[Federal Register Volume 59, Number 83 (Monday, May 2, 1994)]
[Unknown Section]
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From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-10392]
[[Page Unknown]]
[Federal Register: May 2, 1994]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
12 CFR Part 5
[Docket No. 94-06]
RIN 1557-AB27
Rules, Policies and Procedures for Corporate Activities: Merger,
Consolidation, Purchase and Assumption
AGENCY: Comptroller of the Currency, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of the Comptroller of the Currency (OCC) is
adopting final procedures for national banks to follow in merging or
consolidating with Federal savings associations. This action is
necessary because the Federal Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA), which authorized national bank mergers and
consolidations with Federal Savings associations, did not establish
procedures for such transactions. To the extent appropriate, the
procedures imposed here parallel the statutory and regulatory
procedures governing mergers and consolidations between national banks
and state-chartered financial institutions.
EFFECTIVE DATE: This rule is effective on May 2, 1994.
FOR FURTHER INFORMATION CONTACT: Jerome L. Edelstein, Senior Counsel,
Corporate Organization and Resolutions Division, (202) 874-5300; Nancy
Cody, National Bank Examiner/Senior Analyst, Bank Organization and
Structure, (202) 874-5060, 250 E St. SW., Washington, DC 20219.
SUPPLEMENTARY INFORMATION:
Background
Sections 501(a) and 502(b) of title V of the FDICIA, Public Law
102-242, amended the National Bank Act, at 12 U.S.C. 215c, and the
Federal Deposit Insurance Corporation Act (FDI Act), at 12 U.S.C.
1815(d)(3), to authorize national banks, subject to certain
limitations, to acquire or be acquired by Federal savings associations.
Acquisitions, within the meaning of title V, include mergers and
consolidations in addition to purchase and assumption transactions.
Title V clearly authorizes national banks to merge or consolidate with
Federal savings associations if the transaction meets the requirements
set forth in title V.
The authority to merge or consolidate with Federal savings
associations, granted in Title V of FDICIA, supplements long-standing
national bank authority to merge or consolidate with other national
banks or with state chartered financial institutions, including savings
associations. National banks also have had the authority to engage in
purchase and assumption transactions with both Federal and state
chartered depository institutions, including savings associations.
The existing statutes permitting national bank consolidations and
mergers provide procedures for such activities including, under Federal
law at 12 U.S.C. 214(a), 214a, 215, and 215a, specific procedures for
shareholder approval and dissenter's rights for mergers and
consolidations between national banks and with state chartered banking
institutions. The FDICIA did not address such matters for mergers and
consolidations between national banks and Federal savings associations.
Thus, there is significant uncertainty about procedures for national
banks merging or consolidating with Federal savings associations.
Purpose
To address the uncertainty, the OCC, on November 3, 1992, published
an interim rule with request for comment. That rule established
procedures for national banks to merge or consolidate with Federal
savings associations (57 FR 49639). The interim rule, to the extent
appropriate, applied the statutory procedures for mergers and
consolidations between national banks and with state-chartered banking
institutions. The preamble to the interim rule as published at 57 FR
49639-49642 provided a complete explanation. In summary, these
procedures addressed:
--Approval by the board of directors of each institution proposing to
engage in such a merger or consolidation;
--Notice to and approval by the shareholders of such institutions;
--Rights of shareholders who dissent from the proposed transaction and
procedures for valuing their shares; and
--Succession of the resulting institution to all property and rights of
the consolidating or merging institutions.
In addition, the interim rule made various technical changes to 12
CFR Sec. 5.33 governing merger, consolidation, and purchase and
assumption transactions by national banks. These changes make it clear
that the provisions also apply to mergers and consolidations between
national banks and Federal savings associations. These provisions
include:
--The requirement that all participating depository institutions file
relevant proxy material or information with the OCC;
--The application of the OCC's policy on name changes when the
resulting bank selects a new title; and
--The OCC's option to examine any institution proposing to merge into
or be consolidated with a national bank and to charge the applicants a
fee for the examination.
Another change clarifies the authority of national banks to
temporarily retain nonconforming assets acquired in a merger or
consolidation with another depository institution.
The interim rule also provides that the OCC has no approval
authority over a merger or consolidation transaction where the
resulting institution is not a national bank. It requires a national
bank to notify the OCC when it intends to be merged or consolidated
into a depository institution with a different type of charter.
This final rule, adopted by the OCC pursuant to its authority under
the National Bank Act, including 12 U.S.C. 93a and 215c, finalizes the
interim rule. There is one change between the final rule and the
interim rule. The change, which addresses a national bank's retention
of nonconforming assets acquired in a merger or consolidation with
another banking institution, is discussed below.
Comments on the Interim Rule
The OCC received four comment letters on the interim rule--three
filed on behalf of banks and one filed by the Federal Home Loan Bank of
Atlanta (FHLB).
The comment filed by the FHLB concerned Sec. 5.33(b)(8) of the
interim rule, which states that the OCC may permit a national bank to
acquire nonconforming assets through merger (or consolidation) and
retain and carry those assets until they can be divested. The FHLB was
concerned that FHLB stock would have to be divested although the
resulting national bank intended to become an FHLB member. Subject to
OCC approval, a national bank may retain FHLB stock while it takes
actions necessary to become an FHLB member. The interim rule did not
require divestiture of FHLB stock under these circumstances.
Nevertheless, the OCC agrees that there could be confusion
regarding this requirement. Therefore, in this final rule, the OCC has
revised Sec. 5.33(b)(8) to reflect that the OCC may approve a national
bank to hold nonconforming assets for a reasonable time until such
assets can be made to conform.
One bank commenter was concerned that the interim rule
unintentionally required shareholder approval for branch purchases and
sales between national banks and Federal savings associations. The
commenter's concern arises because Sec. 5.33(b)(1) of the interim rule
indicates the term merger refers to a merger, consolidation, or
purchase and assumption, unless the context indicates otherwise. The
provision addressing shareholder approval requirements, 12 CFR 5.33(c),
however, specifically refers to mergers and consolidations, thus in
context, clearly indicating that the general definition of the term
``merger'' is inapplicable and that the shareholder approval provision
does not apply to branch purchases and sales. The OCC believes that
Sec. 5.33 (b)(1) and (c) are sufficiently clear and, therefore, is
adopting these provisions without change.
The two other bank commenters raised issues beyond the scope of
this rulemaking. One bank commenter dealt with the time period for
processing applications for mergers, consolidations, and purchase and
assumption transactions between national banks and various types of
banking institutions in light of certain provisions of the FDICIA. The
interim rule specifically did not address the scope or applicability of
the statutory timeframes; consequently, the OCC does not believe that
it is appropriate to address those issues in this final rule.
The other bank commenter dealt with procedures to affect mergers
and consolidations between national banks and mutual savings
associations. As stated, the purpose of the interim rule was simply to
apply existing statutory and regulatory procedures governing certain
national bank mergers and consolidations to mergers and consolidations
between national banks and Federal savings associations. The OCC will
continue to process applications where mutual savings associations
convert to the stock form of organization and subsequently merge or
consolidate with, or convert into a national bank.
Reasons for Immediate Effective Date
Because statutory law currently authorizes mergers and
consolidations between national banks and Federal savings associations,
and because the procedures in this final rule are already in effect,
the OCC finds that a delay in implementation is unnecessary. Moreover,
the OCC has made only one change from the interim rule. That change,
regarding retention of nonconforming assets, relieves a restriction.
Thus, this final rule is being adopted effective immediately.
Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
Comptroller of the Currency certifies that this final rule will not
have a significant economic impact on a substantial number of small
entities. This final rule imposes only minimal costs on national banks,
regardless of size.
Executive Order 12866
It has been has determined that this document is not a significant
regulatory action as defined in Executive Order 12866.
List of Subjects in 12 CFR Part 5
Administrative practice and procedure, National banks, Reporting
and recordkeeping requirements, Securities.
Authority and Issuance
Accordingly, the interim rule amending 12 CFR part 5, published at
57 FR 49639-49644 on November 3, 1992, is adopted as a final rule with
the following change:
PART 5--RULES, POLICIES, AND PROCEDURES FOR CORPORATE ACTIVITIES
1. The authority citation for part 5 continues to read as follows:
Authority: 12 U.S.C. 1 et seq., 93a.
2. In Sec. 5.33, paragraph (b)(8) is revised to read as follows:
Sec. 5.33 Merger, consolidation, purchase and assumption.
* * * * *
(b) * * *
(8) Nonconforming assets. A national bank seeking to acquire and
retain nonconforming assets in a merger shall identify those assets as
required by the OCC's merger application. OCC, in its discretion, may
permit the bank to retain the assets for a reasonable time to allow it
to dispose of or conform the assets. Retention may be subject to
conditions and an OCC determination of the carrying value of the
retained assets.
* * * * *
Dated: April 25, 1994.
Eugene A. Ludwig,
Comptroller of the Currency.
[FR Doc. 94-10392 Filed 4-29-94; 8:45 am]
BILLING CODE 4810-33-P
