[Federal Register Volume 61, Number 232 (Monday, December 2, 1996)]
[Rules and Regulations]
[Pages 64000-64002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-30763]
[[Page 63999]]
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Part VIII
Department of the Treasury
_______________________________________________________________________
Office of the Comptroller of the Currency
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12 CFR Part 8
Assessment Fees; National Banks, District of Columbia Banks; Interim
Rule
Federal Register / Vol. 61, No. 232 / Monday, December 2, 1996 /
Rules and Regulations
[[Page 64000]]
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 8
[Docket No. 96-27]
RIN 1557-AB41
Assessment of Fees; National Banks; District of Columbia Banks
AGENCY: Office of the Comptroller of the Currency, Treasury.
ACTION: Interim rule with request for comment.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
amending its regulation governing assessments by providing that
national banks that are not the largest national bank in a bank holding
company (referred to as non-lead banks) will pay assessments that are
less than these banks otherwise would pay. This amendment reflects the
cost savings that are realized by the OCC's Supervision by Risk
Program, whereby the OCC focuses on the risk profile of a consolidated
company. The intended effect of this rulemaking is to enable the OCC to
lower assessments on non-lead banks.
DATES: This interim rule is effective on December 2, 1996. Comments
must be received by January 31, 1997.
ADDRESSES: Comments should be directed to, and may be inspected and
copied at: Communications Division, OCC, 250 E Street, SW., Washington,
D.C. 20219, Attention: Docket No. 96-27. In addition, comments may be
sent via FAX, at (202) 874-5274 or via Internet at
regs.comments@occ.treas.gov
FOR FURTHER INFORMATION CONTACT: Roy Madsen, Assistant Chief Financial
Officer, Financial Review, Policy and Analysis, (202) 874-5130;
Patricia S. Grady, Senior Attorney, Administrative and Internal Law
Division, (202) 874-4460; or Mark Tenhundfeld, Assistant Director,
Legislative and Regulatory Activities Division, (202) 874-5090, Office
of the Comptroller of the Currency, Washington, D.C. 20219.
SUPPLEMENTARY INFORMATION:
Background
The OCC charters, regulates, and supervises approximately 2,800
national banks and 66 federal branches and agencies of foreign banks in
the U.S., accounting for more than half the nation's banking assets.
Its mission is to ensure a safe, sound, and competitive national
banking system that supports the citizens, communities, and economy of
the United States. The OCC funds the activities that further this
mission by imposing assessments, fees, and other charges on national
banks, as necessary and appropriate to meet the OCC's expenses,
pursuant to 12 U.S.C. 482.
The OCC charges each national bank a semiannual assessment
according to a formula that is described in part 8 of the agency's
regulations (12 CFR part 8). In general, a national bank's semiannual
assessment is computed as follows. First, the bank identifies its
asset-size category by consulting the chart setting out ten such
categories that is contained in part 8. Once the bank determines its
asset-size category, the bank then calculates its assessment by adding
two numbers. The first number is called the ``base amount,'' 1 and
is provided by the OCC to all banks in the annual ``Notice of
Comptroller of the Currency Fees'' (Notice of Fees) and in each
semiannual assessment notice (Assessment Notice). Each bank derives the
second number by multiplying the ``marginal rate'' for the bank's
asset-size category, which also is provided by the OCC in the Notice of
Fees and Assessment Notices, by the amount of the bank's assets that
exceeds the next lowest asset-size category threshold. The bank then
adds the product of this multiplication to the base amount to arrive at
its total assessment.
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\1\ The base amount for a given bank is calculated by the OCC by
multiplying the lower endpoint of a bank's asset-size category by a
``marginal rate'' determined by the OCC. For a more complete
description of the way in which the OCC computes the base amount,
see 12 CFR 8.2(a)(1).
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The variables in this formula allow the OCC some flexibility in
adjusting assessments to reflect its costs. For example, the applicable
marginal rate declines as asset size grows, resulting in the lowest
marginal rates applying to assets in the largest asset-size categories.
This regressive rate structure reflects the OCC's experience that the
economies of scale realized in the examination and supervision of large
institutions allow a proportionately smaller expenditure of OCC
resources than is required in the case of smaller banks.2
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\2\ See, e.g., 53 FR. 31705 (August 19, 1988) (``Fixed costs of
supervision, such as basic preparatory tasks, do not vary
proportionately from small to large banks. Further, statistical
techniques used in the examination process permit larger
institutions to be examined with proportionately fewer
resources.'').
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The regulation being amended by this rulemaking does not, however,
reflect the significant additional economies now being realized as a
result of the OCC's new risk-based approach to bank supervision. The
OCC's Supervision by Risk Program creates the potential for cost
savings in the OCC's supervision of banks in holding company structures
that the current regulation does not reflect. Under this program, the
OCC focuses on the risk profile of the consolidated company in
recognition of the fact that exposure to risk at the national bank
level may be either mitigated or increased by activities company-
wide.3
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\3\ For further discussion of the OCC's Supervision by Risk
Program, see various components of the Comptroller's Handbook,
including especially the components entitled ``Bank Supervision
Process'' (April 1996) and ``Large Bank Supervision'' (December
1995).
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To implement the Supervision by Risk program effectively, the OCC
must obtain the information necessary to evaluate risks to a national
bank that may be presented by other entities in the banking
organization. Many banks already use information systems that integrate
data from affiliated companies. This type of system facilitates
retrieval of the data by OCC examiners, which, in turn, reduces the
costs incurred by the OCC in obtaining the information that is
essential to the supervisory process. In the OCC's experience, the
largest national bank in a bank holding company often has systems that
are sufficiently comprehensive, detailed, and reliable to facilitate
company-wide risk evaluation.
The declining marginal rate structure in the current assessment
regulation reflects the economies of scale realized in the OCC's
examination and supervision of large banks, but the rule does not
reflect the additional economies that result when the OCC can
facilitate its supervision of smaller banks in a bank holding company
by relying on information that is available from the largest national
bank in that holding company. As a consequence, under the current
regulation, a non-lead bank (defined as any national bank in a bank
holding company other than the largest national bank) would pay an
assessment that does not necessarily reflect these efficiencies.4
This rulemaking changes the current regulation, consistent with the
OCC's supervision-by-risk approach, to enable the OCC to reduce the
assessments to be paid by non-lead national banks in a bank holding
company.
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\4\ This situation is not present in the case of a national bank
that is not in a holding company structure, because there is no
similar opportunity for the OCC to conduct a significant amount of
its supervision of the bank by obtaining information from an
affiliated bank.
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Although the Supervision by Risk Program requires the OCC to focus
on the risk profile of the consolidated company, the OCC also must
continue to examine and supervise each national bank within a banking
organization. Reviewing related banks in a banking
[[Page 64001]]
organization as if they comprised one consolidated entity would ignore
the fact that not all aspects of the OCC's supervision can be
accomplished by viewing a banking organization on a whole-company
basis. Important components of the OCC's supervision are charter-
specific and require examination at the individual bank level. For
example, if one national bank in a banking organization engages in
certain specialized or sophisticated activities (such as capital
markets activities) but the others do not, reviewing consolidated
information on a whole-company basis may not permit the OCC to evaluate
the condition of the bank engaged in the specialized or sophisticated
activity. Careful review at the bank level is necessary to ensure that
each national bank conducts its operations safely and soundly and in a
manner that comports with applicable law.
The OCC also must examine each national bank to ensure each bank's
compliance with the fair lending and consumer protection laws that the
OCC administers. The Community Reinvestment Act (CRA), for instance,
requires the OCC to assess each national bank's record of meeting the
credit needs of the bank's entire community. 12 U.S.C. 2903. Consistent
with this statutory mandate, the OCC conducts a CRA examination of
every national bank. Similarly, the OCC examines every national bank in
order to determine compliance with laws such as the Equal Credit
Opportunity Act (15 U.S.C. 1691 et seq.) and the Truth-in-Lending Act
(15 U.S.C. 1601 et seq.). Effective supervision in these areas requires
the OCC to conduct bank-by-bank reviews of loan files and practices.
In order to better reflect the costs incurred by the OCC in
carrying out its diverse supervisory responsibilities, this interim
rule retains the requirement that each national bank pay an assessment
but adds a provision to part 8 that states that the OCC will charge a
non-lead national bank an assessment that will be less than the bank
otherwise would pay if it were either the lead bank in a holding
company or independent.
Description of the Interim Rule
Pursuant to new Sec. 8.2(a)(6), the OCC will charge a non-lead
national bank an assessment that will be lower than the assessment the
bank otherwise would pay. The specific percentage of the assessment
reduction will be provided in the semiannnual Assessment Notice. New
Sec. 8.2(a)(6)(ii)(B) defines lead bank as the largest national bank
controlled by a bank holding company, based on a comparison of the
total assets held by each national bank owned by that bank holding
company as reported in the Consolidated Reports of Condition and Income
that the national banks in question file for the quarter immediately
preceding the payment of a semiannual assessment. The rule defines bank
holding company and control as having the same meanings as these terms
have in section 2 of the Bank Holding Company Act of 1956 (BHCA) (12
U.S.C. 1841(a)(1) and (a)(2), respectively). Generally speaking, a
company is a bank holding company under the BHCA if it controls a bank.
A company will be deemed to control a bank if the company owns,
controls, or has power to vote at least 25 percent of any class of the
bank's voting securities, controls the election of a majority of the
bank's directors, or is found to exercise a controlling influence over
the management or policies of the bank.
Each non-lead national bank will continue to compute the components
of its assessment under the interim rule in the same way as it
currently does, as summarized at the outset of this preamble
discussion. However, once a non-lead bank determines these components,
it then will reduce the sum of the components by the percentage
specified in the Notice of Fees in order to determine its assessment.
The interim rule also deletes the provisions in current part 8
prohibiting the proration of assessments. The current rule states that
each bank and Federal branch or agency that is subject to the OCC's
jurisdiction must pay the full amount of its assessment for the next
six-month period, ``without proration for any reason.'' 12 C.F.R.
Sec. 8.2(a)(5) and (b). This prohibition is inconsistent with the
reduction in non-lead banks'' assessments because the reduction is
effectively a proration of these banks' assessments. The interim rule
removes the prohibition against prorations in order to avoid creating
an inconsistency within the regulation.
The OCC solicits comment on these amendments made to reflect
differences in the costs of the OCC's supervision based on the
organizational structure in which a national bank operates. The OCC
also welcomes comment on any other aspect of this interim rule.
Use of Immediately Effective Interim Rule
The OCC has determined that notice and comment is not required
before adopting the rule. The interim rule involves agency practice and
procedure and thus is exempt under 5 U.S.C. 553(b)(A) from the prior
notice requirements of the Administrative Procedures Act (5 U.S.C. 500
et seq.). The determination of how assessments are imposed is internal
to the OCC, since the Comptroller is required to recover expenses but
is not required to follow specific calculations or formulae when making
this determination. As a result, the OCC may revise its assessment
structure as necessary to meet its expenses. In addition, the rule is
exempt pursuant to 5 U.S.C. 553(b)(B) from the prior notice
requirements because delaying adoption of the rule pending receipt of
comments would be unnecessary and contrary to the public interest. The
rule confers a benefit on national banks by enabling the OCC to lower
the total amount of assessments paid by affiliated national banks. It
will not have the effect of raising the assessment of any national
bank.
The agency also has determined that the rule may be immediately
effective pursuant to 5 U.S.C. 553(d)(1) and (d)(3). By enabling the
OCC to reduce assessments, the rulemaking will have the effect of
granting a partial exemption from the assessment obligations that
otherwise would apply to non-lead banks. Accordingly, the rule may be
immediately effective under 5 U.S.C. 553(d)(1). There also is good
cause to dispense with a delayed effective date under 5 U.S.C.
553(d)(3), namely, that the interim rule needs to be effective in time
to ensure that reductions will be reflected in the Notice of
Comptroller of the Currency Fees that will be mailed in early December
to all national banks.
The OCC will continue to provide each national bank a semiannual
Assessment Notice, and national banks will continue to have at least 30
days following receipt of a semiannual assessment notice in which to
pay the assessment. Although the OCC is not required to provide notice
and public comment under the Administrative Procedure Act, 5 U.S.C.
553(b)(A) and (b)(B), the OCC invites comment on any aspect of this
interim rule.
Regulatory Flexibility Act
The Regulatory Flexibility Act, 5 U.S.C. 601-612, does not apply to
this interim rule. The Regulatory Flexibility Act applies whenever an
agency is required by 5 U.S.C. 553 or any other law to publish general
notice of proposed rulemaking for any proposed rule. 5 U.S.C. 603(a).
As is explained more fully in the preceding section captioned ``Use of
Immediately Effective Interim Rule,'' publication of this rule for
comment is unnecessary and contrary to the public interest.
Accordingly, section 553 does not require the OCC to publish general
notice of a proposed rulemaking (see 5 U.S.C. 553(b)(A) and (b)(B)).
[[Page 64002]]
Further, there is no other law that requires the OCC to publish a
proposed rule concerning assessments. Section 5240 of the Revised
Statutes (12 U.S.C. 481 and 482) authorizes the OCC to impose and
collect assessments as necessary or appropriate (12 U.S.C. 482), but
does not require the OCC to implement that grant of authority by means
of a regulation. Since the OCC is not required to publish a general
notice of proposed rulemaking for this rule, the Regulatory Flexibility
Act does not apply.
Executive Order 12866
The OCC has determined that this interim rule is not a significant
regulatory action for purposes of Executive Order 12866.
Unfunded Mandates Reform 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 any rule likely to
result in a Federal mandate that may result in the 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. The OCC has
determined that the interim rule will not result in expenditures by
State, local, and tribal governments, or by the private sector, of $100
million or more in any one year. Accordingly, the OCC has not prepared
a budgetary impact statement or specifically addressed any regulatory
alternatives. As discussed in the preamble, the interim rule will
enable the OCC to reduce the amount of the assessments paid by non-lead
banks in a banking organization.
List of Subjects in 12 CFR Part 8
Assessments, Fees, National banks.
Authority and Issuance
For the reasons set forth in the preamble, part 8 of chapter I of
title 12 of the Code of Federal Regulations is amended as set forth
below:
PART 8--ASSESSMENT OF FEES; NATIONAL BANKS; DISTRICT OF COLUMBIA
BANKS
1. The authority citation for part 8 is revised to read as follows:
Authority: 12 U.S.C. 93a, 481, 482, and 3102; 15 U.S.C. 78c and
78l; and 26 D.C. Code 102.
2. In Sec. 8.2, paragraph (b) is redesignated as paragraph (b)(1)
and the two undesignated paragraphs at the end of the section are
designated as paragraphs (b)(2) and (b)(3), respectively.
3. In Sec. 8.2, the last sentence of paragraph (a)(5) and the last
sentence of newly designated paragraph (b)(3) are amended by removing
the phrase ``without proration for any reason''.
4. Section 8.2 is amended by adding a new paragraph (a)(6) to read
as follows:
Sec. 8.2 Semiannual assessment.
(a) * * *
(6)(i) Notwithstanding any other provision of this part, the OCC
shall charge each non-lead bank a semiannual assessment that is less
than the amount of the semiannual assessment that the bank otherwise
would be required to pay under the Notice of Comptroller of the
Currency Fees described in Sec. 8.8. The OCC will specify the
percentage of the reduction of assessments for non-lead banks in the
Notice of Comptroller of the Currency Fees.
(ii) For purposes of this paragraph (a)(6):
(A) Non-lead bank means a national bank that is not the lead bank
in a bank holding company that controls two or more national banks;
(B) Lead bank means the largest national bank controlled by a bank
holding company, based on a comparison of the total assets held by each
national bank owned by that bank holding company as reported in each
bank's Call Report filed for the quarter immediately preceding the
payment of a semiannual assessment; and
(C) Bank holding company and control have the same meanings as
these terms have in sections 2(a)(1) and 2(a)(2), respectively, of the
Bank Holding Company Act of 1956 (12 U.S.C. 1841 (a)(1) and (a)(2)).
* * * * *
Dated: November 27, 1996.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 96-30763 Filed 11-29-96; 8:45 am]
BILLING CODE 4810-33-P
