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Proposed Rule

Continued Application of Regulations to Savings and Loan Holding Companies

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AGENCY:

Board of Governors of the Federal Reserve System.

ACTION:

Notice of intent and request for comment.

SUMMARY:

The Board of Governors of the Federal Reserve System (“Board”) is issuing this notice of its intention to continue to enforce certain regulations previously issued by the Office of Thrift Supervision (“OTS”) after assuming supervisory responsibility for savings and loan holding companies (“SLHCs”) Start Printed Page 43954and their non-depository subsidiaries from the OTS in July 2011. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act” or “Act”) transfers supervisory functions related to SLHCs and their non-depository subsidiaries to the Board on July 21, 2011 (“transfer date”).

DATES:

Comments must be submitted on or before August 31, 2011.

ADDRESSES:

You may submit comments by any of the following methods:

All public comments are available from the Board's Web site at http://www.federalreserve.gov/​generalinfo/​foia/​ProposedRegs.cfm as submitted, unless modified for technical reasons. Accordingly, your comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper form in Room MP-500 of the Board's Martin Building (20th and C Streets, NW.) between 9 a.m. and 5 p.m. on weekdays.

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FOR FURTHER INFORMATION CONTACT:

Amanda K. Allexon, Counsel, (202) 452-3818 or Kathleen O'Day, Deputy General Counsel, (202) 452-3786, Legal Division; Anna Lee Hewko, Assistant Director, (202) 530-6260, or Michael Sexton, Manager, (202) 452-3009, Division of Banking Supervision and Regulation, Board of Governors of the Federal Reserve System, 20th and C Streets, NW., Washington, DC 20551. Telecommunications Device for the Deaf (TDD) users may contact (202-263-4869).

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SUPPLEMENTARY INFORMATION:

Background

The Dodd-Frank Act was enacted on July 21, 2010. Title III of the Dodd-Frank Act transfers to the Board supervisory functions of the OTS related to SLHCs and their non-depository subsidiaries. The Act transfers supervisory functions related to Federal savings associations and state savings associations to the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”), respectively.

With respect to the supervision of SLHCs and their non-depository subsidiaries, section 312 of the Dodd-Frank Act (12 U.S.C. 5412) provides that all functions of the OTS and the Director of the OTS (including authority to issue orders) will transfer to the Board on July 21, 2011. All rulemaking authority related to SLHCs also will transfer to the Board on that date pursuant to section 312 of the Act. Section 316 of the Dodd-Frank Act provides that all orders, resolutions, determinations, agreements, and regulations, interpretive rules, other interpretations, guidelines, and other advisory materials issued, made, prescribed, or allowed to become effective by the OTS on or before the transfer date with respect to SLHCs and their non-depository subsidiaries will remain in effect and shall be enforceable until modified, terminated, set aside, or superseded in accordance with applicable law by the Board, by any court of competent jurisdiction, or by operation of law. The Act includes parallel provisions applicable to the OCC and the FDIC with respect to Federal savings associations and state savings associations, respectively.

Given the extensive transfer of authority to multiple agencies, section 316 of the Dodd-Frank Act (12 U.S.C. 5414(c)) requires the Board, OCC, and FDIC to identify and publish in the Federal Register separate lists of the current OTS regulations that each agency will continue to enforce after the transfer date. The Board is, therefore, issuing this notice in accordance with section 316 of the Dodd-Frank Act. This notice identifies all OTS regulations applicable to SLHCs and their non-depository subsidiaries that the Board currently intends to enforce after the transfer date.

On or immediately after the transfer date, the Board intends to issue an interim final rule to effectuate the transition of OTS regulations to the Board. That rule will include technical, nomenclature, and other changes to certain OTS regulations to accommodate the transfer of supervisory authority from the OTS to the Board and address modifications made by the Dodd-Frank Act. The Board also expects to modify its own rules related to agency administration and procedure, where necessary, to account for the transfer of authority on or after the transfer date. When finalizing that rulemaking, the Board will take into consideration any comments received on this notice as well as those received on the interim final rule. In the future, the Board may propose substantive modifications to rules regarding SLHCs and their non-depository subsidiaries in order to address other modifications made by the Dodd-Frank Act and consolidate rules within the Board's regulatory structure.

Continuing Regulations

The regulations currently applicable to SLHCs and their non-depository subsidiaries are found in Chapter V of Title 12 of the Code of Federal Regulations. The following narrative provides a description of the parts of Chapter V that the Board expects to continue to enforce after July 21, 2011. Following the narrative, a chart is provided that lists each OTS part and the Board's current intention regarding enforcement of such part. The Board notes that failure to transfer an OTS regulation does not relieve any entity of the obligation to comply with all statutory requirements.

Parts 574 though 585 include many of the rules that relate to the supervision of SLHCs, including those concerning the acquisition of savings associations, mutual holding companies, permissible activities, and prohibited service by certain individuals. The Board intends to enforce the substantive provisions of parts 574 through 585 after the transfer date, including the requirements for filing applications and the factors for reviewing such applications. The Board, however, does not expect to transfer provisions in parts 574 though 585 regarding the processing of applications and notices, such as agency review periods, publication requirements, and hearing procedures (including those applicable as a result of cross-references to part 516). Instead, beginning on the transfer date, the Board anticipates adopting the application procedures currently used by bank holding companies (“BHCs”) to equivalent applications and notices submitted by SLHCs. Additionally, the Board anticipates eliminating the current OTS regulations relating to control determinations and rebuttals, including the rebuttable control factors and process in § 574.4, the certification of ownership in § 574.5, and the rebuttal agreement in § 574.100. In its place, the Board expects to insert provisions equivalent to those applicable to BHCs and, beginning on the transfer date, review investments and relationships with SLHCs using the current practices and policies applicable to BHCs, including the Board's policy statement on noncontrolling equity investments issued on September 22, 2008. The Start Printed Page 43955Board does not anticipate revisiting OTS determinations with respect to existing investments and ownership structures. In the near future, the Board anticipates proposing rules that would update and streamline regulations related to control determinations for both BHCs and SLHCs.

The Board intends to enforce certain definitional provisions (parts 541, 561, and 583), as well as parts 533 and 563f to the extent they are directly or indirectly applicable to the supervision of SLHCs and their non-depository subsidiaries. Additionally, the Board expects to enforce certain relevant provisions of part 562 that provide regulatory reporting requirements. The Board, however, issued a notice on February 8, 2011, indicating that it is considering transitioning SLHCs to the Board's current reporting system as soon as practicable.[1] Currently, the Board is reviewing comments received on that notice and is considering issuing a notice of proposed rulemaking on or after the transfer date outlining a proposal on SLHC reporting that may affect part 562 and part 584.

Current OTS rules often integrate regulatory requirements and supervision for both SLHCs and savings associations. As a result, certain regulations that only reference savings associations also may apply to SLHCs (and in particular to mutual holding companies) and their non-depository subsidiaries through cross-references. The Board, therefore, anticipates enforcing parts 546, 552, 559, 563, 563b, 563c, 563e, and 563g, and §§ 543.1(b), 544.2, 544.5, 544.8, 545.95, 545.121, and 565.4. The Board anticipates enforcing part 512 regarding investigative and formal examination proceedings because the Board does not have similar rules currently in place for BHCs.

The Board does not anticipate enforcing parts 500, 503 through 510, 513, 516, 517, and 528 after the transfer date. These parts include agency-specific administrative provisions and, as noted above, the Board anticipates modifying its own rules in this area on or after the transfer date to account for the transfer of authority.

Part 502 itemizes the current assessment fee schedule for OTS-supervised institutions. The Board does not currently charge BHCs or state member banks (“SMBs”) for examinations or inspections. However, section 318 of the Dodd-Frank Act (12 U.S.C. 248) requires the Board to charge fees to offset the cost of regular or special examinations of BHCs, SLHCs and other nonbanking financial companies over $50 billion. As a result, the Board does not anticipate enforcing part 502 and, instead, plans to issue comprehensive guidance with respect to assessment fees on or after the transfer date.

Additionally, the Board does not expect to enforce parts 535, 536, 550, 551, 555, 557, 558, 560, 563d, 564, 567, 568, 569, 570, 571, 572, 573, 590, and 591. The Board believes these provisions only apply to the supervision of savings associations and are not applicable to SLHCs or their non-depository institutions.

The Board reserves the right to continue to enforce any regulation or policy of the OTS if it determines after further review that the rule or policy was applied by the OTS to SLHCs or is otherwise required by law.

The following chart summarizes which parts and sections of Chapter V the Board currently expects to continue to enforce after July 21, 2011.

OTS PartSubjectContinuing provisionsBasis for decision
500Agency organization and functionNoneInternal agency administration.
502Assessments and feesNoneInternal agency administration and modifications required by the Dodd-Frank Act.
503Privacy ActNoneInternal agency administration.
505Freedom of Information ActNoneInternal agency administration.
506Information collection requirements under the Paperwork Reduction ActNoneInternal agency administration.
507Restrictions on post-employment activities of senior examinersNoneInternal agency administration.
508Removals, suspensions, and prohibitions where a crime is charged or provenNoneInternal agency administration.
509Rules of practice and procedure in adjudicatory proceedingsNoneInternal agency administration.
510Miscellaneous Organizational RegulationsNoneInternal agency administration.
512Rules for investigative proceedings and formal examination proceedingsAll of partApplies directly to SLHCs.
513Practice before the OfficeNoneInternal agency administration.
516Application processing proceduresNoneReplacing with Board processes within specific regulations.
517Contracting outreach programsNoneInternal agency administration.
528Nondiscrimination requirementsNoneInternal agency administration.
533Disclosure and reporting of CRA-related agreementsAll of partApplies directly to SLHCs.
535Unfair or deceptive acts or practicesNoneApplies to savings associations only.
536Consumer protection in sales of insuranceNoneApplies through the savings association.
541Definitions for regulations affecting Federal savings associationsSome of partRelevant to SLHC provisions.
543Federal mutual savings associations—Incorporation, organization, and conversionSome of part (Section 543.1(b) (resulting from cross-reference in part 575))Applicable to SLHC as a result of a cross-reference.
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544Federal mutual savings associations—Charter and bylawsSome of part (Sections 544.2, 544.5, and 544.8 (resulting from cross-reference in part 575))Applicable to SLHC as a result of a cross-reference.
545Federal savings associations—OperationsSome of part (Sections 545.95 and 545.121 (resulting from cross-reference in part 575))Applicable to SLHC as a result of a cross-reference.
546Federal mutual savings associations—Merger, dissolution, reorganization, and conversionAll of part (resulting from cross-reference in part 575)Applicable to SLHC as a result of a cross-reference.
550Fiduciary powers of savings associationsNone of partApplies to savings associations only.
551Recordkeeping and confirmation requirements for securities transactionsNoneApplies to savings associations only.
552Federal stock associations—Incorporation, organization, and conversionAll of part (resulting from cross-reference in part 575 and others)Applicable to SLHC as a result of a cross-reference.
555Electronic operationsNoneApplies to savings associations only.
557DepositsNoneApplies to savings associations only.
558Possession by conservators and receivers for Federal and State savings associationsNoneApplies to savings associations only.
559Subordinate organizationsAll of part (resulting from cross-reference in part 575)Applicable to SLHC as a result of a cross-reference.
560Lending and investmentNoneApplies to savings associations only.
561Definitions for regulations affecting all savings associationsSome of partRelevant to SLHC provisions.
562Regulatory reporting standardsSome of partApplies directly to SLHCs.
563Savings Associations—OperationsAll of part (resulting from cross-reference in part 575 and others)Applicable to SLHC as a result of a cross-reference.
563bConversions from mutual to stock formAll of part (resulting from cross-reference in part 575)Applicable to SLHC as a result of a cross-reference.
563cAccounting requirementsAll of partApplicable to SLHC as a result of a cross-reference.
563dSecurities of savings associationsNoneApplies to savings associations only.
563eCommunity reinvestmentSome of partApplicable to SLHC as a result of a cross-reference.
563fManagement official interlocksAll of partApplies directly to SLHCs.
563gSecurities offeringsAll of part (resulting from cross-reference in part 575)Applicable to SLHC as a result of a cross-reference.
564AppraisalsNoneApplies to savings associations only.
565Prompt corrective actionSome of part (Section 565.4 (resulting from cross-reference in part 575))Applicable to SLHC as a result of a cross-reference.
567CapitalNoneApplies to savings associations only.
568Security proceduresNoneApplies to savings associations only.
569ProxiesNoneApplies to savings associations only.
570Safety and soundness guidelines and compliance proceduresNoneApplies to savings associations only.
571Fair Credit ReportingNoneTransferred to new agency..
572Loans in areas having special flood hazardsNone of partApplies to savings associations only.
573Privacy of consumer financial informationNone of partApplies to savings associations only.
574Acquisition of control of savings associationsSome of partApplies directly to SLHCs. The Board will replace current OTS application processing procedures. The Board also will replace provisions related to control determinations and rebuttals.
575Mutual holding companiesSome of partApplies directly to SLHCs. The Board will replace current OTS application processing procedures.
583Definitions for regulations affecting savings and loan holding companiesAll of partRelevant to SLHC provisions.
584Savings and loan holding companiesAll of partApplies directly to SLHCs. The Board will replace current OTS application processing procedures.
585Prohibited service at savings and loan holding companiesAll of partApplies directly to SLHCs.
590Preemption of State usury lawsNoneApplies to savings associations only.
591Preemption of State due-on-sale lawsNoneApplies to savings associations only

By this notice, the Board seeks to inform interested persons, including SLHCs and their non-depository subsidiaries, of the Board's approach to enforcement of certain OTS regulations and invites comment on its intended Start Printed Page 43957approach in order to help identify issues and matters that may require special attention. The Board requests specific comment with respect to whether all regulations relating to the supervision of SLHCs are included in the listing above. Alternatively, does this notice indicate continued enforcement of regulatory provisions that currently do not apply to SLHCs or their non-depository subsidiaries?

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By order of the Board of Governors of the Federal Reserve System, July 14, 2011.

Robert deV. Frierson,

Deputy Secretary of the Board.

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Footnotes

1.  Notice of Intent to Require Reporting Forms for Savings and Loan Holding Companies, 76 Fed. Reg. 7091 (Feb. 8, 2011).

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[FR Doc. 2011-18100 Filed 7-21-11; 8:45 am]

BILLING CODE 6210-01-P