[Federal Register Volume 62, Number 166 (Wednesday, August 27, 1997)]
[Rules and Regulations]
[Pages 45307-45309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-22798]
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DEPARTMENT OF THE TREASURY
Office of Thrift Supervision
12 CFR Part 543
[No. 97-83]
RIN 1550-AB06
Incorporation, Organization, and Conversion of Federal Mutual
Associations
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
amending its regulations governing conversions to federal mutual
savings associations. The final rule permits the direct conversion of
all types of mutual depository institutions into federal mutual savings
associations. This final rule simplifies the conversion process.
EFFECTIVE DATE: August 27, 1997.
FOR FURTHER INFORMATION CONTACT: David A. Permut, Counsel (Banking and
Finance) Business Transactions Division (202/906-7505); Scott Ciardi,
Senior Analyst, Corporate Activities Division (202/906-6960); 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
The OTS is issuing a final regulation that permits all types of
mutual depository institutions to convert directly to a federal mutual
savings association charter.1 The regulation is consistent
with OTS's long-standing position that depository institutions should
be free to operate under whatever charter best suits their business
needs, consistent with safety and soundness. The OTS previously has
granted federal savings associations explicit authority to convert
directly to a bank charter,2 and has promulgated regulations
enabling stock depository institutions to convert directly to a federal
stock savings association charter.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 CFR 552.2-7.
\3\ 12 CFR 552.2-6.
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The OTS published a notice of proposed rulemaking regarding direct
[[Page 45308]]
conversions of mutual depository institutions to federal mutual
charters in the Federal Register on April 2, 1997.4 The
public comment period closed on June 9, 1997. The OTS received two
comments regarding the proposal, both from trade associations. Both
commenters supported the proposal generally, without commenting on
specific aspects of the proposed regulation. In light of the
commenters' support and the OTS's continuing belief that this approach
will promote efficiency and reduce regulatory burden, today's final
regulation adopts the proposed regulation without changes.
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\4\ 62 FR 17115 (April 9, 1997).
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II. Description of the Final Rule
Pursuant to its authority under section 5(a) of the Home Owners'
Loan Act (``HOLA''), the OTS is amending Secs. 543.8 and 543.9 as
proposed, to permit any type of mutual depository institution to
convert directly to a federal mutual savings association.5
Previously, mutual depository institutions could convert to a federal
mutual charter indirectly, by chartering a federal mutual association,
and combining the other depository institution with the new federal
association in a merger or purchase and assumption transaction. The
final regulation eliminates unnecessary regulatory burdens associated
with indirect conversions. The rule applies all existing regulatory
requirements currently applicable to direct conversions by state mutual
associations and savings banks to this expanded class of applicants and
revises Secs. 543.8 and 543.9 as described below.
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\5\ As discussed in the proposal, 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.
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Section 543.8 permits conversions of mutual depository institutions
to federal mutual associations, subject to three requirements. First,
the institution must, upon consummation of the conversion, have its
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 must obtain all necessary
regulatory and member approvals. This provision requires, among other
things, that the converting depository institution have the authority
to convert to a federal association under the statutes and regulations
applicable to the converting institution and that the conversion be
approved by a vote of its members pursuant to the laws applicable to
the converting institution.
Third, a depository institution converting to a federal mutual
association charter must conform with the investment limitations of
Section 5(c) of the HOLA 6 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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\6\ 12 U.S.C. 1464(c).
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The rule also revises Section 543.9(a) to set forth the filing
requirements. Section 543.9(c) is 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) now explicitly provides 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). The revised regulation explicitly states 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.7
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\7\ See 12 CFR 543.3, added by 62 FR 27177, May 19, 1997.
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The OTS notes that applicants utilizing the provisions of the new
direct conversion regulation should file their applications on OTS Form
number 1582.
IV. Executive Order 12866
The Director of the OTS has determined that this final rule does
not constitute a ``significant regulatory action'' for the purposes of
Executive Order 12866.
V. Regulatory Flexibility Act Analysis
Pursuant to Section 605(b) of the Regulatory Flexibility Act, the
OTS certifies that this rule, which will reduce regulatory burdens,
will not have a significant economic impact on a substantial number of
small entities. The final regulation merely reduces regulatory burden
for all institutions, including small entities that convert from a
mutual charter to a federal mutual charter. Accordingly, a Regulatory
Flexibility Analysis is not required.
VI. Unfunded Mandates Act of 1995
Section 202 of the Unfunded Mandates Reform Act of 1995, Public Law
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 final 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.
VII. Effective Date
The OTS finds good cause for dispensing with the 30-day delayed
effective date ordinarily prescribed by the Administrative Procedure
Act (5 U.S.C. 553(d)). This rule confers a benefit on any institution
wishing to convert to a federal mutual charter by reducing the number
of steps required for conversion.
In addition, section 302 of the Community Development and
Regulatory Improvement Act of 1994 (12 U.S.C. 4802(b)(1)) (CDRIA)
delays the effective date of regulations promulgated by the Federal
banking agencies that impose additional reporting, disclosure, or new
requirements, to the first day of the first calendar quarter following
publication of the final rule. OTS believes that CDRIA does not apply
to this final rule because it imposes no new burden.
List of Subjects in 12 CFR Part 543
Conversions, Reporting and recordkeeping requirements, Savings
associations.
Accordingly, the Office of Thrift Supervision amends chapter V,
title 12, Code of Federal Regulations, as set forth below.
[[Page 45309]]
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 its
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 regulatory and
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 with the application, 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: August 19, 1997.
By the Office of Thrift Supervision.
Nicolas P. Retsinas,
Director.
[FR Doc. 97-22798 Filed 8-26-97; 8:45 am]
BILLING CODE 6720-01-P
