[Federal Register Volume 60, Number 76 (Thursday, April 20, 1995)]
[Proposed Rules]
[Pages 19688-19690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9737]
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[[Page 19689]]
FEDERAL RESERVE SYSTEM
12 CFR Part 215
[Regulation O; Docket No. R-0875]
Loans to Executive Officers, Directors, and Principal
Shareholders of Member Banks; Loans to Holding Companies and Affiliates
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
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SUMMARY: The Board is proposing an amendment to Regulation O to conform
the definition of unimpaired capital and unimpaired surplus in the
regulation's definition of lending limit to the definition of capital
and surplus recently adopted by the Office of the Comptroller of the
Currency in calculating the limit on loans by a national bank to a
single borrower. The proposed rule would reduce the recordkeeping
burden for member banks monitoring lending to their insiders and their
related interests.
DATES: Comments should be submitted on or before May 22, 1995.
ADDRESSES: Comments should refer to Docket No. R-0875, and may be
mailed to William 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 may be
inspected in Room MP-500 of the Martin Building between 9 a.m. and 5
p.m. weekdays, except as provided in 12 CFR 261.8 of the Board's rules
regarding availability of information.
FOR FURTHER INFORMATION CONTACT: Gregory Baer, Managing Senior Counsel
(202/452-3236), or Gordon Miller, Attorney (202/452-2534), Legal
Division; or William G. Spaniel, Assistant to the Director (202/452-
3469), Division of Banking Supervision and Regulation, Board of
Governors of the Federal Reserve System. For the hearing impaired only,
Telecommunications Device for the Deaf (TDD), Dorothea Thompson (202/
452-3544).
SUPPLEMENTARY INFORMATION:
Background
The Board's Regulation O (12 CFR Part 215) implements the insider
lending prohibitions of section 22(h) of the Federal Reserve Act.
Section 215.2(i) of the regulation (12 CFR 215.2(i)) defines the limit
for loans to any insider of a member bank and insider of the bank's
affiliates as an amount equal to the limit on loans to a single
borrower established by the National Bank Act (12 U.S.C. 84). That
amount is 15 percent of the bank's unimpaired capital and unimpaired
surplus for loans that are not fully secured, and an additional 10
percent of the bank's unimpaired capital and unimpaired surplus for
loans that are fully secured by certain readily marketable
collateral.1
\1\The lending limit also includes any higher amounts that are
permitted by the exceptions included in 12 U.S.C. 84. Where state
law establishes a lower lending limit for a state member bank, that
lower lending limit is the lending limit for the state member bank.
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Although Regulation O adopts the percentage limits used in the
National Bank Act, Regulation O provides its own definition of what
constitutes unimpaired capital and unimpaired surplus. Unimpaired
capital and unimpaired surplus are equal to the sum of (i) ``total
equity capital'' as reported on the bank's most recent consolidated
report of condition, (ii) any subordinated notes and debentures that
comply with requirements of the bank's primary regulator for inclusion
in the bank's capital structure and are reported on the bank's most
recent consolidated report of condition, and (iii) any valuation
reserves created by charges to the bank's income and reported on the
bank's most recent consolidated report of condition. 12 CFR 215.2(i).
The Office of the Comptroller of the Currency (OCC) has recently
revised its regulatory definition of unimpaired capital and unimpaired
surplus for purposes of implementing the single borrower limit of the
National Bank Act. See 59 FR 8533, February 15, 1995. Under that
revised definition, a national bank's ``capital and surplus'' are equal
to Tier 1 and Tier 2 capital included in the calculation of the bank's
risk-based capital together with the amount of the bank's allowance for
loan and lease losses not included in this calculation. 12 CFR 32.2(b).
The Board is proposing to amend Regulation O to conform its
definition of unimpaired capital and unimpaired surplus to the OCC's
revised definition of capital and surplus. In substantially all cases,
the Board believes that calculating the insider lending limits of
Regulation O using the revised definition would not significantly
increase or decrease a bank's insider lending limit. The elimination of
the separate definition of unimpaired capital and unimpaired surplus in
Regulation O therefore is expected to create minimal disruption in
lending by member banks to their insiders and to insiders of their
affiliates, while eliminating duplication in the calculation of lending
limits for national banks and for state member banks with state lending
limits identical to national bank lending limits.
Initial Regulatory Flexibility Analysis
The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) requires an
agency to publish an initial regulatory flexibility analysis with any
notice of proposed rulemaking. Two of the requirements of an initial
regulatory flexibility analysis (5 U.S.C. 603(b))--a description of the
reasons why the action by the agency is being considered and a
statement of the objectives of, and legal basis for, the proposed
rule--are contained in the supplementary information above.
Another requirement for the initial regulatory flexibility analysis
is a description of, and where feasible, an estimate of the number of
small entities to which the proposed rule will apply. The proposed rule
would apply to all member banks, regardless of size. The Board has
determined that its proposed rule would impose no additional reporting
or recordkeeping requirements, and that there are no relevant federal
rules that duplicate, overlap, or conflict with the proposed rule. In
addition, the proposed rule is not expected to have a negative economic
impact on small institutions. Instead, the proposed rule is expected to
relieve the regulatory burden on a large majority of member banks.
Paperwork Reduction Act
In accordance with section 3507 of the Paperwork Reduction Act of
1980 (44 U.S.C. 3507; 5 CFR 1320.13), the Board will review its
proposed amendment to Regulation O under authority delegated to the
Board by the Office of Management and Budget after considering comments
received during the public comment period.
List of Subjects in 12 CFR Part 215
Credit, Federal Reserve System, Penalties, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 215 as set forth below:
PART 215--LOANS TO EXECUTIVE OFFICERS, DIRECTORS, AND PRINCIPAL
SHAREHOLDERS OF MEMBER BANKS (REGULATION O)
1. The authority citation for part 215 continues to read as
follows:
[[Page 19690]] Authority: 12 U.S.C. 248(i), 375a(10), 375b (9)
and (10), 1817(k)(3) and 1972(2)(G)(ii); Pub. L. 102-242, 105 Stat.
2236.
2. Section 215.2 is amended as follows:
a. The last sentence of paragraph (i) introductory text is revised;
b. Paragraphs (i)(1) and (i)(2) are revised; and
c. Paragraph (i)(3) is removed.
The revisions read as follows:
Sec. 215.2 Definitions.
* * * * *
(i) * * * A member bank's unimpaired capital and unimpaired surplus
equals:
(1) A bank's Tier 1 and Tier 2 capital included in the bank's risk-
based capital under the capital guidelines of the appropriate Federal
banking agency, based on the bank's most recent consolidated report of
condition filed under 12 U.S.C. 1817(a)(3); and
(2) The balance of a bank's allowance for loan and lease losses not
included in the bank's Tier 2 capital for purposes of the calculation
of risk-based capital by the appropriate Federal banking agency, based
on the bank's most recent consolidated report of condition filed under
12 U.S.C. 1817(a)(3).
* * * * *
By order of the Board of Governors of the Federal Reserve
System, April 14, 1995.
William W. Wiles,
Secretary of the Board.
[FR Doc. 95-9737 Filed 4-19-95; 8:45 am]
BILLING CODE 6210-01-P
