[Federal Register Volume 60, Number 243 (Tuesday, December 19, 1995)]
[Proposed Rules]
[Pages 65249-65254]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-30581]
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FEDERAL RESERVE SYSTEM
5 CFR Chapter LVIII
12 CFR Part 264
[Docket No. R-0900]
RIN 3209-AA15
Supplemental Standards of Ethical Conduct for Employees of the
Board of Governors of the Federal Reserve System
AGENCY: Board of Governors of the Federal Reserve System (Board).
ACTION: Proposed rule.
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SUMMARY: The Board of Governors of the Federal Reserve System, with the
concurrence of the Office of Government Ethics (OGE), proposes to issue
regulations for the officers and employees of the Board that supplement
the Standards of Ethical Conduct for Employees of the Executive Branch
issued by OGE. The proposed regulation is a necessary supplement to the
Executive Branch-wide Standards because it addresses ethical issues
unique to the Board. The regulation as proposed would establish rules
relating to: financial interests and transactions; borrowing and
extensions of credit; employment relationships of immediate family
members; and outside employment. The Board is also proposing to replace
its old employee conduct regulation with a residual cross-reference to
the new provisions.
DATES: Comments are invited and must be received on or before February
20, 1996.
ADDRESSES: Comments should refer to Docket No. R-0900, and may be
mailed to Williams W. Wiles, Secretary, Board of Governors of the
Federal Reserve System, 20th Street and Constitution Avenue, NW.,
Washington, DC 20551. Comments also may be delivered to Room B-2222 of
the Eccles Building between 8:45 a.m. and 5:15 p.m. weekdays, or to the
guard station in the Eccles Building courtyard on 20th Street, NW.
(between Constitution Avenue and C Street) at any time. Comments
received will be available for inspection in Room MP-500 of the Martin
Building between 9:00 a.m. and 5:00 p.m. weekdays, except as provided
in 12 CFR 261.8 of the Board's rules regarding availability of
information.
FOR FURTHER INFORMATION CONTACT: Cary Williams, Managing Senior
Counsel, Legal Division, Board of Governors of the Federal Reserve
System, telephone (202) 452-3295, FAX (202) 452-3101. For the hearing
impaired only, Telecommunications Device for the Deaf, Dorothea
Thompson (202) 452-3544.
SUPPLEMENTARY INFORMATION:
I. Background
On August 7, 1992, OGE published the Standards of Ethical Conduct
for Employees in the Executive Branch. See 57 FR 35006-35067, as
corrected at 57 FR 48557 and 57 FR 52583, with additional grace period
extensions at 59 FR 4779-4780 and 60 FR 6390-6391. The Executive
Branch-wide Standards are now codified at 5 CFR part 2635. Effective
February 3, 1993, they established uniform ethical conduct standards
applicable to all executive branch personnel.
With the concurrence of OGE, 5 CFR 2635.105 authorizes executive
agencies to publish agency-specific supplemental regulations necessary
to implement their respective ethics programs. The Board, with OGE's
concurrence, has determined that the following proposed supplemental
regulations are necessary to implement the Board's ethics program
successfully, in light of the Board's unique programs and operations.
The proposed supplemental rule addresses issues relevant to the Board's
roles with respect to monetary policy and banking regulation. The Board
is also proposing to delete the existing provisions of 12 CFR part 264
that its supplemental regulation, once finally adopted, and the
Executive Branch-wide Standards supersede and to add in their place a
residual cross-reference to the current provisions.
II. Analysis of the Proposed Regulations
Section 6801.101 General
Section 6801.101 explains that the proposed regulations contained
in the rule would apply to all Board employees, including Board
members, and are supplemental to the Executive Branch-wide Standards.
[[Page 65250]]
Section 6801.102 Definitions
For purposes of interpreting the provisions in this part,
Sec. 6801.102 sets forth a proposed definition of the terms
``affiliate,'' ``debt or equity interest,'' ``dependent child,''
``depository institution,'' ``employee'' and ``primary government
securities dealer'' and ``supervisory employee.''
Proposed Sec. 6801.102 would include as an affiliate companies that
control, are controlled by, or are under common control with, a
depository institution. This definition was taken from the Bank Holding
Company Act of 1956 and is intended to include any holding companies,
subsidiaries or other affiliated companies of depository institutions.
The term debt or equity interest as proposed would include
``secured and unsecured bonds, debentures, notes, securitized assets,
commercial paper, and preferred and common stock.'' It would extend to
any right to acquire or dispose of any such debt or equity interest and
to beneficial or legal interests derived from a trust. The proposed
term does not, however, include deposit accounts, future interests
created by someone other than the employee or the employee's spouse or
dependent, or any right as a beneficiary of an estate that has not been
settled.
The term dependent child is to be given the same meaning as in
OGE's financial disclosure regulation at 5 CFR 2635.105(d).
The term depository institution is defined in proposed
Sec. 6801.102 as any institution that accepts deposits. This would
include thrifts and foreign banks.
The term employee would include all Board employees, including
Board members, but would not include special Government employees.
The term primary government securities dealer as proposed is
defined as a firm with which the Federal Reserve conducts its open
market operations.
The term supervisory employee would encompass Board members, all
professional staff in the Division of Banking Supervision and
Regulation, and professional staff in other divisions who participate
substantially in supervisory matters involving depository institutions.
Section 6801.103 Prohibited Financial Interests
Section 6801.103(a) as proposed would prohibit a Board employee,
and the spouse and minor child of a Board employee, from owning or
controlling any debt or equity interest in a depository institution or
its affiliates or of a primary government securities dealer or its
affiliates. Under 5 CFR 2635.403(a), an agency may, by supplemental
regulation, prohibit or restrict the holding of a financial interest by
its employees and the spouses and minor children of those employees
based on the agency's determination that the acquisition or holding of
such financial interest would cause a reasonable person to question the
impartiality and objectivity with which agency programs are
administered. The Board has determined that, in light of the Board's
sensitive bank regulatory and monetary policy functions, the
restriction is necessary to: (1) Maintain public confidence in the
impartiality and objectivity with which the Board executes its
regulatory and monetary policy functions; (2) eliminate any concern
that sensitive information provided to the Board might be misused for
private gain; and (3) avoid the wide-spread disqualification of
employees from official matters that might result in the Board's
inability to fulfill its mission.
The Board's current rule prohibits employees from holding equity
interests in banks or their affiliates. 12 CFR 264.735-6(d). This rule
does not apply to debt interests in banks, such as bonds, or to equity
interests in thrifts. The proposed prohibition in Sec. 6801.103(a)
would extend to debt and equity interests in all depository
institutions regardless of whether the depository institution is
regulated by the Board. The Board believes that this is appropriate in
light of the Board's broad regulatory and supervisory authority. For
example, the Board is responsible for setting reserve requirements for
all depository institutions, and the Federal Reserve System provides
liquidity to all depository institutions through the discount window.
In connection with a discount window advance, the Board is authorized
to examine any depository institution.
The Board's current rule also prohibits employees from holding
equity interests in government securities dealers. 12 CFR 264.735-6(d).
The proposed rule would clarify and expand this prohibition by
extending to debt and equity interests in primary government securities
dealers and their affiliates. The Federal Reserve conducts business
with primary government securities dealers, which in turn are expected
to facilitate the Federal Reserve's open market operations and to
provide the Federal Reserve with information to assist it in performing
its duties. Primary government securities dealers are required to
submit reports reflecting their activities to the Federal Reserve on a
regular basis, and must meet qualification requirements of the System
and the Treasury Department
The proposed prohibition in Sec. 6801.103(a) would apply to the
spouse and minor children of a Board employee. In the past, spouses and
minor children of Board employees have not been subject to the Board's
rule on prohibited financial interests. As a result, there has been a
need to disqualify employees from official matters in order to avoid
violations of the criminal laws (18 U.S.C. 208) and in order to
maintain public confidence in the objectivity and impartiality with
which Board programs are carried out. Under 5 CFR 2635.403(a), any
restriction on the holdings of financial interests by the spouses or
minor children of agency employees must be based on the agency's
determination that there is a direct and appropriate nexus between the
restriction as applied to spouses and minor children and the efficiency
of the service. Based on the experiences outlined above, and in order
to avoid the potential appearance that an employee's spouse could trade
on information obtained through the employee's position with the Board,
the Board has determined that such a nexus exists.
Section 6801.103(b) as proposed would provide several exceptions to
the proposed prohibition in Sec. 6801.103(a) on financial interests.
The proposed exceptions are intended to ease the restrictions on the
financial interests of Board employees, their spouses and minor
children, and to permit interests of a character unlikely to raise
questions regarding the objective or impartial performance of Board
employees' official duties or the possible misuse of their positions.
The exception proposed for nonbanking holding companies would permit an
employee to own stock in an automobile manufacturer or a retail
company, for example, that owned a credit card bank or other depository
institution, provided the company's principal line of business was not
banking. The next two proposed exceptions would permit employees to own
interests in depository institutions indirectly through investments in
a publicly traded or available mutual fund (so long as it does not have
a stated policy of concentrating in the financial services industry),
or in a widely held, diversified pension plan.
Section 6801.103(c) of the proposed rule would authorize the
Board's Designated Agency Ethics Official (DAEO), in consultation with
Division
[[Page 65251]]
management, to waive the prohibition in Sec. 6801.103(a) under certain
limited circumstances. In general, a request for a waiver could be
considered if the prohibited interest is acquired without specific
intent, particularly if the owner of the interest is the employee's
spouse or minor child. However, the standards for granting a waiver
would be based, in part, on the policies of each division and,
therefore, could vary among divisions. For example, because of the
greater potential for an actual conflict of interest arising from
depository institution stock ownership, the Board's Division of Banking
Supervision and Regulation could be less inclined to consider a waiver
request for these interests than another division having no regulatory
responsibilities.
Proposed Sec. 6801.103(d) would require employees to consult with
the DAEO concerning the need for recusal as a result of holding any
debt or equity interest based on an exception or a waiver exception in
6801.103(b)(1) or (c).
Section 6801.104 Speculative Dealings [Reserved]
A provision of the Board's current ethics rules prohibits Board
employees from engaging in speculative dealings. See 12 CFR 264.735-
6(d)(iii). The Office of Government Ethics has voiced concern regarding
this provision's lack of notice to employees as to what constitutes
speculative dealings. The Board is in discussion with OGE about this
rule and may amend its supplemental rule, once it is adopted as a final
rule, to include a provision on speculation at some point in the
future. Board employees continue to be prohibited by the Standards of
Ethical Conduct from engaging in a financial transaction using, or
appearing to use, nonpublic information to further their own private
interests or those of another. 5 CFR 2635.101(b)(14) and 2635.703.
Section 6801.105 Prohibition on Preferential Terms From Regulated
Institutions
Proposed Sec. 6801.105 would prohibit a Board employee from
entering into a financial relationship with an entity regulated by the
Board if such relationship is governed by terms more favorable than
those available in like circumstances to members of the public. This
provision has always been a part of the Board's ethics regulation (12
CFR 264.735-6(b)(2)(i)), and the Board has found that it has helped to
remind employees of their responsibility to avoid receiving
preferential treatment in their personal dealings with regulated
entities.
Section 6801.106 Prohibition on Supervisory Employees From Seeking
Credit From Institutions Involved in Work Assignments
Section 6801.106 as proposed would apply only to ``supervisory
employees.'' The term ``supervisory employee'' is defined in proposed
Sec. 6801.102(g) as all professional staff at the Board with
responsibilities in the area of banking supervision and regulation.
This would include all professional staff in the Division of Banking
Supervision and Regulation, the Legal Division, and the Division of
Consumer and Community Affairs; professional staff in the Division of
Research and Statistics who have responsibility for applications;
professional staff in the Office of the Inspector General who are
involved in evaluating the Supervision and Regulation function; and the
Board members.
Section 6801.106(a) as proposed would prohibit a supervisory
employee from seeking credit from, or renegotiating or rolling over
existing credit with, a depository institution if the employee is
assigned to a matter affecting that institution or if the employee is
aware of the pendency of the matter and knows that he or she will
participate in the matter. This prohibition would also apply for three
months after the employee's participation in the matter has ended. In
addition, proposed Sec. 6801.106(b) provides that a supervisory
employee must be disqualified from a matter if he or she learns that
his or her spouse or other related persons or entities have borrowed
from a depository institution that is a party to the matter while the
matter is pending. Section 6801.106(c) provides a proposed exception to
the application of these provisions with respect to borrowing through
the use of a credit card on terms and conditions available to the
general public, or to borrowing through overdraft protection. The
Board's DAEO may grant a waiver of these provisions. The proposed
temporary ban on seeking credit is necessary to prevent the potential
appearance that supervisory employees might use their official position
or their contacts with a depository institution resulting from their
work on a matter involving that institution, to obtain loans or
extensions of credit on favorable terms. The Board's current rule does
not contain restrictions in this area.
Section 6801.107 Disqualification of Supervisory Employees From
Matters Involving Lenders
A supervisory employee would be restricted by proposed
Sec. 6801.107 from participating in any matter in which a depository
institution or an affiliate of a depository institution is a party if
the supervisory employee or the spouse or dependent child of the
supervisory employee, or certain related entities are indebted to the
depository institution or its affiliate. Typical consumer credit, such
as home mortgage loans and credit card debt, would not give rise to the
disqualification requirement.
Section 6801.107 would supplement Sec. 2635.502 of the Executive
Branch-wide Standards. The restriction is necessitated by the frequent
contact that supervisory employees have with lending institutions. The
restriction as proposed is designed to ensure that supervisory
employees do not benefit or appear to benefit from their official
positions and do not lose or appear to lose their impartiality.
Exceptions to the proposed restriction related to borrowing
relationships are set forth in Sec. 6801.107(b). Under the exceptions,
a supervisory employee could participate in matters involving
depository institutions to which the supervisory employee, or the
supervisory employee's spouse or dependent child, is indebted under one
of the conditions indicated in subsection (b)(1)(i)-(iv) as proposed.
The exceptions proposed in Sec. 6801.107(b) are intended to ease the
restrictions on supervisory employees' participation in particular
matters in situations where a loan or extension of credit is unlikely
to raise issues regarding the motivation of the lender or the objective
or impartial performance of official duties by supervisory employees.
Proposed Sec. 6801.107(c) would give the Board's DAEO authority to
grant a written waiver from the prohibitions in Sec. 6801.107 in
accordance with 5 CFR 2635.502(d).
Section 6801.108 Restrictions Resulting From Employment of Family
Members
Section 6801.108(a) as proposed would require a supervisory
employee (as defined in Sec. 6801.101(b)(2)) to report the employment
of an immediate family member (spouse, child, parent or sibling) if the
immediate family member is employed by a depository institution or a
depository institution affiliate. The reporting requirement would be
triggered immediately upon the
[[Page 65252]]
supervisory employee's discovery of the employment relationship.
Under proposed Sec. 6801.108(c), a supervisory employee would be
disqualified from participating in any matter involving an immediate
family member's employer unless the supervisory employee received the
appropriate authorization pursuant to the standard in Sec. 2635.502(d)
of the Executive Branch-wide Standards. This proposed requirement would
eliminate the potential for any appearance of preferential treatment in
those instances where employment of a family member would be likely to
raise questions regarding the appropriateness of actions taken by the
employee.
Section 6801.109 Prior Approval for Compensated Outside Employment
5 CFR 2635.803 provides that an agency may, by supplemental
regulations, require its employees to obtain prior approval before
engaging in outside employment when it has determined that such a
requirement is necessary or desirable for the purpose of administering
its ethics program. The Board's current regulation at 12 CFR 264.735-
6(c) imposes a requirement for prior approval for outside business and
teaching. Based on its finding that this requirement has helped to
ensure that employees' outside activities conform to applicable
statutes and regulations, the Board has determined to continue this
requirement in a somewhat modified form. The proposed provision
requires prior written approval before engaging in any compensated
outside employment, a defined term that may provide more specific
guidance to employees than ``outside business or teaching,'' the scope
of which has not always been clear.
III. Proposed Repeal of the Board's Regulations on Employee
Responsibilities and Conduct
The Board is also proposing to repeal its regulations on the
Responsibilities and Conduct of Board Employees, 12 CFR part 264, and
to add a residual cross-reference to the new provisions.
IV. Matters of Regulatory Procedure
Administrative Procedure Act
This proposed rulemaking is in compliance with the Administrative
Procedure Act (5 U.S.C. 553) and allows for a 60 -day comment period.
Regulatory Flexibility Act
The Board has determined under the Regulatory Flexibility Act (5
U.S.C. chapter 6) that this regulation will not have a significant
economic impact on a substantial number of small business entities
because it affects only Board employees.
Paperwork Reduction Act
The Board has determined that the Paperwork Reduction Act (44
U.S.C. chapter 35) does not apply because this regulation does not
contain any information collection requirements that require the
approval of the Office of Management and Budget.
List of Subjects
5 CFR Part 6801
Conflict of interests, Government employees.
12 CFR Part 264
Conflict of interests, Federal Reserve System.
Dated: November 3, 1995.
William W. Wiles,
Secretary, Board of Governors of the Federal Reserve System.
Approved: November 13, 1995.
Stephen D. Potts,
Director, Office of Government Ethics.
For the reasons set forth in the preamble, the Board, with the
concurrence with the Office of Government Ethics, is proposing to amend
title 5 and chapter II of title 12 of the Code of Federal Regulations
as follows:
TITLE 5--[AMENDED]
1. A new chapter LVIII, consisting of part 6801, is added to title
5 of the Code of Federal Regulations to read as follows:
CHAPTER LVIII--BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
PART 6801--SUPPLEMENTAL STANDARDS OF ETHICAL CONDUCT FOR EMPLOYEES
OF THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
Sec.
6801.101 Purpose.
6801.102 Definitions.
6801.103 Prohibited financial interests.
6801.104 Speculative dealings. [Reserved]
6801.105 Prohibition on preferential terms from regulated
institutions.
6801.106 Prohibition on supervisory employees' seeking credit from
institutions involved in work assignments.
6801.107 Disqualification of supervisory employees from matters
involving lenders.
6801.108 Restrictions resulting from employment of family members.
6801.109 Prior approval for compensated outside employment.
Authority: 5 U.S.C. 7301; 5 U.S.C. App. (Ethics in Government
Act of 1978); 12 U.S.C. 244, 248; E.O. 12674, 54 FR 15159, 3 CFR,
1989 Comp., p.215, as modified by E.O. 12731, 55 FR 42547, 3 CFR,
1990 Comp., p.306; 5 CFR 2635.105, 2635.403(a), 2635.502, 2635.803.
Sec. 6801.101 Purpose.
In accordance with 5 CFR 2635.105, the regulations in this part
supplement the Standards of Ethical Conduct for Employees of the
Executive Branch found at 5 CFR part 2635. They apply to members and
other employees of the Board of Governors of the Federal Reserve System
(``Board'').
Sec. 6801.102 Definitions.
For purposes of this part:
(a) Affiliate means any company that controls, is controlled by, or
is under common corporate control with another company.
(b) (1) Debt or equity interest includes secured and unsecured
bonds, debentures, notes, securitized assets, commercial paper, and
preferred and common stock. The term encompasses both current and
contingent ownership interests therein; any such beneficial or legal
interest derived from a trust; any right to acquire or dispose of any
long or short position in debt or equity interests; any interests
convertible into debt or equity interests; and any options, rights,
warrants, puts, calls, straddles, and derivatives with respect thereto.
(2) Debt or equity interest does not include deposits; credit union
shares; any future interest created by someone other than the employee,
his or her spouse, or dependent; or any right as a beneficiary of an
estate that has not been settled.
(c) Dependent child means an employee's son, daughter, stepson, or
stepdaughter if:
(1) Unmarried, under the age of 21, and living in the employee's
household; or
(2) Claimed as a ``dependent'' on the employee's income tax return.
(d) Depository institution means a bank, trust company, thrift
institution, or any institution that accepts deposits, including a bank
chartered under the laws of a foreign country.
(e) Employee means an officer or employee of the Board, including a
Board member. It does not include a special Government employee.
(f) Primary government securities dealer means a firm with which
the Federal Reserve conducts its open market operations.
(g) Supervisory employee means an employee who is a member of the
professional staff at the Board with responsibilities in the area of
banking supervision and regulation.
[[Page 65253]]
Sec. 6801.103 Prohibited financial interests.
(a) Prohibited interests. Except as permitted by this section, an
employee, or an employee's spouse or minor child, shall not own or
control, directly or indirectly, any debt or equity interest in:
(1) A depository institution or any of its affiliates; or
(2) A primary government securities dealer or any of its
affiliates.
(b) Exceptions. The prohibition in paragraph (a) of this section
does not apply to the ownership or control of a debt or equity interest
in the following:
(1) Nonbanking holding companies. A publicly traded holding company
that:
(i) Owns a bank and either the holding company or the bank is
exempt under the Bank Holding Company Act of 1956, 12 U.S.C. 1841 et
seq., (for example, a credit card bank, a nonbank bank or a
grandfathered bank holding company), and the holding company's
predominant activity is not the ownership or operation of banks and
thrifts;
(ii) Owns a thrift and its predominant activity is not the
ownership or operation of banks and thrifts; or
(iii) Owns a primary government securities dealer and its
predominant activity is not the ownership and operation of banks,
thrifts or securities firms.
(2) Mutual funds. A publicly traded or publicly available mutual
fund or other collective investment fund if:
(i) The fund does not have a stated policy of concentration in the
financial services industry; and
(ii) Neither the employee nor the employee's spouse exercises or
has the ability to exercise control over the financial interests held
by the fund or their selection.
(3) Pension plans. A widely held, diversified pension or other
retirement fund that is administered by an independent trustee.
(c) Waivers. The Board's Designated Agency Ethics Official, in
consultation with Division management, may grant a written waiver
permitting the employee to own or control a debt or equity interest
prohibited by paragraph (a) of this section if:
(1) Extenuating circumstances exist, such as that ownership or
control was acquired:
(i) Through inheritance, gift, merger, acquisition, or other change
in corporate structure, or otherwise without specific intent on the
part of the employee, spouse, or minor child to acquire the debt or
equity interest; or
(ii) By an employee's spouse as part of a compensation package in
connection with the spouse's employment or prior to marriage to the
employee;
(2) The employee makes a prompt and complete written disclosure of
the interest;
(3) The employee's disqualification from participating in any
particular matter having a direct and predictable effect on the
institution or any of its affiliates does not unduly interfere with the
full performance of the employee's duties; and
(4) Granting the waiver would be consistent with Division policy.
(d) Disqualification. If an employee or an employee's spouse or
minor child holds an interest in a holding company under paragraph
(b)(1) or (c) of this section, the employee must consult the Designated
Agency Ethics Official in order to determine whether the employee must
be disqualified from participating in any particular matter involving
that holding company or affiliate under the conflicts of interest rules
of the Office of Government Ethics.
Sec. 6801.104 Speculative dealings. [Reserved]
Sec. 6801.105 Prohibition on preferential terms from regulated
institutions.
An employee may not accept a loan from, or enter into any other
financial relationship with, an institution regulated by the Board, if
the loan or financial relationship is governed by terms more favorable
than would be available in like circumstances to members of the public.
Sec. 6801.106 Prohibition on supervisory employees' seeking credit
from institutions involved in work assignments.
(a) Prohibition on supervisory employee's seeking credit. (1) A
supervisory employee may not, on his or her own behalf, or on behalf of
his or her spouse or child or anyone else (including any business or
nonprofit organization), seek or accept credit from, or renew or
renegotiate credit with, a depository institution or any of its
affiliates if the institution or affiliate is a party to an
application, enforcement action, investigation, or other particular
matter involving specific parties pending before the Board and:
(i) The supervisory employee is assigned to the matter; or
(ii) The supervisory employee is aware of the pendency of the
matter and knows that he or she will participate in the matter by
action, advice or recommendation.
(2) The prohibition in paragraph (a)(1) of this section also
applies for three months after the supervisory employee's participation
in the matter has ended.
(b) Credit sought by spouse and other related persons. A
supervisory employee must disqualify himself or herself from
participating (by action, advice or recommendation) in any application,
enforcement action, investigation or other particular matter involving
specific parties to which a depository institution or any of its
affiliates is a party as soon as the supervisory employee learns that
any of the following related persons are seeking or have sought or
accepted credit from, or have renewed or renegotiated credit with, the
depository institution or any of its affiliates while the matter is
pending before the Board:
(1) The employee's spouse or dependent child;
(2) A company or business if the employee or the employee's spouse
or dependent child owns or controls more than 10 percent of its equity;
or
(3) A partnership if the employee, or the employee's spouse or
dependent child is a general partner.
(c) Exception. The prohibition in paragraph (a) of this section and
the disqualification requirement in paragraph (b) of this section do
not apply with respect to credit obtained through the use of a credit
card or overdraft protection on terms and conditions available to the
public.
(d) Waivers. The Board's Designated Agency Ethics Official, after
consulting with the relevant division director, may grant a written
waiver from the prohibition in paragraph (a) of this section, or the
disqualification requirement in paragraph (b) of this section, based on
a determination that participation in matters otherwise prohibited by
this section would not create an appearance of loss of impartiality or
use of public office for private gain, and would not otherwise be
inconsistent with the Office of Government Ethics' Standards of Ethical
Conduct for Employees of the Executive Branch (5 CFR part 2635) or
prohibited by law.
Sec. 6801.107 Disqualification of supervisory employees from matters
involving lenders.
(a) Disqualification required. A supervisory employee may not
participate by action, advice or recommendation in any application,
enforcement action, investigation, or other particular matter involving
specific parties to which a depository institution or its affiliate is
a party if any of the following are indebted to the depository
institution or any of its affiliates:
(1) The employee;
(2) The spouse or dependent child of the employee;
[[Page 65254]]
(3) A company or business if the employee or the employee's spouse
or dependent child owns or controls more than 10 percent of its equity;
or
(4) A partnership if the employee or the employee's spouse or
dependent child is a general partner.
(b) Exceptions--(1) Consumer credit on nonpreferential terms.
Disqualification of a supervisory employee is not required by paragraph
(a) of this section for the following types of indebtedness if payment
on the indebtedness is current and the indebtedness is on terms and
conditions offered to the public:
(i) Credit extended through the use of a credit card;
(ii) Credit extended through use of an overdraft protection line;
(iii) Amortizing consumer credit (e.g., home mortgage loans,
automobile loans); and
(iv) Credit extended under home equity lines of credit.
(2) Indebtedness of a spouse or dependent child. Disqualification
is not required with respect to any indebtedness of the employee's
spouse or dependent child, or a company, business or partnership in
which the spouse or dependent child has an interest described in
paragraphs (a)(3) and (a)(4) of this section, if:
(i) The indebtedness represents the sole financial interest or
responsibility of the spouse, child, company, business or partnership
and is not derived from the employee's income, assets or activities;
and
(ii) The employee has no knowledge of the identity of the lender.
(c) Waivers. The Board's Designated Agency Ethics Official, after
consulting with the relevant division director, may grant a written
waiver from the disqualification requirement in paragraph (a) of this
section using the authorization process set forth in the Office of
Government Ethics' Standards of Ethical Conduct at 5 CFR 2635.502(d).
Sec. 6801.108 Restrictions resulting from employment of family
members.
(a) Reporting certain employment relationships. A supervisory
employee who has knowledge that his or her spouse, child, parent or
sibling is employed by a depository institution or its holding company
shall report such employment to his or her supervisor and the Ethics
Office within thirty days of the commencement of the supervisory
employee's employment at the Board or promptly upon learning of the
employment relationship.
(b) Disqualification. A supervisory employee may not participate in
any particular matter to which a depository institution or its
affiliate is a party if the depository institution or affiliate employs
his or her spouse, child, parent or sibling unless the supervising
officer, with the concurrence of the Board's Designated Agency Ethics
Official, has authorized the employee to participate in the matter
using the authorization process set forth in the Office of Government
Ethics' Standards of Ethical Conduct at 5 CFR 2635.502(d).
Sec. 6801.109 Prior approval for compensated outside employment.
(a) Approval requirement. An employee shall obtain prior written
approval from his or her division director (or the division director's
designee) and the concurrence of the Board's Designated Agency Ethics
Official before engaging in compensated outside employment.
(b) Standard for approval. Approval will be granted unless a
determination is made that the prospective outside employment is
expected to involve conduct prohibited by statute or Federal
regulation, including 5 CFR part 2635 and this part.
(c) Definition of employment. For purposes of this section, the
term compensated outside employment means any form of compensated non-
Federal employment or business relationship involving the provision of
personal services by the employee. It includes, but is not limited to,
personal services as an officer, director, employee, agent, attorney,
consultant, contractor, general partner, trustee, teacher or speaker.
TITLE 12--BANKS AND BANKING
CHAPTER II--FEDERAL RESERVE SYSTEM
2. 12 CFR part 264 is revised to read as follows:
PART 264--EMPLOYEE RESPONSIBILITIES AND CONDUCT
Sec. 264.101 Cross-reference to employees' ethical conduct standards
and financial disclosure regulations.
Employees of the Board of Governors of the Federal Reserve System
(Board) are subject to the executive branch-wide standards of ethical
conduct at 5 CFR part 2635 and the Board's regulation at 5 CFR part
6801, which supplements the executive branch-wide standards, and the
executive branch-wide financial disclosure regulation at 5 CFR part
2634.
Authority: 5 U.S.C. 7301; 12 U.S.C. 244.
[FR Doc. 95-30581 Filed 12-18-95; 8:45 am]
BILLING CODE 6210-01-P
