[Federal Register Volume 63, Number 71 (Tuesday, April 14, 1998)]
[Proposed Rules]
[Pages 18149-18150]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-9765]
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Proposed Rules
Federal Register
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This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.
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Federal Register / Vol. 63, No. 71 / Tuesday, April 14, 1998 /
Proposed Rules
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 544
[No. 98-34]
RIN 1550-AB17
Charter and Bylaws; One Member, One Vote
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of Thrift Supervision (OTS) proposes to amend its
regulations on federal mutual savings association charters. The
proposed amendment would expand the range of the number of votes a
federal mutual savings association may allow a member to cast on issues
requiring action by the members of the association from the current 50
to 1000 votes to one to 1000 votes per member. This proposal would add
flexibility to the federal mutual charter, and would in particular
allow a federal mutual savings association to adopt a charter providing
for ``one member, one vote.''
DATES: Comments must be received on or before June 15, 1998.
ADDRESSES: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, NW., Washington, D.C. 20552, Attention Docket No. 98-34. These
submissions may be hand-delivered to 1700 G Street, NW., from 9:00 A.M.
to 5:00 P.M. on business days; they may be sent by facsimile
transmission to FAX Number (202) 906-7755; or they may be sent by e-
mail: public.info@ots.treas.gov. Those commenting by e-mail should
include their name and telephone number. Comments will be available for
inspection at 1700 G Street, NW., from 9:00 A.M. until 4:00 P.M. on
business days.
FOR FURTHER INFORMATION CONTACT: Diana L. Garmus, Director, Corporate
Activities Division (202/906-5683); David A. Permut, Counsel (Banking
and Finance) (202/906-7505) or Kevin A. Corcoran, Assistant Chief
Counsel for Business Transactions (202/906-6962), Business Transactions
Division, Chief Counsel's Office, Office of Thrift Supervision, 1700 G
Street, NW., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
I. Background
Various depository institutions that have expressed interest in
converting to a federal mutual savings association charter 1
have asked to retain existing voting procedures following the
conversion. The OTS has received, for example, inquiries from credit
unions with membership voting rights of one vote per member, who have
asked to retain their current voting requirements upon conversion. The
OTS regulations currently allow a state-chartered savings bank to
retain certain member rights upon conversion to a federal mutual
holding company under the OTS Mutual Holding Company
regulations.2 Today's proposal would provide similar
flexibility for financial institutions, including federal credit
unions, that wish to convert to the federal mutual charter.
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\1\ Section 2(5) of the Home Owners' Loan Act defines ``federal
savings associations'' to include federal savings associations and
federal savings banks. Accordingly, references herein to federal
savings associations include federal savings banks.
\2\ See 12 CFR 575.5(a) (1997), which describes existing and
future depositor and borrower membership rights as the same rights
that were conferred upon depositors and borrowers by the
reorganizing association.
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Under the Home Owners' Loan Act (HOLA),3 the OTS may
charter federal thrifts to provide for the deposit of funds and the
extension of credit for homes and other goods and services.4
The OTS has long taken the position that depository institutions should
be free to operate under whatever charter best suits their business
needs, consistent with safety and soundness. Federal savings
associations may operate under a stock charter or mutual charter.
Within each charter, the OTS permits variations.
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\3\ 12 U.S.C. 1461 et seq.
\4\ 12 U.S.C. 1464(a).
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Federal mutual savings associations have varying voting provisions,
often based upon when they obtained their charters. The federal charter
first introduced in 1933 specified that each member received one vote
for every $100 on deposit, subject to a maximum of 50 votes per member.
This 50 vote limit corresponded to the maximum allowable deposit
insurance for one account, $5,000. When deposit insurance limits were
raised to $40,000 per account, the Federal Home Loan Bank Board
(``FHLBB''), predecessor to the OTS, began to issue charters with a
maximum of 400 votes per member, again to correspond to the insurance
limits. When the statutory deposit insurance limits were increased to
$100,000 per account in 1980,5 the FHLBB again amended the
federal mutual charter to allow for 1,000 votes per member.6
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\5\ Pub. L. 96-221, 94 Stat. 147, March 31, 1980 (Codified at 12
U.S.C. 1728).
\6\ See FHLBB Res. No. 83-528, 48 FR 44174 (Sept. 28, 1983).
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II. Proposal
The purpose of today's proposed regulation is to allow greater
flexibility in determining the number of votes per member. The
amendment will permit mutual depository institutions that are
converting to federal savings associations to retain the one vote per
member provision in their current charters, and will permit converting
institutions as well as existing federal mutual savings associations to
adopt a one vote per member provision.
Currently, Section 6 of the OTS model federal mutual charter
7 states that no member may cast more than 1,000 votes.
Section 544.2, however, permits a federal mutual savings association to
amend its charter and prescribe the maximum number of votes per member
to a specific number between 50 and 1000.
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\7\ 12 CFR 544.1 (1997).
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The OTS is proposing to amend 12 CFR 544.2(b)(4) to permit
federally chartered mutual savings associations to set the number of
votes per member within the range of 1 to 1,000, rather than the
current range of 50 to 1,000. New federal mutual savings associations
may include this provision in their initial federal thrift charter.
Existing federal mutual associations may amend their charters under the
prescribed regulatory procedures. 8 Specifically, an
institution would: (i) Obtain a board of directors' resolution adopting
the
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amendment, (ii) obtain a favorable vote by the members, and (iii)
notify the OTS of the adoption at least 30 days prior to the effective
date of the proposed amendment. Unless the OTS notifies the institution
of its objection to the proposed amendment within that 30 days, the
amendment is automatically approved.
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\8\ 12 CFR 544.2(b) (1997).
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III. Solicitation of Comments
The OTS is asking for comment on the proposal. Specifically, the
OTS seeks comment on:
Whether federal mutual savings associations would expect
to encounter any corporate governance problems if they chose to reduce
the maximum number of votes per member. For example, would the savings
association encounter any difficulty in obtaining the necessary votes
of members to take corporate actions?
Whether existing federal mutual associations would find
the added flexibility of an expanded voting requirement useful.
Whether, and under what circumstances, a one vote per
member limitation would either entrench or destabilize management.
Whether by imposing such a limitation, federal
associations with a higher minimum vote requirement that adopt a lower
minimum vote requirement could risk legal actions by account holders.
Whether the proposed revision should be continued as a
preapproved charter amendment, or whether savings associations that
seek to adjust the number of votes per member should be required to
submit an application to the OTS.
IV. Executive Order 12866
The Director of the OTS has determined that this proposed rule does
not constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
V. Regulatory Flexibility Act Analysis
Pursuant to Section 605(b) of the Regulatory Flexibility Act, the
OTS certifies that this proposal will not have a significant economic
impact on a substantial number of small entities. Small entities
utilizing the regulation may be able to retain their existing
membership rights, which will simplify the process of converting to a
federal charter and reduce regulatory burden.
VI. 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 expenditures by state, local, and
tribal governments, in the aggregate, or by the private sector, or $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 OTS has determined that
the proposed 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.
List of Subjects in 12 CFR Part 544
Bylaws, Charters, Reporting and recordkeeping requirements, savings
associations.
Accordingly, the Office of Thrift Supervision proposes to amend
chapter V, title 12, Code of Federal Regulations, as set forth below:
PART 544--CHARTER AND BYLAWS
1. The authority citation for part 544 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
2. Section 544.2 is amended by revising the last sentence of
paragraph (b)(4) to read as follows:
Sec. 544.2 Charter amendments.
* * * * *
(b) * * *
(4) * * * [Fill in a number from 1 to 1000.]
* * * * *
Dated: March 31, 1998.
By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-9765 Filed 4-13-98; 8:45 am]
BILLING CODE 6720-01-P
