E7-25128. Statement of Policy for Section 19 of the Federal Deposit Insurance Act

AGENCY:

Federal Deposit Insurance Corporation (“FDIC”).

ACTION:

Final agency policy statement (amended).

SUMMARY:

On October 13, 2006, Section 19 of the Federal Deposit Insurance Act was modified to address institution-affiliated parties participating in the affairs of Bank Holding Companies and Savings and Loan Holding Companies. The FDIC is introducing a footnote to its Statement of Policy for Section 19 of the Federal Deposit Insurance Act (“SOP”) that will provide the public with a better understanding of the FDIC's scope given the Federal Reserve System's and Office of Thrift Supervision's new authority under Section 19. The FDIC is not seeking comment on the footnote clarifying the SOP, and the change is effective upon publication in the Federal Register.

DATES:

The change to the policy statement is effective December 28, 2007.

FOR FURTHER INFORMATION CONTACT:

Martin P. Thompson, Review Examiner [phone], or John P. Henrie, Field Supervisor, [phone] in the Division of Supervision and Consumer Protection; or Michael P. Condon, Counsel, [phone], or Richard Bogue, Counsel, [phone], in the Legal Division.

SUPPLEMENTARY INFORMATION:

I. Background

Section 19 of the Federal Deposit Insurance Act, 12 U.S.C. 1829, prohibits, without the prior written consent of the FDIC, a person convicted of any criminal offense involving dishonesty or breach of trust or money laundering, or who has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense, from becoming or continuing as an institution-affiliated party (“IAP”), owning or controlling, directly or indirectly, an insured depository institution (“insured institution”), or otherwise participating, directly or indirectly, in the conduct of the affairs of the insured institution. In addition, the law forbids an insured institution from permitting such a person to engage in any conduct or to continue any relationship prohibited by Section 19. The FDIC's SOP was enacted in November 1998 to provide the public with guidance relating to Section 19, and the application thereof.

The Financial Services Regulatory Relief Act of 2006 ^[1] modified Section 19 to address IAPs affiliated with Bank Holding Companies and Savings and Loan Holding Companies. The FDIC has amended the SOP to introduce a technical change that will provide the public with a better understanding of the FDIC's scope given the FRS' and OTS' new authority under Section 19.

II. Clarifying Amendment to the Statement of Policy

FDIC Statement of Policy for Section 19 of the FDI Act

1. The first sentence of the first paragraph of subsection A is amended by adding footnote number 1.

A. Scope of Section 19

Section 19 covers institution-affiliated parties, as defined by 12 U.S.C. 1813(u), and others who are participants in the conduct of the affairs of an insured institution.¹ * * *

By Order of the Board of Directors.

Dated at Washington, DC, the 19th day of December 2007.

Federal Deposit Insurance Corporation.

Valerie J. Best,

Assistant Executive Secretary.

Footnotes

1.  This Statement of Policy applies only to insured depository institutions and their institution-affiliated parties. In addition to the requirement to file an application with the FDIC, such individuals may also need to comply with any filing requirements established by the Board of Governors of the Federal Reserve System under 12 U.S.C. § 1829(d), in the case of a bank holding company, or with the Office of Thrift Supervision under 12 U.S.C. § 1829(e), in the case of a savings and loan holding company.