[Federal Register Volume 63, Number 157 (Friday, August 14, 1998)]
[Proposed Rules]
[Pages 43642-43649]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-21866]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 502
[No. 98-74]
RIN 1550-AB20
Assessments and Fees
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Office of Thrift Supervision (OTS) is proposing to amend
its regulations to more equitably impose assessments on savings
associations. OTS's experience has shown that the current assessment
structure may cause some savings associations to pay assessments over
or under OTS's costs of supervising those savings associations. The
proposal seeks to minimize these disparities. In particular, the
proposal would increase assessments on most institutions with
significant off-balance sheet activities. In the aggregate, the
proposed changes should initially result in decreased assessments with
respect to healthy institutions without significant off-balance sheet
activities. The proposal would also clarify certain other matters
involving assessments and other fees and would revise the entire
assessment and fee regulation using a plain language format.
DATES: Comments must be received on or before October 13, 1998.
ADDRESSES: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552, Attention Docket No. 98-74. 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 by e-mail:
public.info@ots.treas.gov. 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: Christine Harrington, Counsel (Banking
and Finance), (202) 906-7957, or Karen Osterloh, Assistant Chief
Counsel, (202) 906-6639, Regulations and Legislation Division, Chief
Counsel's Office; or Eric Hirschhorn, Principal Financial Economist,
(202) 906-7350, Research & Analysis; William Brady, Acting Director,
Planning & Budget, (202) 906-7408, Office of Thrift Supervision, 1700 G
Street, NW., Washington, DC 20552.
SUPPLEMENTARY INFORMATION:
I. Background
OTS is charged with the mission of examining, regulating, and
providing for the safe and sound operation of savings
associations.1 Under 12 U.S.C. 1467, OTS funds these
operations through assessments on savings associations and through
other fees, as necessary and appropriate.
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\1\ 12 U.S.C. 1463(a).
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In the Federal Deposit Insurance Corporation Improvement Act of
1991 (FDICIA), Congress amended OTS's statutory assessment authority by
removing a provision requiring OTS to assess the costs of examining
savings associations and their affiliates in proportion to their assets
or resources. Instead, Congress authorized the Director of OTS to
assess examination costs against savings associations and their
affiliates, and to recover the agency's direct and indirect expenses,
as the Director deems necessary or appropriate. OTS's experience has
shown that the current assessment structure can be improved to more
equitably correlate assessments with OTS's costs. OTS proposes to
exercise FDICIA's added flexibility to better apportion the costs of
OTS regulation among savings associations. The agency has two primary
goals: (1) establishing an assessment structure that keeps the
assessment rates as low as possible while providing the agency the
resources essential to effective supervision of a changing industry,
and (2) more closely tailoring rates to the agency's increased costs in
supervising certain types of institutions. In the aggregate, the
proposed changes should initially result in decreased assessments for
healthy institutions without significant off-balance sheet activities,
that is, for traditional thrift institutions. In the future, OTS's
revenue would increase or decrease as the size, activities, and
condition of institutions it regulates, change.
II. Description of Proposal
Under the proposed rule, OTS will determine a savings association's
assessment by adding together three components that reflect the size of
the institution, its condition, and the complexity of its operations.
As discussed more fully below, in the agency's experience, each of
these factors substantially affects OTS's costs of supervising savings
associations.
A. Asset Size
Under the current OTS regulation, assessments are based on the
savings association's total assets, as reported in the consolidated
Thrift Financial Report. OTS's current regulation uses decreasing
marginal assessment rates for increasingly larger institutions. This
method was intended to reflect economies of scale realized in
supervising and regulating larger institutions. However, OTS's
experience has shown that the current regulation uses marginal
assessment rates that are no longer consistent with OTS's economies of
scale. Further, it omits certain fixed costs that are the same or
nearly the same for institutions of all sizes, such as costs of
drafting regulations and policies, and basic costs of conducting
examinations.
OTS derived information on the magnitude of economies of scale in
thrift supervision and the relationship between other thrift
institution attributes and supervisory expenses from a statistical
analysis of the variation in total examiner hours among thrifts.
Examiner hours are the main component of supervisory expenses that vary
with the size, condition, or other
[[Page 43643]]
attributes of thrift institutions. As such, they are a useful standard
for evaluating the consistency between an assessment schedule and
actual supervision costs.
An analysis of examiner hours at all OTS-supervised thrifts for
1996 and 1997 confirmed that there are substantial economies of scale
in thrift examination and found that the percentage decline in the
number of examiner hours per million dollars of assets is fairly steady
as size increases. OTS used regression analyses to estimate the
marginal increases in examiner hours for different size groups and how
these marginal increases change with size. This analysis further
confirmed the economies of scale in thrift examination and provided
support for the rate of decline in the proposed marginal assessment
rates.
The proposed regulation is designed to make OTS assessments more
equitable for institutions of all sizes. First, as under the current
regulation, the asset size component would impose marginal assessment
rates that decline as asset size increases. Second, OTS would
incorporate some of its fixed costs into the assessment rates schedule
via an explicit fixed charge. The Office of the Comptroller of the
Currency (OCC) has an analogous charge in its assessment schedule in
the form of a very high rate on the first two million dollars of
assets.
In analyzing the effects of various base assessment rates, OTS
found that the proposed changes, while reflecting OTS's costs, could
have a disproportionate impact on assessments for the smallest savings
associations, those with less than $100 million in assets. OTS is
concerned that such a change might impose undue burdens on those
savings associations, which may not be in a position to readily absorb
such increased costs. Therefore, OTS proposes to include an alternative
size component calculation for such institutions. Under the proposal, a
savings association that existed on the effective date of the
regulation and never had more than $100 million in assets at the end of
any quarter would be a ``qualifying savings association.'' Such an
institution would lose its status as a qualifying institution if,
following the effective date of the regulation, its assets exceeded
$100 million at the end of any quarter. Savings associations formed
after the regulation becomes effective would not be considered
qualifying savings associations. The size component for a qualifying
savings association would be the lesser of the amount that would be
required under the proposed regulation, or the amount that would be
required under the current OTS assessment structure. Because this
alternative is designed to minimize the potential burden associated
with changing to a new assessment structure, OTS specifically requests
comment on whether this treatment should be phased out in the future
and, if so, what phase-out method or period would be appropriate.
As proposed, the asset-based assessment would use a chart to
identify base assessment amounts for total assets at a certain levels,
and impose marginal rates on assets above those levels. This is similar
to the treatment under existing part 502. However, unlike the existing
regulation, proposed part 502 would not include specific base
assessment
amounts or marginal rates in the regulatory text. Rather, OTS proposes
to publish the specific base assessment amounts and marginal rates in
Thrift Bulletins.\2\
OTS currently publishes assessment rates in a Thrift Bulletin,
under authority in current Sec. 502.6 to set rates lower than those
published in current Sec. 502.1. Since the early 1990's, thrifts have
been charged assessments that are different from those included in the
regulation. Having outdated rates in the regulation has caused
confusion. Publishing the rates solely in Thrift Bulletins is designed
to eliminate this confusion. In addition to mailing Thrift Bulletins to
every thrift, OTS puts its Thrift Bulletin on its website (http://
www.ots.treas.gov/) for ready public access. OTS believes that
including this information in Thrift Bulletins rather than in a
regulation would also allow more flexibility to match assessments with
costs when OTS's supervisory costs change. As the industry changes, OTS
costs of supervision and examination will continue to fluctuate. OTS
solicits comments on whether this approach is appropriate.
OTS is currently considering a size component initially containing
the base amounts and marginal rates listed in the following chart:
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If the amount of total assets is-- The size component is--
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Over But not over This amount Plus Of excess over
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$0............................. $67 million...... $1,250 .00015424 $0
67 million..................... 215 million...... 11,584 .00010288 67 million.
215 milion..................... 1 billion........ 26,810 .00008230 215 million.
1 billion...................... 6.03 billion..... 91,416 .00006584 1 billion.
6.03 billion................... 18 billion....... 422,591 .00005267 6.03 billion.
18 billion..................... 35 billion....... 1,053,051 .00004214 18 billion.
35 billion..................... ................. 1,769,431 .00003371 35 billion.
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The actual rates contained in the Thrift Bulletin implementing a final
regulation may differ from those in this chart. The chart reflects
OTS's current costs and the assessment structure proposed today.
Because OTS intends the proposed changes to its assessments regulation
to decrease assessments, in the aggregate, for healthy institutions
without significant off-balance sheet activities, and because OTS is
proposing different options for assessment methods, OTS cannot yet
determine with certainty the base assessment amounts and marginal rates
that would be in the initial Thrift Bulletin. For example, if OTS were
to decide against including a complexity component (discussed below),
the agency would charge higher rates under the size component. The
actual amounts and rates therefore may change depending on which
options OTS selects, taking into account comments OTS receives. At the
same time, OTS wants to be as informative as possible about potential
base assessment amounts and marginal rates. Savings associations may
find this chart useful in determining how this proposed regulation may
affect them. As discussed above, OTS will not include specific rates in
the final rule. The rates assessed under an implementing Thrift
Bulletin will reflect the final regulation structure and OTS's
anticipated costs at the time it issues the Thrift Bulletin.
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\2\ This approach is similar to the OCC's long-standing approach
in its assessment regulations at 12 CFR part 8 (1998).
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OTS specifically seeks comment on how best to match assessments to
OTS's costs of examining and supervising savings associations. While
OTS has proposed to maintain a system of declining marginal assessment
rates, it
[[Page 43644]]
seeks comment on whether any other assessment method may also be
appropriate. OTS also seeks comment on how best to cover fixed costs
that are the same or nearly the same for institutions of all sizes. For
example, should OTS incorporate fixed costs into the assessment rate
schedule or use some other method to cover these costs? OTS also
solicits comments on any aspects of the proposed cap for the size
component for qualifying small institutions. Further, OTS seeks
comments on whether asset-based assessments should be based on total
assets, as under the current regulation, or whether it should be based
on some other measure of assets.
B. Condition
OTS's current regulation includes a 50% premium on the asset-based
assessment for institutions with a composite safety and soundness
examination rating of 4 or 5 because such institutions require more
supervision than higher-rated institutions. Institutions that are rated
in the top three categories are not charged this condition-based
premium. OTS's experience with this assessment structure since 1990 has
shown that the premium rate reflects the higher costs associated with
4- or 5-rated institutions. However, OTS has also found that the
current two-tiered premium structure does not fully reflect supervision
costs for other institutions. Specifically, OTS used regression
analyses of the variation in examiner hours across thrifts to estimate
the percentage differences in examiner hours across thrifts grouped by
safety and soundness examination rating. These analyses show that 3-
rated associations generally require substantially more supervision
than 1-and 2-rated institutions, but not as much as 4- and 5-rated
institutions. Thus, under the current regulation, the higher
supervisory costs for 3-rated institutions may be subsidized by thrifts
with ratings other than 3 since 3-rated institutions pay no additional
premium.
The proposed rule would amend OTS's current premium assessment to
correlate the assessments more closely with OTS's costs. The
statistical analysis of examiner hours found that the added burdens
from 3-rated institutions are approximately half as great as those from
4- and 5-rated institutions. Accordingly, the proposal would impose a
25% premium on the size component of the asset-based assessment for 3-
rated institutions. The proposal would continue to increase the size
component of the asset-based assessment by 50% for 4- and 5-rated
institutions, consistent with OTS's current practice.
OTS encourages comments on any aspects of the proposed condition
component, including whether this component should be based on the
examination ratings or some other factor. OTS further solicits comments
on whether any condition component should be based on total assets, as
under the current regulation, or whether it should be based on some
other measure of assets.
C. Complexity
OTS's current asset-based assessment is based on total assets as
reported on the consolidated Thrift Financial Report. Accordingly, the
asset-based assessment does not reach off-balance sheet assets. OTS
must, however, examine and supervise activities involving off-balance
sheet assets, as well as other assets, to ensure the safety and
soundness of thrift institutions. As a result, OTS incurs expenses
relating to institutions with off-balance sheet assets, and these
expenses can be substantial. Under the current system, these costs are
not assessed directly against the institutions with off-balance sheet
assets, but are shared by all savings associations. Thus, institutions
with minimal or no off-balance sheet assets effectively subsidize the
supervisory costs of institutions with extensive off-balance sheet
assets.
OTS measured the supervisory expenses associated with certain off-
balance sheet activities by extending the regression models of examiner
hours discussed above to determine whether thrifts engaged in these
activities absorb more examiner hours than would be expected based on
asset size and examination ratings. The off-balance sheet activities
included in these analyses were those that impose significant
supervisory burden--trust assets administered by the thrift, loans
serviced for others, and off-balance sheet assets for which the thrift
holds recourse obligations or that are direct credit substitutes. These
analyses found significantly greater supervisory expenses for
institutions with substantial volumes of these activities.
To mitigate the inequities of assessments not matching costs of
supervising complex assets, OTS proposes to amend the assessment
regulation to include a new complexity component. By taking certain
off-balance sheet assets into account, OTS's assessment rates can be
more closely tailored to its expenses in examining institutions. The
proposed complexity component would address trust assets administered
by a savings association, loans serviced for others by a savings
association (including both residential and non-residential loans), and
off-balance sheet assets that are recourse obligations or direct credit
substitutes, as described in the Thrift Financial Report.
OTS is considering whether the complexity component should also
address commercial and non-residential mortgage loans. OTS analyses
have found a high correlation between amounts of these types of loans
and the number of examiner hours and the amount of supervisory
expenses. Savings associations that concentrate on residential mortgage
loans require substantially less examination and supervision than
associations with less traditional loan portfolio concentrations. An
asset-based assessment that treats all loans equally causes traditional
mortgage lenders to subsidize OTS's extra supervisory workload for non-
traditional thrifts. OTS, therefore, seeks comments on whether it
should include commercial and non-residential mortgage loans in the
complexity component.
As proposed, the complexity component would apply only to the
extent that assets included in each category of complex assets (trust
assets, loans serviced for others, and recourse obligations or direct
credit substitutes) exceed a threshold of $1 billion. OTS's experience
shows that the added supervisory workload for institutions with such
complex assets does not become significant until the assets reach
relatively high levels. Therefore, OTS proposes a minimum level of
assets below which OTS would not consider complexity. OTS would compute
the $1 billion threshold separately for each class of complex assets.
OTS currently expects that the assessment rate for complexity
components would be 0.0015% of the amount of assets covered by each
element of the complexity component over the $1 billion threshold,
based on the proposed assessment provisions and OTS's costs. OTS would
publish the assessment rate for the complexity component in a Thrift
Bulletin, available on OTS's website, rather than in a regulation. This
would allow OTS the flexibility to match assessments with fluctuating
supervisory costs. Depending on the assessment structure of any final
rule, the actual complexity component and the threshold may be
different than the proposal.
OTS solicits comments on whether it is appropriate to consider off-
balance sheet assets of any type, including the proposed types, for
purposes of the assessment. OTS specifically requests
[[Page 43645]]
comments on how to treat off-balance sheet assets held by subsidiaries
owned or controlled by the savings association. For example, where a
savings association owns or controls a subsidiary that is a trust
company, how should the trust assets administered by that trust company
be considered under the complexity component? OTS also specifically
seeks comments on whether, and if so, how best, to include commercial
and non-residential mortgage loans or other on-balance sheet assets in
any complexity component.
Further, OTS seeks comments on whether the complexity component
should have a threshold below which complex assets should not be
considered and, if so, whether the proposed $1 billion threshold is too
high or too low. Additionally, OTS seeks comments on whether the
threshold for any particular category should be expressed in dollar
terms, as a percentage of assets (e.g. for commercial loans and non-
residential real estate loans), or in any other terms. OTS also asks
whether there should be any cap on the amount of the complexity
component. Commenters who favor a cap should address how OTS should set
the cap. OTS additionally seeks comments on whether the proposed
assessment rate for any complexity component would be appropriate.
D. Consolidation
Under the current regulation, OTS assessments are based on the
savings association's total assets, as reported in the consolidated
Thrift Financial Report. OTS specifically requests comment on whether
this continues to be the proper approach for subsidiaries that are
other depository institutions or regulated entities. This issue affects
all three proposed components of the assessment calculation. For
example, if Savings Association A directly owns Savings Association B,
looking at the size component by itself would usually make
consolidation result in a lower assessment. However, if Savings
Association A were rated ``1'' while Savings Association B were rated
``3'', the issue arises of what condition component should be assigned
to the consolidated entity. For the complexity component, if Savings
Association A had trust assets of $750 million and Savings Association
B also had trust assets of $750 million, consolidation would result in
the consolidated entity being assessed a complexity component, while
neither thrift would be assessed that component if considered
separately.
Therefore, OTS solicits comments on whether, when a savings
association owns or controls another OTS-regulated savings association,
the two should be considered one entity for assessment purposes. Would
a discount be appropriate? The OCC recently amended its assessment
regulation to give a discount to national banks that are in a holding
company with other national banks but are not the ``lead bank'' in that
structure.See 12 CFR 8.2(a)(6) (1998). Should the OTS consider a
similar approach for savings associations that are in a savings and
loan holding company structure with other OTS-regulated savings
associations? What if the thrift owns or controls another depository
institution, such as a state bank, that is not regulated by OTS?
Similarly, where a savings association owns or controls a non-
depository institution that is regulated by a non-bank regulator (e.g.,
a state-supervised insurance company), should the assets of the
subordinate organization be included in the assets of the parent
savings association?
E. Other Matters
OTS seeks comment on other proposed amendments to the assessments
regulation. First, the existing regulation provides for quarterly or
semi-annual assessments. Under the proposed rule, all assessments would
be semi-annual. OTS has found that semi-annual assessments impose less
regulatory and administrative burden than quarterly assessments and
therefore has imposed semi-annual assessments since January 1992.
The proposed rule would clarify the existing regulation and
incorporate OTS's long-standing practice concerning requests for
refunds or proration of assessments paid by institutions that cease to
be savings associations. The proposed rule would explicitly state that
assessments will not be prorated or refundable to institutions that
cease to be savings associations. The proposal would also clarify an
ambiguity in the existing regulation about the date as of which OTS
determines assessments. Under the proposed rule, and consistent with
current practice, an assessment would not change, either up or down,
due to events that occur after the date of the Thrift Financial Report
upon which the assessment is based.3 Further, the proposed
rule would clarify that the composite rating upon which an
institution's condition component would be based would be the most
recent composite rating of which the savings association has been
notified in writing, as defined in 12 CFR part 516, before an
assessment's due date.
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\3\ Consistent with OTS's current practice, an assessment could
be adjusted to reflect corrections to errors contained in the
applicable Thrift Financial Report.
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The proposed rule also addresses several matters relating to the
imposition of other fees (e.g., application, examination, and
investigation fees). Currently, the regulation includes a formula for
calculating these fees, with the actual fees published annually in a
Thrift Bulletin. The proposed rule, like the long-standing OCC
regulation, would not include such a formula. Fees would continue to be
announced in a Thrift Bulletin available on OTS's website.
The proposed regulation would also clarify that OTS may charge fees
for extraordinary expenses relating to examining, regulating, or
supervising savings associations and their affiliates. While OTS
expects that any such fees would be unusual, they may be necessary or
appropriate in some circumstances. Such extraordinary fees may be
appropriate for recovering supervisory costs from institutions that
pose extraordinary burdens, or of obtaining expert advice in areas
beyond those that OTS normally encounters. Under the proposed rule, OTS
would be able to adjust, add, waive, or eliminate fees in unusual
circumstances.
Finally, OTS proposes to revise all of part 502 using the plain
language format, consistent with the Vice President's National
Performance Review Initiative and guidance in the Federal Register
Document Drafting Handbook (April 1997 edition). This would not affect
the substance of the regulation, but should help to make it easier to
understand.
III. Executive Order 12866
The Director of OTS has determined that this proposed rule does not
constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
IV. Regulatory Flexibility Act Analysis
Pursuant to section 605(b) of the Regulatory Flexibility Act of
1980,4 OTS has evaluated the effects this proposed
rulemaking would have on small businesses, small organizations, and
small governmental jurisdictions. As required, OTS has prepared the
following initial regulatory flexibility analysis.
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\4\ 5 U.S.C. 605(b).
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OTS proposes this rulemaking to revise its current assessments
system to match assessments more closely with
[[Page 43646]]
OTS's costs. The Director of OTS is authorized by statute to impose
assessments.5 As described in this preamble, OTS has found
that under its current assessment system OTS's costs of supervising
some institutions are higher or lower than those associations pay in
assessments. Therefore, OTS is attempting, through this proposed
rulemaking, to more closely associate its costs with assessments.
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\5\ 12 U.S.C. 1462a, 1463, 1467, 1467a.
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OTS has two primary objectives for this proposed rulemaking: (1)
establishing an assessment structure that keeps the assessment rates as
low as possible while providing the agency the resources essential to
effective supervision of a changing industry, and (2) more closely
tailoring rates to the agency's increased costs in supervising certain
types of institutions.
The proposed rule could affect small savings associations through
the proposed condition, size, or complexity components. The proposal
would have no effect on small businesses or small organizations other
than small savings associations and, indirectly, small holding
companies, and would not affect small governmental jurisdictions. Small
savings associations are generally defined, for Regulatory Flexibility
Act purposes, as those with assets under $100 million.6
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\6\ 13 CFR 121.201, Division H (1998).
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A. Impact of Proposed Condition Component.
The proposed condition component would affect small savings
associations. As discussed earlier in this preamble, it would impose an
assessment equal to 25% of an association's size component for each 3-
rated association, regardless of its size. Currently, there are 44
savings associations that are 3-rated and that have assets under $100
million. If a small 3-rated association, for example, were to have $10
million in assets, its assessment would increase $864 annually due to
the condition component (basing its size component on Thrift Bulletin
48-9, December 21, 1992). If its assets were $100 million and its
rating were 3, its assessment would increase $5,462 annually due to the
condition component. Other small, 3-rated savings associations would
see their assessments increase depending on their size.
As discussed earlier, 3-rated savings associations require more
supervisory attention than 1- or 2-rated associations. OTS therefore
has three alternatives: impose extra assessments on all 3-rated
associations; require institutions not rated 3 to subsidize the extra
supervisory costs of 3-rated institutions; or, require some but not all
3-rated institutions to cover those costs. OTS believes it is most
equitable to relate assessments to OTS's supervisory costs, and
therefore proposes a condition component for 3-rated associations.
Furthermore, OTS believes that requiring 3-rated institutions to pay
for their extra supervisory costs would provide an incentive for those
institutions to improve their condition and their ratings. OTS believes
that the proposed condition component best accomplishes OTS's objective
of closely tailoring assessment rates to OTS's increased costs in
supervising 3-rated institutions while keeping assessment rates as low
as possible.
B. Impact of Proposed Size Component.
OTS believes the proposed size component would not have a
significant economic impact on a substantial number of small entities.
OTS specifically designed the proposed rule to allow qualifying savings
associations, generally those with assets under $100 million, to choose
between calculating their size components under either the existing
regulation or the proposed regulation. These institutions can therefore
avoid any increases in their size component.
For an institution that increases above $100 million in assets then
shrinks below $100 million, or a savings association that is formed
after the rule's effective date, this choice would not be available.
OTS cannot predict the number of savings associations that will exceed
then shrink below $100 million in assets, and cannot predict the number
of savings associations that will be formed in the future. OTS cannot
predict the economic impact of the proposed regulation on such
institutions because OTS's assessment rates, as proposed, will vary as
OTS's supervisory costs change.
OTS has considered, as an alternative to the proposed size
component with protection for small institutions, leaving its
assessment system as it is. OTS believes this alternative would not
meet OTS's objective of more closely tailoring assessment rates to
OTS's increased supervisory costs, while minimizing significant
economic impacts on small savings associations.
C. Impact of Proposed Complexity Component.
The proposed complexity component would apply only to savings
associations that have more than $1 billion in certain off balance
sheet assets. For Regulatory Flexibility Act purposes, a small savings
association is generally defined as one having less than $100 million
in assets on its balance sheet. There are currently only four savings
associations that have less than $100 million in balance sheet assets
that would be subject to the proposed complexity component. OTS
believes that four savings associations is not a substantial number of
small savings associations. For purposes of this initial regulatory
flexibility analysis regarding the proposed complexity component, OTS
defines small savings association as one with less than $100 million in
assets including off-balance sheet assets.7 The Regulatory
Flexibility Act is designed to protect the interests of small
businesses, while the proposed complexity component would only affect
savings associations that own or administer assets in excess of $1
billion. OTS does not believe that institutions that own or administer
assets exceeding $1 billion need any special protection from the
proposed complexity component.
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\7\ OTS has established this definition of small savings
association for the sole purpose of this regulatory flexibility
analysis, after consultation with the Small Business
Administration's Office of Advocacy.
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In any event, OTS has considered alternatives to the proposed
complexity component. OTS has considered using no such component, or
including different complex assets in the component, such as commercial
and non-residential mortgage loans. As discussed earlier, OTS is
seeking comment on all aspects of the proposed complexity component.
OTS tentatively believes the component, as proposed, best accomplishes
OTS's objective of tailoring assessments to better match OTS's
supervisory costs, while minimizing significant economic impacts on
small savings associations.
D. Other Matters
The proposed rule would streamline the existing regulation and put
it in a plain language format. It would state that the Director's
statutory authority to charge fees for appropriate expenses would be
used only for extraordinary expenses. OTS believes these changes would
have no significant impact on small savings associations. Under the
proposed rule, assessments would continue to be based on Thrift
Financial Reports that savings associations are otherwise required to
file with OTS, and OTS would continue to collect assessments by its
current procedures. Therefore, the proposed rule would impose no new or
additional reporting, recordkeeping, or compliance requirements.
[[Page 43647]]
Finally, there are no federal rules that duplicate, overlap, or
conflict with this proposed rule.
OTS encourages comments on all aspects of this initial regulatory
flexibility analysis, including any significant economic impacts the
proposed rule would have on small entities.
V. 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 expenditure by state, local, and
tribal governments, in the aggregate, or by the private sector, of $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. 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.
VI. Paperwork Reduction Act
This proposed rule contains no new information collection
requirements. The information collection requirements in proposed
Sec. 502.70 are the same as those in the current assessments
regulation, 12 CFR 502.3 (1998), which the Office of Management and
Budget has previously received and approved in accordance with the
Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under OMB Control
No. 1550-0053.
List of Subjects in 12 CFR Part 502
Assessments, Federal home loan banks, Reporting and recordkeeping
requirements, Savings associations.
Accordingly, the Office of Thrift Supervision proposes to amend
chapter V, title 12, Code of Federal Regulations by revising part 502
to read as follows:
PART 502--ASSESSMENTS AND FEES
Sec.
502.5 Who must pay assessments and fees?
Subpart A--Assessments
502.10 How does OTS calculate my assessment?
502.15 How does OTS determine my size component?
502.20 How does OTS determine my condition component?
502.25 How does OTS determine my complexity component?
502.30 When must I pay my assessment?
502.35 How must I pay my assessment?
502.40 Can I get a refund or proration of my assessment?
502.45 What if I do not pay my assessment on time?
Subpart B--Fees
502.50 What fees does OTS charge?
502.55 Where can I find OTS's fee schedule?
502.60 When will OTS adjust, add, waive, or eliminate a fee?
502.65 When is an application fee due?
502.70 How must I pay an application fee?
502.75 What if I do not pay my fees on time?
Authority: 12 U.S.C. 1462a, 1463, 1467, 1467a.
Sec. 502.5 Who must pay assessments and fees?
(a) Authority. Section 9 of the HOLA, 12 U.S.C. 1467, authorizes
the Director to charge assessments to recover the costs of examining
savings associations and their affiliates, to charge fees to recover
the costs of processing applications and other filings, and to charge
fees to cover OTS's direct and indirect expenses in regulating savings
associations and their affiliates.
(b) Assessments. If you are a savings association that OTS
regulates on the last day of January or on the last day of July of each
year, you must pay a semi-annual assessment due on that day. Subpart A
of this part describes OTS's assessment procedures and requirements.
(c) Fees. Whether or not you are a savings association, if you make
any filings with OTS or use OTS services, the Director may require you
to pay a fee to cover the costs of processing your submission or
providing those services. The filings for which the Director may charge
a fee include notices, applications, and securities filings. Among the
services for which the Director may charge a fee are publications,
seminars, certifications for official copies of agency documents, and
records or services requested by other agencies. The Director also
assesses fees for examining and investigating affiliates of savings
associations. If you are a savings association and you or any of your
affiliates cause OTS to incur extraordinary expenses related to your
examination, investigation, regulation, or supervision, the Director
may charge you a fee to fund those expenses. Subpart B of this part
describes OTS's fee procedures and requirements.
Subpart A--Assessments
Sec. 502.10 How does OTS calculate my assessment?
OTS determines your semi-annual assessment by totaling three
components: your size, your condition, and the complexity of your
business. For the size and complexity components, OTS uses the
September 30 Thrift Financial Report to determine amounts due at the
January 31 assessment; and the March 31 Thrift Financial Report to
determine amounts due at the July 31 assessment. For purposes of this
subpart, total assets are your total assets as reported on Thrift
Financial Reports filed with OTS. For the condition component, OTS uses
the most recent composite rating, as defined in 12 CFR part 516 of this
chapter, of which you have been notified in writing before an
assessment's due date.
Sec. 502.15 How does OTS determine my size component?
(a) General. (1) Unless you are a qualifying savings association
under paragraph (b) of this section, OTS uses the following chart to
calculate your size component:
If your total assets are:-- Your size component is--
----------------------------------------------------------------------------------------------------------------
This amount--
Base assessment Plus--Marginal Of assets over--Class
Over-- But not over-- amount rate floor
Column A Column B.......... Column C Column D Column E
----------------------------------------------------------------------------------------------------------------
0.............................. $67 million....... C1 D1 0
$67 million.................... 215 million....... C2 D2 $67 million.
215 million.................... 1 billion......... C3 D3 215 million.
1 billion...................... 6.03 billion...... C4 D4 1 billion.
6.03 billion................... 18 billion........ C5 D5 6.03 billion.
[[Page 43648]]
18 billion..................... 35 billion........ C6 D6 18 billion.
35 billion..................... .................. C7 D7 35 billion.
----------------------------------------------------------------------------------------------------------------
(2) To calculate your size component, find the row in Columns A and
B that describes your total assets. Reading across in that same row,
find your base assessment amount in Column C, your marginal rate in
Column D, and your class floor in Column E. Calculate how much your
total assets exceed your Column E class floor. Multiply this number by
your Column D marginal rate. Add this number to your Column C base
assessment amount. The total is your size component. OTS will establish
the base assessment amounts and the marginal rates in columns C and D
in a Thrift Bulletin.
(b) Special size component calculation for qualifying savings
associations. If you meet all of the criteria set forth in paragraph
(b)(1) of this section, you are a qualifying savings association and
OTS will calculate your size component in accordance with paragraph
(b)(2) of this section.
(1) Criteria for qualifying savings association status. (i) You
were a savings association as of [effective date of final rule].
(ii) Your total assets have never exceeded $100 million at the end
of any quarter.
(2) Size component for qualifying savings associations. If you are
a qualifying savings association, your size component is the lesser of:
(i) Your size component calculated under paragraph (a) of this
section; or
(ii) Your assessment calculated using the general assessment table
at 12 CFR 502.1(c) as contained in the 12 CFR, parts 500 to 599,
edition revised as of January 1, 1998, as implemented in Thrift
Bulletin 48-9, dated December 21, 1992.
Sec. 502.20 How does OTS determine my condition component?
OTS uses the following chart to determine your condition component:
------------------------------------------------------------------------
Then your condition
If your composite rating is-- component is--
------------------------------------------------------------------------
1 or 2.................................... zero.
3......................................... 25 percent of your size
component.
4 or 5.................................... 50 percent of your size
component.
------------------------------------------------------------------------
Sec. 502.25 How does OTS determine my complexity component?
If your portfolio exceeds any of the thresholds set forth in
paragraph (a) of this section, OTS will calculate your complexity
component as set forth in paragraph (b) of this section. If your
portfolio does not exceed any of the thresholds set forth in paragraph
(a) of this section, your complexity component is zero.
(a) Thresholds for complexity component. (1) You administer trust
assets valued at over $1 billion.
(2) You service loans for others and the total amount of the loans
exceeds $1 billion.
(3) You have off-balance sheet assets that are recourse obligations
or direct credit substitutes, as described in the Thrift Financial
Report, and the total amount of these off-balance sheet assets exceeds
$1 billion.
(b) Calculation of complexity component. OTS calculates your
complexity component by separately determining the amount(s) by which
you exceed each of the thresholds under paragraph (a) of this section,
adding these excess amounts together, and multiplying this total by a
percentage published in a Thrift Bulletin.
Sec. 502.30 When must I pay my assessment?
OTS will bill you semiannually for your assessments. Assessments
are due January 31 and July 31 of each year. At least seven days before
your assessment is due, the Director will mail you a notice that
indicates the amount of your assessment, explains how OTS calculated
the amount, and specifies when payment is due.
Sec. 502.35 How must I pay my assessment?
(a) Debit at Federal Home Loan Banks. If you are a member of a
Federal Home Loan Bank, you must maintain a demand deposit account at
your Federal Home Loan Bank with sufficient funds to pay your
assessment when due. OTS will notify your Federal Home Loan Bank of the
amount of your assessment. OTS will debit your account for your
assessments.
(b) Direct billing. If you are not a member of a Federal Home Loan
Bank, OTS will directly debit an account you must maintain at your
association.
Sec. 502.40 Can I get a refund or proration of my assessment?
OTS will not refund or prorate your assessment, even if you cease
to be a savings association. If you are a savings association for whom
a conservator or receiver has been appointed, you must continue to pay
assessments in accordance with this part. OTS will not increase or
decrease your assessment based on events that occur after the date of
the Thrift Financial Report upon which your assessment is based.
Sec. 502.45 What if I do not pay my assessment on time?
The Director will charge interest on delinquent assessments.
Interest will accrue at a rate (that OTS will determine quarterly)
equal to 150 percent of the average of the bond-equivalent rates of 13-
week Treasury bills auctioned during the preceding calendar quarter.
Assessments under this subpart A are delinquent if you do not pay them
when required by Sec. 502.30.
Subpart B--Fees
Sec. 502.50 What fees does OTS charge?
(a) The Director assesses fees for examining or investigating
savings association affiliates. ``Affiliate'' has the meaning in 12
U.S.C. 1462(9), except that, for this part only, ``affiliate'' does not
include any entity that is consolidated with a savings association on
the Consolidated Statement of the Thrift Financial Report.
(b) The Director assesses fees for processing notices,
applications, securities filings, and requests, and for providing other
services.
[[Page 43649]]
Sec. 502.55 Where can I find OTS's fee schedule?
OTS will periodically publish a schedule of its fees in a Thrift
Bulletin. OTS will publish these fees at least thirty days before they
are effective.
Sec. 502.60 When will OTS adjust, add, waive, or eliminate a fee?
Under unusual circumstances, the Director may deem it necessary or
appropriate to adjust, add, waive, or eliminate a fee. For example, the
Director may:
(a) Reduce any fee to adjust for any inequities, efficiencies, or
changed procedures that OTS projects will reduce its applications
processing costs but that OTS did not consider in determining its fees;
(b) Reduce or waive any fee if OTS determines that the fee would
unduly or unjustifiably discourage particular types of applications or
applications for particular categories of transactions;
(c) Add a fee for a new type of application;
(d) Increase a fee for an application that presents unusual or
particularly complex issues of law or policy or otherwise causes the
agency to incur unusually high processing costs; or
(e) Charge a fee to recover extraordinary expenses related to
examination, investigation, regulation, or supervision of savings
associations or their affiliates.
Sec. 502.65 When is an application fee due?
(a) You must pay the application fee when you file an application.
OTS will not process your application if you do not include the
required fee.
(b) If OTS cannot complete its review of your application because
the application is materially deficient and it refuses to accept your
application for processing, you must pay a new application fee upon
filing a revised application.
(c) If a transaction involves multiple applications, you must pay
the appropriate fee for each application, unless OTS specifies
otherwise by Thrift Bulletin.
Sec. 502.70 How must I pay an application fee?
You must pay an application fee to the Office of Thrift
Supervision. You must include a statement of the fee and how you
calculated the fee.
Sec. 502.75 What if I do not pay my fees on time?
(a) Interest. An examination or investigation fee is delinquent if
OTS does not receive the fee within 30 days of the date specified in a
bill. The Director will charge interest on a delinquent examination or
investigation fee. Interest will accrue at a rate (that OTS will
determine quarterly) equal to 150 percent of the average of the bond-
equivalent rates of 13-week Treasury bills auctioned during the
preceding calendar quarter.
(b) Failure to pay. If your holding company, affiliate, or
subsidiary fails to pay any examination or investigation fee within 60
days of the date specified in a bill, the Director may assess that fee,
with interest, against you and collect it from you. If any such entity
is a holding company, affiliate, or subsidiary of more than one savings
association, the Director may assess the fee against and collect it
from each savings association as the Director may prescribe.
Dated: August 7, 1998.
By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-21866 Filed 8-13-98; 8:45 am]
BILLING CODE 6720-01-U
