the applicants and any other parties that the OCC
determines should receive such notice.
(c) Additional information. The ``Comptroller's Manual for
Corporate Activities'' (Manual) provides additional guidance, including
policies, procedures, and sample forms. The Manual is sent to all
national banks and is available for a fee by writing to the Comptroller
of the Currency, P.O. Box 70004, Chicago, IL 60673-0004.
Sec. 5.3 Definitions.
(a) Applicant means a person or entity that submits a notice or
application to the OCC under this part.
(b) Application means a submission requesting OCC approval to
engage in various corporate activities and transactions.
(c) Appropriate district office means:
(1) The district office for the OCC district where the national
bank's supervisory office is located; or
(2) The OCC's Multinational Banking Department for all national
banks that are subsidiaries of a designated multinational holding
company.
(d) Capital and surplus means:
(1) A bank's Tier 1 and Tier 2 capital includable in the bank's
risk-based capital under the OCC's Minimum Capital Ratios in part 3 of
this chapter; plus
(2) The balance of a bank's allowance for loan and lease losses not
included in the bank's Tier 2 capital for purposes of the calculation
of risk-based capital under part 3 of this chapter.
(e) Depository institution means any bank or savings association.
(f) Eligible bank means a national bank that:
(1) Is well capitalized as defined in Sec. 6.4(b)(1) of this
chapter;
(2) Has a composite rating of 1 or 2 under the Uniform Financial
Institutions Rating System (CAMEL);
(3) Has a Community Reinvestment Act (CRA), 12 U.S.C. 2906, rating
of ``Outstanding'' or ``Satisfactory''; and
(4) Is not subject to a cease and desist order, consent order,
formal written agreement, Prompt Corrective Action directive (see 12
CFR part 6) or, if subject to any such order, agreement, or directive
is informed in writing by the OCC that the bank may be treated as an
``eligible bank'' for purposes of this part.
(g) Filing means an application or notice submitted to the OCC
under this part.
(h) National bank means any national banking association and any
bank or trust company located in the District of Columbia operating
under the OCC's supervision.
(i) Notice means a submission notifying the OCC that a national
bank intends to engage in certain corporate activities or transactions,
or has begun certain corporate activities or transactions.
(j) Short-distance relocation means moving the premises of a branch
or main office within a:
(1) One thousand foot radius of the site if it is located within a
central city of a Metropolitan Statistical Area (MSA) designated by the
Department of Commerce;
(2) One-mile radius of the site if it is located within an MSA
designated by the Department of Commerce, but not within a central
city; or
(3) Two-mile radius of the site if it is not located within an MSA.
Sec. 5.4 Filing required.
(a) Filing. A depository institution must file an application or
notice with the OCC to engage in various corporate activities and
transactions.
(b) Availability of forms. Individual sample forms and instructions
for filings are available in the Manual and from each district office.
(c) Other applications accepted. At the request of the applicant,
the OCC may accept an application form submitted to another Federal
agency that covers the proposed action or transaction and contains
substantially the same information as would be required by the OCC. The
OCC may require the applicant to submit supplemental information.
(d) Where to file. An applicant should address a filing or other
submission under this part to the appropriate district office with
attention to the Licensing Manager (see 12 CFR 4.1a(b)), or, for
multinational banks, to the Deputy Comptroller, Multinational Banking,
Office of the Comptroller of the Currency, Washington, DC 20219.
Sec. 5.5 Fees.
The OCC accepts a filing only if it is delivered with the filing
fee established by the OCC. An applicant must pay the fee by check
payable to the Comptroller of the Currency. The OCC publishes a filing
fee schedule annually in the ``Notice of Comptroller of the Currency
Fees,'' described in Sec. 8.8 of this chapter. The OCC generally does
not refund the fee.
Sec. 5.7 Investigation and required information.
(a) Authority. The OCC may investigate and evaluate facts related
to a filing to the extent necessary to reach an informed decision. The
OCC may require anyone connected with the matter to which the filing
pertains to submit additional information or an opinion of counsel. The
OCC may deem a filing abandoned if the requested information or opinion
of counsel is not furnished within the specified time period.
(b) Fees. The OCC may assess fees for investigations or
examinations conducted under this section. The OCC publishes the rates,
described in Sec. 8.6 of this chapter, annually in the ``Notice of the
Comptroller of the Currency Fees.''
Sec. 5.8 Public notice.
(a) General. An applicant must publish a public notice of its
filing in a newspaper widely available in each geographical area in
which the applicant proposes to engage in business, by or on the date
of filing, or as soon as practicable after the date of filing.
(b) Contents of the public notice. The public notice must state
that a filing is being made, the date (or expected date) of the filing,
the name of the applicant, the subject matter of the filing, that the
public may submit comments, the address of the appropriate district
office where comments should be sent, the closing date of the public
comment period, and any other related information that the OCC
requires.
(c) Confirmation of public notice. The applicant must mail or
deliver a statement containing the date of publication, the name and
address of the newspaper that published the public notice, a copy of
the public notice, and any other information that the OCC requires, to
the appropriate district office promptly following publication.
(d) Multiple transactions. The OCC may consider more than one
transaction, or a series of transactions, to be a single filing for
purposes of the publication requirements of this section.
(e) Other public notices accepted. Upon the request of an
applicant, the OCC may determine that public notice required by another
Federal agency satisfies the public notice requirements of this
section. In making this determination, the OCC considers whether the
scope and contents of the other public notice are comparable to those
required by this section.
(f) Public notice by the OCC. The OCC may give public notice and
request comment on any filing and in any manner the OCC determines to
be appropriate for the particular filing.
Sec. 5.9 Public availability.
(a) General. The OCC provides public portions of a filing and
related submissions to any person who makes a request to the
appropriate district office. Requests should be in writing. The OCC may
impose a fee consistent with those described in Sec. 4.17 of this
chapter.
(b) Public file. A public file consists of the public portion of
the filing, supporting data, and supplementary information, and any
information submitted by interested persons regarding the filing.
(c) Confidentiality. The OCC may deem information confidential and
withhold that information from the public file. The applicant or the
person submitting the information may request that specific information
be deemed confidential.
Sec. 5.10 Comments and requests for hearings.
(a) Submission of comments. During the comment period, any person
may submit written comments on a filing to the appropriate district
office.
(b) Comment period--(1) General. Unless otherwise stated, the
comment period is 30 days after publication of the public notice
required by Sec. 5.8(a), or within 30 days after publication of the
first public notice required by 12 U.S.C. 1828(c).
(2) Extensions. The OCC may extend the comment period if:
(i) The applicant fails to file all required supporting data in
time to permit review by interested persons;
(ii) Any person requesting an extension of time provides adequate
justification; or
(iii) The OCC determines that other extenuating circumstances
exist.
(3) Applicant response. The OCC may give the applicant an
opportunity to respond to comments received.
(c) Hearing requests and orders. Prior to the end of the comment
period, any person may submit a written request for a hearing on a
filing to the appropriate district office. The request must describe
the nature of the issues or facts to be presented and the reasons why
written submissions would be insufficient to make an adequate
presentation to the OCC. A person requesting a hearing must submit a
copy of the request to the applicant simultaneously.
(d) Action on a hearing request. The OCC may grant or deny a
request for a hearing and may limit the issues considered to those it
deems relevant or material. The OCC generally grants a hearing request
only if the OCC determines that written submissions would be
insufficient or that a hearing would otherwise benefit the
decisionmaking process. The OCC also may order a hearing if the OCC
concludes that a hearing would be in the public interest.
(e) Denial of a hearing request. If the OCC denies a hearing
request, it must notify the person requesting the hearing of the reason
for the denial.
Sec. 5.11 Hearings.
(a) OCC procedures prior to the hearing--(1) Notice of Hearing. The
OCC issues a Notice of Hearing if it grants a request for a hearing
under Sec. 5.10 or orders a hearing because it is in the public
interest. The OCC sends a copy of the Notice of Hearing to the
applicant, to the person who requested the hearing, and anyone else
requesting a copy. The Notice of Hearing states the subject and date of
the filing, the time and place of the hearing, and the issues to be
addressed.
(2) Presiding officer. The OCC appoints a presiding officer to
conduct the hearing. The presiding officer is responsible for all
procedural questions not governed by this section.
(b) Participation. Any person who wishes to appear (participant)
must notify the appropriate district office of his or her intent to
participate in the hearing within ten days from the date the OCC issues
the Notice of Hearing. At least five days before the hearing, each
participant must submit to the appropriate district office, applicant,
and any other person the OCC requires, the names of witnesses, and a
copy of each exhibit the participant intends to present.
(c) Transcripts. The OCC arranges for a hearing transcript. The
person requesting the hearing generally bears the cost of one copy of
the transcript for his or her use.
(d) Conduct of the hearing--(1) Presentations. Subject to the
rulings of the presiding officer, the applicant and participants may
make opening statements and present witnesses, material and data.
(2) Information submitted. A person presenting documentary material
must furnish two copies to the OCC and one copy to the applicant and
each participant.
(3) Laws not applicable to hearings. The Administrative Procedure
Act (5 U.S.C. 551 et seq.), part 19 of this chapter, and the Federal
Rules of Evidence (28 U.S.C. Appendix) do not apply to hearings under
this section.
(e) Closing the hearing record. At the applicant's or participant's
request, the OCC may keep the hearing record open for 14 days following
the OCC's receipt of the transcript. The OCC resumes processing the
filing after that date.
Sec. 5.12 Computation of time.
In computing the period of days, the OCC includes the day of the
act (e.g., the date an application is received by the OCC) from which
the period begins to run and the last day of the period, regardless of
whether it is a Saturday, Sunday, or legal holiday.
Sec. 5.13 Decisions.
(a) General. The OCC may approve, conditionally approve, or deny a
filing after appropriate review and consideration of the record. In
deciding an application under this part, the OCC may consider the
activities, resources, or condition of an affiliate of the applicant
that may reasonably reflect on or affect the applicant.
(1) Conditional approval. The OCC may impose conditions on any
approval if the OCC determines that the conditions are necessary or
appropriate to ensure that approval is consistent with relevant
statutory and regulatory standards and OCC policies thereunder.
(2) Expedited approval. The OCC grants eligible banks expedited
approval within a specified time after filing, as described in
applicable sections of this part.
(i) The OCC may decide not to process a filing under expedited
approval procedures, if the OCC concludes that the filing, or an
adverse comment against the filing, presents significant supervisory,
CRA (if applicable), or compliance concerns, or raises significant
legal or policy issues.
(ii) Adverse comments that the OCC determines do not raise
significant supervisory, CRA, or compliance concerns, or significant
legal or policy issues, or are frivolous, filed for competitive
reasons, filed primarily as a means of delaying action on the filing,
or raise negative CRA issues that already have been resolved between
the commenter and the applicant will not affect the OCC's decision
under paragraph (a)(2)(i) of this section.
(b) Denial. The OCC may deny a filing if:
(1) Significant supervisory, CRA (if applicable), or compliance
concerns exist with respect to the applicant;
(2) Approval of the filing is inconsistent with applicable law,
regulation, or OCC policy thereunder; or
(3) The applicant fails to provide information requested by the OCC
that is necessary for the OCC to make an informed decision.
(c) Notification of final disposition. The OCC notifies the
applicant, and any person who makes a written request, of the final
disposition of a filing, including confirmation of an expedited
approval under this part. If the OCC denies a filing, the OCC notifies
the applicant in writing of the reasons for the denial.
(d) Publication of decision. The OCC may issue a public opinion if
its decision represents a new or changed policy or presents issues of
general interest to the public or the banking industry. The OCC may
elect not to disclose information that the OCC deems to be private and
confidential.
(e) Reconsideration. The OCC considers a request for
reconsideration of a denied filing based upon documents, and other data
submitted by the applicant, and reasonable analysis of that information
indicating that the denial resulted from an error in the OCC's
procedures.
(f) Extension of time. When the OCC approves or conditionally
approves a filing, the OCC generally gives the national bank a limited
period of time to commence that new or expanded activity. The OCC does
not generally grant an extension of time to commence a new or expanded
corporate activity approved under this part.
(g) Nullifying a decision--(1) Material misrepresentation or
omission. An applicant must certify that any filing or supporting
material submitted to the OCC contains no material misrepresentations
or omissions. The OCC may review and verify any information filed in
connection with a notice or an application. If the OCC discovers a
material misrepresentation or omission after the OCC has rendered a
decision on the filing, the OCC may nullify its decision. Any person
responsible for any material misrepresentation or omission of facts in
a filing or supporting materials may be subject to enforcement action
and other penalties, including criminal penalties provided in 18 U.S.C.
1001.
(2) Other nullifications. The OCC may nullify any decision on a
filing that is:
(i) Contrary to law, regulation, or OCC policy thereunder; or
(ii) Granted due to clerical or administrative error, or a material
mistake of law or fact.
Subpart B--Initial Activities
Sec. 5.20 Organizing a bank.
(a) Authority. 12 U.S.C. 21, 22, 24 (Seventh), 26, 27, 92a, 93a,
1816, and 2903.
(b) Licensing requirements. Any person desiring to establish a
national bank must submit an application and obtain prior OCC approval.
(c) Scope. This section describes the procedures and requirements
governing OCC review and approval of an application to establish a
national bank, including a national bank with a special purpose.
Information regarding an application to establish an interim national
bank solely to facilitate a business combination is set forth in
Sec. 5.33.
(d) Definitions. For the purposes of this section:
(1) Bankers' bank means a national bank owned exclusively (except
for directors' qualifying shares) by other depository institutions or
depository institution holding companies (as that term is defined in
section 3 of the Federal Deposit Insurance Act (FDIA), 12 U.S.C. 1813),
the activities of which are limited by its articles of association
exclusively to providing services to or for other depository
institutions, their holding companies, and the officers, directors, and
employees of such institutions and companies and to providing
correspondent banking services at the request of other depository
institutions or their holding companies.
(2) Control means control as defined under section 2 of the Bank
Holding Company Act (BHCA), 12 U.S.C. 1841(a)(2).
(3) Final approval means the OCC action issuing a charter
certificate and authorizing a national bank to open for business.
(4) Holding company means any company that controls or proposes to
control a national bank or a proposed national bank whether or not it
is a bank holding company under section 2 of the BHCA, 12 U.S.C.
1841(a)(1).
(5) Organizing group means five or more persons acting on their own
behalf, or serving as representatives of a sponsoring holding company,
who apply to the OCC for a national bank charter.
(6) Preliminary approval means a decision by the OCC permitting an
organizing group to go forward with the organization of the proposed
national bank. A preliminary approval generally is subject to certain
conditions that an applicant must satisfy before the OCC will grant
final approval.
(e) Statutory requirements--(1) General. The OCC charters a
national bank under the authority of the National Bank Act of 1864, as
amended, 12 U.S.C. 1 et seq. The name of a proposed bank must include
the word ``national.'' In determining whether to approve an application
to establish a national bank, the OCC verifies that the proposed
national bank has complied with the following requirements of the
National Bank Act. A national bank must:
(i) Draft and file articles of association with the OCC;
(ii) Draft and file an organization certificate containing
specified information with the OCC;
(iii) Ensure that all capital stock is paid in; and
(iv) Have at least five elected directors.
(2) Community Reinvestment Act. Part 25 of this chapter requires
the OCC to assess and take into account a proposed national bank's
plans for meeting the credit needs of its entire community, including
low- and moderate-income neighborhoods, consistent with the safe and
sound operation of the bank.
(f) Policy--(1) General. The marketplace is normally the best
regulator of economic activity and competition within the marketplace
promotes efficiency and better customer service. Accordingly, it is the
OCC's policy to approve proposals to establish national banks,
including minority institutions, that have a reasonable chance of
success, and that will be operated in a safe and sound manner. It is
not the OCC's policy to ensure that a proposal to establish a national
bank is without risk to the organizers or to protect existing
institutions from healthy competition from a new national bank.
(2) Policy considerations. (i) In evaluating an application to
establish a national bank, the OCC considers whether the proposed bank:
(A) Has organizers who are familiar with national banking laws and
regulations;
(B) Has competent management, including the board of directors,
with ability and experience relevant to the types of services to be
provided;
(C) Has capitalization that is sufficient to support the projected
volume and type of business;
(D) Can reasonably be expected to achieve and maintain
profitability; and
(E) Will be operated in a safe and sound manner.
(ii) The OCC may also consider additional factors listed in section
6 of FDIA, 12 U.S.C. 1816, including the risk to the Federal deposit
insurance fund and whether the proposed bank's corporate powers are
consistent with the purposes of the FDIA.
(3) OCC evaluation. The OCC evaluates a proposed national bank's
organizing group and its operating plan, together. The OCC's judgment
concerning one may affect the evaluation of the other. An organizing
group and its operating plan must be stronger in markets where economic
conditions are marginal or competition is intense.
(g) Organizing group--(1) General. Strong organizing groups
generally include diverse business and financial interests and
community involvement. An organizing group must have the experience,
competence, willingness, and ability to be active in directing the
proposed national bank's affairs in a safe and sound manner. The bank's
initial board of directors generally is comprised of many, if not all,
of the organizers. The operating plan and other information supplied in
the application, must demonstrate an organizing group's collective
ability to establish and operate a successful bank in the economic and
competitive conditions of the market to be served. Each organizer
should be knowledgeable about the operating plan. A poor operating plan
reflects adversely on the organizing group's ability, and the OCC
generally denies applications with poor operating plans.
(2) Management selection. The initial board of directors must
select competent senior executive officers before the OCC grants final
approval. Early selection of executive officers, especially the chief
executive officer, contributes favorably to the preparation and review
of an operating plan that is accurate, complete, and appropriate for
the type of bank proposed and its market, and reflects favorably upon
an application. As a condition of the charter approval, the OCC retains
the right to object to and preclude the hiring of any officer, or the
appointment or election of any director, for a two-year period from the
date the bank commences business.
(3) Financial resources. (i) Each organizer must have a history of
responsibility, personal honesty, and integrity. Personal wealth is not
a prerequisite to become an organizer or director of a national bank.
However, directors' stock purchases, individually and in the aggregate,
should reflect a financial commitment to the success of the national
bank that is reasonable in relation to their individual and collective
financial strength. A director should not have to depend on bank
dividends, fees, or other compensation to satisfy financial
obligations.
(ii) Because directors are often the primary source of additional
capital for banks not affiliated with a holding company, it is
desirable that an organizer who is also proposed as a director of the
national bank be able to supply or have a realistic plan to enable the
bank to obtain capital when needed.
(iii) Any financial or other business arrangement, direct or
indirect, between the organizing group or other insider and the
proposed national bank must be on nonpreferential terms.
(4) Organizational expenses. (i) Organizers are expected to
contribute time and expertise to the organization of the bank.
Organizers should not bill excessive charges to the bank for
professional and consulting services or unduly rely upon these fees as
a source of income.
(ii) A proposed national bank may not pay any fee that is
contingent upon an OCC decision, and such action generally is grounds
for denial of the application or withdrawal of preliminary approval.
Organizational expenses for denied applications are the sole
responsibility of the organizing group.
(5) Sponsor's experience and support. If an application is
sponsored by an existing holding company, individuals affiliated with
other depository institutions, or individuals otherwise experienced in
banking, the OCC considers their records of performance in those
ventures. A sponsor must be financially able to support the new bank's
operations and to provide or locate capital when needed.
(h) Operating plan--(1) General. (i) Organizers of a proposed
national bank must submit an operating plan that adequately addresses
the statutory and policy considerations set forth in paragraphs (e) and
(f)(2) of this section. The plan must reflect sound banking principles
and demonstrate realistic assessments of risk in light of economic and
competitive conditions in the market to be served.
(ii) The OCC may offset deficiencies in one factor by strengths in
one or more other factors. However, deficiencies in some factors, such
as unrealistic earnings prospects, may have a negative influence on the
evaluation of other factors, such as capital adequacy, or may be
serious enough by themselves to result in denial. The OCC considers
inadequacies in an operating plan to reflect negatively on the
organizing group's ability to operate a successful bank.
(2) Earnings prospects. The organizing group must submit pro forma
balance sheets and income statements as part of the operating plan. The
OCC reviews all projections for reasonableness of assumptions and
consistency with the operating plan.
(3) Management. (i) The organizing group must include in the
operating plan information sufficient to permit the OCC to evaluate the
overall management ability of the organizing group. If the organizing
group has limited banking experience or community involvement, the
senior executive officers must be able to compensate for such
deficiencies.
(ii) The organizing group may not hire an officer or elect or
appoint a director if the OCC objects to that person at any time prior
to the date the bank commences business.
(4) Capital. A proposed bank must have sufficient initial capital,
net of any organizational expenses that will be charged to the bank's
capital after it begins operations, to support the bank's projected
volume and type of business.
(5) Community service. (i) The operating plan must indicate the
organizing group's knowledge of and plans for serving the community.
The organizing group must evaluate the banking needs of the community,
including its consumer, business, nonprofit, and government sectors.
The operating plan must demonstrate how the proposed bank responds to
those needs consistent with the safe and sound operation of the bank.
The provisions of this paragraph may not apply to an application to
organize a bank for a special purpose.
(ii) As part of its operating plan, the organizing group must
submit a statement that demonstrates its plans to achieve CRA
objectives.
(iii) Because community support is important to the long-term
success of a bank, the organizing group must include plans for
attracting and maintaining community support.
(6) Safety and soundness. The operating plan must demonstrate that
the organizing group (and the sponsoring company, if any,) is aware of,
and understands, national banking laws and regulations, and safe and
sound banking operations and practices. The OCC will deny an
application that does not meet these safety and soundness requirements.
(7) Trust services. The operating plan must indicate if the
proposed bank intends to offer trust services.
(i) Procedures--(1) Prefiling meeting. The OCC normally requires a
prefiling meeting with the organizers of a proposed national bank
before the organizers file an application. Organizers should be
familiar with the OCC's chartering policy and procedural requirements
in the Manual before the prefiling meeting. The prefiling meeting is
normally held in the district office where the application will be
filed.
(2) Operating plan. An organizing group must file an operating plan
that addresses the subjects discussed in paragraph (h) of this section.
(3) Spokesperson. The organizing group must designate a
spokesperson to represent the organizing group in all contacts with the
OCC. The spokesperson must be an organizer and proposed director of the
new bank.
(4) Decision notification. The OCC notifies the spokesperson and
other interested parties in writing of its decision on an application.
In the case of preliminary approval, the OCC sends organizing
instructions with the decision letter.
(5) Post-decision activities. (i) Before the OCC grants final
approval, a proposed national bank must be established as a body
corporate. A national bank becomes a body corporate after it has filed
its organization certificate and articles of association with the OCC
as required by law. In addition, the organizing group must elect a
board of directors. The proposed bank may not conduct the business of
banking until the OCC grants final approval.
(ii) For all capital obtained through a public offering a proposed
bank must use an offering circular that complies with the OCC's
offering circular regulations, part 16 of this chapter.
(iii) A national bank in organization must raise its capital before
it commences business. Preliminary approval expires if a national bank
in organization does not raise the required capital within 12 months
from the date the OCC grants preliminary approval. Approval expires if
the national bank does not commence business within 18 months from the
date of preliminary approval.
(j) National bankers' banks--(1) Activities and customers. In
addition to the other requirements of this section, when an organizing
group seeks to organize a national bankers' bank, the organizing group
must list in the application the anticipated activities and customers
or clients of the proposed bankers' bank.
(2) Waiver of requirements. At the organizing group's request, the
OCC may waive requirements that are applicable to national banks in
general if those requirements are inappropriate for a national bankers'
bank and would impede its ability to provide desired services to its
market. An applicant should submit a request for a waiver with the
application and must support the request with adequate justification
and legal analysis. A national bankers' bank that is already in
operation may also request a waiver. The OCC cannot waive statutory
requirements that specifically apply to national bankers' banks
pursuant to 12 U.S.C. 27(b)(1).
(3) Investments. A national bank may invest up to ten percent of
its paid-in capital stock and unimpaired surplus in a national or state
bankers' bank, and may own five percent or less of any class of a
national or state bankers' bank's voting securities.
(k) Special purpose banks. An applicant for a national bank charter
that will limit its activities to trust activities, credit card
operations, or another special purpose must adhere to established
charter procedures with modifications appropriate for the
circumstances, as determined by the OCC. In addition to the other
requirements in this section, a bank limited to trust activities,
credit card operations, or another special purpose may not conduct such
business until the OCC grants final approval for the bank to commence
operations.
Sec. 5.24 Conversion.
(a) Authority. 12 U.S.C. 35, 93a, 214a, 214b, 214c, and 2903.
(b) Licensing requirements. A state bank or a Federal savings
association must submit an application and obtain prior OCC approval to
convert to a national bank charter. A national bank must give notice to
the OCC before converting to a state bank or Federal savings
association charter.
(c) Scope. This section describes procedures and standards
governing OCC review and approval of applications by a state bank or
Federal savings association to convert to a national bank charter. This
section also describes notice procedures for a national bank seeking to
convert to a state bank or Federal savings association.
(d) Conversion of a state bank or Federal savings association to a
national bank.--(1) Policy. Consistent with OCC's chartering policy, it
is OCC policy to allow conversion to a national bank charter by another
financial institution that can operate safely and soundly as a national
bank in compliance with applicable laws, regulations, and policies. The
OCC may deny an application by any state bank (including a ``state
bank'' as defined in 12 U.S.C. 214(a)) and any Federal savings
association to convert to a national bank charter on the basis of the
standards for denial set forth in Sec. 5.13(b), or when conversion
would permit the applicant to escape supervisory actions by its current
regulator.
(2) Procedures. (i) A state bank or Federal savings association
must submit its application to convert to a national bank to the
appropriate district office. The application must:
(A) Be signed by the president or other duly authorized officer;
(B) Identify each branch that the resulting bank is expected to
operate after conversion;
(C) Include the institution's most recent audited financial
statements (if any);
(D) Include the latest report of condition and report of income
(the most recent daily statement of condition will suffice if the
savings bank or Federal savings association does not file these
reports);
(E) Include an opinion from the state bank or Federal savings
association's counsel that the conversion is not in contravention of
applicable Federal and state law;
(F) State whether the state bank or Federal savings association
wishes to exercise fiduciary powers after the conversion;
(G) Identify all subsidiaries that the state bank or Federal
savings association will retain following the conversion, and provide
the information and analysis of the subsidiaries' activities that would
be required if the converting bank or savings association were a
national bank establishing a subsidiary pursuant to Sec. 5.34; and
(H) Identify any nonconforming assets, including nonconforming
subsidiaries and activities, that the state bank or Federal savings
association holds or engages in, and describe the plans the state bank
or Federal savings association has for retaining or divesting these
assets.
(ii) The OCC may permit a bank that plans to retain nonconforming
assets to retain those assets subject to conditions and an OCC
determination of the carrying value of the retained assets.
(iii) Approval for a state bank or Federal savings association to
convert to a national bank expires if the conversion has not occurred
within six months of the OCC's preliminary approval of the application.
(iv) When the OCC determines that the applicant has satisfied all
statutory and regulatory requirements, including those set forth in 12
U.S.C. 35, and any other conditions, the OCC issues a charter
certificate. The certificate states that the state bank or Federal
savings association is authorized to begin conducting business as a
national bank as of a specified date.
(3) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to this section, unless the OCC determines
that an application presents significant and novel policy, supervisory,
or legal issues and requires compliance with those sections.
(e) Conversion of a national bank to a state bank.--(1) Procedure.
A national bank may convert to a state bank, within the meaning of 12
U.S.C. 214(a), in accordance with 12 U.S.C. 214c, without prior OCC
approval. Termination of the national bank's status as a national bank
occurs upon the bank's completion of the requirements of 12 U.S.C.
214a, and upon the appropriate district office's receipt of the bank's
national bank charter (or copy of thereof) in connection with the
consummation of the transaction.
(2) Notice. A national bank that desires to convert to a state bank
must submit a notice of its intent to convert to the appropriate
district office. The national bank must file this notice when it first
requests approval to convert from the appropriate state authorities.
The appropriate district office then instructs the national bank to
terminate its status as a national bank.
(3) Exception to the rules of general applicability. Sections 5.5
through 5.8, and 5.10 through 5.13, do not apply to the conversion of a
national bank to a state bank.
(f) Conversion of a national bank to a Federal savings association.
A national bank may convert to a Federal savings association without
prior OCC approval. The requirements and procedures set forth in
paragraph (e) of this section and 12 U.S.C. 214a and 12 U.S.C. 214c
apply to a conversion to a Federal savings association, except as
follows:
(1) In paragraph (e) of this section references to ``appropriate
state authorities'' mean ``appropriate Federal authorities''; and
(2) References in 12 U.S.C. 214c to the ``law of the state'' and
``any state authority'' mean ``laws and regulations governing Federal
savings associations'' and ``Office of Thrift Supervision'',
respectively.
Sec. 5.26 Fiduciary powers.
(a) Authority. 12 U.S.C. 92a.
(b) Licensing requirements. A national bank must submit an
application and obtain prior approval from the OCC to exercise
fiduciary powers.
(c) Scope. This section sets forth the procedures governing OCC
review and approval of an application by a national bank to exercise
fiduciary powers. Fiduciary activities are subject to the provisions of
part 9 of this chapter.
(d) Policy. The exercise of fiduciary powers is primarily a
management decision of the national bank. The OCC generally permits a
national bank to exercise fiduciary powers if the bank is operating in
a satisfactory manner, the proposed activities comply with applicable
statutes and regulations, and the bank retains qualified trust
management.
(e) Procedure.--(1) General. The following institutions must obtain
approval from the OCC to offer trust services to the public:
(i) A national bank without trust powers (including those which
plan to exercise trust powers after merging with a state bank with
trust powers); and
(ii) A state bank or a Federal savings association with trust
powers that converts to a national bank.
(2) Application. A bank must submit an application in the form of a
letter to the OCC requesting approval to exercise fiduciary powers. The
letter must contain:
(i) A statement requesting full or limited powers (specifying which
powers);
(ii) An opinion of counsel that the proposed activities do not
violate applicable Federal, state, or local law, including citations to
applicable law;
(iii) A statement that the capital and surplus of the national bank
are not less than the capital and surplus required by state law of
state banks, trust companies, and other corporations exercising
comparable fiduciary powers; and
(iv) Sufficient biographical information on proposed trust
management personnel to enable the OCC to assess their qualifications.
(3) Mergers and consolidations involving national banks. (i) Where
two or more national banks consolidate or merge, and any of the banks
has, prior to such consolidation or merger, received an approval from
the OCC to exercise fiduciary powers that is in force at the time of
the consolidation or merger, the resulting bank succeeds to the rights
existing under the approval. The resulting bank may exercise fiduciary
powers in the same manner and to the same extent as the bank to which
approval was originally granted. A new application to continue to
exercise such powers is not necessary.
(ii) A national bank with prior OCC approval to exercise fiduciary
powers that is the resulting bank in a merger or consolidation with a
state bank is not required to file a new application to continue to
exercise such powers.
(4) Expedited approval. The OCC approves, conditionally approves,
or denies an eligible bank's application for fiduciary powers on or
before the 30th day after the filing is received by the OCC. The
application is deemed approved by the OCC as of the 30th day after the
filing is received by the OCC unless the OCC notifies the bank prior to
that date that the bank is not eligible for expedited approval under
the standards of Sec. 5.13(a)(2).
(5) Permit. Approval of an application under this section
constitutes a permit under 12 U.S.C. 92a to conduct the fiduciary
powers covered by the application.
(6) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to this section, unless the OCC determines
that an application presents significant and novel policy, supervisory,
or legal issues, and requires compliance with those sections.
(7) Expiration of approval. Approval expires if a national bank
does not commence fiduciary activities within 18 months from the date
of approval.
Subpart C--Expansion of Activities
Sec. 5.30 Establishment, acquisition and relocation of a branch.
(a) Authority. 12 U.S.C. 1-42, and 2901-2907.
(b) Licensing requirements. A national bank must submit an
application and obtain prior OCC approval to establish or relocate a
branch.
(c) Scope. This section describes the procedures and standards
governing OCC review and approval of a national bank's application to
establish a new branch or to relocate a branch. The standards, but not
the procedures, set forth in this section apply to a branch established
as a result of a business combination approved under Sec. 5.33. A
branch established through a business combination is subject only to
the procedures set forth in Sec. 5.33.
(d) Definitions. (1) Branch includes any branch bank, branch
office, branch agency, additional office, or any branch place of
business established by a national bank in the United States or its
territories at which deposits are received, checks paid, or money lent.
(i) A branch established by a national bank may include a mobile
facility; temporary facility; facility that is not permanently staffed,
such as an automated teller machine (ATM), if the facility is owned or
rented by the bank; or a seasonal agency, as described in 12 U.S.C.
36(c).
(ii) A facility otherwise described in paragraph (d)(1) of this
section is not a branch if:
(A) The bank does not permit members of the public to have physical
access to the facility (e.g., an office established by the bank that
receives deposits only through the mail); or
(B) The facility is generally available to customers of other banks
to receive substantially similar services pertaining to their accounts
at other banks on the basis of substantially similar terms and
conditions.
(iii) A facility otherwise described in paragraph (d) of this
section is not a branch if it is located at the site of, or is an
extension of, an approved main or branch office of the national bank.
The OCC determines whether a facility is an extension of an existing
main or branch office on a case-by-case basis.
(2) Home state means the state in which the main office of the
national bank is located.
(e) Policy. In determining whether to approve an application to
establish or relocate a branch, the OCC is guided by the following
principles:
(1) Maintaining a sound banking system;
(2) Encouraging a national bank to help meet the credit needs of
its entire community;
(3) Relying on the marketplace as generally the best regulator of
economic activity; and
(4) Encouraging healthy competition to promote efficiency and
better service to customers.
(f) Procedures--(1) General. Except as provided in paragraph (f)(2)
of this section, each national bank proposing to establish a branch
must submit to the appropriate district office a separate branch
application for each proposed branch.
(2) Consolidated applications--(i) ATM branches and unstaffed
branches. A national bank may request approval, through a single
application, for as many ATM branches or other unstaffed branches as
the national bank proposes to establish within nine months after the
approval date. The bank must list in the application each proposed ATM
branch or other unstaffed branch location.
(ii) Jointly-established branches. If a national bank proposes to
establish a branch jointly with one or more national banks or
depository institutions, only one of the national banks needs to submit
a branch application. The national bank submitting the application may
act as agent for all the national banks in the group of depository
institutions proposing to share the branch. The application must list
in an attachment the name and main office address of each national bank
in the group.
(iii) Messenger services. A national bank may request approval,
through a single application, for multiple messenger services to serve
the same general geographic area. Approval expires if the national bank
has not established any messenger service approved by the OCC within
nine months after the date of approval. (See 12 CFR 7.7490(d).)
(3) Authorization. The OCC authorizes operation of the branch when
all requirements and conditions for opening are satisfied.
(4) Expedited approval for eligible banks. An application submitted
by an eligible bank to establish or relocate a branch is deemed
approved by the OCC as of the seventh day after the close of the
applicable public comment period unless the OCC notifies the bank prior
to that date that the filing is not eligible for expedited approval
under the standards of Sec. 5.13(a)(2).
(g) Interstate branches. A national bank that seeks to establish
and operate a de novo branch in any state other than the bank's home
state or a state in which the bank already has a branch must satisfy
the standards and requirements of 12 U.S.C. 36(g).
(h) Exceptions to rules of general applicability. (1) A national
bank filing an application for a mobile branch must publish a public
notice, as described in Sec. 5.8, but need not identify the specific
sites to be served by the mobile facility in either the public notice
or application.
(2) The comment period on any application to establish one or more
ATM branches or to engage in a short-distance branch relocation is ten
days.
(i) Expiration of approval. Approval expires if a branch has not
commenced business within 18 months after the date of approval.
Approval for an ATM and messenger service branch expires if the branch
has not commenced business within nine months after the date of
approval.
(j) Branch closings. A national bank that operates a branch must
comply with the requirements of 12 U.S.C. 1831r-1 with respect to
procedures for branch closings.
Sec. 5.33 Business combinations.
(a) Authority. 12 U.S.C. 24 (Seventh), 93a, 181, 214a, 215, 215a,
215c, 1815(d)(3), 1828(c), 2903, and Sec. 102, Pub. L. 103-328, 108
Stat. 2338.
(b) Licensing requirements. A national bank must submit an
application and obtain prior OCC approval for a business combination
between the national bank and another depository institution when the
resulting institution is a national bank. A national bank must give
notice to the OCC prior to engaging in a combination where the
resulting institution will not be a national bank.
(c) Scope. This section sets forth the standards for OCC review and
approval of applications for business combinations resulting in
national banks, and for notices and other procedures for national banks
involved in all forms of combinations.
(d) Definitions--(1) Business combination means any merger or
consolidation between a national bank and one or more depository
institutions in which the resulting institution is a national bank, the
acquisition by a national bank of all, or substantially all, of the
assets of another depository institution, or the assumption by a
national bank of deposit liabilities of another depository institution.
(2) Interim bank means a national bank that does not operate
independently but exists solely as a vehicle to accomplish a business
combination.
(3) Home state means, with respect to a national bank, the state in
which the main office of the bank is located and, with respect to a
state bank, the state by which the bank is chartered.
(e) Policy--(1) Factors. The OCC considers the following factors in
evaluating an application for a business combination:
(i) Competition. (A) The OCC considers the effect of a proposed
business combination on competition. The applicant must provide a
competitive analysis of the transaction, including a definition of the
relevant geographic market or markets. An applicant may refer to the
Manual for procedures to expedite its competitive analysis.
(B) The OCC denies an application for a business combination if the
combination would result in a monopoly, or would further a conspiracy
to monopolize or attempt to monopolize the business of banking in any
part of the United States. The OCC also denies any proposed business
combination whose effect in any section of the United States may be
substantially to lessen competition, or tend to create a monopoly, or
which in any other manner would be in restraint of trade, unless the
probable effects of the transaction in meeting the convenience and
needs of the community clearly outweigh the anticompetitive effects of
the transaction. For purposes of weighing against anticompetitive
effects, a business combination may have favorable effects in meeting
the convenience and needs of the community if the depository
institution being acquired has limited long-term prospects, or if the
resulting national bank will provide significantly improved,
additional, or less costly services to the community.
(ii) Financial and managerial resources, and future prospects. The
OCC considers the financial and managerial resources and future
prospects of the existing or proposed institutions.
(iii) Convenience and needs of community. The OCC considers the
probable effects of the business combination on the convenience and
needs of the community served. The applicant must describe these
effects in its application, including any planned office closings or
reductions in services following the business combination and the
likely impact on the community. The OCC also considers additional
relevant factors, including the resulting national bank's ability and
plans to provide expanded or less costly services to the community.
(iv) Community reinvestment. The OCC considers the performance of
the applicant and the depository institution being acquired in helping
to meet the credit needs of the relevant communities, including low-
and moderate-income neighborhoods, consistent with safe and sound
banking practices.
(v) Adequacy of disclosure. (A) An applicant must inform
shareholders of all material aspects of a business combination and must
comply with any applicable requirements of the Federal securities laws
and securities regulations of the OCC. Accordingly, an applicant must
ensure that all proxy and information statements prepared in connection
with a business combination do not contain any untrue statement of a
material fact, or omit to state a material fact necessary in order to
make the statements made, in the light of the circumstances under which
they were made, not misleading.
(B) A national bank applicant with one or more classes of
securities subject to the registration provisions of section 12(b) or
(g) of the Securities Exchange Act of 1934, 15 U.S.C. 78l(b) or 78l(g),
must file preliminary proxy material or information statements for
review with the Director, Securities, Investments, and Fiduciary
Practices Division, OCC, Washington, DC 20219, and with the appropriate
district office. Any other applicant must submit the proxy materials or
information statements it uses in connection with the combination to
the appropriate district office no later than when the materials are
sent to the shareholders.
(2) Acquisition and retention of branches. An applicant must
disclose the location of any branches it will acquire and retain in a
business combination. The OCC considers the acquisition and retention
of branches under the standards set out in Sec. 5.30, but does not
require separate applications under Sec. 5.30.
(3) Subsidiaries. (i) An applicant must identify all subsidiaries
to be acquired in a business combination and state the activities of
each subsidiary. The OCC does not require separate applications under
Sec. 5.34.
(ii) An applicant proposing to acquire, through a business
combination, a subsidiary of a depository institution other than a
national bank also must provide the information and analysis of the
subsidiary's activities that would be required if the acquiring bank
were a national bank establishing the subsidiary pursuant to Sec. 5.34.
(4) Interim banks--(i) Application. An applicant for a business
combination that plans to use an interim bank to accomplish the
transaction must file an application to organize an interim bank as
part of the application for the related business combination.
(ii) Conditional approval. The OCC grants conditional approval to
form an interim bank when it acknowledges receipt of the application
for the related business combination.
(iii) Corporate status. An interim bank becomes a body corporate
and may enter into legally valid agreements when it has filed, and the
OCC has accepted, the interim bank's duly executed articles of
association and organization certificate. OCC acceptance occurs:
(A) On the date the OCC advises the interim bank that its articles
of association and organization certificate are acceptable; or
(B) On the date the interim bank files articles of association and
an organization certificate that conform to the form for those
documents provided by the OCC in the Manual.
(iv) Directors and bylaws. Before the OCC grants final approval,
the OCC must verify that the interim national bank has elected a board
of directors and adopted bylaws.
(5) Nonconforming assets. An applicant must identify any
nonconforming assets, including nonconforming subsidiaries and
activities of the institution to be acquired, that will not be disposed
of prior to consummation of the business combination. The OCC may
permit a national bank to retain nonconforming assets for a reasonable
time to allow it to dispose of or conform the assets. The OCC may set
conditions for retention and may determine the carrying value of
assets.
(6) Fiduciary powers. An applicant must state whether the resulting
bank intends to exercise fiduciary powers pursuant to Sec. 5.26(e)(3).
(7) Expiration of approval. Approval of a business combination, and
conditional approval of an interim bank charter, if applicable, expires
if the business combination is not consummated within one year after
the date of OCC approval.
(f) Exceptions to rules of general applicability--(1) National bank
applicant. Section 5.8 (a) through (c) does not apply to a national
bank applicant that is subject to specific statutory notice
requirements for a business combination. A national bank applicant must
follow, as applicable, public notice requirements contained in 12
U.S.C. 1828(c)(3) (business combinations between insured depository
institutions), 12 U.S.C. 215(a) (consolidation under a national bank
charter), 12 U.S.C. 215a(a)(2) (merger under a national bank charter),
and paragraph (g) of this section (merger or consolidation with a
Federal savings association or under a state bank charter).
(2) Interim bank. Sections 5.8, 5.10, and 5.11 do not apply to an
application to organize an interim bank, unless the OCC determines that
the application presents significant and novel policy, supervisory, or
legal issues and requires compliance with those sections. The OCC
treats an application to organize an interim bank as part of the
related application to engage in a business combination and does not
require a separate public notice and public comment process for interim
banks.
(3) Consolidation. The rules of general applicability do not apply
to transactions covered by paragraph (g)(3) of this section.
(g) Approval procedures and treatment of dissenting shareholders in
consolidations and mergers--(1) Consolidations and mergers with other
national banks and state banks as defined in 12 U.S.C. 215b(1)
resulting in a national bank. A national bank entering into a
consolidation or merger authorized pursuant to 12 U.S.C. 215 or 215a,
respectively, is subject to the approval procedures and requirements
with respect to treatment of dissenting shareholders set forth in those
provisions.
(2) Consolidations and mergers with Federal savings associations
under 12 U.S.C. 215c resulting in a national bank. (i) With the
approval of the OCC, any national bank and any Federal savings
association may consolidate or merge with a national bank as the
resulting institution by complying with the following procedures:
(A) A national bank entering into the consolidation or merger must
follow the procedures of 12 U.S.C 215 or 215a, respectively, as if the
Federal savings association were a state or national bank.
(B) A Federal savings association entering into the consolidation
or merger also must follow the procedures of 12 U.S.C. 215 or 215a,
respectively, as if the Federal savings association were a state bank
or national bank, except where the laws or regulations governing
Federal savings associations specifically provide otherwise.
(ii) The OCC may conduct an appraisal or reappraisal of dissenters'
shares of stock in a national bank involved in a consolidation or
merger with a Federal savings association if all parties agree that the
appraisal or reappraisal is final and binding on each party as to the
value of the shares.
(3) Consolidation or merger of a national bank resulting in a state
bank as defined in 12 U.S.C. 214(a) or a Federal savings association--
(i) Policy. Prior OCC approval is not required for the merger or
consolidation of a national bank with a state bank or Federal savings
association when the resulting institution will be a state bank or
Federal savings association. Termination of a national bank's status as
a national banking association is automatic upon completion of the
requirements of 12 U.S.C. 214a, in accordance with 12 U.S.C. 214c, in
the case of a merger or consolidation into a state bank, or paragraph
(g)(3)(iii) of this section, in the case of a merger or consolidation
into a Federal savings association, and consummation of the
transaction.
(ii) Procedures. A national bank desiring to merge or consolidate
with a state bank or a Federal savings association when the resulting
institution will be a state bank or Federal savings association must
submit a notice to the appropriate district office advising of its
intention. The national bank must submit this notice at the time the
application to merge or consolidate is filed with the responsible
agency under the Bank Merger Act, 12 U.S.C. 1828(c). The OCC then
instructs the bank to terminate its status as a national bank.
(iii) Special procedures for merger or consolidation into a Federal
savings association. (A) With the exception of the procedures in
paragraph (g)(3)(iii)(B) of this section, a national bank entering into
a merger or consolidation with a Federal savings association when the
resulting institution will be a Federal savings association must comply
with the requirements of 12 U.S.C. 214a and 12 U.S.C. 214c as if the
Federal savings association were a state bank. However, for these
purposes the references in 12 U.S.C. 214c to ``law of the state'' and
``any state authority'' mean ``laws and regulations governing Federal
savings associations'' and ``Office of Thrift Supervision,''
respectively.
(B) National bank shareholders who dissent from a plan to merge or
consolidate may receive in cash the value of their national bank shares
if they comply with the requirements of 12 U.S.C. 214a as if the
Federal savings association were a state bank. The OCC conducts an
appraisal or reappraisal of the value of the national bank shares held
by dissenting shareholders only if all parties agree that the
determination will be final and binding. The parties must also agree on
how the full expenses of the OCC in making the appraisal will be
divided among the parties and paid to the OCC. The plan of merger or
consolidation must provide, consistent with the requirements of the
Office of Thrift Supervision (OTS), the manner of disposing of the
shares of the resulting Federal savings association not taken by the
dissenting shareholders of the national bank.
(h) Interstate combinations. A business combination between banks
under the authority of subsection (a)(1) of section 44 of FDIA must
satisfy the standards and requirements and comply with the procedures
of section 44. For purposes of this section, the acquisition of a
branch without the acquisition of all or substantially all of the
assets of a bank is treated as the acquisition of a bank whose home
state is the state in which the branch is located.
(i) Expedited approval for business reorganizations. Business
reorganizations are deemed approved by the OCC as of the 45th day after
the application is received by the OCC, unless the OCC notifies the
applicant that the filing is not eligible for expedited approval under
the standards of Sec. 5.13(a)(2). An application under this paragraph
must contain all necessary information for the OCC to determine that it
qualifies as a business reorganization. For purposes of this paragraph,
the term ``business reorganization'' means:
(1) A business combination between eligible banks that are
controlled by the same holding company; or
(2) A business combination between an eligible bank and an interim
bank chartered in a transaction in which a person or group of persons
exchanges its shares of the eligible bank for shares of a newly formed
holding company and receives after the transaction substantially the
same proportional share interest in the holding company as it held in
the eligible bank (except for changes in interests resulting from the
exercise of dissenters' rights), and the reorganization involves no
other transactions involving the bank.
Sec. 5.34 Operating subsidiaries.
(a) Authority. 12 U.S.C. 24(Seventh) and 93a.
(b) Licensing requirements. A national bank generally must submit
an application and obtain prior OCC approval to establish an operating
subsidiary. In certain circumstances, a national bank need only notify
the OCC after it has commenced specified activities in an operating
subsidiary.
(c) Scope. This section sets forth application and notice
procedures for the establishment and operation of an operating
subsidiary by a national bank.
(d) Standards and requirements--(1) General. A national bank may
establish, acquire, and operate an operating subsidiary to engage in
activities that are a part of, or incidental to, the business of
banking under 12 U.S.C. 24(Seventh), and other activities authorized
for national banks or their subsidiaries under other statutes.
(2) Qualifying subsidiaries. A national bank may invest in a
corporation as an operating subsidiary if the parent bank owns more
than 50 percent of the voting stock of the corporation, and no other
party controls the corporation. In addition, the corporation must
engage only in activities that are a part of, or incidental to, the
business of banking under 12 U.S.C. 24(Seventh), or in other activities
authorized for national banks or their subsidiaries under other
statutes. However, the following corporations are not operating
subsidiaries subject to this section:
(i) Corporations in which the bank's investment is made pursuant to
specific authorization in an individual statute or other OCC
regulation; and
(ii) Corporations in which the bank has acquired shares through
foreclosure on collateral, or otherwise in good faith, by way of
compromise of a doubtful claim, or to avoid a loss in connection with a
debt previously contracted.
(3) Examination and supervision. Each operating subsidiary is
subject to examination and supervision by the OCC. Unless otherwise
provided by statute or regulation, or determined by the OCC in writing,
all provisions of Federal banking laws and regulations applicable to
the operations of the parent bank apply to the operations of the bank's
operating subsidiaries. If, upon examination, the OCC determines that
the subsidiary is created or operated in violation of law, regulation,
or written condition, or that the manner of operation is unsafe or
unsound, the OCC directs the bank or operating subsidiary to take
appropriate remedial action, which may include requiring the bank to
dispose of all or part of the subsidiary.
(e) Procedures--(1) General--(i) Application required. Except as
provided in paragraph (e)(3) of this section, a national bank that
intends to acquire or establish an operating subsidiary, or to perform
new activities in an existing subsidiary, must submit an application
letter to the OCC. The letter must include a detailed description of
the bank's investment in the subsidiary, the proposed activities of the
subsidiary, the organizational structure and management of the
subsidiary, and the relations between the bank and the subsidiary. It
also must state whether any activity of the operating subsidiary will
be conducted at a location other than the main office or a previously
approved branch of the bank. The letter must contain a commitment that
the bank will conduct the proposed activities in accordance with
guidance issued by the OCC regarding those activities. The OCC may
require the applicant to submit a legal analysis if the proposal is
novel, unusually complex or raises substantial unresolved legal issues.
(ii) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to this section, unless the OCC determines
that the application presents significant and novel policy,
supervisory, or legal issues and requires compliance with those
sections.
(iii) OCC review and approval. The OCC reviews a national bank's
application to determine whether the proposed activities are legally
permissible for an operating subsidiary, and to ensure that the
proposal is consistent with safe and sound banking practices and OCC
policy. The OCC may request additional information and analysis from
the applicant. In approving operating subsidiary applications, the OCC
will assure that the proposed activities do not endanger the safety and
soundness of the parent national bank.
(2) Expedited approval for certain applications from eligible
banks--(i) General. An application by an eligible bank that seeks to
engage, through an operating subsidiary, in the activities listed in
paragraph (e)(2)(ii) of this section, is deemed approved by the OCC 30
days after filing with the OCC, unless the OCC notifies the bank prior
to that date that the filing is not eligible for expedited approval
under the standards of Sec. 5.13(a)(2). All approvals are subject to
the condition that the subsidiary conduct the activities in accordance
with guidance issued by the OCC regarding those activities. The OCC
also may impose additional conditions in connection with any approval
under this section.
(ii) Activities eligible for expedited approval for eligible banks.
The following activities qualify for expedited approval:
(A) Dealing, trading, and investing in foreign exchange, coin, and
bullion;
(B) Leasing of personal property, including:
(1) Financial leases for the bank's own account pursuant to 12
U.S.C. 24(Seventh);
(2) Competitive Equality Banking Act of 1987 (CEBA), 12 U.S.C.
3806, leases for the bank's own account pursuant to 12 U.S.C.
24(Tenth); and
(3) Acting as agent, broker, or advisor in leases for others;
(C) Providing securities brokerage, related securities credit,
incidental activities, and investment advice;
(D) Underwriting and dealing in securities permissible under 12
U.S.C. 24(Seventh) and part 1 of this chapter;
(E) Acting as futures commission merchant;
(F) Making, acquiring, servicing, or warehousing loans or other
extensions of credit for the subsidiary's account, or for the account
of others, including consumer loans, credit card loans, commercial
loans, residential mortgage loans, and commercial mortgage loans; or
(G) Serving as an investment adviser for investment companies under
the Investment Company Act of 1940, 15 U.S.C. 80-1 et seq.
(3) Notice process for certain activities--(i) General. A national
bank that is ``adequately capitalized,'' as that term is defined in
part 6 of this chapter, and has not been notified that it is in
``troubled condition'' as defined in Sec. 5.51, may acquire or
establish an operating subsidiary, or perform a new activity in an
existing operating subsidiary, by giving the appropriate district
office written notice within ten days after acquiring or establishing
the subsidiary, or commencing the activity, provided the activity is
listed in paragraph (e)(3)(ii) of this section. The written notice must
include a detailed description of the bank's investment in the
subsidiary and of the activity performed. All approvals are subject to
the condition that the subsidiary conducts the activity in a manner
consistent with guidance issued by the OCC regarding the activity.
(ii) Activities eligible for notice. The following activities
require the filing of a notice with the appropriate district office ten
days after the commencement of the activity:
(A) Holding property, such as real estate, personal property,
securities, or other assets, acquired by the bank through foreclosure
or otherwise in good faith to compromise a doubtful claim or in the
ordinary course of collecting a debt previously contracted;
(B) Business services performed for the bank or its affiliates.
Furnishing services for the internal operations of the bank or its
affiliates, including: accounting, auditing, appraising, advertising
and public relations, data processing and data transmission services,
databases, or facilities;
(C) Financial advice and consulting for the bank or its affiliates;
(D) Selling money orders, savings bonds, or travelers cheques;
(E) Management consulting, operational advice, and specialized
services for other depository institutions;
(F) Courier services between financial institutions;
(G) Providing check and credit card guaranty and verification
services;
(H) Data processing;
(I) Acting as investment or financial adviser, or providing
financial counseling, including:
(1) Serving as the advisory company for a mortgage or real estate
investment trust;
(2) Furnishing general economic information and advice, general
economic statistical forecasting services and industry studies;
(3) Providing financial advice to state or local governments or
foreign governments with respect to issuance of securities;
(4) Providing tax planning and preparation; and
(5) Providing consumer financial counseling;
(J) Advising, structuring, and arranging financial transactions.
Providing financial and transactional advice to customers and assisting
customers in structuring, arranging, and executing various financial
transactions (provided the bank and its affiliates do not participate
as a principal), including:
(1) Mergers, acquisitions, divestitures, joint ventures, leveraged
buyouts, recapitalizations, capital structurings, and financial
transactions (including private and public financings and loan
syndications); and conducting financial feasibility studies;
(2) Swaps and other derivatives;
(3) Foreign exchange transactions and swaps; and
(4) Arranging commercial real estate equity financing; or
(K) Investment advice on futures and options on futures.
(4) No application or notice required. A bank may acquire or
establish an operating subsidiary without filing an application or
providing notice to the OCC provided the:
(i) Activities of the new subsidiary are limited to those
activities previously reported by the bank in connection with the
establishment or acquisition of a prior operating subsidiary;
(ii) Establishment or acquisition of the prior operating subsidiary
was considered permissible by the OCC;
(iii) Activities in which the new subsidiary will engage continue
to be considered legally permissible by the OCC; and
(iv) Activities of the new subsidiary will be conducted in
accordance with any conditions imposed by the OCC in approving the
conduct of these activities for any prior operating subsidiary of the
bank.
Sec. 5.35 Bank service corporations.
(a) Authority. 12 U.S.C. 93a and 1861-1867.
(b) Licensing requirements. Except where otherwise provided, a
national bank must submit a notice and receive prior OCC approval to
invest in the capital stock of a bank service corporation.
(c) Scope. This section describes the procedures and requirements
regarding OCC review and approval of notices to invest in bank service
corporations.
(d) Definitions. (1) Bank service corporation means a corporation
organized to provide services authorized by the Bank Service
Corporation Act, 12 U.S.C. 1861 through 1867, all of whose capital
stock is owned by one or more insured banks.
(2) Depository institution, for purposes of this section, means an
insured bank, a financial institution subject to examination by the
OTS, or the National Credit Union Administration Board (NCUA), or a
financial institution whose accounts or deposits are insured or
guaranteed under state law and eligible to be insured by the Federal
Deposit Insurance Corporation or the NCUA.
(3) Invest includes making any advance of funds to a bank service
corporation, whether by the purchase of stock, the making of a loan, or
otherwise, except a payment for rent earned, goods sold and delivered,
or services rendered before the payment was made.
(4) Principal investor means the insured bank that has the largest
amount invested in the capital stock of a bank service corporation. In
any case where two or more insured banks have equal amounts invested,
the bank service corporation must designate one of the banks as its
principal investor.
(e) Procedures--(1) OCC notice and approval required. Except as
provided in paragraphs (e)(3), (e)(4) and (e)(5) of this section, a
national bank that intends to make an investment in the capital stock
of a bank service corporation must submit a notice to and receive
approval from the OCC. The OCC approves or denies a proposed investment
within 60 days of filing with the OCC unless the OCC notifies the bank
prior to that date that the filing presents significant supervisory or
compliance concerns, or raises significant legal or policy issues.
(2) Expedited approval for eligible banks. Notwithstanding
paragraph (e)(1) of this section, a notice by an eligible bank that
seeks to make an investment in the capital stock of a bank service
corporation is deemed approved by the OCC 30 days after filing with the
OCC, provided that the bank service corporation will engage in an
activity listed in Sec. 5.34(e)(2)(ii), unless the OCC notifies the
bank prior to that date that the filing is not eligible for expedited
approval under the standards of Sec. 5.13(a)(2). Approval under this
paragraph is subject to the condition that the bank service corporation
conducts the activity in a manner consistent with guidance issued by
the OCC regarding the activity.
(3) Notice process for certain activities. A national bank that is
``adequately capitalized,'' as that term is defined in part 6 of this
chapter, and has not been notified that it is in ``troubled
condition,'' as defined in Sec. 5.51, may invest in the capital stock
of a bank service corporation by giving the appropriate district office
written notice within ten days after the investment, provided that the
bank service corporation engages only in the activities listed in
Sec. 5.34(e)(3)(ii). Approval under this paragraph is subject to the
condition that the bank service corporation conducts the activity in a
manner consistent with the guidance issued by the OCC regarding the
activity.
(4) Investments requiring no approval. A national bank does not
need OCC approval to invest in a bank service corporation that provides
the following services only for depository institutions: check and
deposit posting and sorting; computation and posting of interest and
other credits and charges; preparation and mailing of checks,
statements, notices, and similar items; or any other clerical,
bookkeeping, accounting, statistical, or similar functions.
(5) Federal Reserve approval. Notwithstanding paragraphs (e)(1)
through (e)(4) of this section, a national bank may, with the approval
of the Board of Governors of the Federal Reserve System (FRB), invest
in the capital stock of a bank service corporation that provides any
service, other than deposit taking, that the FRB has determined, by
regulation, to be permissible for a bank holding company under 12
U.S.C. 1843(c)(8).
(6) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to requests for approval to invest in bank
service corporations, unless the OCC determines that the notice
presents significant and novel policy, supervisory or legal issues and
requires compliance with those sections.
(f) Required information. A notice required under paragraphs
(e)(1), (e)(2) or (e)(3) of this section must contain the following:
(1) The name and location of the bank service corporation;
(2) A description of the activities the bank service corporation
will conduct;
(3) Information demonstrating that the bank will comply with the
investment limitations of paragraph (h) of this section;
(4) Information demonstrating that all banks investing in the bank
service corporation are located in the same state, unless the FRB has
approved an exception to this requirement under the authority of 12
U.S.C. 1864(f); and
(5) Information demonstrating that the bank service corporation
will conduct these activities only at locations in a state where the
investing bank could be authorized to perform the activities directly,
unless the FRB has approved an exception to this requirement under the
authority of 12 U.S.C. 1864(f).
(g) Examination and supervision. Each bank service corporation in
which a national bank is the principal investor is subject to
examination and supervision by the OCC in the same manner and to the
same extent as the shareholder national bank.
(h) Investment and other limitations--(1) Investment limitations. A
bank may not invest more than ten percent of its capital and surplus in
a bank service corporation. In addition, the bank's total investments
in all bank service corporations may not exceed five percent of the
bank's total assets.
(2) Other limitations. Expect as provided under paragraph (e)(5) of
this section a bank service corporation must only conduct activities
that the national bank could conduct directly. If the bank service
corporation has both national and state bank shareholders, the
activities conducted must also be permissible for the state bank
shareholders.
Sec. 5.36 Other equity investments.
(a) Authority. 12 U.S.C. 24 (Seventh) and 93a.
(b) Licensing requirements. A national bank must submit an
application and obtain prior OCC approval in order to make equity
investments described in this section.
(c) Scope. This section describes OCC procedures and approval
standards for applications by national banks to make equity investments
authorized by statutes that are not covered by other OCC regulations.
(d) Prior approval required for certain investments. A national
bank must obtain approval from the OCC prior to making equity
investments authorized by statutes enacted after February 12, 1990.
(e) Procedures--(1) Application required. A national bank intending
to make an equity investment under this section must submit an
application to the appropriate district office. The application must
describe the proposed activities of the business in which the bank
plans to invest and the legal basis for allowing the investment. It
also must discuss the financial and managerial resources and future
prospects of that business and the financial capability of the bank to
make the proposed investment.
(2) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to bank applications for other equity
investments, unless the OCC determines that the application presents
significant and novel policy, supervisory or legal issues and requires
compliance with those sections.
(3) OCC review and approval. (i) The OCC reviews each application
to determine whether the proposed investment is legally permissible and
to ensure that the proposed investment is consistent with safe and
sound banking practices and OCC policy thereunder. The OCC may request
additional information and analysis from the bank.
(ii) The application to make the proposed equity investment is
deemed approved by the OCC as of the 30th day after the filing is
received by the OCC unless the OCC notifies the bank prior to that date
that the filing presents significant supervisory, or compliance
concerns, or raises significant legal or policy issues.
Sec. 5.37 Investment in bank premises.
(a) Authority. 12 U.S.C. 29, 93a, and 371d.
(b) Scope. This section sets forth the procedures governing OCC
review and approval of applications by national banks to invest in bank
premises as described in paragraph (c)(1) of this section.
(c) Procedure--(1) Application. (i) A national bank must submit an
application to the appropriate district office to invest in the bank
premises or in the stock, bonds, debentures, or other such obligations
of any corporation holding the premises of the bank, or to make loans
to or upon the security of the stock of such corporation, if the
aggregate of all such investments and loans, together with the
indebtedness incurred by any such corporation that is an affiliate of
the bank, as defined in 12 U.S.C. 221a, will exceed the amount of the
capital stock of the bank.
(ii) The application must include:
(A) A description of the bank's present fixed asset investment;
(B) The investment in bank premises that the bank intends to make,
and the reason for exceeding the bank's capital stock; and
(C) The amount that the investment will exceed the bank's capital
stock.
(2) Approval. The OCC approves, conditionally approves, or denies
an application for national bank investment in bank premises as
described in paragraph (c)(1) of this section on or before the 30th day
after the filing is received by the OCC. The application is deemed
approved by the OCC as of the 30th day after the filing is received
unless the OCC notifies the bank prior to that date that the filing
presents significant supervisory, or compliance concerns, or raises
significant legal or policy issues.
(3) No prior approval for eligible banks. Notwithstanding paragraph
(c)(1) of this section, an eligible bank making an aggregate investment
in bank premises up to 20 percent of the bank's capital and surplus
need not submit an application for prior approval to the appropriate
district office. However, the bank must notify the appropriate district
office in writing of the investment within ten days following the
transaction. The written notice must include a detailed description of
the bank's investment.
(4) Exceptions to rules of general applicability. Sections 5.8.,
5.10, and 5.11 do not apply to this section, unless the OCC determines
that an application presents significant and novel policy, supervisory,
or legal issues, and requires compliance with those sections.
(5) Expiration of approval. Approval expires if a national bank
does not make the investment within 18 months from the date of
approval.
Subpart D--Other Changes in Activities and Operations
Sec. 5.40 Change in location of main office.
(a) Authority 12 U.S.C. 30, 93a, and 2901 through 2907.
(b) Licensing requirements. A national bank must give prior notice
to the OCC in order to relocate its main office within city, town or
village limits to an authorized branch location. In order to relocate
to any other permissible location, a national bank must submit an
application and obtain prior OCC approval.
(c) Scope. This section describes OCC procedures and approval
standards for an application or a notice by a national bank to change
the location of its main office.
(d) Procedure--(1) Main office relocation to an authorized branch
location within city, town, or village limits. A national bank may
change the location of its main office to an authorized branch location
(approved or existing branch site) within the limits of the same city,
town, or village. The national bank must submit a notice to the
appropriate district office before the relocation. The notice must
include the new address of the main office and the effective date of
the relocation.
(2) To any other location. To relocate its main office to any other
location, a national bank must file an application to relocate with the
appropriate district office. If relocating outside the limits of its
city, town, or village, a national bank must also:
(i) Obtain the approval of shareholders owning two-thirds of the
voting stock of the bank; and
(ii) Amend its articles of association.
(3) Limitation on relocation. A national bank may not relocate its
main office more than 30 miles outside the limits of the city, town, or
village in which the main office of the national bank is located.
(4) Retention of main office as branch. A national bank desiring to
retain its former main office location as a branch must obtain OCC
approval pursuant to the standards of Sec. 5.30.
(5) Expedited approval. A main office relocation application
submitted by an eligible bank under paragraph (d)(2) of this section is
deemed approved by the OCC as of the seventh day after the close of the
comment period, provided the application would result in a network of
offices that would be permissible if the bank's main office were not
relocated, unless the OCC notifies the bank prior to that time that the
bank is not eligible for expedited approval under the standards of
Sec. 5.13(a)(2).
(6) Exceptions to rules of general applicability. (i) Sections 5.8,
5.9, 5.10, and 5.11 do not apply to a main office relocation to an
authorized branch location within the limits of the city, town, or
village as described in paragraph (d)(1) of this section, unless the
OCC determines that the notice under paragraph (d)(1) of this section
presents significant and novel policy, supervisory, or legal issues and
requires compliance with those sections.
(ii) The comment period on any application filed under paragraph
(d)(2) of this section to engage in a short-distance relocation of a
main office is ten days.
(e) Expiration of approval. Approval expires if the national bank
has not opened its main office at the relocated site within 18 months
of the date of approval.
Sec. 5.42 Change of corporate title.
(a) Authority. 12 U.S.C. 21a, 30, and 93a.
(b) Scope. This section describes the method by which a national
bank may change its corporate title.
(c) Standards. A national bank may change its corporate title
provided that the new title includes the word ``national'' and complies
with other applicable Federal laws, including 18 U.S.C. 709.
(d) Procedures--(1) Notice to the OCC. A national bank must notify
the appropriate district office if it changes its corporate title.
(2) Amendment to articles of association. A national bank whose
corporate title is specified in its articles of association must amend
its articles, in accordance with the procedures of 12 U.S.C. 21a, to
change its title.
(3) Other notification. If a national bank's title is not specified
in its articles of association, it must send written notice of the
change to the appropriate district office. The notice must contain the
old and new titles and the effective date of the change.
(4) Exceptions to rules of general applicability. Sections 5.8,
5.9, 5.10, 5.11, and 5.13(a) do not apply to a national bank's change
of corporate title, unless the OCC determines that the application
presents significant and novel policy, supervisory, or legal issues,
and requires compliance with those sections.
Sec. 5.46 Changes in permanent capital.
(a) Authority. 12 U.S.C. 21a, 51, 51a, 51b, 51b-1, 52, 56, 57, 59,
60, and 93a.
(b) Licensing requirements. A national bank must submit an
application and obtain OCC approval to decrease its permanent capital,
and in certain cases, to increase its permanent capital. Generally, the
OCC only requires a notice when a national bank increases its permanent
capital. A nonexclusive list of sample increases or decreases to a
national bank's permanent capital is contained in the Manual.
(c) Scope. This section describes procedures and standards relating
to transactions resulting in a change in a national bank's permanent
capital.
(d) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to changes in a national bank's permanent
capital.
(e) Definitions. For the purposes of this section the following
definitions apply:
(1) Capital plan means a plan describing the manner and schedule by
which a national bank will attain specified capital levels or ratios,
including a plan to achieve minimum capital ratios filed with the
appropriate district office under Sec. 3.7 of this chapter and a
capital restoration plan filed with the OCC under 12 U.S.C. 1831o and
Sec. 6.5 of this chapter.
(2) Capital stock means the total amount of common stock and
preferred stock.
(3) Capital surplus means the total of:
(i) The amount paid in on capital stock in excess of the par or
stated value;
(ii) Direct capital contributions representing the amounts paid in
to the national bank other than for capital stock;
(iii) The amount transferred from undivided profits reflecting
stock dividends; and
(iv) The amount transferred from undivided profits required by 12
U.S.C. 60.
(4) Permanent capital means the sum of capital stock and capital
surplus.
(f) Policy. In determining whether to approve a proposed change to
a national bank's permanent capital, the OCC considers whether the
change is consistent with law, regulation, and OCC policy thereunder,
provides an adequate capital structure, and, if appropriate, complies
with the bank's capital plan.
(g) Increases in permanent capital--(1) Prior approval. A national
bank need not obtain prior OCC approval for any increase to its
permanent capital unless the bank is:
(i) Required to receive OCC approval pursuant to letter, order,
directive, written agreement or otherwise;
(ii) Selling common or preferred stock for consideration other than
cash; or
(iii) Receiving a material noncash contribution to capital surplus.
(2) Preferred stock. In the case of the sale of preferred stock,
the national bank must also submit provisions in the articles of
association concerning preferred stock dividends, voting and conversion
rights, retirement of the stock, and rights to exercise control over
management to the appropriate district office. The provisions will be
deemed approved by the OCC within 30 days of the submission unless the
OCC notifies the applicant otherwise in writing, including a statement
of the reason for the delay.
(3) Letter of notification. A national bank that proposes to
increase its capital and is not required to file an application under
paragraph (g)(1) of this section must file a letter of notification
pursuant to paragraph (j) of this section following sale or completion
of the transaction and receive certification from the OCC. The proposed
change is deemed approved and certified seven days after the date on
which the OCC receives the letter of notification.
(4) Application and letter of notification. A national bank that
proposes to increase its permanent capital and is required to receive
OCC approval under paragraph (g)(1) of this section must file an
application under paragraph (i) of this section and a letter of
notification under paragraph (j) of this section.
(h) Decreases in permanent capital. A national bank must submit an
application and obtain approval under paragraph (i) of this section for
any reduction of its permanent capital that results in a distribution
of cash or assets or a transfer to undivided profits.
(i) Procedures for changes to permanent capital requiring OCC
approval--(1) Application for prior approval. A national bank proposing
to make a change in its permanent capital that requires prior OCC
approval under paragraphs (g) or (h) of this section must submit an
application to the appropriate district office. The application must:
(i) Describe the type and amount of the proposed change in
permanent capital, explain the reason for the change, and state if the
bank is subject to a capital plan with the OCC;
(ii) In the case of a reduction to capital, provide a schedule
detailing the present and proposed capital structure;
(iii) In the case of a noncash contribution to capital, provide a
description of the method of valuing the contributions; and
(iv) State how the proposed change conforms to a capital plan if
the bank is subject to a capital plan, or if a capital plan is required
in connection with the proposed change in permanent capital.
(2) Expedited approval. An eligible national bank's application is
deemed approved by the OCC 30 days after the date the OCC receives the
application letter, unless the OCC notifies the bank prior to that date
that the application is not eligible for expedited approval under the
standards of Sec. 5.13(a)(2).
(3) Expiration of approval. Approval expires if a national bank has
not completed its changes in permanent capital within one year of the
date of approval.
(j) Letter of notification. After a bank completes an increase in
capital it must submit a letter of notification to the appropriate
district office in order to obtain a certification from the OCC. The
letter of notification must be acknowledged before a notary public by
the bank's president, vice president or cashier and contain:
(1) A description of the transaction, unless already provided
pursuant to paragraph (i) of this section;
(2) The amount, including the par value of the stock, and effective
date of the increase;
(3) A certification to the effect that the funds have been paid in,
if applicable;
(4) A certified copy of the amendment to the articles of
association, if required; and
(5) A statement that the bank has complied with all laws,
regulations and conditions imposed by the OCC.
(k) Offers and sales of stock. A national bank must comply with the
Securities Offering Disclosure Rules in part 16 of this chapter for
offers and sales of common and preferred stock.
(l) Shareholder approval. A national bank must obtain the necessary
shareholder approval required by statute for any change in its
permanent capital.
Sec. 5.47 Subordinated debt as capital.
(a) Authority. 12 U.S.C. 93a.
(b) Licensing requirements. Unless the OCC has previously notified
a national bank that prior approval is required, or unless prior
approval is required by law, a national bank does not need prior OCC
approval to issue or prepay subordinated debt, regardless of whether
the bank intends to count the debt as Tier 2 capital. A national bank
that is not required to obtain prior approval must notify the OCC after
issuing subordinated debt that is to be counted as Tier 2 capital.
(c) Scope. This section sets forth the procedures for OCC review
and approval of applications to issue or prepay subordinated debt.
(d) Definitions. (1) Capital plan means a plan describing the means
and schedule by which a national bank will attain specified capital
levels or ratios, including a plan to achieve minimum capital ratios
filed with the appropriate district office under Sec. 3.7 of this
chapter and a capital restoration plan filed with the OCC under 12
U.S.C. 1831o, and Sec. 6.5 of this chapter.
(2) Tier 2 capital has the same meaning as set forth in Sec. 3.2(d)
of this chapter.
(e) Qualification as regulatory capital. (1) A national bank's
subordinated debt qualifies as Tier 2 capital if the subordinated debt
meets the requirements in part 3 of this chapter, section 2(b)(4) of
Appendix A to part 3 of this chapter, and complies with the ``OCC
Guidelines for Subordinated Debt Instruments'' in the Manual.
(2) If the OCC notifies a national bank that it must obtain OCC
approval before issuing subordinated debt, the subordinated debt will
not qualify as Tier 2 capital until the bank obtains OCC approval for
its inclusion in capital.
(f) Prior approval procedure--(1) Application. A national bank
required to obtain OCC approval before issuing or prepaying
subordinated debt must submit an application to the appropriate
district office. The application must include:
(i) A description of the terms and amount of the proposed issuance
or prepayment;
(ii) A statement of whether the bank is subject to a capital plan
or required to file a capital plan with the OCC and, if so, how the
proposed change conforms to the capital plan;
(iii) A copy of the proposed subordinated note format and note
agreement; and
(iv) A statement of whether the debt issue complies with all laws,
regulations, and the ``OCC Guidelines for Subordinated Debt
Instruments'' in the Manual.
(2) Approval--(i) General. The OCC approves, conditionally
approves, or denies an application to issue or prepay subordinated debt
on or before the 30th day after the complete application is received by
the OCC. The application is deemed approved by the OCC as of the 30th
day after the filing is received by the OCC unless the OCC notifies the
bank prior to that date that the filing presents significant
supervisory, or compliance concerns, or raises significant legal, or
policy issues.
(ii) Notification. When the OCC notifies the bank that the OCC
approves the bank's application to issue or prepay the subordinated
debt, it also notifies the bank whether the debt qualifies as Tier 2
capital.
(iii) Expiration of approval. Approval expires if a national bank
does not complete the sale of the subordinated debt within one year of
approval.
(g) Notice procedure. If a national bank is not required to obtain
approval before issuing subordinated debt, the bank must notify the
appropriate district office in writing within ten days after issuing
subordinated debt that is to be counted as Tier 2 capital. The notice
must include:
(1) The terms of the issuance;
(2) The amount and date of receipt of funds;
(3) A copy of the final subordinated note format and note
agreement; and
(4) A statement that the issue complies with all laws, regulations,
and the ``OCC Guidelines for Subordinated Debt Instruments'' in the
Manual.
(h) Exceptions to rules of general applicability. Sections 5.8,
5.9, 5.10, and 5.11 do not apply to the issuance of subordinated debt.
(i) Issuance of subordinated debt. A national bank must comply with
the Securities Offering Disclosure Rules in part 16 of this chapter
when issuing subordinated debt even if the bank is not required to
obtain prior approval to issue subordinated debt.
Sec. 5.48 Voluntary liquidation.
(a) Authority. 12 U.S.C. 93a, 181, and 182.
(b) Licensing requirements. A national bank considering going into
voluntary liquidation must notify the OCC. Additionally, the bank must
file a notice with the OCC once a liquidation plan is definite.
(c) Exceptions to rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to a voluntary liquidation, unless the OCC
determines that the application presents significant and novel policy,
supervisory or legal issues and requires compliance with those
sections.
(d) Standards. A national bank may liquidate in accordance with the
terms of 12 U.S.C. 181 and 182.
(e) Procedure.--(1) Notice of voluntary liquidation. When the
shareholders of a solvent national bank have voted to voluntarily
liquidate, the bank must file a notice with the appropriate district
office and publish public notice in accordance with 12 U.S.C. 182.
(2) Report of condition. The liquidating bank must submit reports
of the condition of its commercial, trust, and other departments to the
appropriate district office as of the date it begins voluntary
liquidation.
(3) Report of progress. The liquidating agent or committee must
submit a ``Report of Progress of Liquidation'' annually to the
appropriate district office until the liquidation is complete. A
national bank in liquidation must continue to file the quarterly
Consolidated Reports of Condition and Income (Call Reports).
(f) Expedited liquidations in connection with acquisitions.-- (1)
General. When an acquiring depository institution in a business
combination purchases all the assets, and assumes all the liabilities,
including contingent liabilities, of a target national bank, the
acquiring depository institution may dissolve the target national bank
immediately after the combination. However, if any liabilities will
remain in the target national bank, then the standard liquidation
procedures apply.
(2) Procedure. After its shareholders have voted to liquidate and
the national bank has notified the appropriate district office of its
plans, the bank may surrender its charter and dissolve immediately, if:
(i) An acquiring depository institution has purchased all its
assets and assumed all its liabilities, including contingent
liabilities;
(ii) The acquiring depository institution certifies to the OCC that
it has purchased all the assets and assumed all the liabilities,
including contingent liabilities, of the national bank in liquidation;
(iii) The acquiring depository institution and the national bank in
liquidation have published notice that the bank would dissolve after
the purchase and assumption to the acquiror. This is included in the
notice and publication for the purchase and assumption required under
the Bank Merger Act (BMA), 12 U.S.C. 1828(c); and
(iv) The acquiring depository institution is adequately
capitalized.
(g) National bank as acquiror. If another national bank plans to
acquire a national bank in liquidation through merger or through the
purchase of the assets and the assumption of the liabilities of the
bank in liquidation, the acquiring bank must comply with the BMA, 12
U.S.C. 1828(c), and Sec. 5.33.
Sec. 5.50 Change in bank control.
(a) Authority. 12 U.S.C. 93a and 1817(j)(13).
(b) Licensing requirements. Any applicant seeking to acquire
control of a national bank must provide 60 days prior written notice of
a change in control to the OCC, except where otherwise provided in this
section.
(c) Scope.-- (1) General. This section describes the procedures and
standards governing OCC review of notices for a change in control of a
national bank.
(2) Exempt transactions. The following transactions are not subject
to the requirements of this section, except paragraph (h) of this
section:
(i) The acquisition of additional shares of a national bank by a
person who:
(A) Has, continuously since March 9, 1979, held power to vote 25
percent or more of the voting securities of that bank; or
(B) Under paragraph (f)(2)(ii) of this section, would be presumed
to have controlled that bank continuously since March 9, 1979, if the
transaction will not result in that person's direct or indirect
ownership or power to vote 25 percent or more of any class of voting
securities of the national bank; or, in other cases, where the OCC
determines that the person has controlled the bank continuously since
March 9, 1979;
(ii) Unless the OCC otherwise provides in writing, the acquisition
of additional shares of a national bank by a person who has lawfully
acquired and maintained continuous control of the bank under paragraph
(f) of this section after complying with the procedures and filing the
notice required by this section;
(iii) A transaction subject to approval under section 3 of the
BHCA, 12 U.S.C. 1842, or section 18 of FDIA, 12 U.S.C. 1828;
(iv) Any transaction described in section 2(a)(5) or 3(a) (A) or
(B) of the BHCA, 12 U.S.C. 1841(a)(5) and 1842(a) (A) and (B), by a
person described in those provisions;
(v) A customary one-time proxy solicitation or receipt of pro rata
stock dividends; and
(vi) The acquisition of shares of a foreign bank that has a
federally chartered branch in the United States.
(3) Prior notice exemption. The following transactions are not
subject to the prior notice requirements of this section but are
otherwise subject to this section, including filing a notice and paying
the appropriate filing fee, within 90 days after the transaction
occurs:
(i) The acquisition of voting shares of a national bank through
testate or intestate succession;
(ii) The acquisition of voting shares of a national bank as a bona
fide gift;
(iii) The acquisition of voting shares of a national bank resulting
from a redemption of voting securities;
(iv) The acquisition of control of a national bank as a result of
actions by third parties that are not within the control of the
acquiror; and
(v) The acquisition of voting shares of a national bank in
satisfaction of a debt previously contracted (DPC) in good faith.
(A) ``Good faith'' means that a person must either make or acquire
a loan secured by voting securities of a national bank in advance of
any known default. A person who purchases a previously defaulted loan
secured by voting securities of a national bank may not rely on
paragraph (c)(3)(v) of this section to foreclose on that loan, seize or
purchase the underlying collateral, and acquire control of the national
bank without complying with the prior notice requirements of this
section.
(B) To ensure compliance with this section, the acquiror of a
defaulted loan secured by a controlling amount of a national bank's
voting securities must file a notice prior to the time the loan is
acquired unless the acquiror can demonstrate to the satisfaction of the
OCC that the voting securities are not the anticipated source of
repayment for the loan.
(d) Definitions. As used in this section:
(1) Acquisition includes a purchase, assignment, transfer, or
pledge of voting securities, or an increase in percentage ownership of
a national bank resulting from a redemption of voting securities.
(2) Acting in concert means:
(i) Knowing participation in a joint activity or parallel action
towards a common goal whether or not pursuant to an express agreement;
or
(ii) A combination or pooling of voting or other interests in the
securities of an issuer for a common purpose pursuant to any contract,
understanding, relationship, agreement or other arrangement, whether
written or otherwise.
(3) Control means the power, directly or indirectly, to direct the
management or policies of a national bank or to vote 25 percent or more
of any class of voting securities of a national bank.
(4) Notice means a filing by a person in accordance with paragraph
(f) of this section.
(5) Person means an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization, or any other form of
entity, and includes voting trusts and voting agreements and any group
of persons acting in concert.
(6) Voting securities means:
(i) Shares of common or preferred stock, or similar interests, if
the shares or interests, by statute, charter or in any manner, allow
the holder to vote for or select directors (or persons exercising
similar functions) of the issuing national bank, or to vote on or to
direct the conduct of the operations or other significant policies of
the issuing national bank. However, preferred stock or similar
interests are not voting securities if:
(A) Any voting rights associated with the shares or interests are
limited solely to voting rights customarily provided by statute
regarding matters that would significantly affect the rights or
preference of the security or other interest. This includes the
issuance of additional amounts of classes of senior securities, the
modification of the terms of the security or interest, the dissolution
of the issuing national bank, or the payment of dividends by the
issuing national bank when preferred dividends are in arrears;
(B) The shares or interests are a passive investment or financing
device and do not otherwise provide the holder with control over the
issuing national bank; and
(C) The shares or interests do not allow the holder by statute,
charter, or in any manner, to select or to vote for the selection of
directors (or persons exercising similar functions) of the issuing
national bank.
(ii) Securities, other instruments, or similar interests that are
immediately convertible, at the option of the owner or holder thereof,
into voting securities.
(e) Policy--(1) General. The OCC seeks to enhance and maintain
public confidence in the banking system by preventing a change in
control of a national bank that could have serious adverse effects on a
bank's financial stability or management resources, the interests of
the bank's depositors, the Federal deposit insurance fund, or
competition.
(2) Acquisitions subject to the BHCA. (i) If corporations,
partnerships, certain trusts, associations and similar organizations,
that are not already bank holding companies, are not required to secure
prior FRB approval to acquire control of a bank under section 3 of the
BHCA, 12 U.S.C. 1842, they are subject to the notice requirements of
this section.
(ii) Certain transactions, including foreclosures by depository
institutions and other institutional lenders, fiduciary acquisitions by
depository institutions, and increases of majority holdings by bank
holding companies, are described in sections 2(a)(5)(D) and 3(a) (A)
and (B) of the BHCA, 12 U.S.C. 1841(a)(5) and 12 U.S.C. 1842(a), but do
not require the FRB's prior approval. For purposes of this section,
they are considered subject to section 3 of the BHCA, 12 U.S.C. 1842,
and do not require either a prior or subsequent notice to the OCC under
this section.
(3) Assessing financial condition. In assessing the financial
condition of the acquiring person, the OCC weighs any debt servicing
requirements in light of the acquiring person's overall financial
strength; the institution's earnings performance, asset condition,
capital adequacy and future prospects; and the likelihood of the
acquiring party making unreasonable demands on the resources of the
institution.
(f) Procedures.--(1) Exceptions to rules of general applicability.
Sections 5.8(a), 5.9, 5.10, 5.11, and 5.13 (a) through (f) do not apply
to filings under this section.
(2) Who must file. (i) Any person seeking to acquire the power,
directly or indirectly, to direct the management or policies, or to
vote 25 percent or more of a class of voting securities of a national
bank, must file a notice with the OCC 60 days prior to the proposed
acquisition, unless the acquisition is exempt under paragraph (c)(2) of
this section.
(ii) The OCC presumes, unless rebutted, that an acquisition or
other disposition of voting securities through which any person
proposes to acquire ownership of, or the power to vote ten percent or
more, of a class of voting securities of a national bank is an
acquisition by a person of the power to direct that bank's management
or policies if:
(A) The securities to be acquired or voted are subject to the
registration requirements of section 12 of the Securities Exchange Act
of 1934 (SEA), 15 U.S.C. 78l; or
(B) Immediately after the transaction no other person will own or
have the power to vote a greater proportion of that class of voting
securities.
(iii) Other transactions resulting in a person's control of less
than 25 percent of a class of voting securities of a national bank are
not deemed by the OCC to result in control for purposes of this
section.
(iv) If two or more persons, not acting in concert, each propose to
acquire simultaneously equal percentages of ten percent or more of a
class of a national bank's voting securities, and either the
acquisitions are of a class of securities subject to the registration
requirements of the SEA, 15 U.S.C. 78l, or immediately after the
transaction no other shareholder of the national bank would own or have
the power to vote a greater percentage of the class, each of the
acquiring persons must either file a notice or rebut the presumption of
control.
(v) An acquiring person may seek to rebut the presumption
established in paragraph (f)(2)(ii) of this section by presenting
relevant information in writing to the appropriate district office. The
OCC must respond in writing to any person that seeks to rebut the
presumption of control. No rebuttal filing is effective unless the OCC
indicates in writing that the information submitted has been found to
be sufficient to rebut the presumption of control.
(3) Filings. (i) The OCC does not accept a notice of a change in
control unless it is technically complete, i.e., the information
provided is responsive to every item listed in the notice form, and is
accompanied by the appropriate fee.
(A) The notice must contain personal and biographical information,
detailed financial information, details of the proposed change in
control, information on any structural or managerial changes
contemplated for the institution, and other relevant information
required by the OCC. The OCC may waive any of the informational
requirements of the notice if the OCC determines in writing that it is
in the public interest.
(B) When the acquiring person is an individual, or group of
individuals acting in concert, the requirement for personal financial
data for the previous five years may be satisfied with a current
statement of assets and liabilities, a brief income summary, and a
statement of any material changes since the statement date. However,
the OCC may require up to five years of financial data from any
acquiring person.
(ii) The OCC has 60 days from the date it declares the notice to be
technically complete to review the notice.
(A) When the OCC declares a notice technically complete, the
appropriate district office sends a letter of acknowledgment to the
applicant indicating the technically complete date.
(B) As set forth in paragraph (g) of this section, the applicant
must publish an announcement when the notice is filed with the OCC. The
publication of the announcement triggers a 20-day public comment
period. The OCC may waive or shorten the public comment period if an
emergency exists. The OCC also may shorten the comment period for other
good cause. The OCC may act on a proposed change in control prior to
the expiration of the public comment period if the OCC makes a written
determination that an emergency exists.
(C) An applicant must notify the OCC immediately of any material
changes in a notice submitted to the OCC, including changes in
financial or other conditions, that may affect the OCC's decision on
the filing.
(iii) Within the 60-day period the OCC may inform the applicant
that the acquisition has been disapproved, has not been disapproved, or
that the OCC will extend the 60-day review period. The applicant may
request a hearing by the OCC pursuant to Secs. 19.161 and 19.162 of
this chapter (see 12 CFR part 19, subpart H) in the event of a
disapproval.
(4) Disapproval of notice. The OCC may disapprove a notice if it
finds that any of the following factors exist:
(i) The proposed acquisition of control would result in a monopoly
or would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any
part of the United States;
(ii) The effect of the proposed acquisition of control in any
section of the country may be substantially to lessen competition or to
tend to create a monopoly or the proposed acquisition of control would
in any other manner be in restraint of trade, and the anticompetitive
effects of the proposed acquisition of control are not clearly
outweighed in the public interest by the probable effect of the
transaction in meeting the convenience and needs of the community to be
served;
(iii) The financial condition of any acquiring person is such as
might jeopardize the financial stability of the bank or prejudice the
interests of the depositors of the bank;
(iv) The competence, experience, or integrity of any acquiring
person or of any of the proposed management personnel indicates that it
would not be in the interest of the depositors of the bank, or in the
interest of the public to permit such person to control the bank;
(v) Any acquiring person neglects, fails, or refuses to furnish the
OCC all the information it requires; or
(vi) The OCC determines that the proposed transaction would result
in an adverse effect on the Bank Insurance Fund or the Savings
Association Insurance Fund.
(5) Disapproval notification. If the OCC disapproves a notice, it
mails a written notification to the proposed acquiring person within
three days after the decision containing a statement of the basis for
disapproval.
(g) Disclosure.--(1) Announcement. The applicant must publish an
announcement in a newspaper widely available in the geographical area
where the affected national bank is located within ten days of filing.
The OCC may authorize a delayed announcement if immediate announcement
would not be in the public interest.
(i) In addition to the information required by Sec. 5.8(b), the
announcement must include: the name of the national bank named in the
notice; and the comment period (i.e., 20 days from the date of the
announcement). The announcement also must state that the OCC may issue
a letter of intent not to disapprove the notice before the review
period ends; that the OCC may extend the review period; and that the
OCC will keep the information in the notice confidential until the OCC
has acted, except that certain information may be released and made
available for public inspection and copying under the Freedom of
Information Act (FOIA), 5 U.S.C. 552 and paragraph (g)(2) of this
section.
(ii) Regardless of any other provisions of paragraph (g) of this
section, if the OCC determines in writing that an emergency exists and
that the announcement requirements of paragraph (e) of this section
would seriously threaten the safety and soundness of the national bank
to be acquired, including situations where the OCC must act immediately
in order to prevent the probable failure of a national bank, the OCC
may waive or shorten the publication requirement.
(2) Release of information. (i) Upon the request of any person, the
OCC releases the information provided in the public portion of the
notice and makes it available for public inspection and copying, as
soon as possible after a notice has been filed, unless the OCC
determines that the release would not be in the public interest. In
addition, the OCC makes a public announcement of a technically complete
notice, the disposition of the notice and the consummation date of the
transaction, if applicable, in the OCC's ``Weekly Bulletin.''
(ii) The OCC keeps the non-public portion of the notice
confidential subject to the requirements of the FOIA and other
applicable law.
(h) Reporting of stock loans.--(1) Requirements. (i) Any depository
institution, and any affiliate of any depository institution, must file
a consolidated report with the appropriate district office of the
national bank if the depository institution and its affiliates have
credit outstanding to any person or group of persons that in the
aggregate, is secured, directly or indirectly, by 25 percent or more of
any class of voting securities of a national bank.
(ii) If the lending institution is a national bank, the lending
institution must also file a copy of the report with its appropriate
district office if that office is different from the national bank's
appropriate district office. If the lending institution is not a
national bank, it must file a copy of the report filed with the OCC
with the appropriate Federal banking agency for the lending depository
institution.
(iii) Any shares of the national bank held by the depository
institution or any of its affiliates as principal must be included in
the calculation of the number of shares in which the depository
institution or its affiliates has a security interest for purposes of
paragraph (h)(1)(i) of this section.
(2) Definitions. For purposes of paragraph (h) of this section:
(i) Depository institution includes any foreign bank that is
subject to the provisions of the BHCA by virtue of 12 U.S.C. 3106(a).
(ii) Credit outstanding includes any loan or extension of credit;
the issuance of a guarantee, acceptance, or letter of credit, including
an endorsement or standby letter of credit; and any other type of
transaction that extends credit or financing to the person or group of
persons.
(iii) Group of persons includes any number of persons that the
depository institution has reason to believe:
(A) Are acting together, in concert, or with one another to acquire
or control shares of the same insured depository institution, including
an acquisition of shares of the same depository institution at
approximately the same time under substantially the same terms; or
(B) Have made, or propose to make, a joint filing under 15 U.S.C.
78m regarding ownership of the shares of the same depository
institution.
(3) Exceptions. Compliance with paragraph (h)(1) of this section is
not required if:
(i) The person or group of persons referred to in that paragraph
has disclosed the amount borrowed and the security interest therein to
the appropriate district office in connection with a notice filed under
this section or any other application filed with the appropriate
district office as a substitute for a notice under this section, such
as for a national bank charter; or
(ii) The transaction involves a person or group of persons that has
been the owner or owners of record of the stock for a period of one
year or more; or, if the transaction involves stock issued by a newly
chartered bank, before the bank's opening.
(4) Report Requirements. (i) The consolidated report must indicate
the number and percentage of shares securing each applicable extension
of credit, the identity of the borrower, and the number of shares held
as principal by the depository institution and any affiliate of the
institution.
(ii) Depository institutions must file the consolidated report in
writing within 30 days of the date on which the institution or any
affiliate first believes that the security for any outstanding credit
consists of 25 percent or more of any class of voting securities of a
national bank.
(5) Other reporting requirements. A national bank required to
report credit outstanding secured by the shares of a depository
institution to another Federal banking agency also must file a copy of
the report with the appropriate district office.
Sec. 5.51 Changes in directors and senior executive officers.
(a) Authority. 12 U.S.C. 1831i.
(b) Scope. This section describes the circumstances when a national
bank must notify the OCC of a change in its directors and senior
executive officers, and the OCC's authority to disapprove those
notices.
(c) Definitions. (1) Director means every national bank director
except:
(i) A director of a foreign bank that operates a Federal branch;
and
(ii) An advisory director who does not have the authority to vote
on matters before the board of directors and provides solely general
policy advice to the board of directors.
(2) National bank, as defined in Sec. 5.3(h), includes Federal
branch for purposes of this section only.
(3) Senior executive officer means the chief executive officer,
chief operating officer, chief financial officer, chief lending
officer, chief investment officer and any other individual the OCC
identifies to the national bank who exercises significant influence
over, or participates in, major policy making decisions of the bank
without regard to title, salary or compensation. The term also includes
employees of entities retained by a national bank to perform such
functions in lieu of directly hiring the individuals and, with respect
to a Federal branch operated by a foreign bank, the individual
functioning as the chief managing official of the federal branch.
(4) Technically complete notice means a notice that provides all
the information requested in paragraph (e)(2) of this section,
including complete explanations where material issues arise regarding
the competence, experience, character, or integrity of proposed
directors or senior executive officers, and any additional information
that the OCC may request following a determination that the original
submission of the notice was not technically complete.
(5) Technically complete notice date means the date on which the
OCC has received a technically complete notice.
(6) Troubled condition means a national bank that:
(i) Has a composite rating of 4 or 5 under the Uniform Financial
Institutions Rating System (CAMEL);
(ii) Is subject to a cease and desist order, a consent order, a
formal written agreement, or Prompt Corrective Action directive, unless
otherwise informed in writing by the OCC; or
(iii) Is informed in writing by the OCC that as a result of an
examination it has been designated in ``troubled condition'' for
purposes of this section.
(d) Prior notice. A national bank must provide written notice to
the OCC at least 30 days prior to the effective date of any addition or
replacement of a member of the board of directors, the employment of
any individual as a senior executive officer, or a change in
responsibilities of a senior executive officer who will remain a senior
executive officer, if:
(1) The national bank has operated as a depository institution for
less than two years;
(2) Within the preceding two years, the national bank has undergone
a change in control that required a notice to be filed under the Change
in Bank Control Act, 12 U.S.C. 1817(j), or Sec. 5.50;
(3) Within the preceding two years, the national bank was acquired
by a bank holding company, regulated pursuant to the BHCA, for less
than two years, except when:
(i) The newly established bank holding company itself is owned by a
bank holding company regulated, pursuant to the BHCA, for more than two
years;
(ii) The newly established bank holding company is established in a
reorganization where substantially all its shareholders were
shareholders of the acquired national bank prior to the bank holding
company's formation; or
(iii) The individual proposed for a position as a director or
senior executive officer with the national bank has been or is the
subject of a notice filed with the FRB under 12 U.S.C. 1831i for an
equivalent position with the holding company and has not been
disapproved for that position; or
(4) The national bank is not in compliance with minimum capital
requirements applicable to such institution, as prescribed in Secs. 3.6
and 3.9 of this chapter, or is otherwise in troubled condition.
(e) Procedures.--(1) Filing notice. A national bank must file a
notice with its appropriate supervisory office. When a national bank
files a notice the individual to whom the filing pertains must attest
to the validity of the information pertaining to that individual. The
30-day review period begins on the technically complete notice date.
(2) Content of notice. A notice must contain the identity, personal
history, business background, and experience of each person whose
designation as a director or senior executive officer is subject to
this section. The notice must include:
(i) A description of his or her material business activities and
affiliations during the five years preceding the date of the notice;
(ii) A description of any material pending legal or administrative
proceedings to which he or she is a party;
(iii) Any criminal indictment or conviction by a state or Federal
court; and
(iv) Legible fingerprints of such person, except that fingerprints
are not required for any person who, within the three years immediately
preceding the date of the present notice, has been subject to a notice
filed with the OCC pursuant to 12 U.S.C. 1831i or this section and has
previously submitted fingerprints.
(3) Requests for additional information. Following receipt of a
technically complete notice, the OCC may request additional
information, in writing where feasible, and may specify a time period
during which the information must be provided.
(4) Suspension of the 30-day review period. (i) When the OCC makes
a request for additional information pursuant to paragraph (e)(3) of
this section, the national bank must provide the information within the
time period specified by the OCC. Alternatively, the national bank may
request in writing that the OCC suspend processing of the notice. To
enable the national bank to provide the requested information, the OCC
may suspend processing for a period of up to 60 days from the date of
the request. If the national bank has not provided the requested
information within the latest applicable time period specified, the OCC
may:
(A) Make its decision based on the information then before it and
may draw any reasonable inferences from the national bank's failure to
provide the requested information; or
(B) Treat the notice as abandoned pursuant to Sec. 5.7(a), and so
inform the national bank in writing.
(ii) If the OCC does not receive a report that it requested from
another government agency concerning an individual proposed by the
national bank within the 30-day review period, the OCC may request that
the national bank and the proposed individual certify, by signing a
letter provided by the OCC, that the individual will not assume the
proposed position until the OCC has received and reviewed the report
and has issued a notice of intent not to disapprove. In making this
request, the OCC notifies the national bank and the individual of the
basis for its unwillingness to issue a notice of intent not to
disapprove before the end of the 30-day review period without receipt
and review of the report. If either the national bank or the individual
does not sign the certification before the end of the 30-day review
period, the OCC decides whether to issue a notice of disapproval based
on the information then before it.
(5) Notice of disapproval. The OCC may disapprove an individual
proposed as a member of the board of directors or as a senior executive
officer if the OCC determines on the basis of the individual's
competence, experience, character, or integrity that it would not be in
the best interests of the depositors of the national bank or the public
to permit the individual to be employed by, or associated with, the
national bank. The OCC sends a notice of disapproval to both the
national bank and the disapproved individual stating the basis for
disapproval.
(6) Notice of intent not to disapprove. An individual proposed as a
member of the board of directors or as a senior executive officer may
begin service before the expiration of the 30-day review period if the
OCC notifies the national bank that the OCC does not disapprove the
proposed director or senior executive officer.
(7) Waiver of prior notice. (i) A national bank may file a written
petition with the appropriate supervisory office requesting a waiver of
the prior notice requirement. The OCC may waive the prior notice
requirement, but not the filing required under this section. The OCC
may grant a waiver if it finds that delay could harm the national bank
or the public interest, or that other extraordinary circumstances
justify waiving the prior notice requirement. The length of any waiver
depends on the circumstances in each case. If the OCC grants a waiver,
the national bank must file the required notice within the time period
specified in the waiver, and the proposed individual may assume the
position on an interim basis until the individual and the national bank
receive a notice of disapproval or, if an appeal has been filed, until
a notice of disapproval has been upheld on appeal as set forth in
paragraph (f) of this section. If the required notice is not filed
within the time period specified in the waiver, the proposed individual
must resign his or her position. Thereafter, the individual may assume
the position on a permanent basis only after the national bank receives
a notice of intent not to disapprove, after the 30-day review period
elapses, or after a notice of disapproval has been overturned on appeal
as set forth in paragraph (f) of this section. A waiver does not affect
the OCC's authority to issue a notice of disapproval within 30 days of
the expiration of such waiver.
(ii) In the case of the election at a meeting of the shareholders
of a new director not proposed by management, a waiver is automatically
granted and the elected individual may begin service as a director.
However, under these circumstances, the national bank must file the
required notice with the appropriate supervisory office as soon as
practical but not later than seven days from the date the individual is
notified of the election. The individual's continued service is subject
to the conditions specified in paragraph (e)(7)(i) of this section.
(8) Commencement of service. An individual proposed as a member of
the board of directors or as a senior executive officer may assume the
office following the end of the 30-day review period, which begins on
the technically complete notice date, unless:
(i) The OCC issues a notice of disapproval during the 30-day review
period;
(ii) The OCC suspends the 30-day review period pursuant to
paragraph (e)(4)(i) of this section;
(iii) The national bank and the individual certify, pursuant to
paragraph (e)(4)(ii) of this section, that the individual will not
assume the proposed position; or
(iv) The national bank does not provide additional information
within the time period required by the OCC pursuant to paragraph (e)(3)
of this section and the OCC deems the notice to be abandoned pursuant
to Sec. 5.7(a).
(9) Exceptions to rules of general applicability. Sections 5.4(d),
5.8, 5.10, 5.11, and 5.13 (a) through (f) do not apply to notices for
changes in directors and senior executive officers.
(f) Appeal. (1) If the national bank, the proposed individual, or
both, disagree with a disapproval, they may seek review by appealing
the disapproval to the Comptroller, or an authorized delegate, within
15 days of the receipt of the notice of disapproval. The national bank
or the individual may appeal on the grounds that the reasons for
disapproval are contrary to fact or insufficient to justify
disapproval. The appellant must submit all documents and written
arguments that the appellant wishes to be considered in support of the
appeal.
(2) The Comptroller, or an authorized delegate, may designate an
appellate official who was not previously involved in the decision
leading to the appeal at issue. The Comptroller, authorized delegate,
or the appellate official considers all information submitted with the
original notice, the material before the OCC official who made the
initial decision, and any information submitted by the appellant at the
time of the appeal.
(3) The Comptroller, authorized delegate, or the appellate official
must independently determine whether the reasons given for the
disapproval are contrary to fact or insufficient to justify the
disapproval. If either is determined to be the case, the Comptroller,
authorized delegate, or the appellate official may reverse the
disapproval.
(4) Upon completion of the review, the Comptroller, authorized
delegate, or the appellate official must notify the appellant in
writing of the decision. If the original decision is reversed, the
individual may assume the position in the bank for which he or she was
proposed.
Sec. 5.52 Change of address.
(a) Authority. 12 U.S.C. 93a, 161, and 481.
(b) Scope. This section describes the obligation of a national bank
to notify the OCC of any change in its mailing address.
(c) Requirements. Any national bank with a change in the mailing
address of its main office or in its Post Office Box must send a
written notice to the appropriate district office. However, no notice
is required if the change in address results from a transaction
approved under this part.
(d) Exceptions to rules of general applicability. Sections 5.4(d),
5.8, 5.9, 5.10, 5.11, and 5.13 do not apply to changes in a national
bank's address.
Subpart E--Payment of Dividends
Sec. 5.60 Authority, scope, and exceptions to rules of general
applicability.
(a) Authority. 12 U.S.C. 56, 60, and 93a.
(b) Scope. Except as otherwise provided, the restrictions in this
subpart apply to the declaration and payment of all dividends by a
national bank, including dividends paid in stock or property.
(c) Exceptions to the rules of general applicability. Sections 5.8,
5.10, and 5.11 do not apply to this subpart.
Sec. 5.61 Definitions.
For the purposes of this subpart, the following definitions apply:
(a) Capital stock, capital surplus and permanent capital have the
same meaning as set forth in Sec. 5.46.
(b) Retained net income means the net income of a specified period
less the total amount of all dividends declared in that period.
Sec. 5.62 Date of declaration of dividend.
A national bank must use the date a dividend is declared for the
purposes of determining compliance with this subpart.
Sec. 5.63 Capital limitation under 12 U.S.C. 56.
(a) General limitation. Except as provided by 12 U.S.C. 59 and
Sec. 5.46, a national bank may not withdraw, or permit to be withdrawn,
either in the form of a dividend or otherwise, any portion of its
permanent capital. Further, a national bank may not declare a dividend
in excess of undivided profits.
(b) Preferred stock. The provisions of 12 U.S.C. 56 do not apply to
dividends on preferred stock. However, if the undivided profits of the
national bank are not sufficient to cover a proposed dividend on
preferred stock, the proposed dividend constitutes a reduction in
capital subject to 12 U.S.C. 59 and Sec. 5.46.
Sec. 5.64 Earnings limitation under 12 U.S.C. 60.
(a) Transfers to capital surplus. Subject to the restrictions in 12
U.S.C. 56 and this subpart, the directors of a national bank may
declare and pay dividends as frequently and of such amount of undivided
profits as they judge prudent. However, a national bank may not declare
a dividend unless capital surplus equals or exceed the capital stock of
the bank, except:
(1) In the case of an annual dividend, the bank may declare a
dividend if the bank transfers ten percent of its net income for the
preceding four quarters to capital surplus; or
(2) In the case of a quarterly or semiannual dividend, or any other
special dividend, the bank may declare a dividend if the bank transfers
ten percent of its net income for the preceding two quarters to capital
surplus.
(b) Earnings limitation. For purposes of 12 U.S.C. 60, a national
bank may not declare a dividend if the total amount of all dividends
(common and preferred), including the proposed dividend, declared by
the national bank in any calendar year exceeds the total of the
national bank's retained net income of that year to date, combined with
its retained net income of the preceding two years, unless the dividend
is approved by the OCC. A national bank must submit a request for OCC
approval of a dividend under 12 U.S.C. 60 to the appropriate district
office.
(c) Surplus surplus. Any amount in capital surplus in excess of
capital stock required by 12 U.S.C. 60(a) (referred to as ``surplus
surplus'') may be transferred to undivided profits and available as
dividends, provided:
(1) The bank can demonstrate that the surplus came from earnings of
prior periods, excluding the effect of any stock dividend; and
(2) The board of directors of the bank approves the transfer of the
surplus surplus from capital surplus to undivided profits.
Sec. 5.65 Restrictions on undercapitalized institutions.
Notwithstanding any other provision in this subpart, a national
bank may not declare or pay any dividend if, after making the dividend,
the national bank would be ``undercapitalized'' as defined in 12 CFR
part 6.
Sec. 5.66 Dividends payable in property other than cash.
In addition to cash dividends, directors of a national bank may
declare dividends payable in property, with the approval of the OCC.
Even though the property distributed has been previously charged down
or written off entirely, the dividend is equivalent to a cash dividend
in an amount equal to the actual current value of the property. Before
the dividend is declared, the bank should show the excess of the actual
value over book value on the books of the national bank as a recovery,
and the dividend should then be declared in the amount of the full book
value (equivalent to the actual current value) of the property being
distributed.
Sec. 5.67 Fractional shares.
To avoid complicated recordkeeping in connection with fractional
shares, a national bank issuing additional stock by stock dividend,
upon consolidation or merger, or otherwise, may adopt arrangements such
as the following to preclude the issuance of fractional shares. The
bank may:
(a) Issue scripts or warrants for trading;
(b) Make reasonable arrangements to provide those to whom
fractional shares would otherwise be issued an opportunity to realize
at a fair price upon the fraction not being issued through its sale, or
the purchase of the additional fraction required for a full share, if
there is an established and active market in the national bank's stock;
(c) Remit the cash equivalent of the fraction not being issued to
those to whom fractional shares would otherwise be issued. The cash
equivalent is based on the market value of the stock, if there is an
established and active market in the national bank's stock. In the
absence of such a market, the cash equivalent is based on a reliable
and disinterested determination as to the fair market value of the
stock if such stock is available; or
(d) Sell full shares representing all the fractions at public
auction, or to the highest bidder after having solicited and received
sealed bids from at least three licensed stock brokers. The national
bank must distribute the proceeds of the sale pro rata to shareholders
who otherwise would be entitled to the fractional shares.
Dated: September 23, 1994.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 94-28934 Filed 11-28-94; 8:45 am]
BILLING CODE 4810-33-P
