[Federal Register Volume 63, Number 186 (Friday, September 25, 1998)]
[Rules and Regulations]
[Pages 51272-51275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-25633]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Parts 563, 563f and 574
[No. 98-96]
RIN 1550-AB10
Agency Disapproval of Directors and Senior Executive Officers of
Savings Associations and Savings and Loan Holding Companies
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Final rule.
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SUMMARY: The Office of Thrift Supervision (OTS) is issuing a final rule
to amend its regulations implementing section 32 of the Federal Deposit
Insurance Act (FDIA). This statute requires certain savings
associations and savings and loan holding companies to provide prior
notice of the appointment or employment of directors and senior
executive officers. The final rule will eliminate unnecessary
regulatory burden, implement changes enacted in the Economic Growth and
Regulatory Paperwork Reduction Act of 1996 (EGRPRA), and more closely
conform OTS regulations to those of the other banking agencies as
required under section 303 of the Community Development and Regulatory
Improvement Act of 1994 (CDRIA).
EFFECTIVE DATE: September 25, 1998.
FOR FURTHER INFORMATION CONTACT: Frances C. Augello, Senior Counsel,
Business Transactions Division, Chief Counsel's Office (202) 906-6151;
Scott Ciardi, Financial Analyst, Corporate Activities Division, (202)
906-6960; or Mary Jo Johnson, Project Manager, Supervision Policy (202)
906-5739, Office of Thrift Supervision, 1700 G Street, NW., Washington
D.C. 20552.
SUPPLEMENTARY INFORMATION:
I. Background
Section 32 of FDIA 1 requires certain savings
associations and savings and loan holding companies to notify the OTS
at least 30 days before adding any individual to the board of directors
or employing an individual as a senior executive officer. Section 2209
of the EGRPRA 2 amended section 32 of the FDIA by changing
the circumstances under which a notice must be filed. Section 2209 also
provided that the OTS may have as long as 90 days to issue a notice of
disapproval of the proposed addition of a director or employment of a
senior executive officer.
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\1\ 12 U.S.C. 1831i.
\2\ Pub.L. 104-208, 110 Stat. 3009 (Sept. 30, 1996).
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On March 27, 1998 (63 FR 14844), the OTS published a notice of
proposed rulemaking to: (1) amend its regulations implementing section
32 of FDIA to reflect the EGRPRA amendments, (2) eliminate unnecessary
burden, and (3) in accordance with section 303 of the
CDRIA,3 conform the proposed OTS rule generally to
regulations that have been promulgated by the Office of the Comptroller
of the Currency (OCC), the Board of Governors of the Federal Reserve
System (FRB), and the Federal Deposit Insurance Corporation
(FDIC).4
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\3\ Pub. L. 103-325, 108 Stat. 2215 (Sept. 23, 1994).
\4\ (OCC) 61 FR 60341 (November 27, 1996); (FRB) 62 FR 9290
(February 28, 1997); (FDIC) 63 FR 44686 (August 20, 1998).
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In addition, the OTS rewrote the proposed rule using plain language
drafting techniques promoted by the Vice President's National
Performance Review Initiative and new guidance in the Federal Register
Document Drafting Handbook (January 1997 edition).
II. Summary of Comments and Description of the Final Rule
The public comment period on the proposed rule closed on May 26,
1998. The OTS received two comments on its proposal. Commenters
included one savings association and one trade association. One
commenter expressed general support for the proposed rule, including
the use of plain language, which it noted reduces regulatory burden and
makes compliance easier. The other commenter also supported the rule,
and suggested that the rule be clarified to specifically state that an
individual seeking election to the board of directors of a savings
association or savings and loan holding company, not
[[Page 51273]]
nominated by management, is not required to provide prior notice or
obtain a waiver, unless the savings association or savings and loan
holding company is itself subject to the rule, e.g., it is in troubled
condition. The OTS has clarified the rule as suggested by the
commenter, in new Sec. 563.560(b).5
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\5\ See proposed Sec. 574.12(b).
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The OTS has a regulatory project underway that would reorganize,
revise and streamline OTS regulations addressing directors, officers
and employees. These regulations will eventually be consolidated into
new subparts of part 563. Today's final rule implementing section 32 of
the FDIA will be included in new subpart H of part 563. Accordingly,
OTS has re-numbered the proposed provision Secs. 574.10 through 574.18
to new subpart H provision Secs. 563.550 through 563.590. The final
rule also includes technical changes to citations to part 574 contained
in part 563f of OTS regulations. Other than the re-numbering, today's
final rule is substantially identical to the March proposal.
III. Disposition of Existing Regulations
The following chart gives an overview of the changes made to former
Sec. 574.9.
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Revised provision Former provision Comments
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Sec. 563.550........................ ............................. Added.
Sec. 563.555........................ Sec. 574.9(a)............... Modified.
Sec. 563.560........................ Sec. 574.9(b), (c)(3) and Significantly modified.
(d)(1)(ii).
Sec. 574.9(c)(1) and (2).... Deleted.
Sec. 563.565........................ Sec. 574.9(d)(1)............ Modified.
Sec. 563.570........................ Sec. 574.9(d)(1) and (2).... Modified and added.
Sec. 563.575........................ Sec. 574.9(d)(3) and (4).... Significantly modified.
Sec. 574.9(d)(5)............ Deleted.
Sec. 563.580........................ Sec. 574.9(d)(6)............ Modified.
Sec. 563.585........................ Sec. 574.9(b)(2), (d)(7) and Significantly modified.
(d)(9).
Sec. 563.590........................ Sec. 574.9(d)(8)............ Modified.
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IV. Executive Order 12866
The Director of the OTS has determined that this final rule does
not constitute a ``significant regulatory action'' for purposes of
Executive Order 12866.
V. Regulatory Flexibility Act
Pursuant to section 605(b) of the Regulatory Flexibility Act, the
OTS certifies that the final rule does not have a significant economic
impact on a substantial number of small entities. The final rule does
not impose any additional burdens or requirements upon small entities
and reduces several paperwork and other burdens on all savings
associations and savings and loan holding companies.
VI. Paperwork Reduction Act
There are no new information collection requirements contained in
this final rule. The information collection requirements contained in
this final rule are the same as those required in the form Interagency
Notice of Change in Director and Senior Executive Officer,6
which has been previously submitted to and approved by the Office of
Management and Budget for review in accordance with the Paperwork
Reduction Act of 1995 (44 U.S.C. 3507(d)) under OMB Control No. 1550-
0047.
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\6\ OTS Form 1624.
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VII. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Pub. L.
104-4 (Unfunded Mandates Act), requires that an agency prepare a
budgetary impact statement before promulgating a rule that includes a
federal mandate that may result in expenditures by state, local, and
tribal governments, in the aggregate, or by the private sector, 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. The OTS has determined that
the final rule will not result in expenditures by state, local, and
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.
VIII. Effective Date
Section 302 of the CDRIA requires that regulations that impose
additional reporting, disclosure, or other new requirements take effect
on the first day of the calendar quarter following publication of the
rule unless, among other things, the agency determines, for good cause,
that the regulations should become effective before that date. The OTS
believes that an immediate effective date is appropriate since the
final rule relieves existing regulatory burdens on savings associations
and savings and loan holding companies. Further, the OTS believes that
CDRIA does not apply because this final rule imposes no new burdens
immediately on existing savings associations or savings and loan
holding companies. For these reasons, the OTS believes that an
immediate effective date is appropriate for this final rule.
Section 553(d) of the Administrative Procedure Act (APA) requires
an agency to publish a substantive rule at least 30 days before its
effective date. Section 553(d) of the APA permits waiver of the 30-day
delayed effective date requirement for, inter alia, good cause or where
a rule relieves a regulatory restriction. The OTS further finds that
the 30-day delayed effective date requirement may be waived because
this final rule relieves regulatory restrictions on savings
associations and savings and loan holding companies.
List of Subjects
12 CFR Part 563
Accounting, Advertising, Conflict of interests, Crime, Currency,
Holding companies, Investments, Reporting and recordkeeping
requirements, Savings associations, Securities, Surety bonds.
12 CFR Part 563f
Antitrust, Holding companies, Reporting and recordkeeping
requirements, Savings associations.
12 CFR Part 574
Administrative practice and procedure, Holding companies, Reporting
and recordkeeping requirements, Savings associations, Securities.
[[Page 51274]]
Accordingly, the Office of Thrift Supervision hereby amends chapter
V, title 12, Code of Federal Regulations, as set forth below:
PART 563--OPERATIONS
1. The authority citation for part 563 is revised to read as
follows:
Authority: 12 U.S.C. 375b, 1462, 1462a, 1463, 1464, 1467a, 1468,
1817, 1820, 1828, 1831i, 3806; 42 U.S.C. 4106.
2. Subpart H, consisting of Secs. 563.550 through 563.590, is added
to part 563 to read as follows:
Subpart H--Notice of Change of Director or Senior Executive Officer
Sec.
563.550 What does this subpart do?
563.555 What definitions apply to this subpart?
563.560 Who must give prior notice?
563.565 What procedures govern the filing of my notice?
563.570 What information must I include in my notice?
563.575 What procedures govern OTS review of my notice for
completeness?
563.580 What standards and procedures will govern OTS review of the
substance of my notice?
563.585 When may a proposed director or senior executive officer
begin service?
563.590 When will the OTS waive the prior notice requirement?
Subpart H--Notice of Change of Director or Senior Executive Officer
Sec. 563.550 What does this subpart do?
This subpart implements 12 U.S.C. 1831i, which requires certain
savings associations and savings and loan holding companies to notify
the OTS before appointing or employing directors and senior executive
officers.
Sec. 563.555 What definitions apply to this subpart?
The following definitions apply to this subpart:
Director means an individual who serves on the board of directors
of a savings association or savings and loan holding company. This term
does not include an advisory director who:
(1) Is not elected by the shareholders;
(2) Is not authorized to vote on any matters before the board of
directors or any committee of the board of directors;
(3) Provides only general policy advice to the board of directors
or any committee of the board of directors; and
(4) Has not been identified by the OTS in writing as an individual
who performs the functions of a director, or who exercises significant
influence over, or participates in, major policymaking decisions of the
board of directors.
Senior executive officer means an individual who holds the title or
performs the function of one or more of the following positions
(without regard to title, salary, or compensation): president, chief
executive officer, chief operating officer, chief financial officer,
chief lending officer, or chief investment officer. Senior executive
officer also includes any other person identified by the OTS in writing
as an individual who exercises significant influence over, or
participates in, major policymaking decisions, whether or not hired as
an employee.
Troubled condition means:
(1) A savings association that has a composite rating of 4 or 5, as
defined in Sec. 516.3(c) of this chapter;
(2) A savings and loan holding company that has an unsatisfactory
rating under the OTS's holding company rating system, or that is
informed in writing by the OTS that it has an adverse effect on its
subsidiary savings association;
(3) A savings association or savings and loan holding company that
is subject to a capital directive, a cease-and-desist order, a consent
order, a formal written agreement, or a prompt corrective action
directive relating to the safety and soundness or financial viability
of the savings association, unless otherwise informed in writing by the
OTS; or
(4) A savings association or savings and loan holding company that
is informed in writing by the OTS that it is in troubled condition
based on information available to the OTS.
Sec. 563.560 Who must give prior notice?
(a) Savings association or savings and loan holding company. Except
as provided under Sec. 563.590, you must notify the OTS at least 30
days before adding or replacing any member of your board of directors,
employing any person as a senior executive officer, or changing the
responsibilities of any senior executive officer so that the person
would assume a different senior executive position if:
(1) You are a savings association and at least one of the following
circumstances apply:
(i) You do not comply with all minimum capital requirements under
part 567 of this chapter;
(ii) You are in troubled condition; or
(iii) The OTS has notified you, in connection with its review of a
capital restoration plan required under section 38 of the Federal
Deposit Insurance Act or part 565 of this chapter or otherwise, that a
notice is required under this subpart; or
(2) You are a savings and loan holding company and you are in
troubled condition.
(b) Notice by individual. If you are an individual seeking election
to the board of directors of a savings association or savings and loan
holding company described in paragraph (a) of this section, and have
not been nominated by management, you must either provide the prior
notice required under paragraph (a) of this section or follow the
process under Sec. 563.590(b).
Sec. 563.565 What procedures govern the filing of my notice?
The procedures found in Sec. 516.1 of this chapter govern the
filing of your notice under Sec. 563.560.
Sec. 563.570 What information must I include in my notice?
(a) Content requirements. Your notice must include:
(1) The information required under 12 U.S.C. 1817(j)(6)(A), and the
information prescribed in the Interagency Notice of Change in Director
or Senior Executive Officer and the Interagency Biographical and
Financial Report which are available from OTS headquarters at the
address in part 516 of this chapter; or from any OTS regional office;
(2) Legible fingerprints of the proposed director or senior
executive officer. You are not required to file fingerprints if, within
three years prior to the date of submission of the notice, the proposed
director or senior executive officer provided legible fingerprints as
part of a notice filed with the OTS under 12 U.S.C. 1831i; and
(3) Such other information required by the OTS.
(b) Modification of content requirements. The OTS may require or
accept other information in place of the content requirements in
paragraph (a) of this section.
Sec. 563.575 What procedures govern OTS review of my notice for
completeness?
The OTS will first review your notice to determine whether it is
complete.
(a) If your notice is complete, the OTS will notify you in writing
of the date that the OTS received the complete notice.
(b) If your notice is not complete, the OTS will notify you in
writing what additional information you need to submit, why we need the
information, and when you must submit it. You must, within the
specified time period, provide additional information or request that
the OTS suspend processing of the notice. If you fail to act within the
specified time period, the OTS may treat the notice as withdrawn
[[Page 51275]]
or may review the application based on the information provided.
Sec. 563.580 What standards and procedures will govern OTS review of
the substance of my notice?
The OTS will disapprove a notice if, pursuant to the standard set
forth in 12 U.S.C. 1831i(e), the OTS finds that the competence,
experience, character, or integrity of the proposed director or senior
executive officer indicates that it would not be in the best interests
of the depositors of the savings association or of the public to permit
the individual to be employed by, or associated with, the savings
association or savings and loan holding company. If the OTS disapproves
a notice, it will issue a written notice that explains why the OTS
disapproved the notice. The OTS will send the notice to the savings
association or savings and loan holding company and the individual.
Sec. 563.585 When may a proposed director or senior executive officer
begin service?
(a) A proposed director or senior executive officer may begin
service 30 days after the date the OTS receives all required
information, unless:
(1) The OTS notifies you that it has disapproved the notice; or
(2) The OTS extends the 30-day period for an additional period not
to exceed 60 days. If the OTS extends the 30-day period, it will notify
you in writing that the period has been extended, and will state the
reason for the extension. The proposed director or senior executive
officer may begin service upon expiration of the extended period,
unless the OTS notifies you that it has disapproved the notice during
the extended period.
(b) Notwithstanding paragraph (a) of this section, a proposed
director or senior executive officer may begin service after the OTS
notifies you, in writing, of its intention not to disapprove the
notice.
Sec. 563.590 When will the OTS waive the prior notice requirement?
(a) Waiver request. (1) An individual may serve as a director or
senior executive officer before filing a notice under this subpart if
the OTS issues a written finding that:
(i) Delay would threaten the safety or soundness of the savings
association;
(ii) Delay would not be in the public interest; or
(iii) Other extraordinary circumstances exist that justify waiver
of prior notice.
(2) If the OTS grants a waiver, you must file a notice under this
subpart within the time period specified by the OTS.
(b) Automatic waiver. An individual may serve as a director before
filing a notice under this subpart, if the individual was not nominated
by management and the individual submits a notice under this subpart
within seven days after election as a director.
(c) Subsequent OTS action. The OTS may disapprove a notice within
30 days after the OTS issues a waiver under paragraph (a) of this
section or within 30 days after the election of an individual who has
filed a notice and is serving pursuant to an automatic waiver under
paragraph (b) of this section.
PART 563f--MANAGEMENT OFFICIAL INTERLOCKS
3. The authority citation for part 563f continues to read as
follows:
Authority: 12 U.S.C. 3201-3208.
4. Section 563f.2 is amended by revising paragraph (l)(1)(iii) to
read as follows:
Sec. 563f.2 Definitions.
* * * * *
(l) Management official. (1) * * *
(iii) A senior executive officer as that term is defined in
Sec. 563.555 of this chapter;
* * * * *
5. Section 563f.5 is amended by revising paragraphs (b)(2)(i) and
(b)(2)(ii) to read as follows:
Sec. 563f.5 Regulatory Standards exemption.
* * * * *
(b) * * *
(2) * * *
(i) That official is permitted by OTS to serve as a director or
senior executive officer of that institution pursuant to Sec. 563.585
of this chapter; and
(ii) The institution had operated for less than two years, was not
in compliance with minimum capital requirements, or otherwise was in
``troubled condition'' as defined in Sec. 563.555 of this chapter at
the time the service under Sec. 563.585 of this chapter was permitted.
* * * * *
6. Section 563f.6 is amended by revising paragraphs (b)(1) and
(b)(2) to read as follows:
Sec. 563f.6 Management Consignment exemption.
* * * * *
(b) * * *
(1) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(3) of
this section if that official is permitted by the OTS to serve as a
director or senior executive officer of that institution pursuant to
Sec. 563.585 of this chapter and the institution had operated for less
than two years at the time the service under Sec. 563.585 of this
chapter was permitted; and
(2) A proposed management official is capable of strengthening the
management of a depository institution described in paragraph (a)(4) of
this section if that official is permitted by the OTS to serve as a
director or senior executive officer of that institution pursuant to
Sec. 563.585 of this chapter and the institution was not in compliance
with minimum capital requirements or otherwise was in ``troubled
condition'' as defined under Sec. 563.555 of this chapter at the time
service under Sec. 563.585 of this chapter was permitted.
* * * * *
PART 574--ACQUISITION OF CONTROL OF SAVINGS ASSOCIATIONS
7. The authority citation for part 574 is revised to read as
follows:
Authority: 12 U.S.C. 1467a, 1817.
Sec. 574.9 [Removed]
8. Section 574.9 is removed.
Dated: September 18, 1998.
By the Office of Thrift Supervision.
Ellen Seidman,
Director.
[FR Doc. 98-25633 Filed 9-24-98; 8:45 am]
BILLING CODE 6720-01-U
