[Federal Register Volume 64, Number 124 (Tuesday, June 29, 1999)]
[Notices]
[Pages 34844-34847]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-16471]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket No. 99-06]
FEDERAL RESERVE SYSTEM
[Docket No. R-1036]
FEDERAL DEPOSIT INSURANCE CORPORATION
DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
[Docket No. 99-33]
Branch Closings
AGENCIES: Office of the Comptroller of the Currency (OCC), Treasury;
Board of Governors of the Federal Reserve System (Board); Federal
Deposit Insurance Corporation (FDIC); and Office of Thrift Supervision
(OTS), Treasury.
ACTION: Joint policy statement.
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SUMMARY: The OCC, the Board, the FDIC, and the OTS (the agencies) are
revising their joint policy statement regarding branch closings by
insured depository institutions. This action is needed to incorporate
changes in the underlying statute made by section 106 of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 and
section 2213 of the Economic Growth and Regulatory Paperwork Reduction
Act of 1996. The action is intended to clarify the additional steps
regarding notice and consultation for proposed branch closings by
interstate banks in low- or moderate-income areas, and to clarify the
status of automated teller machines, relocations and consolidations,
and branch closings in connection with emergency acquisitions or
assistance by the FDIC.
EFFECTIVE DATE: June 29, 1999.
FOR FURTHER INFORMATION CONTACT:
OCC: Crystal Maddox, National Bank Examiner, Licensing Policy and
Systems Analyst, Bank Organization and Structure Division (202/874-
5060); Sue Auerbach, Senior Attorney, Bank Activities and Structure
Division (202/874-5300); Beth Knickerbocker, Senior Attorney, Community
and Consumer Law Division (202/874-5750); Office of the Comptroller of
the Currency, 250 E Street, SW., Washington DC 20219.
Board: Rick Heyke, Senior Attorney, Legal Division (202/452-3688),
Board of Governors of the Federal Reserve System, 20th and C Streets,
NW., Washington, DC 20551. For the hearing impaired only,
Telecommunications Device for the Deaf (TDD), Diane Jenkins (202/452-
3544).
FDIC: Curtis Vaughn, Examination Specialist, Division of
Supervision (202/898-6759); Gladys C. Gallagher, Counsel, Legal
Division (202/898-3833); Federal Deposit Insurance Corporation, 550
17th Street, NW., Washington, DC 20429.
OTS: Larry Clark, Director of Trust Programs, Compliance Policy and
Specialty Examinations (202/906-5628); Lucrecia R. Moore, Attorney
(202/906-6161); Office of Thrift Supervision, 1700 G Street, NW.,
Washington DC 20552.
SUPPLEMENTARY INFORMATION:
Background Information
Section 42 of the Federal Deposit Insurance Act (12 U.S.C. 1831r-1)
(FDI Act) requires an insured depository institution to give 90 days
prior written notice of any branch closing to its primary Federal
regulator and to branch customers, to post a notice at the branch site
at least 30 days prior to closing, and to develop a policy with respect
to branch closings. The notice to the regulator must include a detailed
statement of the reasons for the decision to close the branch and
information in support of those reasons.
On September 21, 1993 (58 FR 49083), the agencies issued a joint
policy statement to provide guidance to institutions in complying with
section 42 of the FDI Act. The 1993 joint policy statement defines a
branch for purposes of section 42, clarifies what constitutes a branch
closing, and provides guidance to institutions in identifying customers
to be notified in the event of a branch closing.
On September 29, 1994, section 42 of the FDI Act was amended by
section 106 of the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994 (Pub. L. 103-328, 108 Stat. 2338) (Interstate
Act). The Interstate Act changed section 42 of the FDI Act in two ways,
both relating to proposed closings by interstate banks (banks which
maintain branches in more than one state) of branches in low- or
moderate-income areas: First, by providing a new notice procedure; and
second, by requiring the appropriate Federal banking agency to convene
a meeting of community leaders and other
[[Page 34845]]
persons to discuss the feasibility of obtaining adequate alternative
facilities and services if a person from the affected area requests
such a meeting and other prescribed requirements are satisfied.
On September 30, 1996, section 42 of the FDI Act was amended by
section 2213 of the Economic Growth and Regulatory Paperwork Reduction
Act of 1996 (Pub. L. 104-208, 110 Stat. 3009) (Regulatory Relief Act).
The Regulatory Relief Act amended section 42 of the FDI Act to clarify
that section 42 does not apply to: (1) An automated teller machine; (2)
the relocation of a branch or consolidation of one or more branches
into another branch, if the relocation or consolidation occurs within
the immediate neighborhood and does not substantially affect the nature
of the business or customers served; and (3) a branch that is closed in
connection with an emergency acquisition under sections 11(n), 13(f),
or 13(k) of the FDI Act, or any assistance provided by the FDIC under
section 13(c) of the FDI Act. (12 U.S.C. 1821(n), 1823(f) and (k), and
1823(c)).
The agencies are revising the 1993 joint policy statement to
reflect the changes to section 42 of the FDI Act made by the Interstate
Act and the Regulatory Relief Act. The revised policy statement
incorporates the new procedure and provides for banks to inform
customers in affected areas of their ability to comment on a particular
branch closing. The agencies are also clarifying that main offices,
remote service facilities, loan production offices, and insured
branches of foreign banks are not branches for purposes of section 42.
A reference to the Resolution Trust Corporation (RTC) is being
eliminated since the agency ceased to exist on December 31, 1995. The
agencies are also clarifying the section on allocation of customers to
branches.
The text of the revised joint policy statement follows:
Policy Statement of Office of the Comptroller of the Currency,
Board of Governors of the Federal Reserve System, Federal Deposit
Insurance Corporation, and Office of Thrift Supervision Concerning
Branch Closing Notices and Policies
Purpose
This policy statement provides guidance to each insured depository
institution concerning requirements that an institution provide prior
notice of any branch closing and establish internal policies for branch
closings.1
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\1\ An ``insured depository institution'' means any bank or
savings association, as defined in Section 3 of the FDI Act (12
U.S.C. 1813), the deposits of which are insured by the FDIC.
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Background
The Federal Deposit Insurance Corporation Improvement Act of 1991
(Pub. L. 102-242, 105 Stat. 2236) (FDICIA) was enacted on December 19,
1991. Section 228 of the FDICIA added a new section 42 to the Federal
Deposit Insurance Act (12 U.S.C. 1831r-1) (FDI Act) that imposes notice
requirements on insured depository institutions that intend to close
branches. The provision became effective on December 19, 1991. Section
42 was amended on September 29, 1994, by section 106 of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (Pub. L. 103-
328, 108 Stat. 2338), and on September 30, 1996, by the Economic Growth
and Regulatory Paperwork Reduction Act of 1996 (Pub. L. 104-208, 110
Stat. 3009).
The law requires an insured depository institution to submit a
notice of any proposed branch closing to the appropriate Federal
banking agency no later than 90 days prior to the date of the proposed
branch closing. The required notice must include a detailed statement
of the reasons for the decision to close the branch and statistical or
other information in support of such reasons.
The law also requires an insured depository institution to notify
its customers of the proposed closing. The institution must mail the
notice to the customers of the branch proposed to be closed at least 90
days prior to the proposed closing. The institution also must post a
notice to customers in a conspicuous manner on the premises of the
branch proposed to be closed at least 30 days prior to the proposed
closing.
An interstate bank (defined in section 42 as a bank that maintains
branches in more than one state) proposing to close a branch located in
a low- or moderate-income area is required to include in its notice to
customers the mailing address of the appropriate Federal banking agency
and a statement that comments on the closing may be mailed to the
agency.2 In those cases, a person from the affected area may
submit a written request relating to the proposed closing to the
agency, stating specific reasons for the request and including a
discussion of the adverse effect the closing may have on the
availability of banking services in the affected area. If the agency
determines that the request is nonfrivolous, then the agency shall
convene a meeting of appropriate individuals, organizations, depository
institutions, and agency representatives, as determined by the agency
in its discretion, to explore the feasibility of obtaining adequate
alternative facilities and services for the affected area following the
closing of the branch.
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\2\ Under section 42, this requirement does not apply when a
savings association closes a branch.
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Finally, the law requires each institution to adopt policies
regarding closings of branches of the institution.
Applicability
Section 42 of the FDI Act applies to the closing of a ``branch'' by
an insured depository institution.3 The agencies consider a
``branch'' for purposes of section 42 to be a traditional brick-and-
mortar branch, or any similar banking facility other than a main
office, at which deposits are received or checks paid or money lent.
Notice pursuant to section 42 would not be required for the closing of
non-branch facilities, such as an ATM, remote service facility, or loan
production office, or of a temporary branch.4 The law also
does not apply to mergers, consolidations, or other acquisitions,
including branch sales, that do not result in any branch closings.
Institutions that are in doubt about the coverage of a particular
closing should consult the appropriate Federal banking agency.
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\3\ Insured branches of foreign banks are not considered
``branches'' for purposes of section 42 because they are subject to
separate liquidation procedures as specified in 12 CFR 28.22
(Federal branches of foreign banks) and 12 CFR 211.25(f) (state
branches of foreign banks).
\4\ Consistent with the agencies' original interpretation, the
1996 amendment expressly stated that section 42 of the FDI Act
``shall not apply with respect to automated teller machines.'' (Pub.
L. 104-208, 110 Stat. 3009.)
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Mergers
An institution must file a branch closing notice whenever it closes
a branch, including when the closing occurs in the context of a merger,
consolidation or other form of acquisition.5 Branch closings
that occur in the context of transactions subject to the Bank Merger
Act (12 U.S.C. 1828) require a branch closing notice, even if the
transaction received expedited treatment under that Act. The
responsibility for filing the notice lies with the acquiring or
resulting institution, but either party to such a transaction may give
the notice. Thus, for example, the purchaser may give the notice prior
to consummation of the transaction where the purchaser intends to close
a branch following consummation, or the seller may give the notice
because it intends to close a branch at or prior to consummation. In
the latter example, if the transaction
[[Page 34846]]
were to close ahead of schedule, the purchaser, if authorized by the
appropriate Federal banking agency, could operate the branch to
complete compliance with the 90-day requirement without the need for an
additional notice.
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\5\ See ``Other'' below for certain branches closed in
connection with emergency acquisitions or FDIC assistance or
subsequently transferred back to the FDIC.
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Relocations and Consolidations
The law does not apply when a branch is relocated or consolidated
with one or more other branches if the relocation or consolidation
occurs within the immediate neighborhood and does not substantially
affect the nature of the business or customers served. For purposes of
this policy statement, a branch relocation is a movement within the
same immediate neighborhood that does not substantially affect the
nature of the business or customers served. Generally, relocations will
be found to have occurred only when short distances are involved: For
example, moves across the street, around the corner, or a block or two
away. Moves of less than 1,000 feet will generally be considered to be
relocations. In less densely populated areas or where neighborhoods
extend farther, and a long move would not significantly affect the
nature of the business or the customers served by the branch, a
relocation may occur over substantially longer distances.6
Institutions that are in doubt about whether a relocation or a closing
has occurred should consult the appropriate Federal banking agency.
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\6\ OCC and OTS regulations specify distances considered short-
distance relocations. See 12 CFR 5.3(l) (national banks) and 12 CFR
545.95(c) (thrifts).
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Consolidations of branches are considered relocations for purposes
of this policy statement if the branches are located within the same
neighborhood and the nature of the business or customers served is not
affected. Thus, for example, a consolidation of two branches on the
same block following a merger would not constitute a branch closing.
The same guidelines apply to consolidations as to relocations.
Other
Changes of services at a branch are not considered a branch
closing, provided that the remaining facility constitutes a branch (as
defined herein).7
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\7\ The agencies note that where, after a reduction in services,
the resulting facility no longer qualifies as a branch, section 42
would apply. Thus, notices of branch closing would be required if an
institution were to replace a traditional brick-and-mortar branch
with an ATM.
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Section 42 also does not apply when a branch ceases operation but
is not closed by an institution. Thus, the law does not apply to:
A temporary interruption of service caused by an event
beyond the institution's control (e.g., a natural catastrophe), if the
insured depository institution plans to restore branching services at
the site in a timely manner; 8
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\8\ Section 42 would apply, however, if the institution did not
reopen the branch following the incident. Although prior notice
would not be possible in such a case, the institution should notify
the customers of the branch and the appropriate Federal banking
agency in the manner specified by section 42 to the extent possible
and as soon as possible after the decision to close the branch has
been made.
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Transferring back to the FDIC, pursuant to the terms of an
acquisition agreement, a branch of a failed bank or savings association
operated on an interim basis in connection with the acquisition of all
or part of a failed bank or savings association, so long as the
transfer occurs within the option period or within an occupancy period,
not to exceed 180 days, provided in the agreement.
A branch that is closed in connection with an emergency
acquisition under sections 11(n), 13(f), or 13(k) of the FDI Act, or
any assistance provided by the FDIC under section 13(c) of the FDI Act.
(12 U.S.C. 1821(n), 1823(f) and (k), and 1823(c)).
Notice of Branch Closing to the Agency
The law requires an insured depository institution to give notice
of any proposed branch closing to the appropriate Federal banking
agency no later than 90 days prior to the date of the proposed branch
closing. The required notice must include the following:
Identification of the branch to be closed;
The proposed date of closing;
A detailed statement of the reasons for the decision to
close the branch; and
Statistical or other information in support of such
reasons consistent with the institution's written policy for branch
closings.
If an institution believes certain information included in the
notice is confidential in nature, the institution should prepare such
information separately and request confidential treatment. The agency
will decide whether to treat such information confidentially under the
Freedom of Information Act (5 U.S.C. 552).
If a notice provided to a state supervisory agency pursuant to
state law contains the information outlined above, then the institution
may provide a copy of that notice to the appropriate Federal banking
agency in satisfaction of section 42, provided that the notice is filed
at least 90 days prior to the date of the branch closing.
Notice of Branch Closing to Customers
Customer Allocation
The law requires an insured depository institution that proposes to
close a branch to provide notice of the proposed closing to the
customers of the branch. A customer of a branch is a patron of an
institution who has been identified with a particular branch by such
institution through use, in good faith, of a reasonable method for
allocating customers to specific branches. An institution that
allocates customers based on where a customer opened his or her deposit
or loan account will be presumed to have reasonably identified each
customer of a branch. The agencies recognize that use of this means of
allocation, and perhaps others, may result in certain facilities which
technically constitute branches not being assigned any customers, but
believe that this result is permissible so long as the means of
allocation is reasonable; if such a branch is closed, then notification
to the appropriate agency and posting of a notice on the branch
premises will suffice. Finally, an institution need not change its
recordkeeping system in order to make a reasonable determination of who
is a customer of a branch.
Timing
Under section 42, an institution must include a customer notice at
least 90 days in advance of the proposed closing in at least one of the
regular account statements mailed to customers, or in a separate
mailing. If the branch closing occurs after the proposed date of
closing, no additional notice is required to be mailed to customers (or
provided to the appropriate Federal banking agency) if the institution
acted in good faith in projecting the date for closing and in
subsequently delaying the closing.
Content
The mailed customer notice should state the location of the branch
to be closed and the proposed date of closing, and either identify
where customers may obtain service following the closing date or
provide a telephone number for customers to call to determine such
alternative sites. If a notice of branch closing provided to customers
pursuant to state law contains this information, then a separate notice
need not be sent, provided that the notice is sent at least 90 days
prior to the closing.
Low- or Moderate-Income Areas Served by Interstate Banks
If the institution is a bank that maintains branches in more than
one
[[Page 34847]]
state and the branch to be closed is located in a low-or moderate-
income area,9 the notice shall contain the mailing address
of the appropriate Federal banking agency and a statement that comments
on the proposed branch closing may be mailed to that agency. The notice
should also state that the agency does not have the authority to
approve or prevent the branch closing. If the agency receives a written
request by a person from the area in which the branch is located,
relating to the proposed closing and stating specific reasons for the
request, including a discussion of the adverse effect of such closing
on the availability of banking services in the affected area, and if
the agency concludes that the request is nonfrivolous, then the agency
shall convene a meeting of agency representatives, other interested
depository institution regulatory agencies, community leaders, and
other appropriate individuals, organizations, and depository
institutions, as determined by the agency in its discretion. The
purpose of the meeting shall be to explore the feasibility of obtaining
adequate alternative facilities and services for the affected area,
including the establishment of a new branch by another depository
institution, the chartering of a new depository institution, or the
establishment of a community development credit union, following the
closing of the branch. In the case of an institution which will become
an interstate bank prior to the closure of a branch in a low-or
moderate-income area, such information must be included in the notice
unless the closure will occur immediately upon consummation of the
transaction that causes the institution to become interstate. No action
by the appropriate Federal banking agency under this provision shall
affect the authority of an interstate bank to close a branch (including
the timing of such closing) if the requirements of sections 42(a) and
42(b) of the FDI Act (regarding notice to the appropriate Federal
banking agency and notice to the institution's customers) have been met
by such bank with respect to the branch being closed.
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\9\ The term ``low-or moderate-income area'' means a census
tract for which the median family income is: (1) Less than 80
percent of the median family income for the metropolitan statistical
area (as designated by the Director of the Office of Management and
Budget) in which the census tract is located; or (2) in the case of
a census tract that is not located in a metropolitan statistical
area, less than 80 percent of the median family income for the State
in which the census tract is located, as determined without taking
into account family income in metropolitan statistical areas in such
State. (12 U.S.C. 1831r-l(d)(4)).
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On-Site Notice
Under section 42, an institution also must post notice to branch
customers in a conspicuous manner on the branch premises at least 30
days prior to the proposed closing. This notice should state the
proposed date of closing and identify where customers may obtain
service following that date or provide a telephone number for customers
to call to determine such alternative sites. An institution may revise
the notice to extend the projected date of closing without triggering a
new 30-day notice period.
Contingent Notices
In some situations, an institution, in its discretion and to
expedite transactions, may mail and post notices to customers of a
proposed branch closing that is contingent upon an event. For example,
in the case of a proposed merger or acquisition, an institution may
notify customers of its intent to close a branch upon approval by the
appropriate Federal banking agency of the proposed merger or
acquisition.
Policies for Branch Closings
The law requires all insured depository institutions to adopt
policies for branch closings. Each institution with one or more
branches must adopt such a policy. If an institution currently has no
branches, it must adopt a policy for branch closing when it establishes
its first branch. The policy should be in writing and meet the size and
needs of the institution.
Each branch closing policy adopted pursuant to section 42 should
include factors for determining which branch to close and which
customers to notify, and procedures for providing the notices required
by the statute.
Compliance
The Federal banking agencies will examine for compliance with
section 42 of the FDI Act in accordance with each agency's compliance
examination procedures, to determine whether the institution has
adopted a branch closing policy and whether the institution provided
the required notices when it closed a branch. If an institution fails
to comply with section 42, the appropriate Federal banking agency may
make adverse findings in the compliance evaluation or take appropriate
enforcement action.
Dated: May 19, 1999.
John D. Hawke, Jr.,
Comptroller of the Currency.
By order of the Board of Governors of the Federal Reserve
System, June 22, 1999.
Jennifer J. Johnson,
Secretary of the Board.
Dated: June 3, 1999.
Robert E. Feldman,
Executive Secretary, Federal Deposit Insurance Corporation.
Dated: June 18, 1999.
Ellen Seidman,
Director, Office of Thrift Supervision.
[FR Doc. 99-16471 Filed 6-28-99; 8:45 am]
BILLING CODE Board of Governors: 6210-01-P (25%) OCC: 4810-33-P (25%)
FDIC: 6714-01-P (25%) OTS: 6720-01-P (25%)
