[Federal Register Volume 62, Number 68 (Wednesday, April 9, 1997)]
[Proposed Rules]
[Pages 17115-17117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8952]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 543
[No. 97-31]
RIN 1550-AB06
Incorporation, Organization, and Conversion of Federal Mutual
Associations
AGENCY: Office of Thrift Supervision, Treasury.
ACTION: Proposed rule with request for comments.
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SUMMARY: The Office of Thrift Supervision (OTS) proposes to amend its
regulations governing conversions to federal mutual savings
associations to permit the direct conversion of all types of mutual
depository institutions into federal mutual savings associations. This
proposal would simplify the conversion process.
DATES: Comments must be received on or before June 9, 1997.
ADDRESSES: Send comments to Manager, Dissemination Branch, Records
Management and Information Policy, Office of Thrift Supervision, 1700 G
Street, NW., Washington, D.C. 20552, Attention Docket No, 97-31. 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 they may be sent by e-
mail: public.info@ots.treas.gov. Those commenting by e-mail should
include their name and telephone number. 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: Scott Ciardi, Senior Analyst,
Corporate Activities Division (202/906-6960); David A. Permut, Counsel
(Banking and Finance) (202/906-7505) or Kevin A. Corcoran, Assistant
Chief Counsel for Business Transactions (202/906-6962), Business
Transactions Division, Chief Counsel's Office, Office of Thrift
Supervision, 1700 G Street, NW., Washington, D.C. 20552.
SUPPLEMENTARY INFORMATION:
I. Background
Various types of depository institutions have expressed interest in
converting to a federal savings association charter.1 The OTS has
[[Page 17116]]
received, for example, inquiries from credit unions and commercial
banks on the process of converting to a federal thrift charter.
Depository institutions may determine that because their businesses
focus on housing or consumer credit needs, these operations may be
conducted most efficiently through a federal thrift charter. The Home
Owners' Loan Act (HOLA) 2 sets forth the purposes of a federal
thrift charter as providing for the deposit of funds and for the
extension of credit for homes and other goods and services.3
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\1\ Section 2(5) of the Home Owners' Loan Act defines ``federal
savings associations'' to include federal savings associations and
federal savings banks. Accordingly, references herein to federal
savings associations include federal savings banks.
\2\ 12 U.S.C. 1461 et seq.
\3\ 12 U.S.C. 1464.
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The OTS has long taken the position that depository institutions
should be free to operate under whatever charter best suits their
business needs, consistent with safety and soundness. To that end, the
OTS has granted federal savings associations explicit authority to
convert directly to a bank charter,4 and has promulgated
regulations enabling stock depository institutions to convert directly
to a federal stock savings association charter.5 The purpose of
today's proposed regulation is to permit mutual depository institutions
to convert directly to a savings association charter.
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\4\ 12 CFR 552.2-7.
\5\ 12 CFR 552.2-6.
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II. Current Law
Sections 5(i) and 5(o) of the HOLA provide for direct conversions
of, respectively, state savings associations and state-chartered
savings banks that are Bank Insurance Fund members to a federal
charter.6 Separately, pursuant to Section 5(a) of the HOLA, the
OTS has promulgated a regulation permitting the direct conversion to a
federal stock savings association charter of any stock depository
institution that is, or is eligible to become, a member of a Federal
Home Loan Bank.7
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\6\ 12 U.S.C. 1464 (i) and (o).
\7\ 12 CFR 552.2-6.
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Depository institutions in mutual or stock form also may convert to
a federal association charter indirectly, by obtaining a new federal
savings association charter, and causing the existing institution to
combine with the new federal association in a merger or purchase and
assumption transaction.8 This method, however, is more burdensome
to the applicant because it involves several different regulatory
approvals.
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\8\ The authority for federal mutual and stock associations to
engage in these types of transactions is set forth at 12 CFR 546.2
and 552.13, respectively.
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Section 5(a) is a broad grant of authority to the Director of the
OTS, encompassing (among other things) approval of direct conversions
of mutual depository institutions to a federal mutual charter. Section
5(a) authorizes the Director of the OTS, under such regulations as the
Director may prescribe, to provide for the organization, examination,
operation and regulation of federal savings associations. Section 5(a)
of the HOLA gives the OTS plenary authority to provide for the
organization and regulation of federal savings associations, consistent
with the ``best practices'' of thrift institutions in the United States
and for the purpose of encouraging such institutions to provide credit
for housing safely and soundly.9
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\9\ 12 U.S.C. 1464(a).
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In addition, recent revisions to HOLA provisions governing
permissible investments (Section 5(c)), and to its definition of
``qualified thrift investment'' (Section 10(m)) reflect a congressional
intent for federal savings associations and savings banks to have a
significant role in many kinds of consumer finance, as well as in home
mortgage lending.10 The OTS believes that non-thrift depository
institutions that conclude that their operations in providing credit
for housing and other consumer-related purposes make the federal
savings association charter the optimal charter should be able to
convert to that charter without encountering unnecessary regulatory
burdens.
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\10\ See Economic Growth and Regulatory Paperwork Reduction Act
of 1996, Pub. L. 104-208, section 2303(a)-(e), (g), 110 Stat. 3009
(codified in portions of 12 U.S.C. 1464(b), (c), 1467a(m)).
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The OTS already has amended its regulations to facilitate the
direct conversion of stock depository institutions to federal stock
savings associations.11 The OTS has now determined, pursuant to
its Section 5(a) authority, to amend its regulations to facilitate
direct conversions of mutual depository institutions to a federal
mutual thrift charter.
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\11\ 12 CFR 552.2-6.
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III. Proposed Amendments
The proposed rule would revise 12 CFR 543.8 and 543.9 to permit any
type of mutual depository institution to convert to a federal mutual
savings association. The proposed rule would apply all existing
regulatory requirements currently applicable to direct conversions by
state mutual associations and savings banks to this expanded class of
applicants and would revise Sections 543.8 and 543.9 as described
below. Proposed Section 543.8 would permit conversion subject to three
requirements.
First, the institution must, upon consummation of the conversion,
have deposits insured by the Federal Deposit Insurance Corporation
(``FDIC''). See also Sec. 543.9(c)(3).
Second, the depository institution, in accomplishing the
conversion, must comply with all applicable state and federal statutes
and regulations, and OTS policies, and obtain all necessary regulatory
and member approvals. This provision requires, among other things, that
the converting depository institution have authority to convert to a
federal association under the statutes and regulations applicable to
the converting institution, and the conversion be approved by a vote of
its members pursuant to the laws applicable to the converting
institution.
Third, depository institutions converting to a federal mutual
association charter must conform with the investment limitations of
Section 5(c) of the HOLA 12 within a time frame prescribed by the
OTS. Section 552.2-6 of the OTS regulations already contains this
requirement for federal stock associations.
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\12\ 12 U.S.C. 1464(c).
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The proposal also would revise Section 543.9(a) to set forth the
filing requirements. Section 543.9(c) would be revised to eliminate the
statement that the OTS will not consider the application of a
converting institution not insured by the FDIC until the FDIC completes
an eligibility examination. The OTS does not believe it is necessary to
delay consideration of an application until the eligibility examination
has been completed. Moreover, the OTS has the ability to deem a
conversion application incomplete, if processing of the application
hinges on the final results of the eligibility examination, under the
application processing procedures at Section 516.2.
In addition, Section 543.9(c) would be revised to provide
explicitly that the OTS will consider applications to convert to a
federal mutual charter under the standards set forth at section 5(e) of
the HOLA, as well as Section 543.2(g). Moreover the revised regulation
would explicitly state that converting institutions that have been in
existence as depository institutions for less than three years will be
subject to all approval criteria and other requirements applicable to
de novo federal associations.13
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\13\ See 12 CFR 571.6.
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[[Page 17117]]
IV. Solicitation of Comments
The OTS invites public comment on all aspects of the proposal.
V. Executive Order 12866
The Director of the OTS has determined that this proposed rule does
not constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
VI. Regulatory Flexibility Act Analysis
Pursuant to Section 605(b) of the Regulatory Flexibility Act, the
OTS certifies that this proposal, which will reduce regulatory burdens,
will not have a significant economic impact on a substantial number of
small entities, because small entities utilizing the regulation may be
able to reduce the number of applications they must file in order to
convert to a federal charter. Accordingly, an initial Regulatory
Flexibility Analysis is not required.
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, or $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 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.
List of Subjects in 12 CFR Part 543
Conversions, Reporting and recordkeeping requirements, Savings
associations.
Accordingly, the Office of Thrift Supervision proposes to amend
chapter V, title 12, Code of Federal Regulations, as set forth below.
PART 543--INCORPORATION, ORGANIZATION, AND CONVERSION OF FEDERAL
MUTUAL ASSOCIATIONS
1. The authority citation for part 543 continues to read as
follows:
Authority: 12 U.S.C. 1462, 1462a, 1463, 1464, 1467a, 2901 et
seq.
2. Section 543.8 is amended by revising the heading and paragraph
(a) to read as follows:
Sec. 543.8 Conversion of depository institutions to Federal mutual
charter.
(a) With the approval of the OTS, any depository institution, as
defined in Sec. 552.13 of this chapter, that is in mutual form may
convert into a Federal mutual savings association, provided that:
(1) The depository institution, upon conversion, will have deposits
insured by the Federal Deposit Insurance Corporation;
(2) The depository institution, in accomplishing the conversion,
complies with all applicable state and federal statutes and
regulations, and OTS policies, and obtains all necessary member
approvals; and
(3) The resulting Federal mutual association conforms within the
time prescribed by the OTS to the requirements of section 5(c) of the
Home Owners' Loan Act.
* * * * *
3. Section 543.9 is amended by revising paragraph (a) and the
introductory text of paragraph (c) to read as follows:
Sec. 543.9 Application for conversion to Federal mutual charter.
(a) Filing. Any depository institution that proposes to convert to
a Federal mutual association as provided in Sec. 543.8 shall, after
approval by its board of directors, file in accordance with Sec. 516.1
of this chapter an application on forms obtained from the OTS. The
applicant shall submit any financial statements or other information
the OTS may require.
* * * * *
(c) Action on application. The OTS will consider such application
and any information submitted therewith, and may approve the
application in accordance with section 5(e) of the Home Owners' Loan
Act and Sec. 543.2(g)(1). Converting depository institutions that have
been in existence less than three years will be subject to all approval
criteria and other requirements applicable to de novo Federal
associations. Approval of an application and issuance by the OTS of a
charter will be subject to:
* * * * *
Dated: April 2, 1997.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 97-8952 Filed 4-8-97; 8:45 am]
BILLING CODE 6720-01-P
