[Federal Register Volume 63, Number 229 (Monday, November 30, 1998)]
[Rules and Regulations]
[Pages 65663-65673]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-31745]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 502
[No. 98-118]
RIN 1550-AB20
Assessments and Fees
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of Thrift Supervision (OTS) is amending its
regulations to more equitably impose assessments on savings
associations. OTS's experience has shown that the current assessment
structure may cause some savings associations to pay assessments over
or under OTS's costs of supervising those savings associations. The
final rule is designed to correlate OTS's assessments on savings
associations more closely with the costs associated with supervising
those associations. At the same time, the final rule establishes a
regulatory structure that allows OTS to keep its assessment rates as
low as possible while providing OTS the resources essential to
effectively supervise the industry. The rule also clarifies certain
other matters involving assessments and other fees, and revises the
entire assessment and fee regulation using a plain language format.
EFFECTIVE DATE: January 1, 1999.
FOR FURTHER INFORMATION CONTACT: Christine Harrington, Counsel (Banking
and Finance), (202) 906-7957, or Karen Osterloh, Assistant Chief
Counsel, (202) 906-6639, Regulations and Legislation Division, Chief
Counsel's Office; or Eric Hirschhorn, Principal Financial Economist,
(202) 906-7350, Research & Analysis; William Brady, Director, Planning
& Budget, (202) 906-7408, Office of Thrift Supervision, 1700 G Street,
NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
I. Background
OTS is charged with the mission of examining, regulating, and
providing for the safe and sound operation of savings
associations.1 Under 12 U.S.C. 1467, OTS funds these
operations through assessments on savings associations and through
other fees, as necessary and appropriate. This section authorizes the
Director of OTS to assess examination costs against savings
associations and their affiliates, and to recover the agency's direct
and indirect expenses, as the Director deems necessary or appropriate.
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\1\ 12 U.S.C. 1463(a).
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Recently, OTS analyzed its operating costs and compared these costs
to its assessments on savings associations under its current
regulation. OTS found that its assessments could be more closely
correlated to its costs in certain respects. For these reasons, on
August 14, 1998, OTS proposed to amend its assessment
regulation.2 The proposed rule based assessments on three
components: the savings association's asset size, its condition, and
its complexity. The proposed rule also streamlined and clarified OTS's
regulation concerning fees, and clarified administrative matters.
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\2\ 63 FR 43642 (Aug. 14, 1998).
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Today, OTS is issuing a final assessments rule. Briefly, this final
rule is substantially identical to the proposal, but with certain
changes to the complexity component. OTS limits its trust examinations
fee to those associations not subject to the complexity component's
coverage of trust assets. Additionally, OTS has decided to adopt a
structure that will permit OTS to use one or more different assessment
rates for each of the different activities covered by the complexity
component. Currently, for trust assets and recourse obligations and
direct credit substitutes, OTS will use flat rates. In contrast, for
loans serviced for others, OTS will initially use two rates to reflect
economies of scale in examining these activities. Additionally, the
final rule clarifies which assets and activities are covered by each of
the three categories within the complexity component. The final rule is
described more specifically below.
II. General Discussion of Comments
The comment period on the proposed rule closed on October 13, 1998.
OTS received thirteen comments from eight savings associations, four
trade associations, and one holding company. The comments were mixed,
with most commenters supporting some parts of the proposal while
opposing others. Several commenters opposed the complexity component as
proposed, but expressed no opinions on other aspects of the proposal.
One commenter supported the proposal, but suggested alternatives. One
commenter discussed the proposal but did not take a position. All
others had mixed reactions.
In the proposed rule, OTS indicated that it has two goals with
respect to the assessment rule. First, OTS wants to establish an
assessment structure that keeps assessment rates as low as possible
while providing the resources essential to effective supervision of a
changing industry. One commenter opposed the proposal to the extent
that it would result in an overall increase in assessments. The final
rule adopted today is designed to correlate OTS assessments to the
costs of supervision of the thrift industry. As the industry's size,
condition, and complexity change in the future, OTS's costs will also
change. The final rule will enable OTS's revenues to move along with
these changes in its supervisory expenses. OTS believes the approach in
the final rule is appropriate and should not result in overcharging the
thrift industry.
As its second goal, OTS wants to more closely tailor assessments
with OTS's supervisory costs. To do so, OTS used statistical analyses
of examiner hours to correlate its proposed assessments with
supervisory costs. Two commenters supported basing assessments on
examination costs, while one opposed this method, believing examiner
hours are excessive. Examiner hours are the main component of OTS's
supervisory expenses that vary with the size, condition, or other
attributes of thrift institutions. As such, they are a useful standard
for evaluating consistency between an assessment schedule and actual
supervision. OTS has not found, and no one has proposed, a better
alternative. OTS, therefore, will continue to base its assessments on
its statistical analyses of examination costs.
Commenters specifically argued that OTS did not provide empirical
evidence supporting its assertions regarding examination time and
costs. One commenter noted that OTS did not provide details regarding
the actual supervision costs, the structure of the quantitative model
used to analyze costs, or the variables in the model.
While OTS studied examination costs and examination hours devoted
to different tasks, it did not publish these studies in the Federal
Register because they are too voluminous. Instead, OTS provided
adequate details through other means. First, OTS summarized its
findings in the notice of proposed rulemaking. In addition, OTS placed
a paper providing background analysis in the public comment file. This
paper has been available for inspection in the OTS public reading room.
Moreover, the Principal Financial Economist who conducted the studies
was listed as an
[[Page 65664]]
contact person in the proposed rule. Finally, OTS's financial
statements, including information about OTS's expenses, are available
on OTS's web site.
Several commenters noted that the proposed assessments rule would
place OTS-regulated institutions at a competitive disadvantage with
regard to national banks and other entities. For example, these
commenters pointed out that the Office of the Comptroller of the
Currency (OCC), which regulates national banks, does not impose a
complexity component, charges a lower condition premium for 4- and 5-
rated institutions, and does not charge for trust examinations.
Commenters argued that the proposed complexity component would
discourage thrifts from engaging in the certain activities,
particularly where profit margins are low, as in the loan servicing
field. Other commenters predicted that new or existing institutions may
reconsider their charter choice.
Competitive disparities are inevitable in any assessment structure.
Savings associations compete with many institutions that are subject to
differing assessments structures and other entities that are not
subject to any assessments. For example, thrifts compete with credit
unions, and with state chartered commercial and savings banks who do
not pay Federal assessments. Thrifts also compete with entities that
are not regulated by a federal banking agency, such as mutual funds.
Moreover, eliminating the aspects of this rule that are different
from the OCC assessments model would not eliminate all competitive
inequities. Rather, such a change would merely move a competitive
disparity from one thrift to another. For example, if OTS were to
eliminate the assessment on trust activities or on loan servicing, it
would necessarily transfer the costs of supervising those activities
from the institutions that cause them to other savings associations.
These other institutions would be forced to bear these costs while, at
the same time, they are trying to compete with other institutions who
do not have to cover such costs. OTS sees no benefit in such an
approach. OTS's goal in amending its assessment regulation is to more
closely tailor its assessments to its costs, which this regulation
does. OTS believes this is the most equitable approach.
One commenter encouraged OTS to meet with the OCC to discuss the
disparities between the assessments for thrifts and national banks.
Specifically, this commenter urged OTS to evaluate the merits of the
complexity component with the OCC before implementing the proposed
rule. This commenter encouraged OTS to work toward a uniform regulation
with the OCC. Another commenter noted that section 303(a)(2) of the
Riegle Community Development Act requires OTS to work toward uniform
regulation with the other federal banking agencies.3
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\3\ 12 U.S.C. 4803(a)(2). This statute required Federal banking
agencies to work jointly toward uniform regulations in common areas.
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OTS considered the OCC's assessment structure in developing its
proposed and final rules, just as the OCC considered the OTS structure
in adding a surcharge on its assessments for national banks requiring
additional supervisory resources.4 However, because the
thrift industry and the national bank industry differ in certain
respects, identical rules are not necessarily the most equitable. For
example, thrifts concentrate on mortgage lending operations, such as
mortgage servicing, more than national banks. As a result, an
assessment that does not cover mortgage loan servicing would have a
more inequitable impact on institutions in the thrift industry than in
the banking industry. OTS's system will reduce the cross-subsidies
between thrifts. While this system is different than the OCC's, OTS
believes it is more equitable for the thrift industry.
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\4\ See 62 FR 54147 n.5 (Oct. 21, 1997).
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III. Description of the Final Rule
A. Size Component
OTS proposed to base the first component of the assessment
calculation on asset size, as reported in the Thrift Financial Report
(TFR). Like the current regulation, the size component would use
marginal assessment rates that decline as asset size increases. Second,
OTS would incorporate some fixed costs into the assessment rate
schedule via an explicit charge. Commenters generally supported the
size component, and one noted that this method is easy to understand
and to plan for. Specific comments regarding the size component are
discussed below.
1. Declining Rate Schedule
The proposed assessment structure uses assessment rates that
decline as asset size increases because OTS realizes economies of scale
in supervising and regulating larger savings associations. Because
OTS's experience indicated that the current marginal assessment rates
are no longer consistent with existing economies of scale, the
projected marginal rates in the preamble to the proposed rule differed
from the rates OTS had been using for assessments. Four commenters
supported this system of declining rates.
Like the current rule, the proposed graduated schedule included
seven asset size classes. The highest class included institutions with
over $35 billion in assets. One commenter urged OTS to add more asset
size classes. This commenter believed that the largest asset size
category, $35 billion and larger, denies economies of scale to the
largest institutions.5 Another commenter suggested that OTS
reexamine whether the proposed asset size categories are appropriate.
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\5\ Alternatively, the commenter proposed that OTS base
assessments on a per hour charge for examiners' actual time at each
institution. While this method would correlate assessments with
OTS's supervisory costs, it would also result in fluctuating and
unpredictable assessments. OTS does not always examine thrifts at
regular intervals. Some are examined more or less frequently in
response to marketplace or other events. Currently, for example, OTS
is conducting Year 2000 examinations, which are a temporary cost.
OTS believes that the final assessments rule offers savings
associations a measure of predictability as to the amount due at the
time of each assessment. This will aid both institutions and the
agency in the budgetary process. Further, this assessment scheme is
simpler and less burdensome for the agency to administer.
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OTS considered altering the asset size categories in its
assessments regulation, but declines to amend them at this time. There
currently are not enough savings institutions significantly over $35
billion in size to justify a new, larger, size category. OTS believes
the seven asset size categories, along with an adjustable marginal
assessment rate for each category, will permit OTS to appropriately
recognize existing economies of scale in the size component. If those
economies of scale change over time, OTS can incorporate those changes
by adjusting the rates, for each appropriate class, accordingly.
2. Fixed Charge
OTS proposed to incorporate fixed supervision costs into the
assessment rate schedule via an explicit charge assessed on all savings
associations. Two commenters supported this proposal.6 One
commenter, however, suggested that OTS should include a lower fixed
cost in the schedule to cover only the ``basic'' cost of examination
and impose the fixed cost of other activities (e.g., rule drafting)
directly on those institutions that are affected by the specific
regulatory activity.
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\6\ Three commenters argued that the fixed charge could be
burdensome to small institutions. These comments are discussed below
in connection with the alternate fee calculation for small
institutions.
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The commenter's proposed alternative would impose excessive and
unnecessary administrative burdens on
[[Page 65665]]
OTS. It would be impractical administratively to charge each affected
institution for specific supervision costs on a rule by rule or policy
by policy basis. It is impossible to determine all the thrifts affected
by any rule or policy. It would also increase OTS's costs and create
uncertainty over the assessments that thrifts would pay from one year
to the next. Accordingly, OTS declines to adopts the commenter's
alternative proposal. The final rule continues to incorporate the fixed
cost aspect of the size component, as proposed.
3. Alternate Calculation for Certain Small Institutions
OTS recognized that the size component could have a
disproportionate impact on the smallest savings associations--those
with less than $100 million in assets. Accordingly, OTS proposed to
base the size component for certain qualifying savings associations on
the lesser of the new size component or the assessment calculated under
the current general assessment table. This grandfather provision would
not be available to savings associations formed after this rule's
effective date, or to institutions whose assets have exceeded $100
million at the end of any quarter. Three commenters supported the
grandfather provision.
Three commenters suggested modifications to the grandfather
provisions. These commenters suggested that institutions with less than
$100 million in assets should qualify for the grandfather provision,
even if they had more that $100 million in assets at the end of a prior
quarter. Another commenter believed that institutions should qualify
for the grandfather clause if their asset size is $150 million or less.
These suggested approaches would have little effect. For the
January 1999 assessment, the size component for institutions with over
$67.5 million in assets will be lower under the new assessment schedule
than under the existing general assessment schedule. Thus, even if
these institutions qualified for the special treatment afforded small
institutions, OTS would use the new size component to compute their
assessment, rather than the grandfather provision. Institutions under
$67.5 million in assets will find little difference between the two
assessments. OTS acknowledges that if supervisory expenses increase in
the future, this may no longer be true. However, if OTS needs to
increase its rates, it will consider the effects of an increase on
small institutions before increasing the marginal rates under the size
component.
Finally, one commenter urged that institutions that become savings
associations after the rule's effective date should qualify for the
small institution exemption. In proposing the small institution
exemption, OTS was concerned that the new size component would impose
undue burdens on existing savings associations, which may not be in a
position to absorb the new burden. It is not necessary to minimize the
potential burden of a changing regulatory structure for newly created
institutions because those institutions will be able to plan for and
take into account the new assessment schedule as they make their
initial business decisions.
4. Assessment Rates
In its proposed rulemaking, OTS included a chart indicating the
base assessment amounts and marginal assessment rates it was
considering for the initial size component. OTS, however, also
indicated that these amounts and rates could change depending on
changes to the final rule. For example, OTS noted that if it were to
decide against imposing a complexity component, it would charge higher
rates under the size component.
As discussed below, OTS has adopted different assessment rates for
the activities within the complexity component. As a result, the rates
for the initial size component are different than those listed in the
notice of proposed rulemaking. The rates OTS will apply for the January
31, 1999 semi-annual assessment are set forth in a Thrift Bulletin
issued simultaneously with this rulemaking and available on OTS's web
site.
B. Condition Component
Under the second component of the assessment calculation, OTS
proposed to impose an additional 25% premium on the size component for
3-rated institutions and to continue its current 50% premium on 4- and
5-rated institutions. Commenters addressing the condition component
generally favored it. One commenter, however, opposed the 25%
surcharge, arguing that OTS's examination rating system is arbitrary
and may pressure examiners to generate income through the rating
system.
The CAMELS rating system that OTS uses was developed jointly by all
of the Federal banking regulators in an effort to establish a uniform
rating system using standard criteria and definitions for rating in six
different ratings areas. The CAMELS rating system, with its correlation
to increased supervisory attention, is well suited to distinguish
between savings associations whose performance is consonant with safe
and sound operations (1- and 2-rated institutions), those whose
performance is flawed in certain respects (3-rated institutions), and
those whose performance is poor or unsatisfactory (4- and 5-rated
institutions). Over the years, this rating system has proven to be an
effective supervisory tool for evaluating the soundness of financial
institutions on a uniform basis and for identifying those institutions
requiring special supervisory attention or concerns.7
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\7\ See 61 FR 67021 (Dec. 19, 1996) (Uniform Financial
Institutions Rating System).
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Moreover, OTS does not believe that the surcharge for 3-rated
thrifts will place pressure on examiners to generate income. OTS's
experience with its surcharge for 4- and 5-rated thrifts has shown no
pressure to lower ratings to generate revenue. On the contrary, the
number of 4- and 5-rated savings associations has steadily decreased
since OTS began imposing a premium for lower rated associations. For
example, there were 203 institutions rated 4 or 5 in 1992, which
dropped to 101 in 1993, and plummeted to only 18 by June 1998.
Two commenters were concerned that the condition component would
take capital away from struggling institutions. While OTS agrees with
these commenters' concerns, its analyses demonstrate that examiners
devote substantially more hours to 3-rated institutions than 1-or 2-
rated institutions, although not as many hours as 4- and 5-rated
institutions. In other words, 3-rated institutions cause OTS to incur
extra supervisory costs. OTS must, therefore, pass along those costs
either to 3-rated associations or to other institutions. Passing the
costs to 4- and 5-rated institutions would worsen their condition.
Passing the costs to 1- and 2-rated institutions would unfairly burden
them. OTS believes the 25% surcharge for three-rated institutions in
the condition component is the most fair and appropriate solution
overall, and therefore adopts it as proposed.
To alleviate some of the burden on 3-rated institutions, one
commenter suggested a sliding scale within the 3-rated category. Under
this alternative, some institutions would not incur a full 25% premium.
OTS considered the commenter's suggestion, but believes that it would
be impossible to administer fairly. OTS does not assign ``high'' and
``low'' three-ratings and does not track its examiners' hours on this
basis. Accordingly, OTS declines to adopt this suggestion.
[[Page 65666]]
C. Complexity Component
OTS proposed to include a new complexity component in its
assessment regulation. This component would impose an assessment based
on a percentage of the value of certain complex assets or activities
that require OTS to expend supervisory resources beyond those at
institutions of similar size and condition. OTS proposed that the
complexity component cover loans serviced for others, trust assets, and
recourse obligations and direct credit substitutes, to the extent that
any of these categories exceed $1 billion. OTS solicited comments on
whether commercial loans and non-residential real estate loans should
also be included in the basis for the complexity component.
The complexity component drew the most public comment. One
commenter agreed that the component was logical, and another supported
the complexity component for larger institutions with complex
operations but not for local community institutions that make consumer
and commercial loans. Ten others opposed at least one aspect of the
proposed complexity component. As detailed below, OTS adopts much of
the complexity component as proposed, but makes certain changes and
clarifications in response to the comments.
1. Assets or Activities Subject to the Complexity Component
(a) Loan serviced for others. The proposed rule would include loans
serviced for others as part of the base for the complexity component.
Three commenters asked how OTS would interpret ``loans serviced for
others.'' Loans serviced for others, as clarified in the final rule,
means the principal amount of loans serviced for others, as currently
reported in the TFR on line SI390.8 This definition is
familiar to all thrifts that service loans for others because they
routinely use it in completing TFRs. OTS, therefore, believes this is
the most appropriate definition to use.
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\8\ This definition covers loans and securities that a savings
association or its consolidated subsidiary services but does not
own. It excludes loans and securities for which the savings
association or its consolidated subsidiary owns the servicing rights
but for which it has subcontracted subservicing to a third party. It
also excludes loans and securities serviced for a savings
association by its consolidated subsidiary or a subsidiary
depository institution.
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Four commenters noted that loans serviced for others are reflected
on the balance sheet under some circumstances (i.e., mortgage servicing
rights and asset backed securities), and are therefore covered by the
size component. At the same time, these assets would also be covered by
the complexity component. Commenters urged OTS to either remove the
asset from the complexity component base or from the size component
base.
OTS's statistical analyses of examiner hours showed that
institutions that service loans for others require more examiner hours
than institutions of similar size and condition without such
activities. Thus, even to the extent that some assets related to these
activities are also covered by the size component, the analyses
demonstrates that the size component alone does not cover the
supervisory costs for such activities.9
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\9\ OTS recognizes that servicing rights are covered by the size
component. However, the value of those rights, within the size
component, is a very small percentage of the loan size. For example,
in June 1998, no thrift reported servicing rights assets over 2.25%
of loans serviced for others. Therefore, even to the extent that
loan servicing is counted in two components, the amount counted
twice is very small. Because the amount involved is so small, OTS
does not believe that the deduction of these amounts is warranted.
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One commenter observed that there could also be inconsistent
counting on an industry-wide basis. For example, loans included under
one association's size component could also be covered by another
association's complexity component as loans serviced for others. By
contrast, if an originator retained both the loans and the servicing,
the loans would be included in the originator's size component, but the
servicing would not be assessed under the complexity component. This
commenter questioned why OTS should collect more revenue in the first
instance than in the second.
When loans are split into their components and spread between
institutions, it is appropriate to assess under different components to
correlate to OTS's costs. Separating loans from their servicing
increases OTS's supervisory workload because both the loans and the
loan servicing require OTS's review, sometimes by different groups of
examiners. To the extent that loan servicing for others exceeds $1
billion, OTS has found that this activity increases OTS's examination
costs independently of an institution's size and condition.
Finally, one commenter noted that complex assets are often
supported by other related on-balance sheet assets (e.g., fixed assets
to generate cash flow) and that these related assets are also assessed
under the size component. Such fixed assets are not included in the
complexity component, so they are not assessed twice. Rather, they are
included only in the size component, as are all fixed assets. OTS sees
no reason to treat these assets differently than the fixed assets that
support any lines of business.
Two commenters suggested that mortgage loans serviced for
government sponsored entities (GSEs) should be excluded from the
complexity component because GSEs already supervise their servicers.
GSEs, however, do not always examine servicing for the same purposes as
OTS, so OTS oversight is also necessary. The complexity component is
based on, and reflects, OTS's examination costs. If OTS did not assess
for those costs through the complexity component, the same costs would
necessarily be imposed on other savings associations.
One commenter urged OTS to distinguish between loan servicing and
subservicing. This commenter argued that subservicing does not raise
the same safety and soundness concerns that servicing does, and that
subservicing should therefore be excluded from the complexity
component. In this rulemaking, OTS is seeking to correlate assessments
with its costs of supervision rather than with the safety and soundness
of activities. Nevertheless, OTS did consider this concern about
subservicing. The agency's workload analyses are based on TFRs, which
do not distinguish between servicing and subservicing. Therefore, the
agency's statistical analysis cannot separate examination time spent on
subservicing specifically. However, the agency's experience is that
supervising loan servicing and subservicing are quite similar and
require substantially the same amount of examiner time. With both
servicing and subservicing, examiners look at the quality of
operations, and they analyze future expected income and costs.
Subservicing may require slightly less examiner time than
servicing. However, this is counterbalanced by the fact that direct
servicing is assessed under the size component because a small
percentage of the loan value does appear on the balance sheet as a
servicing asset. Thus, while subservicing may require slightly less
examining than direct servicing, subservicing is assessed less under
this rule than direct servicing.
Current information demonstrates that subservicing should be
covered by the complexity component. OTS will monitor the amount of its
time examiners spend on subservicing. If, over time, OTS determines
that subservicing requires less examination than direct servicing, OTS
may partially or wholly exclude subservicing from assessments.
(b) Trust assets administered by the association.
[[Page 65667]]
The proposed rule would include an assessment under the complexity
component on trust assets administered by a savings association. For
purposes of this rule, OTS uses the trust assets identified in Line
SI350 of the TFR. This covers assets in both discretionary and
nondiscretionary accounts.
Two commenters pointed out that OTS currently charges an hourly
examination fee for trust examinations. Commenters argued that this fee
in addition to the complexity component's assessment of trust assets
would be too burdensome. One, a state-chartered trust company, noted
that it is subject to both state and OTS charges for trust
examinations.10 Another commenter argued that OTS should
impose only a trust examination fee and should not impose any
complexity component on trust assets.
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\10\ This commenter felt that, while state and federal agencies
acknowledge the desirability of working together, they generally do
not coordinate trust examinations. The commenter would prefer to see
a proposal aimed at finding remedies for these inefficiencies. OTS
agrees that regulators should avoid duplicative examinations when
possible. As a policy matter, OTS makes every effort to coordinate
examinations with state regulators, but it is not always possible to
do so. OTS will continue its efforts to coordinate examinations
where appropriate.
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OTS agrees that coverage of trust assets under the complexity
component, when combined with the trust examination fee, is
duplicative. OTS will not assess both against the same institution.
Under the final rule, the complexity component will only apply when
trust assets administered by an association exceed $1 billion. The
trust examination fee, on the other hand, as set forth in a Thrift
Bulletin issued today, will apply only to trust examinations of savings
associations that administer $1 billion or less in trust assets. The
final rule, at Secs. 502.5(c) and 502.50(a), states that trust
examination fees do not apply to associations that administer more than
$1 billion in trust assets. This approach should alleviate concerns
about overly burdensome assessments on savings associations that
administer trust assets. At the same time, it will keep assessments and
fees correlated to OTS's costs of supervising associations that
administer trust assets.
(c) Recourse obligations and direct credit substitutes.
The proposed rule would impose an assessment, as part of the
complexity component, on off-balance sheet activities that are recourse
obligations and direct credit substitutes, if those activities exceed
$1 billion. One commenter asked OTS to clarify what this assessment
covers. For purposes of this rule, OTS uses the same definitions for
recourse obligations and direct credit substitutes that OTS uses for
the TFR line CC455. This definition includes the full value of assets
covered, fully or partially, by a savings association's recourse
obligations or direct credit substitutes. The final rule, at
Sec. 502.25(a)(3), contains this clarification. Generally, recourse
obligations are arrangements by which an association retains credit
risk on assets that it sells to a third party. Direct credit
substitutes are arrangements by which an association assumes credit
risk on assets that another institution sells to a third party.
One commenter specifically requested that OTS clarify its use of
the phrase ``off-balance sheet assets.'' This commenter noted that that
some off-balance sheet assets, such as routine interest rate swaps,
require less OTS oversight than other types, such as complex hedging
strategies. The complexity component would not be assessed against all
off-balance sheet activities, but only those identified in the
regulation. To avoid confusion with other types of off-balance sheet
activities, however, OTS has revised the rule text to delete the phrase
``off-balance sheet assets.''
Another commenter observed that some direct credit substitutes and
recourse obligations are also on-balance sheet assets, and are subject
to assessment twice, under the size and the complexity components.
However, these items have an independent significant effect on OTS's
costs. OTS's statistical analyses of examiner hours showed that
institutions with recourse obligations or direct credit substitutes
require more examiner hours than institutions of similar size and
condition without such activities. Thus, even to the extent that some
recourse obligations and direct credit substitutes are covered by the
size component, the analysis demonstrates that the size component alone
does not cover the supervisory costs for such activities.
(d) Commercial and non-residential real estate loans.
OTS asked for comment whether commercial and non-residential real
estate loans should be included in the complexity component. The four
commenters addressing this question advocated excluding these loan
types from the complexity component's coverage. One pointed out that
while these are more complex than other loans, they have higher
balances and produce economies of scale in the examination process.
Another commenter believed that all on-balance sheet assets should be
subject to the same assessment rate no matter their complexity.
Finally, one commenter believed that commercial and non-residential
mortgages should not be included in the complexity component without
sound empirical evidence that this lending entails more examination
costs.11
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\11\ One commenter believed that commercial and non-residential
mortgage loans only require extra supervisory efforts if they suffer
from credit problems. This commenter argued that OTS's extra costs
for such credit problem would be covered by the condition component
and that covering the costs in the complexity component is
unnecessary. OTS agrees that credit risk is a part of commercial
lending, but it does not follow that savings associations exposed to
some credit risk are necessarily rated a 3, 4, or 5. Thus, the
condition component may not apply to associations with commercial
loans that require extra supervision.
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OTS has decided against including commercial loans and non-
residential real estate loans in the complexity component. OTS wishes
to encourage thrifts to diversify their operations where they can do so
safely and soundly. Additionally, commercial and non-residential real
estate lending is currently a relatively minor part of the industry's
overall activities. However, OTS will continue to collect empirical
data on this lending activity. If in the future, OTS determines that
its costs of supervision warrant the addition of commercial and non-
residential loans to the complexity component, it will propose
appropriate revisions to the assessment rule.
(e) Loans sold with servicing released.
OTS considered including another type of asset in the complexity
component--loans sold with servicing released. Some savings
associations originate large volumes of loans and immediately sell the
loans and the servicing. Because the originators sell these loans
quickly, only a portion of the loans appear on the savings
association's September or March TFR and are subject to assessment
under the size component. These associations, however, can incur
serious risks to their safety and soundness and significant compliance
obligations in producing and selling large volumes of these loans. As a
consequence, examiners must expend considerable amounts of time
examining these operations.
The final rule does not specifically address loans sold with
servicing released. However, if OTS determines that a particular
savings association is taking on additional risks with this type of
activity, thus requiring OTS to incur extraordinary expenses to examine
and supervise the activity, the agency may impose a fee under
Secs. 502.5(c) and 502.60(c).12 If in the future, the risks
[[Page 65668]]
from this activity become more commonplace or more severe, OTS may
consider amending this rule to specifically cover the activity.
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\12\ One commenter opposed proposed Secs. 502.5(c) and 502.60,
arguing that the condition component should cover all extraordinary
expenses. OTS continues to believe that the most appropriate
treatment of extraordinary expenses is to charge the institution
that causes OTS to incur the expenses. Contrary to the commenter's
assertion, OTS does not always incur such costs in examining 3-, 4-
or 5-rated institutions. Rather, extraordinary fees may be
appropriate for recovering supervisory costs from any institution
that poses an extraordinary burden, or requires OTS to obtain expert
advice in areas beyond those that OTS normally encounters. Such
costs might, for example, include the cost of an interpreter where
numerous documents are in a foreign language. OTS might also assess
a fee for extraordinary expenses if assets are nominally transferred
to on affiliate to avoid assessments, but the savings association
retains the risks and responsibilities of those assets. For these
reasons, OTS adopts Secs. 502.5(c) and 502.60(e) as proposed.
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2. $1 Billion Threshold
OTS proposed to assess the complexity component only when assets
included in each category of complex assets (trust assets, loans
serviced for others, and recourse obligations and direct credit
substitutes) exceed $1 billion. OTS solicited comments on this proposed
$1 billion threshold. One commenter believed the $1 billion proposed
threshold is reasonable, while another thought it is too high. One
commenter opined that complex assets require less supervisory attention
in larger institutions than in smaller institutions. This commenter
argued that the complexity component should apply when complex assets
exceed a specified percentage of assets.
OTS's statistical analyses found that a $1 billion threshold is
better correlated with the agency's examination workload than a
percentage-of-assets threshold. Additionally, a threshold based on a
percentage of assets would be more difficult to administer, and would
be more uncertain for thrifts. For these reasons, OTS adopts the $1
billion threshold as proposed.
3. Assessment Rates for Complexity Component
OTS proposed to use the same assessment rate for all assets subject
to the complexity component. The preamble to the proposed rule
indicated that OTS expected to apply a flat rate of 0.0015% to all
complex assets that exceed the $1 billion thresholds.
Several commenters questioned whether all complex assets warrant
the same assessment rate. Commenters argued that different off-balance
sheet assets may require differing levels of supervision.
In response to these comments, OTS reviewed its cost statistics.
OTS found that loans serviced for others, trust assets, and recourse
obligations and direct credit substitutes do not all have identical
effects on examination hours. More specifically, OTS found that
recourse obligations and direct credit substitutes have a greater
effect on examiner hours than trust assets administered by a savings
association, which, in turn, have a greater effect on examiner hours
than loans serviced for others. OTS therefore believes different
assessment rates should apply to the different activities within the
complexity component. Initially, OTS will assess trust assets at a rate
of 0.0015%, and recourse obligations and direct credit substitutes at
0.0030%. For loans serviced for others, OTS will use two different
assessment rates to recognize economies of scale, as discussed
immediately below.
OTS proposed no upper limit on the complexity component, but
requested comment on whether there should be a cap on this component.
Five commenters discussed economies of scale in administering or
supervising complex activities. One thought a cap of $3 billion would
avoid penalizing thrifts who have achieved economies of scale in their
operations. Three favored a declining marginal assessment rate as asset
size increases, and one of these suggested a flat fee together with a
declining assessment rate. The fifth commenter did not suggest a
specific method for addressing economies of scale. In addition, two
commenters suggested some unspecified cap on the complexity component.
In response to comments, OTS reviewed its data, focusing on the
extent to which economies of scale affect examiner workload for complex
activities. The analysis demonstrates that OTS may realize some
economies of scale in supervising loans serviced for others for
portfolios above $10 billion.
OTS's experience with the examination of trust assets, recourse
obligations and direct credit substitutes, on the other hand, does not
support a conclusion that the economies of scale for these activities
should be reflected in the assessment rates. Therefore, the agency
continues to use a flat rate for each of these activities above the $1
billion threshold. OTS will continue to collect and analyze data
concerning these activities to determine whether it should recognize
economies of scale in the future.
Therefore, OTS has revised Sec. 502.25 to indicate that it may
establish one or more assessment rates for activities under the
complexity component. OTS will set forth all assessment rates for the
complexity component in a Thrift Bulletin and will revise theses rates
periodically. Initially, OTS will use the following rates:
Assessment
Complexity component category rate
(percent)
Loans serviced for others, over $1 billion, up to $10
billion.................................................... 0.0010
Loans serviced for others, over $10 billion................. 0.0005
Trust assets administered................................... 0.0015
Recourse obligations and direct credit substitutes.......... 0.0030
D. Consolidation
OTS solicited comments on how it should assess savings associations
that own depository institutions or non-depository institutions, or
multiple savings associations owned by one holding company. Four
commenters favored consolidating thrifts that own thrifts for
assessment purposes, while one opposed this approach. One commenter
opposed aggregating off-balance sheet activities of a thrift's
consolidated subsidiary with the parent's off-balance sheet activities,
believing that the parent-subsidiary structure insulates the thrift
from risk. Two commenters thought OTS should adjust assessments to
reflect economies of scale in supervising institutions within the same
family structure. Finally, two commenters believed that non-lead
thrifts owned by a multiple savings and loan holding company should get
a discount on their assessments.
OTS will continue to include consolidated depository institution or
other regulated subsidiaries in the assessment calculations for parent
thrifts on the same basis as all other consolidated subsidiaries. This
will incorporate economies of scale into the assessment of consolidated
companies through the decreased assessment rates for larger
associations. OTS believes recognizing these economies of scale is
appropriate because it reflects OTS's costs of supervising consolidated
entities. OTS will not, at this time, incorporate any discount for a
non-lead thrift owned by a multiple savings and loan holding company,
but will continue its practice of treating the sister thrifts as
separate corporations. Because sister thrifts do not necessarily
operate as one company, and can have very different operations and
different types or amounts of risk, OTS does not realize the same
economies of scale as it does with one larger thrift.
E. Other Matters
1. Semi-annual Assessment
Unlike the current rule, which provides for quarterly or semi-
annual
[[Page 65669]]
assessments, the proposed rule would collect all assessments on a semi-
annual basis. Three commenters supported the semi-annual assessment,
and none opposed it. OTS believes that a semi-annual assessment will
impose the least burden on the thrift industry and the agency.
Accordingly, the final rule requires semi-annual assessments.
One commenter requested that OTS clarify whether the complexity
component would be imposed on a semiannual basis. The proposed rule
stated, at Sec. 502.10, ``OTS determines your semiannual assessment by
totaling three components: your size, your condition and the complexity
of your business.'' OTS calculates each component semiannually.
2. Publication of Assessment Schedules
The size component would use a chart to identify base assessment
amounts for total assets at certain levels, and would impose marginal
rates on assets above those levels. This is similar to the treatment
under existing part 502. However, unlike the existing regulation, the
proposed rule would not include specific base assessment amounts or
marginal rates in the regulatory text. Rather, OTS proposed to publish
the specific base amounts and marginal rates in publicly available
Thrift Bulletins and on its web site. Similarly, OTS proposed to
publish the assessment rate for the complexity component in the Thrift
Bulletin and on its web site.
Three commenters agreed that this approach is reasonable. These
commenters argued that this system eliminates delays, is more flexible,
and will make rates more easily available. One commenter, however,
argued that OTS should not increase the assessment rate schedule
without publishing a proposal in the Federal Register for notice and
comment. This commenter, however, would not object to the current
system where the regulation reflects higher assessment levels that are
subject to a reduction in a Thrift Bulletin. This commenter also argued
that OTS may be required to publish a new proposal if the rates in the
final regulation differ significantly from the proposal.
OTS currently publishes assessment rates in a Thrift Bulletin,
under the authority in existing Sec. 502.6 to set rates lower than
those published in its regulation. Thus, since the early 1990s, thrift
have been charged assessments that are different from those included in
the regulation. Having outdated rates in the regulation has caused
confusion. For this reason, OTS does not want to codify rates in a
regulation that will quickly become obsolete.
Additionally, OTS's goals in this rulemaking are to keep its rates
as low as it can while still providing OTS with essential resources,
and to more closely tailor its rates to its costs. With actual rates in
a Thrift Bulletin rather than in a regulation, OTS can readily revise
the rates to lower them when it is appropriate, and can more readily
align them to changes in OTS's costs of supervising the thrift
industry. The industry has received an opportunity to comment on the
structure through this rulemaking. Conducting new rulemakings for
adjustments in rates would impede the agency's ability to adjust its
rates to reflect increases in its supervisory workload, and thus could
impair its ability to regulate the industry. For these reasons, OTS
will announce the rates in Thrift Bulletins.
3. Refund and Proration of Assessments
In the proposed rule, OTS clarified the existing regulation and
incorporated OTS's long-standing practice by stating that it will not
refund or prorate assessments, even if an entity ceases to be a savings
association. Further, OTS stated that it would not increase or decrease
assessments based on events that occur after the date of the TFR upon
which the assessment is based, except for errors in the TFR. One
commenter believed that this approach avoids burden.
OTS believes that changing assessments for events after the
relevant TFR date complicates the assessment process without adding any
benefit. Accordingly, OTS adopts proposed Sec. 502.40 without
amendment. At the same time, however, assessments must be calculated
accurately and should not be based on errors in the TFR. Therefore,
consistent with its current practice, OTS will, where necessary,
continue to adjust assessment to reflect corrections to errors
contained in the TFR.
IV. Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601 et. seq., applies to
this rulemaking. Accordingly, OTS included in its notice of proposed
rulemaking an initial regulatory flexibility analysis (IRFA). With this
final rule, OTS includes the following final regulatory flexibility
analysis, as required by section 604(a) of the Regulatory Flexibility
Act, 5 U.S.C. 604(a). In the IRFA, OTS solicited comments on all
aspects of the IRFA, including any significant impacts the proposed
rule would have on small entities. OTS received no comments on its
IRFA. However, OTS did receive comments discussing small savings
associations and the proposed rule's special size component calculation
for qualifying associations. These comments are discussed earlier in
this preamble.
Reasons for rulemaking. OTS is issuing this final rule to revise
its current assessments system to match assessments more closely with
OTS's costs. As described in this preamble and in the notice of
proposed rulemaking, OTS has found that, under its prior assessment
system, OTS's costs of supervising some institutions are higher or
lower than those associations pay in assessments. OTS believes it is
inappropriate for some savings associations to subsidize the costs of
others. Therefore, OTS is attempting, through this rule, to more
closely associate its costs with assessments.
Objectives of and legal basis for the final rule. OTS has two
primary objectives for this final rule: (1) establishing an assessment
structure that keeps the agency's rates as low as possible, and (2)
more closely tailoring rates to the agency's increased costs in
supervising certain types of institutions. The Director of OTS is
authorized by statute to impose assessments.13
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\13\ 12 U.S.C. 1462a, 1463, 1467, 1467a.
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Effect of the final rule on small savings associations. This final
rule could affect small savings associations through its condition,
size, or complexity components. The rule will have no effect on small
businesses or small organizations other than small savings
associations, and will not affect small governmental jurisdictions.
Small savings associations are generally defined, for Regulatory
Flexibility Act purposes, as those with assets under $100
million.14
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\14\ 13 CFR 121.201 Division H (1998).
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The condition component will affect small savings associations. As
discussed earlier in this preamble and in the notice of proposed
rulemaking, the condition component imposes an assessment equal to 25%
of an association's size component for each 3-rated association,
regardless of its size. Currently, there are 43 savings associations
that are 3-rated and that have assets under $100 million. The smallest
of these has assets of approximately $5 million, and the largest has
approximately $100 million. Their assessments will increase due to the
condition component by approximately $422 and $5464 annually,
respectively. Other 3-rated small savings associations will see their
assessments increase, depending on their size. The largest increase
will be $5792 for a thrift with $69 million in assets. (Thrifts between
$69 million and
[[Page 65670]]
$100 million will realize a smaller asset-based assessment under the
new rule, while thrifts below $69 million will see no change in their
asset-based assessment. Because the condition component is a percentage
of the asset-based assessment, it will be greater for a $69 million
thrift than for a $100 million thrift.)
As discussed more fully in the notice of proposed rulemaking, 3-
rated savings associations require more supervisory attention than 1-
or 2-rated associations. OTS therefore has three alternatives: impose
extra assessments on all 3-rated associations; require institutions not
rated 3 to subsidize the extra supervisory costs of 3-rated
institutions; or require some but not all 3-rated institutions to cover
those costs. OTS believes it is most equitable to match assessments
with OTS's supervisory costs, and therefore adopts a condition
component for 3-rated associations. Furthermore, OTS believes that
requiring 3-rated institutions to pay for their extra supervisory costs
will provide an incentive for those institutions to improve their
condition and their ratings. OTS believes that the condition component
best accomplishes OTS's objective of closely tailoring assessment rates
to OTS's increased costs in supervising 3-rated institutions while
keeping assessment rates as low as possible.
OTS believes the size component will not have a significant
economic impact on a small number of small entities. OTS specifically
designed this rule to allow qualifying savings associations, generally
those with assets under $100 million, to choose between calculating
their size components under either the old regulation or the new
regulation. These institutions can therefore avoid any increases in
their size components.
If an institution increases above $100 million in assets then
shrinks below $100 million, or for savings associations that are not
yet formed, this choice would not be available. OTS cannot predict the
number of savings associations that will exceed then shrink below $100
million in assets, and cannot predict the number of savings
associations that will be formed in the future. Likewise, OTS cannot
predict the economic impact of the final rule on such institutions.
That is because OTS's assessment rates will vary in the future, as
OTS's supervisory costs change.
OTS considered, as an alternative to the size component with
protection for small institutions, leaving its assessment system
unchanged. OTS believes this alternative would not meet OTS's objective
of closely tailoring assessment rates to OTS's increased supervisory
costs while keeping assessment rates as low as possible, while
minimizing significant economic impacts on small savings associations.
The complexity component applies only to savings associations that
have more than $1 billion in certain activities, mostly off balance
sheet. For Regulatory Flexibility Act purposes, a small savings
association is generally defined as one having less than $100 million
in assets on its balance sheet. There are five savings associations
that have less than $100 million in balance sheet assets that are
subject to the complexity component. OTS believes that a regulatory
flexibility analysis is not necessary regarding the complexity
component for two reasons. First, OTS believes that five savings
associations is not a substantial number of small savings associations.
Second, for purposes of the regulatory flexibility analysis regarding
the complexity component, OTS defines a small savings association as
one with less than $100 million in assets including off-balance sheet
assets. OTS received no public comments on this definition of small
savings association. The Regulatory Flexibility Act is designed to
protect the interests of small businesses, while the complexity
component only affects savings associations with assets or activities
in excess of $1 billion. OTS does not believe that institutions whose
activities involve more than $1 billion in off-balance sheet assets
need any particular protection from the complexity component.
In any event, OTS considered alternatives to the complexity
component. OTS considered using no such component, and considered
including different complex assets in the component, such as commercial
and non-residential mortgage loans. With no complexity component, less
complex thrifts would have to subsidize OTS's costs of supervising
complex institutions. OTS believes the complexity component best
accomplishes OTS's objective of tailoring assessments to match OTS's
supervisory costs and keeping assessments as low as possible, while
minimizing significant economic impacts on small savings associations.
Other matters. The final rule imposes no reporting, recordkeeping,
or other compliance requirements. Assessments will continue to be based
on Thrift Financial Reports that savings associations are otherwise
required to file with OTS, and OTS will continue to collect assessments
by its current procedures. Therefore, the final rule will impose no new
or additional reporting, recordkeeping, or compliance requirements.
Finally, there are no federal rules that duplicate, overlap, or
conflict with this rule.
V. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
federal mandate that may result in expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of $100
million or more in any one year. If a budgetary impact statement is
required, section 205 of the Unfunded Mandates Act also requires an
agency to identify and consider a reasonable number of regulatory
alternatives before promulgating a rule. This final rule will not
result in expenditures by state, local, or tribal governments or by the
private sector of $100 million or more. Accordingly, this rulemaking is
not subject to section 202 of the Unfunded Mandates Act.
VI. Paperwork Reduction Act of 1995
This final rule contains no new information collection
requirements. The information collection requirements in Sec. 502.70
are the same as those in the prior assessments regulation, 12 CFR 502.3
(1998), which the Office of Management and Budget has previously
received and approved in accordance with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under OMB Control No. 1550-0053.
VII. Executive Order 12866
The Director of OTS has determined that this final rule does not
constitute a ``significant regulatory action'' for purposes of
Executive Order 12866.
List of Subjects in 12 CFR Part 502
Assessments, Federal home loan banks, Reporting and recordkeeping
requirements, Savings associations.
Accordingly, the Office of Thrift Supervision amends chapter V,
title 12, Code of Federal Regulations, by revising part 502 to read as
follows:
PART 502--ASSESSMENTS AND FEES
Sec.
502.5 Who must pay assessments and fees?
Subpart A--Assessments
502.10 How does OTS calculate my assessment?
502.15 How does OTS determine my size component?
502.20 How does OTS determine my condition component?
[[Page 65671]]
502.25 How does OTS determine my complexity component?
502.30 When must I pay my assessment?
502.35 How must I pay my assessment?
502.40 Can I get a refund or proration of my assessment?
502.45 What if I do not pay my assessment on time?
Subpart B--Fees
502.50 What fees does OTS charge?
502.55 Where can I find OTS's fee schedule?
502.60 When will OTS adjust, add, waive, or eliminate a fee?
502.65 When is an application fee due?
502.70 How must I pay an application fee?
502.75 What if I do not pay my fees on time?
Authority: 12 U.S.C. 1462a, 1463, 1467, 1467a.
Sec. 502.5 Who must pay assessments and fees?
(a) Authority. Section 9 of the HOLA, 12 U.S.C. 1467, authorizes
the Director to charge assessments to recover the costs of examining
savings associations and their affiliates, to charge fees to recover
the costs of processing applications and other filings, and to charge
fees to cover OTS ``s direct and indirect expenses in regulating
savings associations and their affiliates.
(b) Assessments. If you are a savings association that OTS
regulates on the last day of January or on the last day of July of each
year, you must pay a semi-annual assessment due on that day. Subpart A
of this part describes OTS's assessment procedures and requirements.
(c) Fees. Whether or not you are a savings association, if you make
any filings with OTS or use OTS services, the Director may require you
to pay a fee to cover the costs of processing your submission or
providing those services. The filings for which the Director may charge
a fee include notices, applications, and securities filings. Among the
services for which the Director may charge a fee are publications,
seminars, certifications for official copies of agency documents, and
records or services requested by other agencies. The Director also
assesses fees for examining and investigating savings associations that
administer trust assets of $1 billion or less, and affiliates of
savings associations. If you are a savings association and you or any
of your affiliates cause OTS to incur extraordinary expenses related to
your examination, investigation, regulation, or supervision, the
Director may charge you a fee to fund those expenses. Subpart B of this
part describes OTS's fee procedures and requirements.
Subpart A--Assessments
Sec. 502.10 How does OTS calculate my assessment?
OTS determines your semi-annual assessment by totaling three
components: your size, your condition, and the complexity of your
business. For the size and complexity components, OTS uses the
September 30 Thrift Financial Report to determine amounts due at the
January 31 assessment; and the March 31 Thrift Financial Report to
determine amounts due at the July 31 assessment. For purposes of this
subpart, total assets are your total assets as reported on Thrift
Financial Reports filed with OTS. For the condition component, OTS uses
the most recent composite rating, as defined in 12 CFR Part 516, of
which you have been notified in writing before an assessment's due
date.
Sec. 502.15 How does OTS determine my size component?
(a) General. (1) Unless you are a qualifying savings association
under paragraph (b) of this section, OTS uses the following chart to
calculate your size component:
--------------------------------------------------------------------------------------------------------------------------------------------------------
If your total assets are: Your size component is:
--------------------------------------------------------------------------------------------------------------------------------------------------------
This amount-- Base Plus-- Marginal
Over-- But not over-- assessment amount rate Of assets over-- Class floor
Column A Column B.................... Column C ColColumn E
0........................................ $67 million................. C1 D1 0.
$67 million.............................. 215 million................. C2 D2 $67 million.
215 million.............................. 1 billion................... C3 D3 215 million.
1 billion................................ 6.03 billion................ C4 D4 1 billion.
6.03 billion............................. 18 billion.................. C5 D5 6.03 billion.
18 billion............................... 35 billion.................. C6 D6 18 billion.
35 billion............................... ............................ C7 D7 35 billion.
--------------------------------------------------------------------------------------------------------------------------------------------------------
(2) To calculate your size component, find the row in Columns A and
B that describes your total assets. Reading across in that same row,
find your base assessment amount in Column C, your marginal rate in
Column D, and your class floor in Column E. Calculate how much your
total assets exceed your Column E class floor. Multiply this number by
your Column D marginal rate. Add this number to your Column C base
assessment amount. The total is your size component. OTS will establish
the base assessment amounts and the marginal rates in columns C and D
in a Thrift Bulletin.
(b) Special size component calculation for qualifying savings
associations. If you meet all of the criteria set forth in paragraph
(b)(1) of this section, you are a qualifying savings association and
OTS will calculate your size component in accordance with paragraph
(b)(2) of this section.
(1) Criteria for qualifying savings association status. (i) You
were a savings association as of January 1, 1999.
(ii) Your total assets have never exceeded $100 million at the end
of any quarter.
(2) Size component for qualifying savings associations. If you are
a qualifying savings association, your size component is the lesser of:
(i) Your size component calculated under paragraph (a) of this
section; or
(ii) Your assessment calculated using the general assessment table
at 12 CFR 502.1(c) as contained in the 12 CFR, parts 500 to 599,
edition revised as of January 1, 1998, as implemented in Thrift
Bulletin 48-9, dated December 21, 1992.
Sec. 502.20 How does OTS determine my condition component?
OTS uses the following chart to determine your condition component:
If your composite rating is: Then your condition component is:
1 or 2.............................. zero.
3................................... 25 percent of your size component.
4 or 5.............................. 50 percent of your size component.
[[Page 65672]]
Sec. 502.25 How does OTS determine my complexity component?
If your portfolio exceeds any of the thresholds in paragraph (a) of
this section, OTS will calculate your complexity component according to
paragraph (c) of this section. If your portfolio does not exceed any of
the thresholds in paragraph (a) of this section, your complexity
component is zero.
(a) Thresholds for complexity component. OTS uses three separate
thresholds in calculating your complexity component. You exceed a
threshold if you have more than $1 billion in any of the following:
(1) Trust assets you administer.
(2) The outstanding principal balance of assets covered, fully or
partially, by your recourse obligations or direct credit substitutes.
(3) The principal amount of loans that you service for others.
(b) Assessment rates. OTS will establish one or more assessment
rates for each of the types of activities listed in paragraph (a) of
this section. OTS will publish those assessment rates in a Thrift
Bulletin.
(c) Calculation of complexity component. OTS separately considers
each of the thresholds in paragraph (a) of this section in calculating
your complexity component. OTS first calculates the amount by which you
exceed any of those thresholds. OTS multiplies the amount by which you
exceed any threshold in paragraph (a) of this section by the applicable
assessment rate(s) under paragraph (b) of this section. OTS then totals
the results. This total is your complexity component.
Sec. 502.30 When must I pay my assessment?
OTS will bill you semiannually for your assessments. Assessments
are due January 31 and July 31 of each year. At least seven days before
your assessment is due, the Director will mail you a notice that
indicates the amount of your assessment, explains how OTS calculated
the amount, and specifies when payment is due.
Sec. 502.35 How must I pay my assessment?
(a) Debit at Federal Home Loan Banks. If you are a member of a
Federal Home Loan Bank, you must maintain a demand deposit account at
your Federal Home Loan Bank with sufficient funds to pay your
assessment when due. OTS will notify your Federal Home Loan Bank of the
amount of your assessment. OTS will debit your account for your
assessments.
(b) Direct billing. If you are not a member of a Federal Home Loan
Bank, OTS will directly debit an account you must maintain at your
association.
Sec. 502.40 Can I get a refund or proration of my assessment?
OTS will not refund or prorate your assessment, even if you cease
to be a savings association. If you are a savings association for whom
a conservator or receiver has been appointed, you must continue to pay
assessments in accordance with this part. OTS will not increase or
decrease your assessment based on events that occur after the date of
the Thrift Financial Report upon which your assessment is based.
Sec. 502.45 What if I do not pay my assessment on time?
The Director will charge interest on delinquent assessments.
Interest will accrue at a rate (that OTS will determine quarterly)
equal to 150 percent of the average of the bond-equivalent rates of 13-
week Treasury bills auctioned during the preceding calendar quarter.
Assessments under this subpart A are delinquent if you do not pay them
when required by Sec. 502.30.
Subpart B--Fees
Sec. 502.50 What fees does OTS charge?
(a) The Director assesses fees for examining or investigating
savings associations that administer trust assets of $1 billion or
less, and savings association affiliates. ``Affiliate'' has the meaning
in 12 U.S.C. 1462(9), except that, for this part only, ``affiliate''
does not include any entity that is consolidated with a savings
association on the Consolidated Statement of the Thrift Financial
Report.
(b) The Director assesses fees for processing notices,
applications, securities filings, and requests, and for providing other
services.
Sec. 502.55 Where can I find OTS's fee schedule?
OTS will periodically publish a schedule of its fees in a Thrift
Bulletin. OTS will publish these fees at least thirty days before they
are effective.
Sec. 502.60 When will OTS adjust, add, waive, or eliminate a fee?
Under unusual circumstances, the Director may deem it necessary or
appropriate to adjust, add, waive, or eliminate a fee. For example, the
Director may:
(a) Reduce any fee to adjust for any inequities, efficiencies, or
changed procedures that OTS projects will reduce its applications
processing costs but that OTS did not consider in determining its fees;
(b) Reduce or waive any fee if OTS determines that the fee would
unduly or unjustifiably discourage particular types of applications or
applications for particular categories of transactions;
(c) Add a fee for a new type of application;
(d) Increase a fee for an application that presents unusual or
particularly complex issues of law or policy or otherwise causes the
agency to incur unusually high processing costs; or
(e) Charge a fee to recover extraordinary expenses related to
examination, investigation, regulation, or supervision of savings
associations or their affiliates.
Sec. 502.65 When is an application fee due?
(a) You must pay the application fee when you file an application.
OTS will not process your application if you do not include the
required fee.
(b) If OTS cannot complete its review of your application because
the application is materially deficient and it refuses to accept your
application for processing, you must pay a new application fee upon
filing a revised application.
(c) If a transaction involves multiple applications, you must pay
the appropriate fee for each application, unless OTS specifies
otherwise by Thrift Bulletin.
Sec. 502.70 How must I pay an application fee?
You must pay an application fee to the Office of Thrift
Supervision. You must include a statement of the fee and how you
calculated the fee.
Sec. 502.75 What if I do not pay my fees on time?
(a) Interest. An examination or investigation fee is delinquent if
OTS does not receive the fee within 30 days of the date specified in a
bill. The Director will charge interest on a delinquent examination or
investigation fee. Interest will accrue at a rate (that OTS will
determine quarterly) equal to 150 percent of the average of the bond-
equivalent rates of 13-week Treasury bills auctioned during the
preceding calendar quarter.
(b) Failure to pay. If your holding company, affiliate, or
subsidiary fails to pay any examination or investigation fee within 60
days of the date specified in a bill, the Director may assess that fee,
with interest, against you and collect it from you. If any such entity
is a holding company, affiliate, or subsidiary of more than one savings
association, the Director may assess the fee against and collect it
from each savings association as the Director may prescribe.
Dated: November 20, 1998.
[[Page 65673]]
By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-31745 Filed 11-27-98; 8:45 am]
BILLING CODE 6720-01-P
