[Title 12 CFR ]
[Code of Federal Regulations (annual edition) - January 1, 2009 Edition]
[From the U.S. Government Printing Office]



[[Page i]]

          

          12


          Parts 300 to 499

                         Revised as of January 1, 2009


          Banks and Banking
          



________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of January 1, 2009
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

[[Page ii]]

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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 12:
          Chapter III--Federal Deposit Insurance Corporation         3
          Chapter IV--Export-Import Bank of the United States      617
  Finding Aids:
      Table of CFR Titles and Chapters........................     675
      Alphabetical List of Agencies Appearing in the CFR......     695
      List of CFR Sections Affected...........................     705

[[Page iv]]





                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 12 CFR 303.0 refers 
                       to title 12, part 303, 
                       section 0.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

    The contents of the Federal Register are required to be judicially 
noticed (44 U.S.C. 1507). The Code of Federal Regulations is prima facie 
evidence of the text of the original documents (44 U.S.C. 1510).

HOW TO USE THE CODE OF FEDERAL REGULATIONS

    The Code of Federal Regulations is kept up to date by the individual 
issues of the Federal Register. These two publications must be used 
together to determine the latest version of any given rule.
    To determine whether a Code volume has been amended since its 
revision date (in this case, January 1, 2009), consult the ``List of CFR 
Sections Affected (LSA),'' which is issued monthly, and the ``Cumulative 
List of Parts Affected,'' which appears in the Reader Aids section of 
the daily Federal Register. These two lists will identify the Federal 
Register page number of the latest amendment of any given rule.

EFFECTIVE AND EXPIRATION DATES

    Each volume of the Code contains amendments published in the Federal 
Register since the last revision of that volume of the Code. Source 
citations for the regulations are referred to by volume number and page 
number of the Federal Register and date of publication. Publication 
dates and effective dates are usually not the same and care must be 
exercised by the user in determining the actual effective date. In 
instances where the effective date is beyond the cut-off date for the 
Code a note has been inserted to reflect the future effective date. In 
those instances where a regulation published in the Federal Register 
states a date certain for expiration, an appropriate note will be 
inserted following the text.

OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
amendments to existing regulations in the CFR. These OMB numbers are 
placed as close as possible to the applicable recordkeeping or reporting 
requirements.

OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 1986, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, or 1973-1985, published in seven separate volumes. For 
the period beginning January 1, 1986, a ``List of CFR Sections 
Affected'' is published at the end of each CFR volume.

INCORPORATION BY REFERENCE

    What is incorporation by reference? Incorporation by reference was 
established by statute and allows Federal agencies to meet the 
requirement to publish regulations in the Federal Register by referring 
to materials already published elsewhere. For an incorporation to be 
valid, the Director of the Federal Register must approve it. The legal 
effect of incorporation by reference is that the material is treated as 
if it were published in full in the Federal Register (5 U.S.C. 552(a)). 
This material, like any other properly issued regulation, has the force 
of law.
    What is a proper incorporation by reference? The Director of the 
Federal Register will approve an incorporation by reference only when 
the requirements of 1 CFR part 51 are met. Some of the elements on which 
approval is based are:
    (a) The incorporation will substantially reduce the volume of 
material published in the Federal Register.
    (b) The matter incorporated is in fact available to the extent 
necessary to afford fairness and uniformity in the administrative 
process.
    (c) The incorporating document is drafted and submitted for 
publication in accordance with 1 CFR part 51.
    What if the material incorporated by reference cannot be found? If 
you have any problem locating or obtaining a copy of material listed in 
the Finding Aids of this volume as an approved incorporation by 
reference, please contact the agency that issued the regulation 
containing that incorporation. If, after contacting the agency, you find 
the material is not available, please notify the Director of the Federal 
Register, National Archives and Records Administration, Washington DC 
20408, or call 202-741-6010.

CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
separate volume, revised annually as of January 1, entitled CFR Index 
and Finding Aids. This volume contains the Parallel Table of Statutory 
Authorities and Agency Rules (Table I). A list of CFR titles, chapters, 
and parts and an alphabetical list of agencies publishing in the CFR are 
also included in this volume.
    An index to the text of ``Title 3--The President'' is carried within 
that volume.
    The Federal Register Index is issued monthly in cumulative form. 
This index is based on a consolidation of the ``Contents'' entries in 
the daily Federal Register.
    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

[[Page vii]]


REPUBLICATION OF MATERIAL

    There are no restrictions on the republication of material appearing 
in the Code of Federal Regulations.

INQUIRIES

    For a legal interpretation or explanation of any regulation in this 
volume, contact the issuing agency. The issuing agency's name appears at 
the top of odd-numbered pages.
    For inquiries concerning CFR reference assistance, call 202-741-6000 
or write to the Director, Office of the Federal Register, National 
Archives and Records Administration, Washington, DC 20408 or e-mail 
[email protected].

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ELECTRONIC SERVICES

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CFR Sections Affected), The United States Government Manual, the Federal 
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    The Office of the Federal Register also offers a free service on the 
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register. The NARA site also contains links to GPO Access.

    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    January 1, 2009.







[[Page ix]]



                               THIS TITLE

    Title 12--Banks and Banking is composed of seven volumes. The parts 
in these volumes are arranged in the following order: parts 1-199, 200-
219, 220-299, 300-499, 500-599, part 600-899, and 900-end. The first 
volume containing parts 1-199 is comprised of chapter I--Comptroller of 
the Currency, Department of the Treasury. The second and third volumes 
containing parts 200-299 are comprised of chapter II--Federal Reserve 
System. The fourth volume containing parts 300-499 is comprised of 
chapter III--Federal Deposit Insurance Corporation and chapter IV--
Export-Import Bank of the United States. The fifth volume containing 
parts 500-599 is comprised of chapter V--Office of Thrift Supervision, 
Department of the Treasury. The sixth volume containing parts 600-899 is 
comprised of chapter VI--Farm Credit Administration, chapter VII--
National Credit Union Administration, chapter VIII--Federal Financing 
Bank. The seventh volume containing part 900-end is comprised of chapter 
IX--Federal Housing Finance Board, chapter XI--Federal Financial 
Institutions Examination Council, chapter XIV--Farm Credit System 
Insurance Corporation, chapter XV--Department of the Treasury, chapter 
XVII--Office of Federal Housing Enterprise Oversight, Department of 
Housing and Urban Development and chapter XVIII--Community Development 
Financial Institutions Fund, Department of the Treasury. The contents of 
these volumes represent all of the current regulations codified under 
this title of the CFR as of January 1, 2009.

    For this volume, Michele Bugenhagen was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Michael L. White, assisted by Ann Worley.


[[Page 1]]



                       TITLE 12--BANKS AND BANKING




                  (This book contains parts 300 to 499)

  --------------------------------------------------------------------
                                                                    Part

chapter iii--Federal Deposit Insurance Corporation..........         303

chapter iv--Export-Import Bank of the United States.........         400

[[Page 3]]



           CHAPTER III--FEDERAL DEPOSIT INSURANCE CORPORATION




  --------------------------------------------------------------------

              SUBCHAPTER A--PROCEDURE AND RULES OF PRACTICE
Part                                                                Page
300-302         [Reserved]

303             Filing procedures...........................           5
304             Forms, instructions and reports.............          48
305-306         [Reserved]

307             Certification of assumption of deposits and 
                    notification of changes of insured 
                    status..................................          49
308             Rules of practice and procedure.............          51
309             Disclosure of information...................         134
310             Privacy Act regulations.....................         148
311             Rules governing public observation of 
                    meetings of the Corporation's Board of 
                    Directors...............................         153
312             [Reserved]

313             Procedures for corporate debt collection....         157
       SUBCHAPTER B--REGULATIONS AND STATEMENTS OF GENERAL POLICY
323             Appraisals..................................         177
324             [Reserved]

325             Capital maintenance.........................         181
326             Minimum security devices and procedures and 
                    Bank Secrecy Act compliance.............         287
327             Assessments.................................         290
328             Advertisement of membership.................         319
329             Interest on deposits........................         322
330             Deposit insurance coverage..................         324
331             [Reserved]

332             Privacy of consumer financial information...         339
333             Extension of corporate powers...............         357
334             Fair credit reporting.......................         359
335             Securities of nonmember insured banks.......         387
336             FDIC employees..............................         396
337             Unsafe and unsound banking practices........         400
338             Fair housing................................         406
339             Loans in areas having special flood hazards.         410

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340             Restrictions on sale of assets by the 
                    Federal Deposit Insurance Corporation...         414
341             Registration of securities transfer agents..         417
342             [Reserved]

343             Consumer protection in sales of insurance...         419
344             Recordkeeping and confirmation requirements 
                    for securities transactions.............         423
345             Community reinvestment......................         431
346             Disclosure and reporting of CRA-related 
                    agreements..............................         451
347             International banking.......................         463
348             Management official interlocks..............         487
349             [Reserved]

350             Disclosure of financial and other 
                    information by FDIC-insured State 
                    nonmember banks.........................         492
351             [Reserved]

352             Nondiscrimination on the basis of disability         494
353             Suspicious activity reports.................         498
357             Determination of economically depressed 
                    regions.................................         500
359             Golden parachute and indemnification 
                    payments................................         501
360             Resolution and receivership rules...........         508
361             Minority and Women Outreach Program 
                    contracting.............................         534
362             Activities of insured State banks and 
                    insured savings associations............         535
363             Annual independent audits and reporting 
                    requirements............................         558
364             Standards for Safety and Soundness..........         566
365             Real Estate Lending Standards...............         576
366             Minimum standards of integrity and fitness 
                    for an FDIC contractor..................         581
367             Suspension and exclusion of contractor and 
                    termination of contracts................         585
368             Government securities sales practices.......         594
369             Prohibition against use of interstate 
                    branches primarily for deposit 
                    production..............................         597
370             Temporary liquidity guarantee program.......         599
371             Recordkeeping requirements for qualified 
                    financial contracts (Eff. 1-21-09)......         611

[[Page 5]]



              SUBCHAPTER A_PROCEDURE AND RULES OF PRACTICE



                        PARTS 300-302 [RESERVED]



PART 303_FILING PROCEDURES--Table of Contents




Sec.
303.0 Scope.

                Subpart A_Rules of General Applicability

303.1 Scope.
303.2 Definitions.
303.3 General filing procedures.
303.4 Computation of time.
303.5 Effect of Community Reinvestment Act performance on filings.
303.6 Investigations and examinations.
303.7 Public notice requirements.
303.8 Public access to filing.
303.9 Comments.
303.10 Hearings and other meetings.
303.11 Decisions.
303.12 Waivers.
303.13 [Reserved]
303.14 Being ``engaged in the business of receiving deposits other than 
          trust funds.''
303.15 Certain limited liability companies deemed incorporated under 
          State law.
303.16-303.19 [Reserved]

                       Subpart B_Deposit Insurance

303.20 Scope.
303.21 Filing procedures.
303.22 Processing.
303.23 Public notice requirements.
303.24 Application for deposit insurance for an interim institution.
303.25 Continuation of deposit insurance upon withdrawing from 
          membership in the Federal Reserve System.
303.26-303.39 [Reserved]

 Subpart C_Establishment and Relocation of Domestic Branches and Offices

303.40 Scope.
303.41 Definitions.
303.42 Filing procedures.
303.43 Processing.
303.44 Public notice requirements.
303.45 Special provisions.
303.46 Financial education programs that include the provision of bank 
          products and services.
303.47-303.59 [Reserved]

                      Subpart D_Merger Transactions

303.60 Scope.
303.61 Definitions.
303.62 Transactions requiring prior approval.
303.63 Filing procedures.
303.64 Processing.
303.65 Public notice requirements.
303.66-303.79 [Reserved]

                    Subpart E_Change in Bank Control

303.80 Scope.
303.81 Definitions.
303.82 Transactions requiring prior notice.
303.83 Transactions not requiring prior notice.
303.84 Filing procedures.
303.85 Processing.
303.86 Public notice requirements.
303.87-303.99 [Reserved]

        Subpart F_Change of Director or Senior Executive Officer

303.100 Scope.
303.101 Definitions.
303.102 Filing procedures and waiver of prior notice.
303.103 Processing.
303.104-303.119 [Reserved]

               Subpart G_Activities of Insured State Banks

303.120 Scope.
303.121 Filing procedures.
303.122 Processing.
303.123-303.139 [Reserved]

          Subpart H_Activities of Insured Savings Associations

303.140 Scope.
303.141 Filing procedures.
303.142 Processing.
303.143-303.159 [Reserved]

                  Subpart I_Mutual-to-Stock Conversions

303.160 Scope.
303.161 Filing procedures.
303.162 Waiver from compliance.
303.163 Processing.
303.164-303.179 [Reserved]

                     Subpart J_International Banking

303.180 Scope.
303.181 Definitions.
303.182 Establishing, moving or closing a foreign branch of a state 
          nonmember bank; Sec. 347.103.
303.183 Investmentby insured state nonmember banks in foreign 
          organizations; Sec. 347.108.
303.184 Moving an insured branch of a foreign bank.
303.185 Merger transactions involving foreign banks or foreign 
          organizations.

[[Page 6]]

303.186 Exemptions from insurance requirement for a state branch of a 
          foreign bank; Sec. 347.206.
303.187 Approval for an insured state branch of a foreign bank to 
          conduct activities not permissible for federal branches; Sec. 
          347.213
303.188-303.199 [Reserved]

                   Subpart K_Prompt Corrective Action

303.200 Scope.
303.201 Filing procedures.
303.202 Processing.
303.203 Applications for capital distribution.
303.204 Applicationsfor acquisitions, branching, and new lines of 
          business.
303.205 Applications for bonuses and increased compensation for senior 
          executive officers.
303.206 Application for payment of principal or interest on subordinated 
          debt.
303.207 Restricted activities for critically undercapitalized 
          institutions.
303.208-303.219 [Reserved]

   Subpart L_Section 19 of the FDI Act (Consent to Service of Persons 
                 Convicted of Certain Criminal Offenses)

303.220 Scope.
303.221 Filing procedures.
303.222 Service at another insured depository institution.
303.223 Applicant's right to hearing following denial.
303.224-303.239 [Reserved]

                         Subpart M_Other Filings

303.240 General.
303.241 Reduce or retire capital stock or capital debt instruments.
303.242 Exercise of trust powers.
303.243 Brokered deposit waivers.
303.244 Golden parachute and severance plan payments.
303.245 Waiver of liability for commonly controlled depository 
          institutions.
303.246 Conversion with diminution of capital.
303.247 Continue or resume status as an insured institution following 
          termination under section 8 of the FDI Act.
303.248 Truth in Lending Act--Relief from reimbursement.
303.2490 Management official interlocks.
303.250 Modification of conditions.
303.251 Extension of time.
303.252-303.259 [Reserved]

Subpart N [Reserved]

    Authority: 12 U.S.C. 378, 1464, 1813, 1815, 1817, 1818, 1819 
(Seventh and Tenth), 1820, 1823, 1828, 1831a, 1831e, 1831o, 1831p-1, 
1831w, 1835a, 1843(l), 3104, 3105, 3108, 3207; 15 U.S.C. 1601-1607.

    Source: 67 FR 79247, Dec. 27, 2002, unless otherwise noted.



Sec. 303.0  Scope.

    (a) This part describes the procedures to be followed by both the 
FDIC and applicants with respect to applications, requests, or notices 
(filings) required to be filed by statute or regulation. Additional 
details concerning processing are explained in related FDIC statements 
of policy.
    (b) Additional application procedures may be found in the following 
FDIC regulations:
    (1) 12 CFR part 327--Assessments (Request for review of assessment 
risk classification);
    (2) 12 CFR part 328--Advertisement of Membership (Application for 
temporary waiver of advertising requirements);
    (3) 12 CFR part 345--Community Reinvestment (CRA strategic plans and 
requests for designation as a wholesale or limited purpose institution);



                Subpart A_Rules of General Applicability



Sec. 303.1  Scope.

    Subpart A prescribes the general procedures for submitting filings 
to the FDIC which are required by statute or regulation. This subpart 
also prescribes the procedures to be followed by the FDIC, applicants 
and interested parties during the process of considering a filing, 
including public notice and comment. This subpart explains the 
availability of expedited processing for eligible depository 
institutions (defined in Sec. 303.2(r)). Certain terms used throughout 
this part are also defined in this subpart.



Sec. 303.2  Definitions.

    Except as modified or otherwise defined in this part, terms used in 
this part that are defined in the Federal Deposit Insurance Act (12 
U.S.C. 1811 et seq.) have the meanings provided in the Federal Deposit 
Insurance Act. Additional definitions of terms used in this part are as 
follows:

[[Page 7]]

    (a) Act or FDI Act means the Federal Deposit Insurance Act (12 
U.S.C. 1811 et seq.).
    (b) Adjusted part 325 total assets means adjusted 12 CFR part 325 
total assets as calculated and reflected in the FDIC's Report of 
Examination.
    (c) Adverse comment means any objection, protest, or other adverse 
written statement submitted by an interested party relative to a filing. 
The term adverse comment shall not include any comment concerning the 
Community Reinvestment Act (CRA), fair lending, consumer protection, or 
civil rights that the appropriate regional director or designee 
determines to be frivolous (for example, raising issues between the 
commenter and the applicant that have been resolved). The term adverse 
comment also shall not include any other comment that the appropriate 
regional director or designee determines to be frivolous (for example, a 
non-substantive comment submitted primarily as a means of delaying 
action on the filing).
    (d) Amended order to pay means an order to forfeit and pay civil 
money penalties, the amount of which has been changed from that assessed 
in the original notice of assessment of civil money penalties.
    (e) Applicant means a person or entity that submits a filing to the 
FDIC.
    (f) Application means a submission requesting FDIC approval to 
engage in various corporate activities and transactions.
    (g) Appropriate FDIC region and appropriate regional director mean, 
respectively, the FDIC region and the FDIC regional director which the 
FDIC designates as follows:
    (1) When an institution or proposed institution that is the subject 
of a filing or administrative action is not and will not be part of a 
group of related institutions, the appropriate FDIC region for the 
institution and any individual associated with the institution is the 
FDIC region in which the institution or proposed institution is or will 
be located, and the appropriate regional director is the regional 
director for that region; or
    (2) When an institution or proposed institution that is the subject 
of a filing or administrative action is or will be part of a group of 
related institutions, the appropriate FDIC region for the institution 
and any individual associated with the institution is the FDIC region in 
which the group's major policy and decision makers are located, or any 
other region the FDIC designates on a case-by-case basis, and the 
appropriate regional director is the regional director for that region.
    (h) Associate director means any associate director of the Division 
of Supervision and Consumer Protection (DSC) or, in the event such title 
become obsolete, any official of equivalent authority within the 
division.
    (i) Book capital means total equity capital which is comprised of 
perpetual preferred stock, common stock, surplus, undivided profits and 
capital reserves, as those items are defined in the instructions of the 
Federal Financial Institutions Examination Council (FFIEC) for the 
preparation of Consolidated Reports of Condition and Income for insured 
banks.
    (j) Comment means any written statement of fact or opinion submitted 
by an interested party relative to a filing.
    (k) Corporation or FDIC means the Federal Deposit Insurance 
Corporation.
    (l) CRA protest means any adverse comment from the public related to 
a pending filing which raises a negative issue relative to the Community 
Reinvestment Act (CRA) (12 U.S.C. 2901 et seq.), whether or not it is 
labeled a protest and whether or not a hearing is requested.
    (m) Deputy director means the deputy director of the Division of 
Supervision and Consumer Protection (DSC) or, in the event such title 
become obsolete, any official of equivalent or higher authority within 
the division.
    (n) Deputy regional director means any deputy regional director of 
the Division of Supervision and Consumer Protection (DSC) or, in the 
event such title become obsolete, any official of equivalent authority 
within the same FDIC region of DSC.
    (o) Appropriate FDIC office means the office designated by the 
appropriate regional director or designee.
    (p) DSC means the Division of Supervision and Consumer Protection 
or, in the event the Division of Supervision

[[Page 8]]

and Consumer Protection is reorganized, such successor division.
    (q) Director means the Director of the Division of Supervision and 
Consumer Protection (DSC) or, in the event such title become obsolete, 
any official of equivalent or higher authority within the division.
    (r) Eligible depository institution means a depository institution 
that meets the following criteria:
    (1) Received an FDIC-assigned composite rating of 1 or 2 under the 
Uniform Financial Institutions Rating System (UFIRS) as a result of its 
most recent federal or state examination;
    (2) Received a satisfactory or better Community Reinvestment Act 
(CRA) rating from its primary federal regulator at its most recent 
examination, if the depository institution is subject to examination 
under part 345 of this chapter;
    (3) Received a compliance rating of 1 or 2 from its primary federal 
regulator at its most recent examination;
    (4) Is well-capitalized as defined in the appropriate capital 
regulation and guidance of the institution's primary federal regulator; 
and
    (5) Is not subject to a cease and desist order, consent order, 
prompt corrective action directive, written agreement, memorandum of 
understanding, or other administrative agreement with its primary 
federal regulator or chartering authority.
    (s) Filing means an application, notice or request submitted to the 
FDIC under this part.
    (t) General Counsel means the head of the Legal Division of the FDIC 
or any official within the Legal Division exercising equivalent 
authority for purposes of this part.
    (u) Insider means a person who is or is proposed to be a director, 
officer, organizer, or incorporator of an applicant; a shareholder who 
directly or indirectly controls 10 percent or more of any class of the 
applicant's outstanding voting stock; or the associates or interests of 
any such person.
    (v) Institution-affiliated party shall have the same meaning as 
provided in section 3(u) of the Act (12 U.S.C. 1813(u)).
    (w) NEPA means the National Environmental Policy Act of 1969 (42 
U.S.C. 4321 et seq.).
    (x) NHPA means the National Historic Preservation Act of 1966 (16 
U.S.C. 470 et seq.).
    (y) Notice means a submission notifying the FDIC that a depository 
institution intends to engage in or has commenced certain corporate 
activities or transactions.
    (z) Notice to primary regulator means the notice described in 
section 8(a)(2)(A) of the Act concerning termination of deposit 
insurance (12 U.S.C. 1818(a)(2)(A)).
    (aa) Regional counsel means a regional counsel of the Legal Division 
or, in the event the title becomes obsolete, any official of equivalent 
authority within the Legal Division.
    (bb) Regional director means any regional director in the Division 
of Supervision and Consumer Protection (DSC), or in the event such title 
become obsolete, any official of equivalent authority within the 
division.
    (cc) [Reserved]
    (dd) Standard conditions means the conditions that the FDIC may 
impose as a routine matter when approving a filing, whether or not the 
applicant has agreed to their inclusion. The following conditions, or 
variations thereof, are standard conditions:
    (1) That the applicant has obtained all necessary and final 
approvals from the appropriate federal or state authority or other 
appropriate authority;
    (2) That if the transaction does not take effect within a specified 
time period, or unless, in the meantime, a request for an extension of 
time has been approved, the consent granted shall expire at the end of 
the specified time period;
    (3) That until the conditional commitment of the FDIC becomes 
effective, the FDIC retains the right to alter, suspend or withdraw its 
commitment should any interim development be deemed to warrant such 
action; and
    (4) In the case of a merger transaction (as defined in ] 303.61(a) 
of this part), including a corporate reorganization, that the proposed 
transaction not be consummated before the 30th calendar day (or shorter 
time period as may be prescribed by the FDIC with

[[Page 9]]

the concurrence of the Attorney General) after the date of the order 
approving the merger transaction.
    (ee) Tier 1 capital shall have the same meaning as provided in ] 
325.2(v) of this chapter (12 CFR 325.2(v)).
    (ff) Total assets shall have the same meaning as provided in ] 
325.2(x) of this chapter (12 CFR 325.2(x)).

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.3  General filing procedures.

    Unless stated otherwise, filings should be submitted to the 
appropriate FDIC office. Forms and instructions for submitting filings 
may be obtained from any FDIC regional director. If no form is 
prescribed, the filing should be in writing; be signed by the applicant 
or a duly authorized agent; and contain a concise statement of the 
action requested. For specific filing and content requirements, consult 
the appropriate subparts of this part. The FDIC may require the 
applicant to submit additional information.



Sec. 303.4  Computation of time.

    For purposes of this part, and except as otherwise specifically 
provided, the FDIC begins computing the relevant period on the day after 
an event occurs (e.g., the day after a substantially complete filing is 
received by the FDIC or the day after publication begins) through the 
last day of the relevant period. When the last day is a Saturday, Sunday 
or federal holiday, the period runs until the end of the next business 
day.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.5  Effect of Community Reinvestment Act performance on filings.

    Among other factors, the FDIC takes into account the record of 
performance under the Community Reinvestment Act (CRA) of each applicant 
in considering a filing for approval of:
    (a) The establishment of a domestic branch;
    (b) The relocation of the bank's main office or a domestic branch;
    (c) The relocation of an insured branch of a foreign bank;
    (d) A transaction subject to the Bank Merger Act; and
    (e) Deposit insurance.



Sec. 303.6  Investigations and examinations.

    The FDIC may examine or investigate and evaluate facts related to 
any filing under this chapter to the extent necessary to reach an 
informed decision and take any action necessary or appropriate under the 
circumstances.



Sec. 303.7  Public notice requirements.

    (a) General. The public must be provided with prior notice of a 
filing to establish a domestic branch, relocate a domestic branch or the 
main office, relocate an insured branch of a foreign bank, engage in a 
merger transaction, initiate a change of control transaction, or request 
deposit insurance. The public has the right to comment on, or to 
protest, these types of proposed transactions during the relevant 
comment period. In order to fully apprise the public of this right, an 
applicant shall publish a public notice of its filing in a newspaper of 
general circulation. For specific publication requirements, consult 
subparts B (Deposit Insurance), C (Branches and Relocations), D (Merger 
Transactions), E (Change in Bank Control), and J (International Banking) 
of this part.
    (b) Confirmation of publication. The applicant shall mail or 
otherwise deliver a copy of the newspaper notice to the appropriate FDIC 
office as part of its filing, or, if a copy is not available at the time 
of filing, promptly after publication.
    (c) Content of notice. (1) The public notice referred to in 
paragraph (a) of this section shall consist of the following:
    (i) Name and address of the applicant(s). In the case of an 
application for deposit insurance for a de novo bank, include the names 
of all organizers or incorporators. In the case of an application to 
establish a branch, include the location of the proposed branch or, in 
the case of an application to relocate a branch or main office, include 
the current and proposed address of the office. In the case of a merger 
application, include the names of all parties to the transaction. In the 
case of a notice

[[Page 10]]

of acquisition of control, include the name(s) of the acquiring parties. 
In the case of an application to relocate an insured branch of a foreign 
bank, include the current and proposed address of the branch.
    (ii) Type of filing being made;
    (iii) Name of the depository institution(s) that is the subject 
matter of the filing;
    (iv) That the public may submit comments to the appropriate FDIC 
regional director;
    (v) The address of the appropriate FDIC office where comments may be 
sent (the same location where the filing will be made);
    (vi) The closing date of the public comment period as specified in 
the appropriate subpart; and
    (vii) That the nonconfidential portions of the application are on 
file in the appropriate FDIC office and are available for public 
inspection during regular business hours; photocopies of the 
nonconfidential portion of the application file will be made available 
upon request.
    (2) The requirements of paragraphs (c)(1)(iv) through (vii) of this 
section may be satisfied through use of the following notice:

Any person wishing to comment on this application may file his or her 
comments in writing with the regional director of the Federal Deposit 
Insurance Corporation at the appropriate FDIC office [insert address of 
office] not later than [insert closing date of the public comment period 
specified in the appropriate subpart of part 303]. The non-confidential 
portions of the application are on file at the appropriate FDIC office 
and are available for public inspection during regular business hours. 
Photocopies of the nonconfidential portion of the application file will 
be made available upon request.

    (d) Multiple transactions. The FDIC may consider more than one 
transaction, or a series of transactions, to be a single filing for 
purposes of the publication requirements of this section. When 
publishing a single public notice for multiple transactions, the 
applicant shall explain in the public notice how the transactions are 
related. The closing date of the comment period shall be the closing 
date of the longest public comment period that applies to any of the 
related transactions.
    (e) Joint public notices. For a transaction subject to public notice 
requirements by the FDIC and another federal or state banking authority, 
the FDIC will accept publication of a single joint notice containing all 
the information required by both the FDIC and the other federal agency 
or state banking authority, provided that the notice states that 
comments must be submitted to the appropriate FDIC office and, if 
applicable, the other federal or state banking authority.
    (f) Where public notice is required, the FDIC may determine on a 
case-by-case basis that unusual circumstances surrounding a particular 
filing warrant modification of the publication requirements.



Sec. 303.8  Public access to filing.

    (a) General. For filings subject to a public notice requirement, any 
person may inspect or request a copy of the non-confidential portions of 
a filing (the public file) until 180 days following final disposition of 
a filing. Following the 180-day period, non-confidential portions of an 
application file will be made available in accordance with ' 303.8(c). 
The public file generally consists of portions of the filing, supporting 
data, supplementary information, and comments submitted by interested 
persons (if any) to the extent that the documents have not been afforded 
confidential treatment. To view or request photocopies of the public 
file, an oral or written request should be submitted to the appropriate 
FDIC office. The public file will be produced for review not more than 
one business day after receipt by the appropriate FDIC office of the 
request (either written or oral) to see the file. The FDIC may impose a 
fee for photocopying in accordance with Sec. 309.5(f) of this chapter 
at the rates the FDIC publishes annually in the Federal Register.
    (b) Confidential treatment. (1) The applicant may request that 
specific information be treated as confidential. The following 
information generally is considered confidential:
    (i) Personal information, the release of which would constitute a 
clearly unwarranted invasion of privacy;

[[Page 11]]

    (ii) Commercial or financial information, the disclosure of which 
could result in substantial competitive harm to the submitter; and
    (iii) Information, the disclosure of which could seriously affect 
the financial condition of any depository institution.
    (2) If an applicant requests confidential treatment for information 
that the FDIC does not consider to be confidential, the FDIC may include 
that information in the public file after notifying the applicant. On 
its own initiative, the FDIC may determine that certain information 
should be treated as confidential and withhold that information from the 
public file.
    (c) FOIA requests. A written request for information withheld from 
the public file, or copies of the public file following closure of the 
file 180 days after final disposition, should be submitted pursuant to 
the Freedom of Information Act (5 U.S.C. 552) and part 309 of this 
chapter to the FDIC, Attn: FOIA/Privacy Group, Legal Division, 550 17th 
Street, NW., Washington, DC 20429.



Sec. 303.9  Comments.

    (a) Submission of comments. For filings subject to a public notice 
requirement, any person may submit comments to the appropriate FDIC 
regional director during the comment period.
    (b) Comment period--(1) General. Consult appropriate subparts of 
this part for the comment period applicable to a particular filing.
    (2) Extension. The FDIC may extend or reopen the comment period if:
    (i) The applicant fails to file all required information on a timely 
basis to permit review by the public or makes a request for confidential 
treatment not granted by the FDIC that delays the public availability of 
that information;
    (ii) Any person requesting an extension of time satisfactorily 
demonstrates to the FDIC that additional time is necessary to develop 
factual information that the FDIC determines may materially affect the 
application; or
    (iii) The FDIC determines that other good cause exists.
    (3) Solicitation of comments. Whenever appropriate, the appropriate 
regional director may solicit comments from any person or institution 
which might have an interest in or be affected by the pending filing.
    (4) Applicant response. The FDIC will provide copies of all comments 
received to the applicant and may give the applicant an opportunity to 
respond.



Sec. 303.10  Hearings and other meetings.

    (a) Matters covered. This section covers hearings and other 
proceedings in connection with filings and determinations for or by:
    (1) Deposit insurance by a proposed new depository institution or 
operating non-insured institution;
    (2) An insured state nonmember bank to establish a domestic branch 
or to relocate a main office or domestic branch;
    (3) Relocation of an insured branch of a foreign bank;
    (4)(i) Merger transaction which requires the FDIC's prior approval 
under the Bank Merger Act (12 U.S.C. 1828(c));
    (ii) Except as otherwise expressly provided, the provisions of this 
Sec. 303.10 shall not be applicable to any proposed merger transaction 
which the FDIC Board of Directors determines must be acted upon 
immediately to prevent the probable failure of one of the institutions 
involved, or must be handled with expeditious action due to an existing 
emergency condition, as permitted by the Bank Merger Act (12 U.S.C. 
1828(c)(6));
    (5) Nullification of a decision on a filing; and
    (6) Any other purpose or matter which the FDIC Board of Directors in 
its sole discretion deems appropriate.
    (b) Hearing requests. (1) Any person may submit a written request 
for a hearing on a filing:
    (i) To the appropriate regional director before the end of the 
comment period; or
    (ii) To the appropriate regional director, pursuant to a notice to 
nullify a decision on a filing issued pursuant to Sec. 303.11(g)(2)(i) 
or (ii).


(2) The request must describe the nature of the issues or facts to be 
presented and the reasons why written submissions would be insufficient 
to make an adequate presentation of those issues or facts to the FDIC. A

[[Page 12]]

person requesting a hearing shall simultaneously submit a copy of the 
request to the applicant.

    (c) Action on a hearing request. The appropriate regional director, 
after consultation with the Legal Division, may grant or deny a request 
for a hearing and may limit the issues that he or she deems relevant or 
material. The FDIC generally grants a hearing request only if it 
determines that written submissions would be insufficient or that a 
hearing otherwise would be in the public interest.
    (d) Denial of a hearing request. If the appropriate regional 
director, after consultation with the Legal Division, denies a hearing 
request, he or she shall notify the person requesting the hearing of the 
reason for the denial. A decision to deny a hearing request shall be a 
final agency determination and is not appealable.
    (e) FDIC procedures prior to the hearing--(1) Notice of hearing. The 
FDIC shall issue a notice of hearing if it grants a request for a 
hearing or orders a hearing because it is in the public interest. The 
notice of hearing shall state the subject and date of the filing, the 
time and place of the hearing, and the issues to be addressed. The FDIC 
shall send a copy of the notice of hearing to the applicant, to the 
person requesting the hearing, and to anyone else requesting a copy.
    (2) The presiding officer shall be the regional director or designee 
or such other person as may be named by the Board or the Director. The 
presiding officer is responsible for conducting the hearing and 
determining all procedural questions not governed by this section.
    (f) Participation in the hearing. Any person who wishes to appear 
(participant) shall notify the appropriate regional director of his or 
her intent to participate in the hearing no later than 10 days from the 
date that the FDIC issues the Notice of Hearing. At least 5 days before 
the hearing, each participant shall submit to the appropriate regional 
director, as well as to the applicant and any other person as required 
by the FDIC, the names of witnesses, a statement describing the proposed 
testimony of each witness, and one copy of each exhibit the participant 
intends to present.
    (g) Transcripts. The FDIC shall arrange for a hearing transcript. 
The person requesting the hearing and the applicant each shall bear the 
cost of one copy of the transcript for his or her use unless such cost 
is waived by the presiding officer and incurred by the FDIC.
    (h) Conduct of the hearing--(1) Presentations. Subject to the 
rulings of the presiding officer, the applicant and participants may 
make opening and closing statements and present and examine witnesses, 
material, and data.
    (2) Information submitted. Any person presenting material shall 
furnish one copy to the FDIC, one copy to the applicant, and one copy to 
each participant.
    (3) Laws not applicable to hearings. The Administrative Procedure 
Act (5 U.S.C. 551 et seq.), the Federal Rules of Evidence (28 U.S.C. 
Appendix), the Federal Rules of Civil Procedure (28 U.S.C. Rule 1 et 
seq.), and the FDIC's Rules of Practice and Procedure (12 CFR part 308) 
do not govern hearings under this Sec. 303.10.
    (i) Closing the hearing record. At the applicant's or any 
participant's request, or at the FDIC's discretion, the FDIC may keep 
the hearing record open for up to 10 days following the FDIC's receipt 
of the transcript. The FDIC shall resume processing the filing after the 
record closes.
    (j) Disposition and notice thereof. The presiding officer shall make 
a recommendation to the FDIC within 20 days following the date the 
hearing and record on the proceeding are closed. The FDIC shall notify 
the applicant and all participants of the final disposition of a filing 
and shall provide a statement of the reasons for the final disposition.
    (k) Computation of time. In computing periods of time under this 
section, the provisions of Sec. 308.12 of the FDIC's Rules of Practice 
and Procedure (12 CFR 308.12) shall apply.
    (l) Informal proceedings. The FDIC may arrange for an informal 
proceeding with an applicant and other interested parties in connection 
with a filing, either upon receipt of a written request for such a 
meeting made during

[[Page 13]]

the comment period, or upon the FDIC's own initiative. No later than 10 
days prior to an informal proceeding, the appropriate regional director 
shall notify the applicant and each person who requested a hearing or 
oral presentation of the date, time, and place of the proceeding. The 
proceeding may assume any form, including a meeting with FDIC 
representatives at which participants will be asked to present their 
views orally. The regional director may hold separate meetings with each 
of the participants.
    (m) Authority retained by FDIC Board of Directors to modify 
procedures. The FDIC Board of Directors may delegate authority by 
resolution on a case-by-case basis to the presiding officer to adopt 
different procedures in individual matters and on such terms and 
conditions as the Board of Directors determines in its discretion. The 
resolution shall be made available for public inspection and copying in 
the Office of the General Counsel, Executive Secretary Section under the 
Freedom of Information Act (5 U.S.C. 552(a)(2)).



Sec. 303.11  Decisions.

    (a) General procedures. The FDIC may approve, conditionally approve, 
deny, or not object to a filing after appropriate review and 
consideration of the record. The FDIC will promptly notify the applicant 
and any person who makes a written request of the final disposition of a 
filing. If the FDIC denies a filing, the FDIC will immediately notify 
the applicant in writing of the reasons for the denial.
    (b) Authority retained by FDIC Board of Directors to modify 
procedures. In acting on any filing under this part, the FDIC Board of 
Directors may by resolution adopt procedures which differ from those 
contained in this part when it deems it necessary or in the public 
interest to do so. The resolution shall be made available for public 
inspection and copying in the Office of the General Counsel, Executive 
Secretary Section under the Freedom of Information Act (5 U.S.C. 
552(a)(2)).
    (c) Expedited processing. (1) A filing submitted by an eligible 
depository institution as defined in Sec. 303.2(r) will receive 
expedited processing as specified in the appropriate subparts of this 
part unless the FDIC determines to remove the filing from expedited 
processing for any of the reasons set forth in paragraph (c)(2) of this 
section. Except for filings made pursuant to subpart J (International 
Banking), expedited processing will not be available for any filing that 
the appropriate regional director does not have delegated authority to 
approve.
    (2) Removal of filing from expedited processing. The FDIC may remove 
a filing from expedited processing at any time prior to final 
disposition if:
    (i) For filings subject to public notice under Sec. 303.7, an 
adverse comment is received that warrants additional investigation or 
review;
    (ii) For filings subject to evaluation of CRA performance under 
Sec. 303.5, a CRA protest is received that warrants additional 
investigation or review, or the appropriate regional director determines 
that the filing presents a significant CRA or compliance concern;
    (iii) For any filing, the appropriate regional director determines 
that the filing presents a significant supervisory concern, or raises a 
significant legal or policy issue; or
    (iv) For any filing, the appropriate regional director determines 
that other good cause exists for removal.
    (3) For purposes of this section, a significant CRA concern 
includes, but is not limited to, a determination by the appropriate 
regional director that, although a depository institution may have an 
institution-wide rating of satisfactory or better, a depository 
institution's CRA rating is less than satisfactory in a state or multi-
state metropolitan statistical area, or a depository institution's CRA 
performance is less than satisfactory in a metropolitan statistical area 
as defined in 12 CFR 345.12 (MSA) or in the non-MSA portion of a state 
in which it seeks to expand through approval of an application for a 
deposit facility as defined in 12 U.S.C. 2902(3).
    (4) If the FDIC determines that it is necessary to remove a filing 
from expedited processing pursuant to paragraph (c)(2) of this section, 
the FDIC promptly will provide the applicant with a written explanation
    (d) Multiple transactions. If the FDIC is considering related 
transactions,

[[Page 14]]

some or all of which have been granted expedited processing, then the 
longest processing time for any of the related transactions shall govern 
for purposes of approval.
    (e) Abandonment of filing. A filing must contain all information set 
forth in the applicable subpart of this part. To the extent necessary to 
evaluate a filing, the FDIC may require an applicant to provide 
additional information. If information requested by the FDIC is not 
provided within the time period specified by the agency, the FDIC may 
deem the filing abandoned and shall provide written notification to the 
applicant and any interested parties that submitted comments to the FDIC 
that the file has been closed.
    (f) Appeals and requests for reconsideration--(1) General. Appeal 
procedures for a denial of a change in bank control (subpart E), change 
in senior executive officer or board of directors (subpart F) or denial 
of an application pursuant to section 19 of the FDI Act (subpart L) are 
contained in 12 CFR part 308, subparts D, L, and M, respectively. For 
all other filings covered by this chapter for which appeal procedures 
are not provided by regulation or other written guidance, the procedures 
specified in paragraphs (f) (2) and (3) of this section shall apply. A 
decision to deny a request for a hearing is a final agency determination 
and is not appealable.
    (2) Filing procedures. Within 15 days of receipt of notice from the 
FDIC that its filing has been denied, any applicant may file a request 
for reconsideration with the appropriate regional director.
    (3) Content of filing. A request for reconsideration must contain 
the following information:
    (i) A resolution of the board of directors of the applicant 
authorizing filing of the request if the applicant is a corporation, or 
a letter signed by the individual(s) filing the request if the applicant 
is not a corporation;
    (ii) Relevant, substantive information that for good cause was not 
previously set forth in the filing; and
    (iii) Specific reasons why the FDIC should reconsider its prior 
decision.
    (4)-(5) [Reserved]
    (6) Processing. The FDIC will notify the applicant whether 
reconsideration will be granted or denied within 15 days of receipt of a 
request for reconsideration. If a request for reconsideration is granted 
pursuant to Sec. 303.11(f), the FDIC will notify the applicant of the 
final agency decision on such filing within 60 days of its receipt of 
the request for reconsideration.
    (g) Nullification, withdrawal, revocation, amendment, and suspension 
of decisions on filings--(1) Grounds for action. Except as otherwise 
provided by law or regulation, the FDIC may nullify, withdraw, revoke, 
amend or suspend a decision on a filing if it becomes aware at anytime:
    (i) Of any material misrepresentation or omission related to the 
filing or of any material change in circumstance that occurred prior to 
the consummation of the transaction or commencement of the activity 
authorized by the decision on the filing; or
    (ii) That the decision on the filing is contrary to law or 
regulation or was granted due to clerical or administrative error.
    (iii) Any person responsible for a material misrepresentation or 
omission in a filing or supporting materials may be subject to an 
enforcement action and other penalties, including criminal penalties 
provided in Title 18 of the United States Code.
    (2) Notice of intent and temporary order. (i) Except as provided in 
Sec. 303.11(g)(2)(ii), before taking action under this Sec. 303.11(g), 
the FDIC shall issue and serve on an applicant written notice of its 
intent to take such action. A notice of intent to act on a filing shall 
include:
    (A) The reasons for the proposed action; and
    (B) The date by which the applicant may file a written response with 
the FDIC.
    (ii) The FDIC may issue a temporary order on a decision on a filing 
without providing an applicant a prior notice of intent if the FDIC 
determines that:
    (A) It is necessary to reevaluate the impact of a change in 
circumstance prior to the consummation of the transaction or 
commencement of the activity authorized by the decision on the filing; 
or

[[Page 15]]

    (B) The activity authorized by the filing may pose a threat to the 
interests of the depository institution's depositors or may threaten to 
impair public confidence in the depository institution.
    (iii) A temporary order shall provide the applicant with an 
opportunity to make a written response in accordance with Sec. 
303.11(g)(3) of this section.
    (3) Response to notice of intent or temporary order. An applicant 
may file a written response to a notice of intent or a temporary order 
within 15 days from the date of service of the notice or temporary 
order. The written response should include:
    (i) An explanation of why the proposed action or temporary order is 
not warranted; and
    (ii)(A) Any other relevant information, mitigation circumstance, 
documentation, or other evidence in support of the applicant's position. 
An applicant may also request a hearing under Sec. 303.10.
    (B) Failure by an applicant to file a written response with the FDIC 
to a notice of intent or a temporary order within the specified time 
period, shall constitute a waiver of the opportunity to respond and 
shall constitute consent to a final order under this paragraph (g). The 
FDIC shall consider any such response, if filed in a timely manner, 
within 30 days of receiving the response.
    (4) Effective date. All orders issued pursuant to this section shall 
become effective immediately upon issuance unless otherwise stated 
therein.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.12  Waivers.

    (a) The Board of Directors, of the FDIC (Board) may, for good cause 
and to the extent permitted by statute, waiver the applicability of any 
provision of this chapter.
    (b) The provisions of this chapter may be suspended, revoked, 
amended or waived for good cause shown, in whole or in part, at any time 
by the Board, subject to the provisions of the Administrative Procedure 
Act and the provisions of this chapter. Any provision of the rules may 
be waived by the Board on its own motion or on petition if good cause 
thereof is shown.

[68 FR 50459, Aug. 21, 2003]



Sec. 303.13  [Reserved]



Sec. 303.14  Being ``engaged in the business of receiving deposits other than 

trust funds.''

    (a) Except as provided in paragraphs (b), (c), and (d) of this 
section, a depository institution shall be ``engaged in the business of 
receiving deposits other than trust funds'' only if it maintains one or 
more non-trust deposit accounts in the minimum aggregate amount of 
$500,000.
    (b) An applicant for federal deposit insurance under section 5 of 
the FDI Act, 12 U.S.C. 1815(a), shall be deemed to be ``engaged in the 
business of receiving deposits other than trust funds'' from the date 
that the FDIC approves deposit insurance for the institution until one 
year after it opens for business.
    (c) Any depository institution that fails to satisfy the minimum 
deposit standard specified in paragraph (a) of this section as of two 
consecutive call report dates (i.e., March 31st, June 30th, September 
30th, and December 31st) shall be subject to a determination by the FDIC 
that the institution is not ``engaged in the business of receiving 
deposits other than trust funds'' and to termination of its insured 
status under section 8(p) of the FDI Act, 12 U.S.C. 1818(p). For 
purposes of this paragraph, the first three call report dates after the 
institution opens for business are excluded.
    (d) Notwithstanding any failure by an insured depository institution 
to satisfy the minimum deposit standard in paragraph (a) of this 
section, the institution shall continue to be ``engaged in the business 
of receiving deposits other than trust funds'' for purposes of section 3 
of the FDI Act until the institution's insured status is terminated by 
the FDIC pursuant to a proceeding under section 8(a) or section 8(p) of 
the FDI Act. 12 U.S.C. 1818(a) or 1818(p).

[[Page 16]]



Sec. 303.15  Certain limited liability companies deemed incorporated under 

State law.

    (a) For purposes of the definition of ``State bank'' in 12 U.S.C. 
1813(a)(2) and this Chapter, a banking institution that is chartered as 
a limited liability company (LLC) under the law of any State is deemed 
to be ``incorporated'' under the law of the State, if
    (1) The institution is not subject to automatic termination, 
dissolution, or suspension upon the happening of some event (including, 
e.g., the death, disability, bankruptcy, expulsion, or withdrawal of an 
owner of the institution), other than the passage of time;
    (2) The exclusive authority to manage the institution is vested in a 
board of managers or directors that is elected or appointed by the 
owners, and that operates in substantially the same manner as, and has 
substantially the same rights, powers, privileges, duties, 
responsibilities, as a board of directors of a bank chartered as a 
corporation in the State;
    (3) Neither State law, nor the institution's operating agreement, 
bylaws, or other organizational documents provide that an owner of the 
institution is liable for the debts, liabilities, and obligations of the 
institution in excess of the amount of the owner's investment; and
    (4) Neither State law, nor the institution's operating agreement, 
bylaws, or other organizational documents require the consent of any 
other owner of the institution in order for an owner to transfer an 
ownership interest in the institution, including voting rights.
    (b) For purposes of the Federal Deposit Insurance Act and this 
Chapter,
    (1) Each of the terms ``stockholder'' and ``shareholder'' includes 
an owner of any interest in a bank chartered as an LLC, including a 
member or participant;
    (2) The term ``director'' includes a manager or director of a bank 
chartered as an LLC, or other person who has, with respect to such a 
bank, authority substantially similar to that of a director of a 
corporation;
    (3) The term ``officer'' includes an officer of a bank chartered as 
an LLC, or other person who has, with respect to such a bank, authority 
substantially similar to that of an officer of a corporation; and
    (4) Each of the terms ``voting stock,'' ``voting shares,'' and 
``voting securities'' includes ownership interests in a bank chartered 
as an LLC, as well as any certificates or other evidence of such 
ownership interests.

[68 FR 7308, Feb. 13, 2003]



Sec. Sec. 303.16-303.19  [Reserved]



                       Subpart B_Deposit Insurance



Sec. 303.20  Scope.

    This subpart sets forth the procedures for applying for deposit 
insurance for a proposed depository institution or an operating 
noninsured depository institution under section 5 of the FDI Act (12 
U.S.C. 1815). It also sets forth the procedures for requesting 
continuation of deposit insurance for a state-chartered bank withdrawing 
from membership in the Federal Reserve System and for interim 
institutions chartered to facilitate a merger transaction. Each bank 
that results from the conversion of a Federal savings association into 
multiple banks pursuant to section 5(i)(5) of the Home Owners' Loan Act, 
12 U.S.C. 1464(i)(5), is treated as a proposed depository institution or 
a de novo institution, as appropriate, for purposes of this subpart.

[67 FR 79247, Dec. 27, 2002, as amended at 73 FR 2145, Jan. 14, 2008]



Sec. 303.21  Filing procedures.

    (a) Applications for deposit insurance shall be filed with the 
appropriate FDIC office. The relevant application forms and instructions 
for applying for deposit insurance for an existing or proposed 
depository institution may be obtained from any FDIC regional director.
    (b) An application for deposit insurance for an interim depository 
institution shall be filed and processed in accordance with the 
procedures set forth in Sec. 303.24, subject to the provisions of Sec. 
303.62(b)(2) regarding deposit insurance for interim institutions. An 
interim institution is defined as a state-

[[Page 17]]

or federally-chartered depository institution that does not operate 
independently but exists solely as a vehicle to accomplish a merger 
transaction.
    (c) A request for continuation of deposit insurance upon withdrawing 
from membership in the Federal Reserve System shall be in letter form 
and shall provide the information prescribed in Sec. 303.25.



Sec. 303.22  Processing.

    (a) Expedited processing for proposed institutions. (1) An 
application for deposit insurance for a proposed institution which will 
be a subsidiary of an eligible depository institution as defined in 
Sec. 303.2(r) or an eligible holding company will be acknowledged in 
writing by the FDIC and will receive expedited processing unless the 
applicant is notified in writing to the contrary and provided with the 
basis for that decision. An eligible holding company is defined as a 
bank or thrift holding company that has consolidated assets of at least 
$150 million or more; a BOPEC rating of at least ``2'' for bank holding 
companies or an above average or ``A'' rating for thrift holding 
companies; and at least 75 percent of its consolidated depository 
institution assets comprised of eligible depository institutions. The 
FDIC may remove an application from expedited processing for any of the 
reasons set forth in Sec. 303.11(c)(2).
    (2) Under expedited processing, the FDIC will take action on an 
application within 60 days of receipt of a substantially complete 
application or 5 days after the expiration of the comment period 
described in Sec. 303.23, whichever is later. Final action may be 
withheld until the FDIC has assurance that permission to organize the 
proposed institution will be granted by the chartering authority. 
Notwithstanding paragraph (a)(1) of this section, if the FDIC does not 
act within the expedited processing period, it does not constitute an 
automatic or default approval.
    (b) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50459, Aug. 21, 2003]



Sec. 303.23  Public notice requirements.

    (a) De novo institutions and operating noninsured institutions. The 
applicant shall publish a notice as prescribed in Sec. 303.7 in a 
newspaper of general circulation in the community in which the main 
office of the depository institution is or will be located. Notice shall 
be published as close as practicable to, but no sooner than five days 
before, the date the application is mailed or delivered to the 
appropriate FDIC office. Comments by interested parties must be received 
by the appropriate regional director within 30 days following the date 
of publication, unless the comment period has been extended or reopened 
in accordance with Sec. 303.9(b)(2).
    (b) Exceptions to public notice requirements. No publication shall 
be required in connection with the granting of insurance to a new 
depository institution established pursuant to the resolution of a 
depository institution in default, or to an interim depository 
institution formed solely to facilitate a merger transaction, or for a 
request for continuation of federal deposit insurance by a state-
chartered bank withdrawing from membership in the Federal Reserve 
System.



Sec. 303.24  Application for deposit insurance for an interim institution.

    (a) Application required. Subject to Sec. 303.62(b)(2), a deposit 
insurance application is required for a state-chartered interim 
institution if the related merger transaction is subject to approval by 
a federal banking agency other than the FDIC. A separate application for 
deposit insurance for an interim institution is not required in 
connection with any merger requiring FDIC approval pursuant to subpart D 
of this part.
    (b) Content of separate application. A letter application for 
deposit insurance for an interim institution, accompanied by a copy of 
the related merger

[[Page 18]]

application, shall be filed with the appropriate FDIC office. The letter 
application shall briefly describe the transaction and contain a 
statement that deposit insurance is being requested for an interim 
institution that does not operate independently but exists solely as a 
vehicle to accomplish a merger transaction which will be reviewed by a 
federal banking agency other than the FDIC.
    (c) Processing. An application for deposit insurance for an interim 
depository institution will be acknowledged in writing by the FDIC. 
Final action will be taken within 21 days after receipt of a 
substantially complete application, unless the applicant is notified in 
writing that additional review is warranted. If the FDIC does not act 
within the expedited processing period, it does not constitute an 
automatic or default approval.



Sec. 303.25  Continuation of deposit insurance upon withdrawing from 

membership in the Federal Reserve System.

    (a) Content of application. To continue its insured status upon 
withdrawal from membership in the Federal Reserve System, a state-
chartered bank shall submit a letter application to the appropriate FDIC 
office. A complete application shall consist of the following 
information:
    (1) A copy of the letter, and any attachments thereto, sent to the 
appropriate Federal Reserve Bank setting forth the bank's intention to 
terminate its membership;
    (2) A copy of the letter from the Federal Reserve Bank acknowledging 
the bank's notice to terminate membership;
    (3) A statement regarding any anticipated changes in the bank's 
general business plan during the next 12-month period; and
    (4)(i) A statement by the bank's management that there are no 
outstanding or proposed corrective programs or supervisory agreements 
with the Federal Reserve System.
    (ii) If such programs or agreements exist, a statement by the 
applicant that its Board of Directors is willing to enter into similar 
programs or agreements with the FDIC which would become effective upon 
withdrawal from the Federal Reserve System.
    (b) Processing. An application for deposit insurance under this 
section will be acknowledged in writing by the FDIC. The FDIC shall 
notify the applicant, within 15 days of receipt of a substantially 
complete application, either that federal deposit insurance will 
continue upon termination of membership in the Federal Reserve System or 
that additional review is warranted and the applicant will be notified, 
in writing, of the FDIC's final decision regarding continuation of 
deposit insurance. If the FDIC does not act within the expedited 
processing period, it does not constitute an automatic or default 
approval.



Sec. Sec. 303.26-303.39  [Reserved]



 Subpart C_Establishment and Relocation of Domestic Branches and Offices



Sec. 303.40  Scope.

    (a) General. This subpart sets forth the application requirements 
and procedures for insured state nonmember banks to establish a branch, 
relocate a branch or main office, and retain existing branches after the 
interstate relocation of the main office subject to the approval by the 
FDIC pursuant to sections 13(f), 13(k), 18(d) and 44 of the FDI Act.
    (b) Merger transaction. Applications for approval of the acquisition 
and establishment of branches in connection with a merger transaction 
under section 18(c) of the FDI Act (12 U.S.C. 1828(c)), are processed in 
accordance with subpart D (Merger Transactions) of this part.
    (c) Insured branches of foreign banks and foreign branches of 
domestic banks. Applications regarding insured branches of foreign banks 
and foreign branches of domestic banks are processed in accordance with 
subpart J (International Banking) of this part.
    (d) Interstate acquisition of individual branch. Applications 
requesting approval of the interstate acquisition of an individual 
branch or branches located in a state other than the applicant's home 
state without the acquisition of the whole bank are treated as

[[Page 19]]

interstate bank merger transactions under section 44 of the FDI Act (12 
U.S.C. 1831a(u)), and are processed in accordance with subpart D (Merger 
Transactions) of this part.



Sec. 303.41  Definitions.

    For purposes of this subpart:
    (a) Branch, except as provided in this paragraph, includes any 
branch bank, branch office, additional office, or any branch place of 
business located in any State of the United States or in any territory 
of the United States, Puerto Rico, Guam, American Samoa, the Trust 
Territory of the Pacific Islands, the Virgin Islands, and the Northern 
Mariana Islands at which deposits are received or checks paid or money 
lent. A branch does not include an automated teller machine, an 
automated loan machine, a remote service unit, or a facility described 
in section 303.46. The term branch also includes the following:
    (1) A messenger service that is operated by a bank or its affiliate 
that picks up and delivers items relating to transactions in which 
deposits are received or checks paid or money lent. A messenger service 
established and operated by a non-affiliated third party generally does 
not constitute a branch for purposes of this subpart. Banks contracting 
with third parties to provide messenger services should consult with the 
FDIC to determine if the messenger service constitutes a branch.
    (2) A mobile branch, other than a messenger service, that does not 
have a single, permanent site and uses a vehicle that travels to various 
locations to enable the public to conduct banking business. A mobile 
branch may serve defined locations on a regular schedule or may serve a 
defined area at varying times and locations.
    (3) A temporary branch that operates for a limited period of time 
not to exceed one year as a public service, such as during an emergency 
or disaster situation.
    (4) A seasonal branch that operates at various periodically 
recurring intervals, such as during state and local fairs, college 
registration periods, and other similar occasions.
    (b) Branch relocation means a move within the same immediate 
neighborhood of the existing branch that does not substantially affect 
the nature of the business of the branch or the customers of the branch. 
Moving a branch to a location outside its immediate neighborhood is 
considered the closing of an existing branch and the establishment of a 
new branch. Closing of a branch is covered in the FDIC Statement of 
Policy Concerning Branch Closing Notices and Policies. 1 FDIC Law, 
Regulations, Related Acts 5391; see Sec. 309.4 (a) and (b) of this 
chapter for availability.
    (c) De novo branch means a branch of a bank which is established by 
the bank as a branch and does not become a branch of such bank as a 
result of:
    (1) The acquisition by the bank of an insured depository institution 
or a branch of an insured depository institution; or
    (2) The conversion, merger, or consolidation of any such institution 
or branch.
    (d) Home state means the state by which the bank is chartered.
    (e) Host state means a state, other than the home state of the bank, 
in which the bank maintains, or seeks to establish and maintain, a 
branch.

[67 FR 79247, Dec. 27, 2002, as amended at 73 FR 35338, June 23, 2008; 
73 FR 55432, Sept. 25, 2008]



Sec. 303.42  Filing procedures.

    (a) General. An applicant shall submit an application to the 
appropriate FDIC office on the date the notice required by Sec. 303.44 
is published, or within 5 days after the date of the last required 
publication.
    (b) Content of filing. A complete letter application shall include 
the following information:
    (1) A statement of intent to establish a branch, or to relocate the 
main office or a branch;
    (2) The exact location of the proposed site including the street 
address. With regard to messenger services, specify the geographic area 
in which the services will be available. With regard to a mobile branch 
specify the community or communities in which the vehicle will operate 
and the manner in which it will be used;
    (3) Details concerning any involvement in the proposal by an insider 
of

[[Page 20]]

the bank as defined in Sec. 303.2(u), including any financial 
arrangements relating to fees, the acquisition of property, leasing of 
property, and construction contracts;
    (4) A statement on the impact of the proposal on the human 
environment, including, information on compliance with local zoning laws 
and regulations and the effect on traffic patterns for purposes of 
complying with the applicable provisions of the NEPA and the FDIC 
Statement of Policy on NEPA (1 FDIC Law, Regulations, Related Acts 5185; 
see Sec. 309.4 (a) and (b) of this chapter for availability);
    (5) A statement as to whether or not the site is eligible for 
inclusion in the National Register of Historic Places for purposes of 
complying with applicable provisions of the NHPA and the FDIC Statement 
of Policy on NHPA (1 FDIC Law, Regulations, Related Acts 5175; see Sec. 
309.4 (a) and (b) of this chapter for availability) including 
documentation of consultation with the State Historic Preservation 
Officer, as appropriate;
    (6) Comments on any changes in services to be offered, the community 
to be served, or any other effect the proposal may have on the 
applicant's compliance with the CRA;
    (7) A copy of each newspaper publication required by Sec. 303.44 of 
this subpart, the name and address of the newspaper, and date of the 
publication;
    (8) When an application is submitted to relocate the main office of 
the applicant from one state to another, a statement of the applicant's 
intent regarding retention of branches in the state where the main 
office exists prior to relocation.
    (c) Undercapitalized institutions. Applications to establish a 
branch by applicants subject to section 38 of the FDI Act (12 U.S.C. 
1831o) also should provide the information required by Sec. 303.204. 
Applications pursuant to sections 38 and 18(d) of the FDI Act (12 U.S.C. 
1831o and 1828(d)) may be filed concurrently or as a single application.
    (d) Additional information. The FDIC may request additional 
information to complete processing.



Sec. 303.43  Processing.

    (a) Expedited processing for eligible depository institutions. An 
application filed under this subpart by an eligible depository 
institution as defined in Sec. 303.2(r) will be acknowledged in writing 
by the FDIC and will receive expedited processing, unless the applicant 
is notified in writing to the contrary and provided with the basis for 
that decision. The FDIC may remove an application from expedited 
processing for any of the reasons set forth in Sec. 303.11(c)(2). 
Absent such removal, an application processed under expedited processing 
will be deemed approved on the latest of the following:
    (1) The 21st day after receipt by the FDIC of a substantially 
complete filing;
    (2) The 5th day after expiration of the comment period described 
inSec. 303.44; or
    (3) In the case of an application to establish and operate a de novo 
branch in a state that is not the applicant's home state and in which 
the applicant does not maintain a branch, the 5th day after the FDIC 
receives confirmation from the host state that the applicant has both 
complied with the filing requirements of the host state and submitted a 
copy of the application with the FDIC to the host state bank supervisor.
    (b) Standard processing. For those applications which are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.



Sec. 303.44  Public notice requirements.

    (a) Newspaper publications. For applications to establish or 
relocate a branch, a notice as described in Sec. 303.7(c) shall be 
published once in a newspaper of general circulation. For applications 
to relocate a main office, notice shall be published at least once each 
week on the same day for two consecutive weeks. The required publication 
shall be made in the following communities:
    (1) To establish a branch. In the community in which the main office 
is located and in the communities to be served by the branch (including 
messenger services and mobile branches).
    (2) To relocate a main office. In the community in which the main 
office is

[[Page 21]]

currently located and in the community to which it is proposed the main 
office will relocate.
    (3) To relocate a branch. In the community in which the branch is 
located.
    (b) Public comments. Comments by interested parties must be received 
by the appropriate regional director within 15 days after the date of 
the last newspaper publication required by paragraph (a) of this 
section, unless the comment period has been extended or reopened in 
accordance with Sec. 303.9(b)(2).
    (c) Lobby notices. In the case of applications to relocate a main 
office or a branch, a copy of the required newspaper publication shall 
be posted in the public lobby of the office to be relocated for at least 
15 days beginning on the date of the last published notice required by 
paragraph (a) of this section.



Sec. 303.45  Special provisions.

    (a) Emergency or disaster events. (1) In the case of an emergency or 
disaster at a main office or a branch which requires that an office be 
immediately relocated to a temporary location, applicants shall notify 
the appropriate FDIC office within 3 days of such temporary relocation.
    (2) Within 10 days of the temporary relocation resulting from an 
emergency or disaster, the bank shall submit a written application to 
the appropriate FDIC office, that identifies the nature of the emergency 
or disaster, specifies the location of the temporary branch, and 
provides an estimate of the duration the bank plans to operate the 
temporary branch.
    (3) As part of the review process, the FDIC will determine on a case 
by case basis whether additional information is necessary and may waive 
public notice requirements.
    (b) Redesignation of main office and existing branch. In cases where 
an applicant desires to redesignate its main office as a branch and 
redesignate an existing branch as the main office, a single application 
shall be submitted. The FDIC may waive the public notice requirements in 
instances where an application presents no significant or novel policy, 
supervisory, CRA, compliance or legal concerns. A waiver will be granted 
only to a redesignation within the applicant's home state.
    (c) Expiration of approval. Approval of an application expires if 
within 18 months after the approval date a branch has not commenced 
business or a relocation has not been completed.



Sec. 303.46  Financial education programs that include the provision of bank 

products and services.

    No branch application or prior approval is required in order for a 
state nonmember bank to participate in one or more financial education 
programs that involve receiving deposits, paying withdrawals, or lending 
money if:
    (a) Such service or services are provided on school premises, or a 
facility used by the school;
    (b) Such service or services are provided at the discretion of the 
school;
    (c) The principal purpose of each program is financial education. 
For example, the principal purpose of a program would be considered to 
be financial education if the program is designed to teach students the 
principles of personal financial management, banking operations, or the 
benefits of saving for the future, and is not designed for the purpose 
of profit-making; and
    (d) Each program is conducted in a manner that is consistent with 
safe and sound banking practices and complies with applicable law.

[73 FR 35338, June 23, 2008]



Sec. Sec. 303.47-303.59  [Reserved]



                      Subpart D_Merger Transactions



Sec. 303.60  Scope.

    This subpart sets forth the application requirements and procedures 
for transactions subject to FDIC approval under the Bank Merger Act, 
section 18(c) of the FDI Act (12 U.S.C. 1828(c)). Additional guidance is 
contained in the FDIC ``Statement of Policy on Bank Merger 
Transactions'' (1 FDIC Law, Regulations, Related Acts 5145; see Sec. 
309.4(a) and (b) of this chapter for availability).



Sec. 303.61  Definitions.

    For purposes of this subpart:
    (a) Merger transaction includes any transaction:

[[Page 22]]

    (1) In which an insured depository institution merges or 
consolidates with any other insured depository institution or, either 
directly or indirectly, acquires the assets of, or assumes liability to 
pay any deposits made in, any other insured depository institution; or
    (2) In which an insured depository institution merges or 
consolidates with any noninsured bank or institution or assumes 
liability to pay any deposits made in, or similar liabilities of, any 
noninsured bank or institution, or in which an insured depository 
institution transfers assets to any noninsured bank or institution in 
consideration of the assumption of any portion of the deposits made in 
the insured depository institution.
    (b) Corporate reorganization means a merger transaction that 
involves solely an insured depository institution and one or more of its 
affiliates.
    (c) Interim merger transaction means a merger transaction (other 
than a purchase and assumption transaction) between an operating 
depository institution and a newly-formed depository institution or 
corporation that will not operate independently and that exists solely 
for the purpose of facilitating a corporate reorganization.
    (d) Resulting institution refers to the acquiring, assuming or 
resulting institution in a merger transaction.

[67 FR 79247, Dec. 27, 2002, as amended at 71 FR 20526, Apr. 21, 2006; 
73 FR 2145, Jan. 14, 2008]



Sec. 303.62  Transactions requiring prior approval.

    (a) Merger transactions. The following merger transactions require 
the prior written approval of the FDIC under this subpart:
    (1) Any merger transaction, including any corporate reorganization, 
interim merger transaction, or optional conversion, in which the 
resulting institution is to be an insured state nonmember bank; and
    (2) Any merger transaction, including any corporate reorganization 
or interim merger transaction, that involves an uninsured bank or 
institution.
    (b) Related provisions. Transactions covered by this subpart also 
may be subject to other provisions or application requirements, 
including the following:
    (1) Interstate merger transactions. Merger transactions between 
insured banks that are chartered in different states are subject to the 
provisions of section 44 of the FDI Act (12 U.S.C. 1831u). In the case 
of a merger transaction that consists of the acquisition by an out of 
state bank of a branch without acquisition of the bank, the branch is 
treated for section 44 purposes as a bank whose home state is the state 
in which the branch is located.
    (2) Deposit insurance. An application for deposit insurance will be 
required in connection with a merger transaction between a state-
chartered interim institution and an insured depository institution if 
the related merger application is being acted upon by a federal banking 
agency other than the FDIC. If the FDIC is the federal banking agency 
responsible for acting on the related merger application, a separate 
application for deposit insurance is not necessary. Procedures for 
applying for deposit insurance are set forth in subpart B of this part. 
An application for deposit insurance will not be required in connection 
with a merger transaction (other than a purchase and assumption 
transaction) of a federally-chartered interim institution and an insured 
institution, even if the resulting institution is to operate under the 
charter of the federal interim institution.
    (3) Branch closings. Branch closings in connection with a merger 
transaction are subject to the notice requirements of section 42 of the 
FDI Act (12 U.S.C. 1831r-1), including requirements for notice to 
customers. These requirements are addressed in the ``Interagency Policy 
Statement Concerning Branch Closings Notices and Policies'' (1 FDIC Law, 
Regulations, Related Acts (FDIC) 5391; see Sec. 309.4(a) and (b) of 
this chapter for availability.)
    (4) Undercapitalized institutions. Applications for a merger 
transaction by applicants subject to section 38 of the FDI Act (12 
U.S.C. 1831o) should also provide the information required by Sec. 
303.204. Applications pursuant to sections 38 and 18(c) of the FDI Act 
(12

[[Page 23]]

U.S.C, 1831o and 1828(c)) may be filed concurrently or as a single 
application.
    (5) Certification of assumption of deposit liability. An insured 
depository institution assuming deposit liabilities of another insured 
institution must provide certification of assumption of deposit 
liability to the FDIC in accordance with 12 CFR part 307.

[67 FR 79247, Dec. 27, 2002, as amended at 71 FR 20526, Apr. 21, 2006]



Sec. 303.63  Filing procedures.

    (a) General. Applications required under this subpart shall be filed 
with the appropriate FDIC office. The appropriate forms and instructions 
may be obtained upon request from any FDIC regional director.
    (b) Merger transactions. Applications for approval of merger 
transactions shall be accompanied by copies of all agreements or 
proposed agreements relating to the merger transaction and any other 
information requested by the FDIC.
    (c) Interim merger transactions. Applications for approval of 
interim merger transactions and any related deposit insurance 
applications shall be made by filing the forms and other documents 
required by paragraphs (a) and (b) of this section and such other 
information as may be required by the FDIC for consideration of the 
request for deposit insurance.

[67 FR 79247, Dec. 27, 2002, as amended at 73 FR 2145, Jan. 14, 2008]



Sec. 303.64  Processing.

    (a) Expedited processing for eligible depository institutions--(1) 
General. An application filed under this subpart by an eligible 
depository institution as defined in Sec. 303.2(r) and which meets the 
additional criteria in paragraph (a)(4) of this section will be 
acknowledged by the FDIC in writing and will receive expedited 
processing, unless the applicant is notified in writing to the contrary 
and provided with the basis for that decision. The FDIC may remove an 
application from expedited processing for any of the reasons set forth 
in Sec. 303.11(c)(2).
    (2) Under expedited processing, the FDIC will take action on an 
application by the date that is the latest of:
    (i) 45 days after the date of the FDIC's receipt of a substantially 
complete merger application; or
    (ii) 10 days after the date of the last notice publication required 
under Sec. 303.65 of this subpart; or
    (iii) 5 days after receipt of the Attorney General's report on the 
competitive factors involved in the proposed transaction; or
    (iv) For an interstate merger transaction subject to the provisions 
of section 44 of the FDI Act (12 U.S.C. 1831u), 5 days after the FDIC 
receives confirmation from the host state (as defined in Sec. 
303.41(e)) that the applicant has both complied with the filing 
requirements of the host state and submitted a copy of the FDIC merger 
application to the host state's bank supervisor.
    (3) Notwithstanding paragraph (a)(1) of this section, if the FDIC 
does not act within the expedited processing period, it does not 
constitute an automatic or default approval.
    (4) Criteria. The FDIC will process an application using expedited 
procedures if:
    (i) Immediately following the merger transaction, the resulting 
institution will be ``well-capitalized'' pursuant to subpart B of part 
325 of this chapter (12 CFR part 325); and
    (ii)(A) All parties to the merger transaction are eligible 
depository institutions as defined in Sec. 303.2(r); or
    (B) The acquiring party is an eligible depository institution as 
defined in Sec. 303.2(r) and the amount of the total assets to be 
transferred does not exceed an amount equal to 10 percent of the 
acquiring institution's total assets as reported in its report of 
condition for the quarter immediately preceding the filing of the merger 
application.
    (b) Standard processing. For those applications not processed 
pursuant to the expedited procedures, the FDIC will provide the 
applicant with written notification of the final action taken by the 
FDIC on the application when the decision is rendered.

[[Page 24]]



Sec. 303.65  Public notice requirements.

    (a) General. Except as provided in paragraph (b) of this section, an 
applicant for approval of a merger transaction must publish notice of 
the proposed transaction on at least three occasions at approximately 
equal intervals in a newspaper of general circulation in the community 
or communities where the main offices of the merging institutions are 
located or, if there is no such newspaper in the community, then in the 
newspaper of general circulation published nearest thereto.
    (1) First publication. The first publication of the notice should be 
as close as practicable to the date on which the application is filed 
with the FDIC, but no more than 5 days prior to the filing date.
    (2) Last publication. The last publication of the notice shall be on 
the 25th day after the first publication or, if the newspaper does not 
publish on the 25th day, on the newspaper's publication date that is 
closest to the 25th day.
    (b) Exceptions--(1) Emergency requiring expeditious action. If the 
FDIC determines that an emergency exists requiring expeditious action, 
notice shall be published twice. The first notice shall be published as 
soon as possible after the FDIC notifies the applicant of such 
determination. The second notice shall be published on the 7th day after 
the first publication or, if the newspaper does not publish on the 7th 
day, on the newspaper's publication date that is closest to the 7th day.
    (2) Probable failure. If the FDIC determines that it must act 
immediately to prevent the probable failure of one of the institutions 
involved in a proposed merger transaction, publication is not required.
    (c) Content of notice--(1) General. The notice shall conform to the 
public notice requirements set forth in Sec. 303.7.
    (2) Branches. If it is contemplated that the resulting institution 
will operate offices of the other institution(s) as branches, the 
following statement shall be included in the notice required in Sec. 
303.7(b):

It is contemplated that all offices of the above-named institutions will 
continue to be operated (with the exception of [insert identity and 
location of each office that will not be operated]).

    (3) Emergency requiring expeditious action. If the FDIC determines 
that an emergency exists requiring expeditious action, the notice shall 
specify as the closing date of the public comment period the date that 
is the 10th day after the date of the first publication.
    (d) Public comments. Comments must be received by the appropriate 
FDIC office within 30 days after the first publication of the notice, 
unless the comment period has been extended or reopened in accordance 
with Sec. 303.9(b)(2). If the FDIC has determined that an emergency 
exists requiring expeditious action, comments must be received by the 
appropriate FDIC office within 10 days after the first publication.



Sec. Sec. 303.66-303.79  [Reserved]



                    Subpart E_Change in Bank Control



Sec. 303.80  Scope.

    This subpart sets forth the procedures for submitting a notice to 
acquire control of an insured state nonmember bank or a parent company 
of an insured state nonmember bank pursuant to the Change in Bank 
Control Act of 1978, section 7(j) of the FDI Act (12 U.S.C. 1817(j)).

[68 FR 50459, Aug. 21, 2003]



Sec. 303.81  Definitions.

    For purposes of this subpart:
    (a) Acquisition includes a purchase, assignment, transfer, pledge or 
other disposition of voting shares, or an increase in percentage 
ownership resulting from a redemption of voting shares of an insured 
state nonmember bank or a parent company.
    (b) Acting in concert means knowing participation in a joint 
activity or parallel action towards a common goal of acquiring control 
of an insured state nonmember bank or a parent company, whether or not 
pursuant to an express agreement.
    (c) Control means the power, directly or indirectly, to direct the 
management or policies of an insured bank or a parent company or to vote 
25 percent or more of any class of voting shares of an insured bank or a 
parent company.

[[Page 25]]

    (d) Parent Company means any company that controls, directly or 
indirectly, an insured state nonmember bank.
    (e) Person means an individual, corporation, partnership, trust, 
association, joint venture, pool, syndicate, sole proprietorship, 
unincorporated organization, and any other form of entity; and a voting 
trust, voting agreement, and any group of persons acting in concert.

[68 FR 50459, Aug. 21, 2003]



Sec. 303.82  Transactions requiring prior notice.

    (a) Prior notice requirement. Any person acting directly or 
indirectly, or through or in concert with one or more persons, shall 
give the FDIC 60 days prior written notice, as specified in Sec. 
303.84, before acquiring control of an insured state nonmember bank or 
any parent company, unless the acquisition is exempt under Sec. 303.83.
    (b) Acquisition requiring prior notice--(1) Acquisition of control. 
The acquisition of control, unless exempted, requires prior notice to 
the FDIC.
    (2) Rebuttable presumption of control. The FDIC presumes that an 
acquisition of voting shares of an insured state nonmember bank or a 
parent company constitutes the acquisition of the power to direct the 
management or policies of an insured bank or a parent company requiring 
prior notice to the FDIC, if, immediately after the transaction, the 
acquiring person (or persons acting in concert) will own, control, or 
hold with power to vote 10 percent or more of any class of voting shares 
of the institution, and if:
    (i) The institution has registered shares under section 12 of the 
Securities Exchange Act of 1934 (15 U.S.C. 78l); or
    (ii) No other person will own, control or hold the power to vote a 
greater percentage of that class of voting shares immediately after the 
transaction. If two or more persons, not acting in concert, each propose 
to acquire simultaneously equal percentages of 10 percent or more of a 
class of voting shares of an insured state nonmember bank or a parent 
company, each such person shall file prior notice with the FDIC.
    (c) Acquisition of loans in default. The FDIC presumes an 
acquisition of a loan in default that is secured by voting shares of an 
insured state nonmember bank or a parent company to be an acquisition of 
the underlying shares for purposes of this section.
    (d) Other transactions. Acquisitions other than those set forth in 
paragraph (b)(2) of this section resulting in a person's control of less 
than 25 percent of a class of voting shares of an insured state 
nonmember bank or a parent company are not deemed by the FDIC to 
constitute control for purposes of the Change in Bank Control Act.
    (e) Rebuttal of presumptions. Prior notice to the FDIC is not 
required for any acquisition of voting shares under the presumption of 
control set forth in this section, if the FDIC finds that the 
acquisition will not result in control. The FDIC will afford any person 
seeking to rebut a presumption in this section an opportunity to present 
views in writing or, if appropriate, orally before its designated 
representatives at an informal meeting.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50460, Aug. 21, 2003]



Sec. 303.83  Transactions not requiring prior notice.

    (a) Exempt transactions. The following transactions do not require 
notice to the FDIC under this subpart:
    (1) The acquisiition of additional voting shares of an insured state 
nonmember bank or a parent company by a person who:
    (i) Held the power to vote 25 percent or more of any class of voting 
shares of the institution continuously since the later of March 9, 1979, 
or the date that the institution commenced business as an insured state 
nonmember bank or a parent company; or
    (ii) Is presumed, under Sec. 303.82(b)(2), to have controlled the 
institution continuously since March 9, 1979, if the aggregate amount of 
voting shares held does not exceed 25 percent or more of any class of 
voting shares of the institution or, in other cases, where the FDIC 
determines that the person has controlled the institution continuously 
since March 9, 1979;
    (2) The acquisition of additional shares of a class of voting shares 
of an

[[Page 26]]

insured state nonmember bank or a parent company by any person (or 
persons acting in concert) who has lawfully acquired and maintained 
control of the institution (for purposes of Sec. 303.82) after 
complying with the procedures of the Change in Bank Control Act to 
acquire voting shares of the institution under this subpart;
    (3) Acquisitions of voting shares subject to approval under section 
3 of the Bank Holding Company Act (12 U.S.C. 1842(a)), section 18(c) of 
the FDI Act (12 U.S.C. 1828(c)), or section 10 of the Home Owners' Loan 
Act (12 U.S.C. 1467a);
    (4) Transactions exempt under the Bank Holding Company Act: 
foreclosures by institutional lenders, fiduciary acquisitions by banks, 
and increases of majority holdings by bank holding companies described 
in sections 2(a)(5), 3(a)(A), or 3(a)(B) respectively of the Bank 
Holding Company Act (12 U.S.C. 1841(a)(5), 1842(a)(A), and 1842(a)(B));
    (5) A customary one-time proxy solicitation;
    (6) The receipt of voting shares of an insured state nonmember bank 
or a parent company through a pro rata stock dividend;
    (7) The acquisition of voting shares in a foreign bank, which has an 
insured branch or branches in the United States. (This exemption does 
not extend to the reports and information required under paragraphs 9, 
10, and 12 of the Change in Bank Control Act of 1978 (12 U.S.C. 
1817(j)(9), (10), and (12)) and;
    (8) The acquisition of voting shares of a depository institution 
holding company that either the Board of Governors of the Federal 
Reserve System or the Office of Thrift Supervision reviews pursuant to 
the Change in Bank Control Act (12 U.S.C. 1817(j)).
    (b) Prior notice exemption. (1) The following acquisitions of voting 
shares of an insured state nonmember bank or a parent company, which 
otherwise would require prior notice under this subpart, are not subject 
to the prior notice requirements if the acquiring person notifies the 
appropriate FDIC office within 90 calendar days after the acquisition 
and provides any relevant information requested by the FDIC:
    (i) The acquisition of voting shares through inheritance;
    (ii) The acquisition of voting shares as a bona fide gift; or
    (iii) The acquisition of voting shares in satisfaction of a debt 
previously contracted in good faith, except that the acquirer of a 
defaulted loan secured by a controlling amount of a state nonmember 
bank's voting securities or a parent company's voting securities shall 
file a notice before the loan is acquired.
    (2) The following acquisitions of voting shares of an insured state 
nonmember bank or a parent company, which otherwise would require prior 
notice under this subpart, are not subject to the prior notice 
requirements if the acquiring person notifies the appropriate FDIC 
office within 90 calendar days after receiving notice of the acquisition 
and provides any relevant information requested by the FDIC.
    (i) A percentage increase in ownership of voting shares resulting 
from a redemption of voting shares by the issuing bank or a parent 
company; or
    (ii) The sale of shares by any shareholder that is not within the 
control of a person resulting in that person becoming the largest 
shareholder.
    (3) Nothing in paragraph (b)(1) of this section limits the authority 
of the FDIC to disapprove a notice pursuant to Sec. 303.85(c).

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50460, Aug. 21, 2003]



Sec. 303.84  Filing procedures.

    (a) Filing notice. (1) A notice required under this subpart shall be 
filed with the appropriate FDIC office and shall contain all the 
information required by paragraph 6 of the Change in Bank Control Act, 
section 7 (j) of the FDI Act, (12 U.S.C. 1817(j)(6)), or prescribed in 
the designated interagency form which may be obtained from any FDIC 
regional director.
    (2) The FDIC may waive any of the informational requirements of the 
notice if the FDIC determines that it is in the public interest.
    (3) A notificant shall notify the appropriate FDIC office 
immediately of any material changes in a notice submitted to the FDIC, 
including changes in financial or other conditions.

[[Page 27]]

    (4) When the acquiring person is an individual, or group of 
individuals acting in concert, the requirement to provide personal 
financial data may be satisfied by a current statement of assets and 
liabilities and an income summary, as required in the designated 
interagency form, together with a statement of any material changes 
since the date of the statement or summary. The FDIC may require 
additional information if appropriate.
    (b) Other laws. Nothing in this subpart shall affect any obligation 
which the acquiring person(s) may have to comply with the federal 
securities laws or other laws.



Sec. 303.85  Processing.

    (a) Acceptance of notice, additional information. The FDIC shall 
notify the person or persons submitting a notice under this subpart in 
writing of the date the notice is accepted as substantially complete. 
The FDIC may request additional information at any time.
    (b) Commencement of the 60-day notice period: consummation of 
acquisition. (1) The 60-day notice period specified in Sec. 303.82 
shall commerce on the day after the date of acceptance of a 
substantially complete notice by the appropriate regional director. The 
notificant(s) may consummate the proposed acquisition after the 
expiration of the 60-day notice period, unless the FDIC disapproves the 
proposed acquisition or extends the notice period.
    (c) Disapproval of acquisition of control. Subpart D of 12 CFR part 
308 sets forth the rules of practice and procedure for a notice of 
disapproval.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50460, Aug. 21, 2003]



Sec. 303.86  Public notice requirements.

    (a) Publication--(1) Newspaper announcement. Any person(s) filing a 
notice under this subpart shall publish an announcement soliciting 
public comment on the proposed acquisition. The announcement shall be 
published in a newspaper of general circulation in the community in 
which the home office of the state nonmember bank to be acquired is 
located. The announcement shall be published as close as is practicable 
to the date the notice is filed with the appropriate FDIC office, but in 
no event more than 10 calendar days before or after the filing date.
    (2) Contents of newspaper announcement. The newspaper announcement 
shall conform to the public notice requirements set forth in Sec. 
303.7.
    (b) Delay of publication. The FDIC may permit delay in the 
publication required by this section if the FDIC determines, for good 
cause, that it is in the public interest to grant such a delay. Requests 
for delay of publication may be submitted to the appropriate FDIC 
office.
    (c) Shortening or waiving public comment period, waiving 
publications; acting before close of public comment period. The FDIC may 
shorten the public comment period to a period of not less than 10 days, 
or waive the public comment or newspaper publication requirements of 
paragraph (a) of this section, or act on a notice before the expiration 
of a public comment period, if it determines in writing either that an 
emergency exists or that disclosure of the notice, solicitation of 
public comment, or delay until expiration of the public comment period 
would seriously threaten the safety and soundness of the bank to be 
acquired.
    (d) Consideration of public comments. In acting upon a notice filed 
under this subpart, the FDIC shall consider all public comments received 
in writing within 20 days following the required newspaper publication 
or, if the FDIC has shortened the public comment period pursuant to 
paragraph (c) of this section, within such shorter period.
    (e) Publication if filing is subsequent to acquisition of control. 
(1) Whenever a notice of a proposed acquisition of control is not filed 
in accordance with the Change in Bank Control Act and these regulations, 
the acquiring person(s) shall, within 10 days of being so directed by 
the FDIC, publish an announcement of the acquisition of control in a 
newspaper of general circulation in the community in which the home 
office of the state nonmember bank to be acquired is located.
    (2) The newspaper announcement shall contain the name(s) of the 
acquiror(s), the name of the depository institution involved, and the 
date of

[[Page 28]]

the acquisition of the stock. The announcement shall also contain a 
statement indicating that the FDIC is currently reviewing the 
acquisition of control. The announcement also shall state that any 
person wishing to comment on the change in control may do so by 
submitting written comments to the appropriate regional director of the 
FDIC (give address of appropriate FDIC office) within 20 days following 
the required newspaper publication.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50461, Aug. 21, 2003]



Sec. Sec. 303.87-303.99  [Reserved]



        Subpart F_Change of Director or Senior Executive Officer



Sec. 303.100  Scope.

    This subpart sets forth the circumstances under which an insured 
state nonmember bank must notify the FDIC of a change in any member of 
its board of directors or any senior executive officer and the 
procedures for filing such notice. This subpart implements section 32 of 
the FDI Act (12 U.S.C. 1831i).



Sec. 303.101  Definitions.

    For purposes of this subpart:
    (a) Director means a person who serves on the board of directors or 
board of trustees of an insured state nonmember bank, except that 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 board of trustees or any committee thereof;
    (3) Solely provides general policy advice to the board of directors 
or board of trustees and any committee thereof; and
    (4) Has not been identified by the FDIC as a person who performs the 
functions of a director for purposes of this subpart.
    (b) Senior executive officer means a person who holds the title of 
president, chief executive officer, chief operating officer, chief 
managing official (in an insured state branch of a foreign bank), chief 
financial officer, chief lending officer, or chief investment officer, 
or, without regard to title, salary, or compensation, performs the 
function of one or more of these positions. Senior executive officer 
also includes any other person identified by the FDIC, whether or not 
hired as an employee, with significant influence over, or who 
participates in, major policymaking decisions of the insured state 
nonmember bank.
    (c) Troubled condition means any insured state nonmember bank that:
    (1) Has a composite rating, as determined in its most recent report 
of examination, of 4 or 5 under the Uniform Financial Institutions 
Rating System (UFIRS), or in the case of an insured state branch of a 
foreign bank, an equivalent rating; or
    (2) Is subject to a proceeding initiated by the FDIC for termination 
or suspension of deposit insurance; or
    (3) Is subject to a cease-and-desist order or written agreement 
issued by either the FDIC or the appropriate state banking authority 
that requires action to improve the financial condition of the bank or 
is subject to a proceeding initiated by the FDIC or state authority 
which contemplates the issuance of an order that requires action to 
improve the financial condition of the bank, unless otherwise informed 
in writing by the FDIC; or
    (4) Is informed in writing by the FDIC that it is in troubled 
condition for purposes of the requirements of this subpart on the basis 
of the bank's most recent report of condition or report of examination, 
or other information available to the FDIC.



Sec. 303.102  Filing procedures and waiver of prior notice.

    (a) Insured state nonmember banks. An insured state nonmember bank 
shall give the FDIC written notice, as specified in paragraph (c)(1) of 
this section, at least 30 days prior to adding or replacing any member 
of its board of directors, employing any person as a senior executive 
officer of the bank, or changing the responsibilities of any senior 
executive officer so that the person would assume a different senior 
executive officer position, if:
    (1) The bank is not in compliance with all minimum capital 
requirements applicable to the bank as determined on the basis of the 
bank's most

[[Page 29]]

recent report of condition or report of examination;
    (2) The bank is in troubled condition; or
    (3) The FDIC determines, in connection with its review of a capital 
restoration plan required under section 38(e)(2) of the FDI Act (12 
U.S.C. 1831o(e)(2)) or otherwise, that such notice is appropriate.
    (b) Insured branches of foreign banks. In the case of the addition 
of a member of the board of directors or a change in senior executive 
officer in a foreign bank having an insured state branch, the notice 
requirement shall not apply to such additions and changes in the foreign 
bank parent, but only to changes in senior executive officers in the 
state branch.
    (c) Waiver of prior notice--(1) Waiver requests. The FDIC may permit 
an individual, upon petition by the bank to the appropriate FDIC office, 
to serve as a senior executive officer or director before filing the 
notice required under this subpart if the FDIC finds that:
    (i) Delay would threaten the safety or soundness of the bank;
    (ii) Delay would not be in the public interest; or
    (iii) Other extraordinary circumstances exist that justify waiver of 
prior notice.
    (2) Automatic waiver. In the case of the election of a new director 
not proposed by management at a meeting of the shareholders of an 
insured state nonmember bank, the prior 30-day notice is automatically 
waived and the individual immediately may begin serving, provided that a 
complete notice is filed with the appropriate FDIC office within two 
business days after the individual's election.
    (3) Effect on disapproval authority. A waiver shall not affect the 
authority of the FDIC to disapprove a notice within 30 days after a 
waiver is granted under paragraph (c)(1) of this section or the election 
of an individual who has filed a notice and is serving pursuant to an 
automatic waiver under paragraph (c)(2) of this section.
    (d)(1) Content of filing. The notice required by paragraph (a) of 
this section shall be filed with the appropriate FDIC office and shall 
contain information pertaining to the competence, experience, character, 
or integrity of the individual with respect to whom the notice is 
submitted, as prescribed in the designated interagency form which is 
available from any FDIC regional director. The FDIC may require 
additional information.
    (2) Modification. The FDIC may modify or accept other information in 
place of the requirements of paragraph (d)(1) of this section for a 
notice filed under this subpart.



Sec. 303.103  Processing.

    (a) Processing. The 30-day notice period specified in Sec. 
303.102(a) shall begin on the date substantially all information 
required to be submitted by the notificant pursuant to Sec. 
303.102(c)(1) is received by the appropriate FDIC office. The FDIC shall 
notify the bank submitting the notice of the date on which the notice is 
accepted for processing and of the date on which the 30-day notice 
period will expire. If processing cannot be completed within 30 days, 
the notificant will be advised in writing, prior to expiration of the 
30-day period, of the reason for the delay in processing and of the 
additional time period, not to exceed 60 days, in which processing will 
be completed.
    (b) Commencement of service--(1) At expiration of period. A proposed 
director or senior executive officer may begin service after the end of 
the 30-day period or any other additional period as provided under 
paragraph (a) of this section, unless the FDIC disapproves the notice 
before the end of the period.
    (2) Prior to expiration of period. A proposed director or senior 
executive officer may begin service before the end of the 30-day period 
or any additional time period as provided under paragraph (a) of this 
section, if the FDIC notifies the bank and the individual in writing of 
the FDIC's intention not to disapprove the notice.
    (c) Notice of disapproval. The FDIC may disapprove a notice filed 
under Sec. 303.102 if the FDIC finds that the competence, experience, 
character, or integrity of the individual with respect to whom the 
notice is submitted indicates that it would not be in the best interests 
of the depositors of the bank or in the best interests of the public to 
permit the individual to be employed

[[Page 30]]

by, or associated with, the bank. Subpart L of 12 CFR part 308 sets 
forth the rules of practice and procedure for a notice of disapproval.



Sec. Sec. 303.104-303.119  [Reserved]



               Subpart G_Activities of Insured State Banks



Sec. 303.120  Scope.

    This subpart sets forth procedures for complying with notice and 
application requirements contained in subpart A of part 362 of this 
chapter, governing insured state banks and their subsidiaries engaging 
in activities which are not permissible for national banks and their 
subsidiaries. This subpart sets forth procedures for complying with 
notice and application requirements contained in subpart B of part 362 
of this chapter, governing certain activities of insured state nonmember 
banks, their subsidiaries, and certain affiliates. This subpart also 
sets forth procedures for complying with the notice requirements 
contained in subpart E of part 362 of this chapter, governing 
subsidiaries of insured state nonmember banks engaging in financial 
activities.



Sec. 303.121  Filing procedures.

    (a) Where to file. A notice or application required by subpart A, 
subpart B, or subpart E of part 362 of this chapter shall be submitted 
in writing to the appropriate FDIC office.
    (b) Contents of filing. A complete letter notice or letter 
application shall include the following information:
    (1) Filings generally. (i) A brief description of the activity and 
the manner in which it will be conducted;
    (ii) The amount of the bank's existing or proposed direct or 
indirect investment in the activity as well as calculations sufficient 
to indicate compliance with any specific capital ratio or investment 
percentage limitation detailed in subpart A, B, or E of part 362 of this 
chapter;
    (iii) A copy of the bank's business plan regarding the conduct of 
the activity;
    (iv) A citation to the state statutory or regulatory authority for 
the conduct of the activity;
    (v) A copy of the order or other document from the appropriate 
regulatory authority granting approval for the bank to conduct the 
activity if such approval is necessary and has already been granted;
    (vi) A brief description of the bank's policy and practice with 
regard to any anticipated involvement in the activity by a director, 
executive office or principal shareholder of the bank or any related 
interest of such a person; and
    (vii) A description of the bank's expertise in the activity.
    (2) [Reserved]
    (3) Copy of application or notice filed with another agency. If an 
insured state bank has filed an application or notice with another 
federal or state regulatory authority which contains all of the 
information required by paragraph (b) (1) of this section, the insured 
state bank may submit a copy to the FDIC in lieu of a separate filing.
    (4) Additional information. The FDIC may request additional 
information to complete processing.



Sec. 303.122  Processing.

    (a) Expedited processing. A notice filed by an insured state bank 
seeking to commence or continue an activity under Sec. 
362.3(a)(2)(iii)(A)(2), Sec. 362.4(b)(3)(i), or Sec. 362.4(b)(5) of 
this chapter will be acknowledged in writing by the FDIC and will 
receive expedited processing, unless the applicant is notified in 
writing to the contrary and provided a basis for that decision. The FDIC 
may remove the notice from expedited processing for any of the reasons 
set forth in Sec. 303.11(c)(2). Absent such removal, a notice processed 
under expedited processing is deemed approved 30 days after receipt of a 
complete notice by the FDIC (subject to extension for an additional 15 
days upon written notice to the bank) or on such earlier date authorized 
by the FDIC in writing.
    (b) Standard processing for applications and notices that have been 
removed from expedited processing. For an application filed by an 
insured state bank seeking to commence or continue an activity under 
Sec. 362.3(a)(2)(iii)(A)(2), Sec. 362.3(b)(2)(i), Sec. 
362.3(b)(2)(ii)(A), Sec. 362.3(b)(2)(ii)(C), Sec. 362.4(b)(1),

[[Page 31]]

Sec. 362.4(b)(4), Sec. 362.5(b)(2), or Sec. 362.8(b) or seeking a 
waiver or modification under Sec. 362.18(e) or Sec. 362.18(g)(3) of 
this chapter or for notices which are not processed pursuant to the 
expedited processing procedures, the FDIC will provide the insured State 
bank with written notification of the final action as soon as the 
decision is rendered. The FDIC will normally review and act in such 
cases within 60 days after receipt of a completed application or notice 
(subject to extension for an additional 30 days upon written notice to 
the bank), but failure of the FDIC to act prior to the expiration of 
these periods does not constitute approval.



Sec. Sec. 303.123-303.139  [Reserved]



          Subpart H_Activities of Insured Savings Associations



Sec. 303.140  Scope.

    This subpart sets forth procedures for complying with the notice and 
application requirements contained in subpart C of part 362 of this 
chapter, governing insured state savings associations and their service 
corporations engaging in activities which are not permissible for 
federal savings associations and their service corporations. This 
subpart also sets forth procedures for complying with the notice 
requirements contained in subpart D of part 362 of this chapter, 
governing insured savings associations which establish or engage in new 
activities through a subsidiary.



Sec. 303.141  Filing procedures.

    (a) Where to file. All applications and notices required by subpart 
C or subpart D of part 362 of this chapter are to be in writing and 
filed with the appropriate FDIC office.
    (b) Contents of filing--(1) Filings generally. A complete letter 
notice or letter application shall include the following information:
    (i) A brief description of the activity and the manner in which it 
will be conducted;
    (ii) The amount of the association's existing or proposed direct or 
indirect investment in the activity as well as calculations sufficient 
to indicate compliance with any specific capital ratio or investment 
percentage limitation detailed in subpart C or D of part 362 of this 
chapter;
    (iii) A copy of the association's business plan regarding the 
conduct of the activity;
    (iv) A citation to the state statutory or regulatory authority for 
the conduct of the activity;
    (v) A copy of the order or other document from the appropriate 
regulatory authority granting approval for the association to conduct 
the activity if such approval is necessary and has already been granted;
    (vi) A brief description of the association's policy and practice 
with regard to any anticipated involvement in the activity by a 
director, executive officer or principal shareholder of the association 
or any related interest of such a person; and
    (vii) A description of the association's expertise in the activity.
    (2) [Reserved]
    (3) Copy of application or notice filed with another agency. If an 
insured savings association has filed an application or notice with 
another federal or state regulatory authority which contains all of the 
information required by paragraph (b)(1) of this section, the insured 
state bank may submit a copy to the FDIC in lieu of a separate filing.
    (4) Additional information. The FDIC may request additional 
information to complete processing.



Sec. 303.142  Processing.

    (a) Expedited processing. A notice filed by an insured state savings 
association seeking to commence or continue an activity under Sec. 
362.11(b)(2)(ii) of this chapter will be acknowledged in writing by the 
FDIC and will receive expedited processing, unless the applicant is 
notified in writing to the contrary and provided a basis for that 
decision. The FDIC may remove the notice from expedited processing for 
any of the reasons set forth in Sec. 303.11(c)(2). Absent such removal, 
a notice processed under expedited processing is deemed approved 30 days 
after receipt of a complete notice by the FDIC (subject to extension for 
an additional 15 days upon written notice to the bank) or on such 
earlier date authorized by the FDIC in writing.

[[Page 32]]

    (b) Standard processing for applications and notices that have been 
removed from expedited processing. For an application filed by an 
insured state savings association seeking to commence or continue an 
activity under Sec. 362.11(a)(2)(ii), Sec. 362.11(b)(2)(i), Sec. 
362.12(b)(1) of this chapter or for notices which are not processed 
pursuant to the expedited processing procedures, the FDIC will provide 
the insured state savings association with written notification of the 
final action as soon as the decision is rendered. The FDIC will normally 
review and act in such cases within 60 days after receipt of a completed 
application or notice (subject to extension for an additional 30 days 
upon written notice to the bank), but failure of the FDIC to act prior 
to the expiration of these periods does not constitute approval.
    (c) Notices of activities in excess of an amount permissible for a 
federal savings association; subsidiary notices. Receipt of a notice 
filed by an insured state savings association as required by Sec. 
362.11(b)(3) or Sec. 362.15 of this chapter will be acknowledged in 
writing by the FDIC. The notice will be reviewed at the appropriate FDIC 
office, which will take such action as it deems necessary and 
appropriate.



Sec. Sec. 303.143-303.159  [Reserved]



                  Subpart I_Mutual-To-Stock Conversions



Sec. 303.160  Scope.

    This subpart sets forth the notice requirements and procedures for 
the conversion of an insured mutual state-chartered savings bank to the 
stock form of ownership. The substantive requirements governing such 
conversions are contained in Sec. 333.4 of this chapter.



Sec. 303.161  Filing procedures.

    (a) Prior notice required. In addition to complying with the 
substantive requirements in Sec. 333.4 of this chapter, an insured 
state-chartered mutually owned savings bank that proposes to convert 
from mutual to stock form shall file with the FDIC a notice of intent to 
convert to stock form.
    (b) General. (1) A notice required under this subpart shall be filed 
in letter form with the appropriate FDIC office at the same time as 
required conversion application materials are filed with the 
institution's state regulator.
    (2) An insured mutual savings bank chartered by a state that does 
not require the filing of a conversion application shall file a notice 
in letter form with the appropriate FDIC office as soon as practicable 
after adoption of its plan of conversion.
    (c) Content of notice. The notice shall provide a description of the 
proposed conversion and include all materials that have been filed with 
any state or federal banking regulator and any state or federal 
securities regulator. At a minimum, the notice shall include, as 
applicable, copies of:
    (1) The plan of conversion, with specific information concerning the 
record date used for determining eligible depositors and the 
subscription offering priority established in connection with any 
proposed stock offering;
    (2) Certified board resolutions relating to the conversion;
    (3) A business plan, including a detailed discussion of how the 
capital acquired in the conversion will be used, expected earnings for 
at least a three-year period following the conversion, and a 
justification for any proposed stock repurchases;
    (4) The charter and bylaws of the converted institution;
    (5) The bylaws and operating plans of any other entities formed in 
connection with the conversion transaction, such as a holding company or 
charitable foundation;
    (6) A full appraisal report, prepared by an independent appraiser, 
of the value of the converting institution and the pricing of the stock 
to be sold in the conversion transaction;
    (7) Detailed descriptions of any proposed management or employee 
stock benefit plans or employment agreements and a discussion of the 
rationale for the level of benefits proposed, individually and by 
participant group;
    (8) Indemnification agreements;
    (9) A preliminary proxy statement and sample proxy;
    (10) Offering circular(s) and order form;
    (11) All contracts or agreements relating to solicitation, 
underwriting,

[[Page 33]]

market-making, or listing of conversion stock and any agreements among 
members of a group regarding the purchase of unsubscribed shares;
    (12) A tax opinion concerning the federal income tax consequences of 
the proposed conversion;
    (13) Consents from experts to use their opinions as part of the 
notice; and
    (14) An estimate of conversion-related expenses.
    (d) Additional information. The FDIC, in its discretion, may request 
any additional information it deems necessary to evaluate the proposed 
conversion. The institution proposing to convert from mutual to stock 
form shall promptly provide such information to the FDIC.
    (e) Acceptance of notice. The 60-day notice period specified inSec. 
303.163 shall commence on the date of receipt of a substantially 
complete notice. The FDIC shall notify the institution proposing to 
convert in writing of the date the notice is accepted.
    (f) Related applications. Related applications that require FDIC 
action may include:
    (1) Applications for deposit insurance, as required by subpart B of 
this part; and
    (2) Applications for consent to merge, as required by subpart D of 
this part.



Sec. 303.162  Waiver from compliance.

    (a) General. An institution proposing to convert from mutual to 
stock form may file with the appropriate FDIC office a letter requesting 
waiver of compliance with this subpart or Sec. 333.4 of this chapter:
    (1) When compliance with any provision of this section or Sec. 
333.4 of this chapter would be inconsistent or in conflict with 
applicable state law, or
    (2) For any other good cause shown.
    (b) Content of filing. In making a request for waiver under 
paragraph (a) of this section, the institution shall demonstrate that 
the requested waiver, if granted, would not result in any effects that 
would be detrimental to the safety and soundness of the institution, 
entail a breach of fiduciary duty on part of the institution's 
management or otherwise be detrimental or inequitable to the 
institution, its depositors, any other insured depository 
institution(s), the Deposit Insurance Fund, or to the public interest.

[67 FR 79247, Dec. 27, 2002, as amended at 71 FR 20526, Apr. 21, 2006]



Sec. 303.163  Processing.

    (a) General considerations. The FDIC shall review the notice and 
other materials submitted by the institution proposing to convert from 
mutual to stock form, specifically considering the following factors:
    (1) The proposed use of the proceeds from the sale of stock, as set 
forth in the business plan;
    (2) The adequacy of the disclosure materials;
    (3) The participation of depositors in approving the transaction;
    (4) The form of the proxy statement required for the vote of the 
depositors/members on the conversion;
    (5) Any proposed increased compensation and other remuneration 
(including stock grants, stock option rights and other similar benefits) 
to be granted to officers and directors/trustees of the bank in 
connection with the conversion;
    (6) The adequacy and independence of the appraisal of the value of 
the mutual savings bank for purposes of determining the price of the 
shares of stock to be sold;
    (7) The process by which the bank's trustees approved the appraisal, 
the pricing of the stock, and the proposed compensation arrangements for 
insiders;
    (8) The nature and apportionment of stock subscription rights; and
    (9) The bank's plans to fulfill its commitment to serving the 
convenience and needs of its community.
    (b) Additional considerations. (1) In reviewing the notice and other 
materials submitted under this subpart, the FDIC will take into account 
the extent to which the proposed conversion transaction conforms with 
the various provisions of the mutual-to-stock conversion regulations of 
the Office of Thrift Supervision (OTS) (12 CFR part 563b), as currently 
in effect at the time the notice is submitted. Any non-conformity with 
those provisions will be closely reviewed.

[[Page 34]]

    (2) Conformity with the OTS requirements will not be sufficient for 
FDIC regulatory purposes if the FDIC determines that the proposed 
conversion transaction would pose a risk to the bank's safety or 
soundness, violate any law or regulation, or present a breach of 
fiduciary duty.
    (c) Notice period. (1) The period in which the FDIC may object to 
the proposed conversion transaction shall be the later of:
    (i) 60 days after receipt of a substantially complete notice of 
proposed conversion; or
    (ii) 20 days after the last applicable state or other federal 
regulator has approved the proposed conversion.
    (2) The FDIC may, in its discretion, extend the initial 60-day 
period for up to an additional 60 days by providing written notice to 
the institution.
    (d) Letter of non-objection. If the FDIC determines, in its 
discretion, that the proposed conversion transaction would not pose a 
risk to the institution's safety or soundness, violate any law or 
regulation, or present a breach of fiduciary duty, then the FDIC shall 
issue to the institution proposing to convert a letter of non-objection 
to the proposed conversion.
    (e) Letter of objection. If the FDIC determines, in its discretion, 
that the proposed conversion transaction poses a risk to the 
institution's safety or soundness, violates any law or regulation, or 
presents a breach of fiduciary duty, then the FDIC shall issue a letter 
to the institution stating its objection(s) to the proposed conversion 
and advising the institution not to consummate the proposed conversion 
until such letter is rescinded. A copy of the letter of objection shall 
be furnished to the institution's primary state regulator and any other 
state or federal banking regulator and state or federal securities 
regulator involved in the conversion.
    (f) Consummation of the conversion. (1) An institution may 
consummate the proposed conversion upon either:
    (i) The receipt of a letter of non-objection; or
    (ii) The expiration of the notice period.
    (2) If a letter of objection is issued, then the institution shall 
not consummate the proposed conversion until the FDIC rescinds such 
letter.



Sec. Sec. 303.164-303.179  [Reserved]



                     Subpart J_International Banking



Sec. 303.180  Scope.

    This subpart sets forth procedures for complying with application 
requirements relating to the foreign activities of insured state 
nonmember banks, U.S. activities of insured branches of foreign banks, 
and certain foreign mergers of insured depository institutions.



Sec. 303.181  Definitions.

    For the purposes of this subpart, the following additional 
definitions apply:
    (a) Board of Governors means the Board of Governors of the Federal 
Reserve System.
    (b) Comptroller means the Office of the Comptroller of the Currency.
    (c) Eligible insured branch. An insured branch will be treated as an 
eligible depository institution within the meaning of Sec. 303.2(r) if 
the insured branch:
    (1) Received an FDIC-assigned composite ROCA supervisory rating 
(which rates risk management, operational controls, compliance, and 
asset quality) of 1 or 2 as a result of its most recent federal or state 
examination, and the FDIC, Comptroller, or Board of Governors have not 
expressed concern about the condition or operations of the foreign 
banking organization or the support it offers the branch;
    (2) Received a satisfactory or better Community Reinvestment Act 
(CRA) rating from its primary federal regulator at its most recent 
examination, if the depository institution is subject to examination 
under part 345 of this chapter;
    (3) Received a compliance rating of 1 or 2 from its primary federal 
regulator at its most recent examination;
    (4) Is well-capitalized as defined in subpart B of part 325 of this 
chapter; and
    (5) Is not subject to a cease and desist order, consent order, 
prompt corrective action directive, written agreement, memorandum of 
understanding, or other administrative agreement with any U.S. bank 
regulatory authority.

[[Page 35]]

    (d) Federal branch means a federal branch of a foreign bank as 
defined by Sec. 347.202 of this chapter.
    (e) Foreign bank means a foreign bank as defined by Sec. 347.202 of 
this chapter.
    (f) Foreign branch means a foreign branch of an insured state 
nonmember bank as defined by Sec. 347.102 of this chapter.
    (g) Foreign organization means a foreign organization as defined by 
Sec. 347.102 of this chapter.
    (h) Insured branch means an insured branch of a foreign bank as 
defined by Sec. 347.202 of this chapter.
    (i) Noninsured branch means a noninsured branch of a foreign bank as 
defined by Sec. 347.202 of this chapter.
    (j) State branch means a state branch of a foreign bank as defined 
by Sec. 347.202 of this chapter.



Sec. 303.182  Establishing, moving or closing a foreign branch of an insured 

state nonmember bank.

    (a) Notice procedures for general consent. Notice in the form of a 
letter from an eligible depository institution establishing or 
relocating a foreign branch pursuant to Sec. 347.117(a) of this chapter 
must be provided to the appropriate FDIC office no later than 30 days 
after taking such action. The notice must include the location of the 
foreign branch, including a street address, and a statement that the 
foreign branch has not been located on a site on the World Heritage List 
or on the foreign country's equivalent of the National Register of 
Historic Places (National Register), in accordance with section 402 of 
the National Historic Preservation Act Amendments of 1980 (NHPA 
Amendments Act) (16 U.S.C. 470a-2). The FDIC will provide written 
acknowledgment of receipt of the notice.
    (b) Filing procedures for other branch establishments--(1) Where to 
file. An applicant seeking to establish a foreign branch other than 
under Sec. 347.117(a) of this chapter shall submit an application to 
the appropriate FDIC office.
    (2) Content of filing. A complete letter application must include 
the following information:
    (i) The exact location of the proposed foreign branch, including the 
street address, and a statement whether the foreign branch will be 
located on a site on the World Heritage List or on the foreign country's 
equivalent of the National Register, in accordance with section 402 of 
the NHPA Amendments Act;
    (ii) Details concerning any involvement in the proposal by an 
insider of the applicant, as defined in Sec. 303.2(u) of this part, 
including any financial arrangements relating to fees, the acquisition 
of property, leasing of property, and construction contracts;
    (iii) A brief description of the applicant's business plan with 
respect to the foreign branch; and
    (iv) A brief description of the proposed activities of the branch 
and, to the extent any of the proposed activities are not authorized by 
Sec. 347.115 of this chapter, the applicant's reasons why they should 
be approved.
    (3) Additional information. The FDIC may request additional 
information to complete processing.
    (c) Processing--(1) Expedited processing for eligible depository 
institutions. An application filed under Sec. 347.118(a) of this 
chapter by an eligible depository institution as defined in Sec. 
303.2(r) of this part seeking to establish a foreign branch by expedited 
processing will be acknowledged in writing by the FDIC and will receive 
expedited processing, unless the applicant is notified in writing to the 
contrary and provided with the basis for that decision. The FDIC may 
remove the application from expedited processing for any of the reasons 
set forth in Sec. 303.11(c)(2) of this part. Absent such removal, an 
application processed under expedited processing is deemed approved 45 
days after receipt of a substantially complete application by the FDIC, 
or on such earlier date authorized by the FDIC in writing.
    (2) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.
    (d) Closing. Notices of branch closing under Sec. 347.121 of this 
chapter, in the form of a letter including the name, location, and date 
of closing of the closed

[[Page 36]]

branch, shall be filed with the appropriate FDIC office no later than 30 
days after the branch is closed.

[70 FR 17558, Apr. 6, 2005]



Sec. 303.183  Investment by insured state nonmember banks in foreign 

organization.

    (a) Notice procedures for general consent. Notice in the form of a 
letter from an eligible depository institution making direct or indirect 
investments in a foreign organization pursuant to Sec. 347.117(b) of 
this chapter shall be provided to the appropriate FDIC office no later 
than 30 days after taking such action. The FDIC will provide written 
acknowledgment of receipt of the notice.
    (b) Filing procedures for other investments--(1) Where to file. An 
applicant seeking to make a foreign investment other than under Sec. 
347.117(b) of this chapter shall submit an application to the 
appropriate FDIC office.
    (2) Content of filing. A complete application shall include the 
following information:
    (i) Basic information about the terms of the proposed transaction, 
the amount of the investment in the foreign organization and the 
proportion of its ownership to be acquired;
    (ii) Basic information about the foreign organization, its financial 
position and income, including any available balance sheet and income 
statement for the prior year, or financial projections for a new foreign 
organization;
    (iii) A listing of all shareholders known to hold ten percent or 
more of any class of the foreign organization's stock or other evidence 
of ownership, and the amount held by each;
    (iv) A brief description of the applicant's business plan with 
respect to the foreign organization;
    (v) A brief description of any business or activities which the 
foreign organization will conduct directly or indirectly in the United 
States, and to the extent such activities are not authorized by subpart 
A of part 347, the applicant's reasons why they should be approved;
    (vi) A brief description of the foreign organization's activities, 
and to the extent such activities are not authorized by subpart A of 
part 347, the applicant's reasons why they should be approved; and
    (vii) If the applicant seeks approval to engage in underwriting or 
dealing activities, a description of the applicant's plans and 
procedures to address all relevant risks.
    (3) Additional information. The FDIC may request additional 
information to complete processing.
    (c) Processing--(1) Expedited processing for eligible depository 
institutions. An application filed under Sec. 347.118(b) of this 
chapter by an eligible depository institution as defined in Sec. 
303.2(r) of this part seeking to make direct or indirect investments in 
a foreign organization will be acknowledged in writing by the FDIC and 
will receive expedited processing, unless the applicant is notified in 
writing to the contrary and provided with the basis for that decision. 
The FDIC may remove the application from expedited processing for any of 
the reasons set forth in Sec. 303.11(c)(2) of this part. Absent such 
removal, an application processed under expedited processing is deemed 
approved 45 days after receipt of a substantially complete application 
by the FDIC, or on such earlier date authorized by the FDIC in writing.
    (2) Standard processing. For those applications which are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.
    (d) Divestiture. If an insured state nonmember bank holding 50 
percent or more of the voting equity interests of a foreign organization 
or otherwise controlling the foreign organization divests itself of such 
ownership or control, the insured state nonmember bank shall file a 
notice in the form of a letter, including the name, location, and date 
of divestiture of the foreign organization, with the appropriate FDIC 
office no later than 30 days after the divestiture.

[67 FR 79247, Dec. 27, 2002, as amended at 70 FR 17558, Apr. 6, 2005]



Sec. 303.184  Moving an insured branch of a foreign bank.

    (a) Filing procedures--(1) Where and when to file. An application by 
an insured branch of a foreign bank seeking

[[Page 37]]

the FDIC's consent to move from one location to another, as required by 
section 18(d)(1) of the FDI Act (12 U.S.C. 1828(d)(1)), shall be 
submitted in writing to the appropriate FDIC office on the date the 
notice required by paragraph (c) of this section is published, or within 
5 days after the date of the last required publication.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) The exact location of the proposed site, including the street 
address;
    (ii) Details concerning any involvement in the proposal by an 
insider of the applicant, as defined in Sec. 303.2(u), including any 
financial arrangements relating to fees, the acquisition of property, 
leasing of property, and construction contracts;
    (iii) A statement of the impact of the proposal on the human 
environment, including information on compliance with local zoning laws 
and regulations and the effect on traffic patterns, for purposes of 
complying with the applicable provisions of the NEPA, and the FDIC 
``Statement of Policy on NEPA'' (1 FDIC Law, Regulations, Related Acts 
5185; see Sec. 309.4(a) and (b) of this chapter for availability).
    (iv) A statement as to whether or not the site is eligible for 
inclusion in the National Register of Historic Places for purposes of 
complying with the applicable provisions of the NHPA, and the FDIC 
AStatement of Policy on NHPA'' (1 FDIC Law, Regulations, Related Acts 
5175; see Sec. 309.4(a) and (b) of this chapter for availability), 
including documentation of consultation with the State Historic 
Preservation Officer, as appropriate.
    (v) Comments on any changes in services to be offered, the community 
to be served, or any other effect the proposal may have on the 
applicant's compliance with the CRA; and
    (vi) A copy of the newspaper publication required by paragraph (c) 
of this section, as well as the name and address of the newspaper and 
the date of the publication.
    (3) Comptroller's application. If the applicant is filing an 
application with the Comptroller which contains the information required 
by paragraph (a)(2) of this section, the applicant may submit a copy to 
the FDIC in lieu of a separate application.
    (4) Additional information. The FDIC may request additional 
information to complete processing.
    (b) Processing--(1) Expedited processing for eligible insured 
branches. An application filed by an eligible insured branch as defined 
in Sec. 303.181(c) of this part will be acknowledged in writing by the 
FDIC and will receive expedited processing if the applicant is proposing 
to move within the same state, unless the applicant is notified to the 
contrary and provided with the basis for that decision. The FDIC may 
remove an application from expedited processing for any of the reasons 
set forth in Sec. 303.11(c)(2) of this part. Absent such removal, an 
application processed under expedited processing will be deemed approved 
on the latest of the following:
    (i) The 21st day after the FDIC's receipt of a substantially 
complete application; or
    (ii) The 5th day after expiration of the comment period described in 
paragraph (c) of this section.
    (2) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action as soon as 
the decision is rendered.
    (c) Publication requirement and comment period--(1) Newspaper 
publications. The applicant shall publish a notice of its proposal to 
move from one location to another, as described in Sec. 303.7(b), in a 
newspaper of general circulation in the community in which the insured 
branch is located prior to its being moved and in the community to which 
it is to be moved. The notice shall include the insured branch's current 
and proposed addresses.
    (2) Public comments. All public comments must be received by the 
appropriate regional director within 15 days after the date of the last 
newspaper publication required by paragraph (c)(1) of this section, 
unless the comment period has been extended or reopened in accordance 
with Sec. 303.9(b)(2).
    (3) Lobby notices. If the insured branch has a public lobby, a copy 
of the newspaper publication shall be posted in the public lobby for at 
least 15 days

[[Page 38]]

beginning on the date of the publication required by paragraph (c)(1) of 
this section.
    (d) Other approval criteria. (1) The FDIC may approve an application 
under this section if the criteria in paragraphs (d)(1)(i) through 
(d)(1)(vi) of this section is satisfied.
    (i) The factors set forth in section 6 of the FDI Act (12 U.S.C. 
1816) have been considered and favorably resolved;
    (ii) The applicant is at least adequately capitalized as defined in 
subpart B of part 325 of this chapter;
    (iii) Any financial arrangements which have been made in connection 
with the proposed relocation and which involve the applicant's 
directors, officers, major shareholders, or their interests are fair and 
reasonable in comparison to similar arrangements that could have been 
made with independent third parties;
    (iv) Compliance with the CRA, the NEPA, the NHPA and any applicable 
related regulations, including 12 CFR part 345, has been considered and 
favorably resolved;
    (v) No CRA protest as defined in Sec. 303.2(l) has been filed which 
remains unresolved or, where such a protest has been filed and remains 
unresolved, the Director or designee concurs that approval is consistent 
with the purposes of the CRA and the applicant agrees in writing to any 
conditions imposed regarding the CRA; and
    (vi) The applicant agrees in writing to comply with any conditions 
imposed by the FDIC, other than the standard conditions defined in Sec. 
303.2(dd) which may be imposed without the applicant's written consent.
    (e) Relocation of insured branch from one state to another. If the 
foreign bank proposes to relocate an insured state branch to a state 
that is outside the state where the branch is presently located, in 
addition to meeting the approval criteria contained in paragraph (d) of 
this section, the foreign bank must:
    (i) Comply with any applicable state laws or regulations of the 
states affected by the proposed relocation; and
    (ii) Obtain any required regulatory approvals from the appropriate 
state licensing authority of the state to which the insured branch 
proposes to relocate before relocating the existing branch operations 
and surrendering its existing license to the appropriate state licensing 
authority of the state from which the branch is relocating.

[67 FR 79247, Dec. 27, 2002, as amended at 70 FR 17559, Apr. 6, 2005]



Sec. 303.185  Merger transactions involving foreign banks or foreign 

organizations.

    (a) Merger transactions involving an insured branch of a foreign 
bank. Merger transactions requiring the FDIC's prior approval as set 
forth in Sec. 303.62 include any merger transaction in which the 
resulting institution is an insured branch of a foreign bank which is 
not a federal branch, or any merger transaction which involves any 
insured branch and any uninsured institution. In such cases:
    (1) References to an eligible depository institution in subpart D of 
this part include an eligible insured branch as defined in Sec. 
303.181;
    (2) The definition of a corporate reorganization in Sec. 303.61(b) 
includes a merger transaction between an insured branch and other 
branches, agencies, or subsidiaries in the United States of the same 
foreign bank; and
    (3) For the purposes of Sec. 303.62(b)(1) on interstate mergers, a 
merger transaction involving an insured branch is one involving the 
acquisition of a branch of an insured bank without the acquisition of 
the bank for purposes of section 44 of the FDI Act (12 U.S.C. 1831u) 
only when the merger transaction involves fewer than all the insured 
branches of the same foreign bank in the same state.
    (b) Certain merger transactions with foreign organizations outside 
any State. Merger transactions requiring the FDIC's prior approval as 
set forth in Sec. 303.62 include any merger transaction in which an 
insured depository institution becomes directly liable for obligations 
which will, after the merger transaction, be treated as deposits under 
section 3(l)(5)(A)(i)-(ii) of the FDI Act (12 U.S.C. 1813(l)(5)(A)(i)-
(ii)), as a result of a merger or consolidation with a foreign 
organization or an assumption of liabilities of a foreign organization.

[[Page 39]]



Sec. 303.186  Exemptions from insurance requirements for a state branch of a 

foreign bank.

    (a) Filing procedures--(1) Where to file. An application by a 
foreign bank for consent to operate as a noninsured state branch, as 
permitted by Sec. 347.215(b) of this chapter, shall be submitted in 
writing to the appropriate FDIC office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) The kinds of deposit activities in which the state branch 
proposes to engage;
    (ii) The expected source of deposits;
    (iii) The manner in which deposits will be solicited;
    (iv) How the activity will maintain or improve the availability of 
credit to all sectors of the United States economy, including the 
international trade finance sector;
    (v) That the activity will not give the foreign bank an unfair 
competitive advantage over United States banking organizations; and
    (vi) A resolution by the applicant's board of directors, or evidence 
of approval by senior management if a resolution is not required 
pursuant to the applicant's organizational documents, authorizing the 
filing of the application.
    (3) Additional information. The FDIC may request additional 
information to complete processing.
    (4) Processing. The FDIC will provide the applicant with written 
notification of the final action taken.

[67 FR 79247, Dec. 27, 2002, as amended at 70 FR 17559, Apr. 6, 2005]



Sec. 303.187  Approval for an insured state branch of a foreign bank to 

conduct activities not permissible for federal branches.

    (a) Filing procedures--(1) Where to file. An application by an 
insured state branch seeking approval to conduct activities not 
permissible for a federal branch, as required by Sec. 347.212(a) of 
this chapter, shall be submitted in writing to the appropriate FDIC 
office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) A brief description of the activity, including the manner in 
which it will be conducted and an estimate of the expected dollar volume 
associated with the activity;
    (ii) An analysis of the impact of the proposed activity on the 
condition of the United States operations of the foreign bank in general 
and of the branch in particular, including a copy of the feasibility 
study, management plan, financial projections, business plan, or similar 
document concerning the conduct of the activity;
    (iii) A resolution by the applicant's board of directors, or 
evidence of approval by senior management if a resolution is not 
required pursuant to the applicant's organizational documents, 
authorizing the filing of the application;
    (iv) A statement by the applicant of whether it is in compliance 
with sections 347.209 and 347.210 of this chapter;
    (v) A statement by the applicant that it has complied with all 
requirements of the Board of Governors concerning applications to 
conduct the activity in question and the status of each such 
application, including a copy of the Board of Governors' disposition of 
such application, if applicable; and
    (vi) A statement of why the activity will pose no significant risk 
to the Deposit Insurance Fund.
    (3) Board of Governors application. If the application to the Board 
of Governors contains the information required by paragraph (a) of this 
section, the applicant may submit a copy to the FDIC in lieu of a 
separate letter application.
    (4) Additional information. The FDIC may request additional 
information to complete processing.
    (b) Divestiture or cessation--(1) Where To file. Divestiture plans 
necessitated by a change in law or other authority, as required by Sec. 
347.212(e) of this chapter, shall be submitted in writing to the 
appropriate FDIC office.
    (2) Content of filing. A complete letter application shall include 
the following information:
    (i) A detailed description of the manner in which the applicant 
proposes to divest itself of or cease the activity in question; and

[[Page 40]]

    (ii) A projected timetable describing how long the divestiture or 
cessation is expected to take.
    (3) Additional information. The FDIC may request additional 
information to complete processing.

[67 FR 79247, Dec. 27, 2002, as amended at 70 FR 17559, Apr. 6, 2005; 71 
FR 20526, Apr. 21, 2006]



Sec. Sec. 303.188-303.199  [Reserved]



                   Subpart K_Prompt Corrective Action



Sec. 303.200  Scope.

    (a) General. (1) This subpart covers applications filed pursuant to 
section 38 of the FDI Act (12 U.S.C. 1831o), which requires insured 
depository institutions that are not adequately capitalized to receive 
approval prior to engaging in certain activities. Section 38 restricts 
or prohibits certain activities and requires an insured depository 
institution to submit a capital restoration plan when it becomes 
undercapitalized. The restrictions and prohibitions become more severe 
as an institution's capital level declines.
    (2) Definitions of the capital categories referenced in this Prompt 
Corrective Action subpart may be found in subpart B of part 325 of this 
chapter, Sec. 325.103(b) for state nonmember banks and Sec. 325.103(c) 
for insured branches of foreign banks.
    (b) Institutions covered. Restrictions and prohibitions contained in 
subpart B of part 325 of this chapter apply primarily to insured state 
nonmember banks and insured branches of foreign banks, as well as to 
directors and senior executive officers of those institutions. Portions 
of subpart B of part 325 of this chapter also apply to all insured 
depository institutions that are deemed to be critically 
undercapitalized.



Sec. 303.201  Filing procedures.

    Applications shall be filed with the appropriate FDIC office. The 
application shall contain the information specified in each respective 
section of this subpart, and shall be in letter form as prescribed in 
Sec. 303.3. Additional information may be requested by the FDIC. Such 
letter shall be signed by the president, senior officer or a duly 
authorized agent of the insured depository institution and be 
accompanied by a certified copy of a resolution adopted by the 
institution's board of directors or trustees authorizing the 
application.



Sec. 303.202  Processing.

    The FDIC will provide the applicant with a subsequent written 
notification of the final action taken as soon as the decision is 
rendered.



Sec. 303.203  Applications for capital distributions.

    (a) Scope. An insured state nonmember bank and any insured branch of 
a foreign bank shall submit an application for capital distribution if, 
after having made a capital distribution, the institution would be 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized.
    (b) Content of filing. An application to repurchase, redeem, retire 
or otherwise acquire shares or ownership interests of the insured 
depository institution shall describe the proposal, the shares or 
obligations which are the subject thereof, and the additional shares or 
obligations of the institution which will be issued in at least an 
amount equivalent to the distribution. The application also shall 
explain how the proposal will reduce the institution's financial 
obligations or otherwise improve its financial condition. If the 
proposed action also requires an application under section 18(i) of the 
FDI Act (12 U.S.C. 1828(i)) as implemented by Sec. 303.241 of this part 
regarding prior consent to retire capital, such application should be 
filed concurrently with, or made a part of, the application filed 
pursuant to section 38 of the FDI Act (12 U.S.C. 1831o).



Sec. 303.204  Applications for acquisitions, branching, and new lines of 

business.

    (a) Scope. (1) Any insured state nonmember bank and any insured 
branch of a foreign bank which is undercapitalized or significantly 
undercapitalized, and any insured depository institution which is 
critically undercapitalized, shall submit an application to engage in 
acquisitions, branching or new lines of business.

[[Page 41]]

    (2) A new line of business will include any new activity exercised 
which, although it may be permissible, has not been exercised by the 
institution.
    (b) Content of filing. Applications shall describe the proposal, 
state the date the institution's capital restoration plan was accepted 
by its primary federal regulator, describe the institution's status in 
implementing the plan, and explain how the proposed action is consistent 
with and will further the achievement of the plan or otherwise further 
the purposes of section 38 of the FDI Act. If the FDIC is not the 
applicant's primary federal regulator, the application also should state 
whether approval has been requested from the applicant's primary federal 
regulator, the date of such request and the disposition of the request, 
if any. If the proposed action also requires applications pursuant to 
section 18 (c) or (d) of the FDI Act (mergers and branches) (12 U.S.C. 
1828 (c) or (d)), such applications should be filed concurrently with, 
or made a part of, the application filed pursuant to section 38 of the 
FDI Act (12 U.S.C. 1831o).



Sec. 303.205  Applications for bonuses and increased compensation for senior 

executive officers.

    (a) Scope. Any insured state nonmember bank or insured branch of a 
foreign bank that is significantly or critically undercapitalized, or 
any insured state nonmember bank or any insured branch of a foreign bank 
that is undercapitalized and which has failed to submit or implement in 
any material respect an acceptable capital restoration plan, shall 
submit an application to pay a bonus or increase compensation for any 
senior executive officer.
    (b) Content of filing. Applications shall list each proposed bonus 
or increase in compensation, and for the latter shall identify 
compensation for each of the twelve calendar months preceding the 
calendar month in which the institution became undercapitalized. 
Applications also shall state the date the institution's capital 
restoration plan was accepted by the FDIC, and describe any progress 
made in implementing the plan.



Sec. 303.206  Application for payment of principal or interest on subordinated 

debt.

    (a) Scope. Any critically undercapitalized insured depository 
institution shall submit an application to pay principal or interest on 
subordinated debt.
    (b) Content of filing. Applications shall describe the proposed 
payment and provide an explanation of action taken under section 
38(h)(3)(A)(ii) of the FDI Act (action other than receivership or 
conservatorship). The application also shall explain how such payments 
would further the purposes of section 38 of the FDI Act (12 U.S.C. 
1831o). Existing approvals pursuant to requests filed under section 
18(i)(1) of the FDI Act (12 U.S.C. 1828(i)(1)) (capital stock reductions 
or retirements) shall not be deemed to be the permission needed pursuant 
to section 38.



Sec. 303.207  Restricted activities for critically undercapitalized 

institutions.

    (a) Scope. Any critically undercapitalized insured depository 
institution shall submit an application to engage in certain restricted 
activities.
    (b) Content of filing. Applications to engage in any of the 
following activities, as set forth in sections 38(i)(2) (A) through (G) 
of the FDI Act, shall describe the proposed activity and explain how the 
activity would further the purposes of section 38 of the FDI Act (12 
U.S.C. 1831o):
    (1) Enter into any material transaction other than in the usual 
course of business including any action with respect to which the 
institution is required to provide notice to the appropriate federal 
banking agency. Materiality will be determined on a case-by-case basis;
    (2) Extend credit for any highly leveraged transaction (as defined 
in part 325 of this chapter);
    (3) Amend the institution's charter or bylaws, except to the extent 
necessary to carry out any other requirement of any law, regulation, or 
order;
    (4) Make any material change in accounting methods;
    (5) Engage in any covered transaction (as defined in section 23A(b) 
of the Federal Reserve Act (12 U.S.C. 371c(b));

[[Page 42]]

    (6) Pay excessive compensation or bonuses. Part 364 of this chapter 
provides guidance for determining excessive compensation; or
    (7) Pay interest on new or renewed liabilities at a rate that would 
increase the institution's weighted average cost of funds to a level 
significantly exceeding the prevailing rates of interest on insured 
deposits in the institution's normal market area. Section 337.6 of this 
chapter (Brokered deposits) provides guidance for defining the relevant 
terms of this provision; however this provision does not supersede the 
general prohibitions contained in Sec. 337.6.



Sec. Sec. 303.208-303.219  [Reserved]



   Subpart L_Section 19 of the FDI Act (Consent to Service of Persons 
                 Convicted of Certain Criminal Offenses)



Sec. 303.220  Scope.

    This subpart covers applications under section 19 of the FDI Act (12 
U.S.C. 1829). Pursuant to section 19, any person who has been convicted 
of any criminal offense involving dishonesty, breach of trust, or money 
laundering, or has agreed to enter into a pretrial diversion or similar 
program in connection with a prosecution for such offense, may not 
become, or continue as, an institution-affiliated party of an insured 
depository institution; own or control, directly or indirectly, any 
insured depository institution; or otherwise participate, directly or 
indirectly, in the conduct of the affairs of any insured depository 
institution without the prior written consent of the FDIC.



Sec. 303.221  Filing procedures.

    (a) Where to file. An application under section 19 of the FDI Act 
shall be filed with the appropriate FDIC office.
    (b) Contents of filing. Application forms may be obtained from any 
FDIC regional director. The FDIC may require additional information 
beyond that sought in the form, as warranted, in individual cases.



Sec. 303.222  Service at another insured depository institution.

    In the case of a person who has already been approved by the FDIC 
under this subpart or section 19 of the FDI Act in connection with a 
particular insured depository institution, such person may not become an 
institution affiliated party, or own or control directly or indirectly 
another insured depository institution, or participate in the conduct of 
the affairs of another insured depository institution, without the prior 
written consent of the FDIC.



Sec. 303.223  Applicant's right to hearing following denial.

    An applicant may request a hearing following a denial of an 
application in accordance with the provisions of part 308 of this 
chapter.



Sec. Sec. 303.224-303.239  [Reserved]



                         Subpart M_Other Filings



Sec. 303.240  General.

    This subpart sets forth the filing procedures to be followed when 
seeking the FDIC's consent to engage in certain activities or accomplish 
other matters as specified in the individual sections contained herein. 
For those matters covered by this subpart that also have substantive 
FDIC regulations or related statements of policy, references to the 
relevant regulations or statements of policy are contained in the 
specific sections.



Sec. 303.241  Reduce or retire capital stock or capital debt instruments.

    (a) Scope. This section contains the procedures to be followed by an 
insured state nonmember bank to seek the prior approval of the FDIC to 
reduce the amount or retire any part of its common or preferred stock, 
or to retire any part of its capital notes or debentures pursuant to 
section 18(i)(1) of the Act (12 U.S.C. 1828(i)(1)).
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following:
    (1) The type and amount of the proposed change to the capital 
structure and the reason for the change;

[[Page 43]]

    (2) A schedule detailing the present and proposed capital structure;
    (3) The time period that the proposal will encompass;
    (4) If the proposal involves a series of transactions affecting Tier 
1 capital components which will be consummated over a period of time 
which shall not exceed twelve months, the application shall certify that 
the insured depository institution will maintain itself as a well-
capitalized institution as defined in part 325 of this chapter, both 
before and after each of the proposed transactions;
    (5) If the proposal involves the repurchase of capital instruments, 
the amount of the repurchase price and the basis for establishing the 
fair market value of the repurchase price;
    (6) A statement that the proposal will be available to all holders 
of a particular class of outstanding capital instruments on an equal 
basis, and if not, the details of any restrictions; and
    (7) The date that the applicant's board of directors approved the 
proposal.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the application.
    (e) Undercapitalized institutions. Procedures regarding applications 
by an undercapitalized insured depository institution to retire capital 
stock or capital debt instruments pursuant to section 38 of the FDI Act 
(12 U.S.C. 1831o) are set forth in subpart K (Prompt Corrective Action), 
Sec. 303.203. Applications pursuant to sections 38 and 18(i) may be 
filed concurrently, or as a single application.
    (f) Expedited processing for eligible depository institutions. An 
application filed under this section by an eligible depository 
institution as defined inSec. 303.2(r) will be acknowledged in writing 
by the FDIC and will receive expedited processing, unless the applicant 
is notified in writing to the contrary and provided with the basis for 
that decision. The FDIC may remove an application from expedited 
processing for any of the reasons set forth in Sec. 303.11(c)(2). 
Absent such removal, an application processed under expedited processing 
will be deemed approved 20 days after the FDIC's receipt of a 
substantially complete application.
    (g) Standard processing. For those applications that are not 
processed pursuant to expedited procedures, the FDIC will provide the 
applicant with written notification of the final action as soon as the 
decision is rendered.



Sec. 303.242  Exercise of trust powers.

    (a) Scope. This section contains the procedures to be followed by a 
state nonmember bank to seek the FDIC's prior consent to exercise trust 
powers. The FDIC's prior consent to exercise trust powers is not 
required in the following circumstances:
    (1) Where a state nonmember bank received authority to exercise 
trust powers from its chartering authority prior to December 1, 1950; or
    (2) Where an insured depository institution continues to conduct 
trust activities pursuant to authority granted by its chartering 
authority subsequent to a charter conversion or withdrawal from 
membership in the Federal Reserve System.
    (b) Where to file. Applicants shall submit to the appropriate FDIC 
office a completed form, ``Application for Consent To Exercise Trust 
Powers''. This form may be obtained from any FDIC regional director.
    (c) Content of filing. The filing shall consist of the completed 
trust application form.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Expedited processing for eligible depository institutions. An 
application filed under this section by an eligible depository 
institution as defined in Sec. 303.2(r) will be acknowledged in writing 
by the FDIC and will receive expedited processing, unless the applicant 
is notified in writing to the contrary and provided with the basis for 
that decision. The FDIC may remove an application from expedited 
processing for any of the reasons set forth in Sec. 303.11(c)(2). 
Absent such removal, an application processed under expedited procedures 
will be deemed approved 30 days after the FDIC's receipt of a 
substantially complete application.

[[Page 44]]

    (f) Standard processing. For those applications that are not 
processed pursuant to the expedited procedures, the FDIC will provide 
the applicant with written notification of the final action when the 
decision is rendered.



Sec. 303.243  Brokered deposit waivers.

    (a) Scope. Pursuant to section 29 of the FDI Act (12 U.S.C. 1831f) 
and part 337 of this chapter, an adequately capitalized insured 
depository institution may not accept, renew or roll over any brokered 
deposits unless it has obtained a waiver from the FDIC. A well-
capitalized insured depository institution may accept brokered deposits 
without a waiver, and an undercapitalized insured depository institution 
may not accept, renew or roll over any brokered deposits under any 
circumstances. This section contains the procedures to be followed to 
file with the FDIC for a brokered deposit waiver. The FDIC will provide 
notice to the depository institution's appropriate federal banking 
agency and any state regulatory agency, as appropriate, that a request 
for a waiver has been filed and will consult with such agency or 
agencies, prior to taking action on the institution's request for a 
waiver. Prior notice and/or consultation shall not be required in any 
particular case if the FDIC determines that the circumstances require it 
to take action without giving such notice and opportunity for 
consultation.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following:
    (1) The time period for which the waiver is requested;
    (2) A statement of the policy governing the use of brokered deposits 
in the institution's overall funding and liquidity management program;
    (3) The volume, rates and maturities of the brokered deposits held 
currently and anticipated during the waiver period sought, including any 
internal limits placed on the terms, solicitation and use of brokered 
deposits;
    (4) How brokered deposits are costed and compared to other funding 
alternatives and how they are used in the institution's lending and 
investment activities, including a detailed discussion of asset growth 
plans;
    (5) Procedures and practices used to solicit brokered deposits, 
including an identification of the principal sources of such deposits;
    (6) Management systems overseeing the solicitation, acceptance and 
use of brokered deposits;
    (7) A recent consolidated financial statement with balance sheet and 
income statements; and
    (8) The reasons the institution believes its acceptance, renewal or 
rollover of brokered deposits would pose no undue risk.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the application.
    (e) Expedited processing for eligible depository institutions. An 
application filed under this section by an eligible depository 
institution as defined in this paragraph will be acknowledged in writing 
by the FDIC and will receive expedited processing, unless the applicant 
is notified in writing to the contrary and provided with the basis for 
that decision. For the purpose of this section, an applicant will be 
deemed an eligible depository institution if it satisfies all of the 
criteria contained in Sec. 303.2(r) except that the applicant may be 
adequately capitalized rather than well-capitalized. The FDIC may remove 
an application from expedited processing for any of the reasons set 
forth in Sec. 303.11(c)(2). Absent such removal, an application 
processed under expedited procedures will be deemed approved 21 days 
after the FDIC's receipt of a substantially complete application.
    (f) Standard processing. For those filings which are not processed 
pursuant to the expedited procedures, the FDIC will provide the 
applicant with written notification of the final action as soon as the 
decision is rendered.
    (g) Conditions for approval. A waiver issued pursuant to this 
section shall:
    (1) Be for a fixed period, generally no longer than two years, but 
may be extended upon refiling; and
    (2) May be revoked by the FDIC at any time by written notice to the 
institution.

[[Page 45]]



Sec. 303.244  Golden parachute and severance plan payments.

    (a) Scope. Pursuant to section 18(k) of the FDI Act (12 U.S.C. 
1828(k)) and part 359 of this chapter, an insured depository institution 
or depository institution holding company may not make golden parachute 
payments or excess nondiscriminatory severance plan payments unless the 
depository institution or holding company obtains permission to make 
such payments in accordance with the rules contained in part 359 of this 
chapter. This section contains the procedures to file for the FDIC's 
consent when such consent is necessary under part 359 of this chapter.
    (1) Golden parachute payments. A troubled insured depository 
institution or a troubled depository institution holding company is 
prohibited from making golden parachute payments (as defined in Sec. 
359.1(f)(1) of this chapter) unless it obtains the consent of the 
appropriate federal banking agency and the written concurrence of the 
FDIC. Therefore, in the case of golden parachute payments, the 
procedures in this section apply to all troubled insured depository 
institutions and troubled depository institution holding companies.
    (2) Excess nondiscriminatory severance plan payments. In the case of 
excess nondiscriminatory severance plan payments as provided by Sec. 
359.1(f)(2)(v) of this chapter, the FDIC's consent is necessary for 
state nonmember banks that meet the criteria set forth in Sec. 
359.1(f)(1)(ii) of this chapter. In addition, the FDIC's consent is 
required for all insured depository institutions or depository 
institution holding companies that meet the same criteria and seek to 
make payments in excess of the 12-month amount specified in Sec. 
359.1(f)(2)(v).
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC regional director.
    (c) Content of filing. The application shall contain the following:
    (1) The reasons why the applicant seeks to make the payment;
    (2) An identification of the institution-affiliated party who will 
receive the payment;
    (3) A copy of any contract or agreement regarding the subject matter 
of the filing;
    (4) The cost of the proposed payment and its impact on the 
institution's capital and earnings;
    (5) The reasons why the consent to the payment should be granted; 
and
    (6) Certification and documentation as to each of the points cited 
in Sec. 359.4(a)(4).
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with a 
subsequent written notification of the final action taken as soon as the 
decision is rendered.

[67 FR 79247, Dec. 27, 2002, as amended at 68 FR 50461, Aug. 21, 2003]



Sec. 303.245  Waiver of liability for commonly controlled depository 

institutions.

    (a) Scope. Section 5(e) of the FDI Act (12 U.S.C. 1815(e)) creates 
liability for commonly controlled insured depository institutions for 
losses incurred or anticipated to be incurred by the FDIC in connection 
with the default of a commonly controlled insured depository institution 
or any assistance provided by the FDIC to any commonly controlled 
insured depository institution in danger of default. In addition to 
certain statutory exceptions and exclusions contained in sections 
5(e)(6), (7) and (8), the FDI Act also permits the FDIC, in its 
discretion, to exempt any insured depository institution from this 
liability if it determines that such exemption is in the best interests 
of the Deposit Insurance Fund. This section describes procedures to 
request a conditional waiver of liability pursuant to section 5 of the 
FDI Act (12 U.S.C. 1815(e)(5)(A)).
    (b) Definition. Conditional waiver of liability means an exemption 
from liability pursuant to section 5(e) of the FDI Act (12 U.S.C. 
1815(e)) subject to terms and conditions.
    (c) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (d) Content of filing. The application shall contain the following 
information:
    (1) The basis for requesting a waiver;

[[Page 46]]

    (2) The existence of any significant events (e.g., change in 
control, capital injection, etc.) that may have an impact upon the 
applicant and/or any potentially liable institution;
    (3) Current, and if applicable, pro forma financial information 
regarding the applicant and potentially liable institution(s); and
    (4) The benefits to the appropriate FDIC insurance fund resulting 
from the waiver and any related events.
    (e) Additional information. The FDIC may request additional 
information at any time during the processing of the filing.
    (f) Processing. The FDIC will provide the applicant with written 
notification of the final action as soon as the decision is rendered.
    (g) Failure to comply with terms of conditional waiver. In the event 
a conditional waiver of liability is issued, failure to comply with the 
terms specified therein may result in the termination of the conditional 
waiver of liability. The FDIC reserves the right to revoke the 
conditional waiver of liability after giving the applicant written 
notice of such revocation and a reasonable opportunity to be heard on 
the matter pursuant to Sec. 303.10.

[67 FR 79247, Dec. 27, 2002, as amended at 71 FR 20526, Apr. 21, 2006]



Sec. 303.246  Conversion with diminution of capital.

    (a) Scope. This section contains the procedures to be followed by an 
insured federal depository institution seeking the prior written consent 
of the FDIC pursuant to section 18(i)(2) of the FDI Act (12 U.S.C. 
1828(i)(2)) to convert from an insured federal depository institution to 
an insured state nonmember bank (except a District bank) where the 
capital stock or surplus of the resulting bank will be less than the 
capital stock or surplus, respectively, of the converting institution at 
the time of the shareholders' meeting approving such conversion.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following 
information:
    (1) A description of the proposed transaction;
    (2) A schedule detailing the present and proposed capital structure; 
and
    (3) A copy of any documents submitted to the state chartering 
authority with respect to the charter conversion.
    (d) Additional information. The FDIC may request additional 
information at any time during the processing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action when the decision is rendered.

[67 FR 79247, Dec. 27, 2002. Redesignated at 71 FR 20526, Apr. 21, 2006]



Sec. 303.247  Continue or resume status as an insured institution following 

termination under section 8 of the FDI Act.

    (a) Scope. This section relates to an application by a depository 
institution whose insured status has been terminated under section 8 of 
the FDI Act (12 U.S.C. 1818) for permission to continue or resume its 
status as an insured depository institution. This section covers 
institutions whose deposit insurance continues in effect for any purpose 
or for any length of time under the terms of an FDIC order terminating 
deposit insurance, but does not cover operating non-insured depository 
institutions which were previously insured by the FDIC, or any non-
insured, non-operating depository institution whose charter has not been 
surrendered or revoked.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The filing shall contain the following 
information:
    (1) A complete statement of the action requested, all relevant 
facts, and the reason for such requested action; and
    (2) A certified copy of the resolution of the depository 
institution's board of directors authorizing submission of the filing.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification

[[Page 47]]

of the final action as soon as the decision is rendered.

[67 FR 79247, Dec. 27, 2002. Redesignated at 71 FR 20526, Apr. 21, 2006]



Sec. 303.248  Truth in Lending Act--Relief from reimbursement.

    (a) Scope. This section applies to requests for relief from 
reimbursement pursuant to the Truth in Lending Act (15 U.S.C. 1601 et 
seq.) and Regulation Z (12 CFR part 226). Related delegations of 
authority are also set forth.
    (b) Procedures to be followed in filing initial requests for relief. 
Requests for relief from reimbursement shall be filed with the 
appropriate FDIC office or within 60 days after receipt of the 
compliance report of examination containing the request to conduct a 
file search and make restitution to affected customers. The filing shall 
contain a complete and concise statement of the action requested, all 
relevant facts, the reasons and analysis relied upon as the basis for 
such requested action, and all supporting documentation.
    (c) Additional information. The FDIC may request additional 
information at any time during processing of any such requests.
    (d) Processing. The FDIC will acknowledge receipt of the request for 
reconsideration and provide the applicant with written notification of 
its determination within 60 days of its receipt of the request for 
reconsideration.
    (e) Procedures to be followed in filing requests for 
reconsideration. Within 15 days of receipt of written notice that its 
request for relief has been denied, the requestor may petition the 
appropriate FDIC office for reconsideration of such request in 
accordance with the procedures set forth inSec. 303.11(f).

[67 FR 79247, Dec. 27, 2002. Redesignated at 71 FR 20526, Apr. 21, 2006]



Sec. 303.249  Management official interlocks.

    (a) Scope. This section contains the procedures to be followed by an 
insured state nonmember bank to seek the approval of FDIC to establish 
an interlock pursuant to the Depository Institutions Management 
Interlocks Act (12 U.S.C. 3207), section 13 of the FDI Act (12 U.S.C. 
1823(k)) and part 348 of this chapter (12 CFR part 348).
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following:
    (1) A description of the proposed interlock;
    (2) A statement of reason as to why the interlock will not result in 
a monopoly or a substantial lessening of competition; and
    (3) If the applicant is seeking an exemption set forth in Sec. 
348.5 or 348.6 of this chapter, a description of the particular 
exemption which is being requested and a statement of reasons as to why 
the exemption is applicable.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action when the decision is rendered.

[67 FR 79247, Dec. 27, 2002. Redesignated at 71 FR 20526, Apr. 21, 2006]



Sec. 303.250  Modification of conditions.

    (a) Scope. This section contains the procedures to be followed by an 
insured depository institution to seek the prior consent of the FDIC to 
modify the requirement of a prior approval of a filing issued by the 
FDIC.
    (b) Where to file. Applicants should submit a letter application to 
the appropriate FDIC regional director.
    (c) Content of filing. The application should contain the following 
information:
    (1) A description of the original approved application;
    (2) A description of the modification requested; and
    (3) The reason for the request.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with a written 
notification of the final action as soon as the decision is rendered.

[67 FR 79247, Dec. 27. Redesignated at 71 FR 20526, Apr. 21, 2006]

[[Page 48]]



Sec. 303.251  Extension of time.

    (a) Scope. This section contains the procedures to be followed by an 
insured depository institution to seek the prior consent of the FDIC for 
additional time to fulfill a condition required in an approval of a 
filing issued by the FDIC or to consummate a transaction which was the 
subject of an approval by the FDIC.
    (b) Where to file. Applicants shall submit a letter application to 
the appropriate FDIC office.
    (c) Content of filing. The application shall contain the following 
information:
    (1) A description of the original approved application;
    (2) Identification of the original time limitation;
    (3) The additional time period requested; and
    (4) The reason for the request.
    (d) Additional information. The FDIC may request additional 
information at any time during processing of the filing.
    (e) Processing. The FDIC will provide the applicant with written 
notification of the final action as soon as the decision is rendered.

[67 FR 79247, Dec. 27. Redesignated at 71 FR 20526, Apr. 21, 2006]



Sec. Sec. 303.252-303.259  [Reserved]



PART 304_FORMS, INSTRUCTIONS, AND REPORTS--Table of Contents




Sec.
304.1 Purpose.
304.2 Where to obtain forms and instructions.
304.3 Reports.

    Authority: 5 U.S.C. 552; 12 U.S.C. 1817, 1831, 1867.

    Source: 67 FR 18793, Apr. 17, 2002, unless otherwise noted.



Sec. 304.1  Purpose.

    Part 304 informs the public where it may obtain forms and 
instructions for reports, applications, and other submittals used by the 
FDIC, and also describes certain forms that are not described elsewhere 
in FDIC regulations.



Sec. 304.2  Where to obtain forms and instructions.

    Forms and instructions used in connection with applications, 
reports, and other submittals used by the FDIC can be obtained by 
contacting the FDIC Public Information Center (801 17th Street, NW., 
Washington, DC 20434; telephone: 800-276-6003 or 202-416-6940), except 
as noted below in Sec. 304.3. In addition, many forms and instructions 
can be obtained from FDIC regional offices. A list of FDIC regional 
offices can be obtained from the FDIC Public Information Center or found 
at the FDIC's web site at http://www.fdic.gov, or in the directory of 
FDIC Law, Regulations and Related Acts published by the FDIC.



Sec. 304.3  Reports.

    (a) Consolidated Reports of Condition and Income, Forms FFIEC 031 
and 041. Pursuant to section 7(a) of the Federal Deposit Insurance Act 
(12 U.S.C. 1817(a)), every national bank, state member bank, and insured 
state nonmember bank is required to file Consolidated Reports of 
Condition and Income (also known as the Call Report) in accordance with 
the instructions for these reports. All assets and liabilities, 
including contingent assets and liabilities, must be reported in, or 
otherwise taken into account in the preparation of, the Call Report. The 
FDIC uses Call Report data to calculate deposit insurance assessments 
and monitor the condition, performance, and risk profile of individual 
banks and the banking industry. Reporting banks must also submit 
annually such information on small business and small farm lending as 
the FDIC may need to assess the availability of credit to these sectors 
of the economy. The report forms and instructions can be obtained from 
the Division of Supervision and Consumer Protection (DSC), FDIC, 
Washington, DC 20429.

(Approved by the Office of Management and Budget under control number 
3064-0052)

    (b) Report of Assets and Liabilities of U.S. Branches and Agencies 
of Foreign Banks, Form FFIEC 002. Pursuant to section 7(a) of the 
Federal Deposit Insurance Act (12 U.S.C. 1817(a)), every insured U.S. 
branch of a foreign bank is

[[Page 49]]

required to file a Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks in accordance with the instructions for the 
report. All assets and liabilities, including contingent assets and 
liabilities, must be reported in, or otherwise taken into account in the 
preparation of the report. The FDIC uses the reported data to calculate 
deposit insurance assessments and monitor the condition, performance, 
and risk profile of individual insured branches and the banking 
industry. Insured branches must also submit annually such information on 
small business and small farm lending as the FDIC may need to assess the 
availability of credit to these sectors of the economy. Because the 
Board of Governors of the Federal Reserve System collects and processes 
this report on behalf of the FDIC, the report forms and instructions can 
be obtained from Federal Reserve District Banks or through the web site 
of the Federal Financial Institutions Examination Council, http://
www.ffiec.gov/.

(Approved by the Office of Management and Budget under control number 
7100-0032)

    (c) Summary of Deposits, Form FDIC 8020/05. Form 8020/05 is a report 
on the amount of deposits for each authorized office of an insured bank 
with branches; unit banks do not report. Reports as of June 30 of each 
year must be submitted no later than the immediately succeeding July 31. 
The report forms and the instructions for completing the reports will be 
furnished to all such banks by, or may be obtained upon request from, 
the Division of Supervision and Consumer Protection (DSC), FDIC, 550 
17th Street, NW., Washington, DC 20429.

(Approved by the Office of Management and Budget under control number 
3064-0061)

    (d) Notification of Performance of Bank Services, Form FDIC 6120/06. 
Pursuant to Section 7 of the Bank Service Company Act (12 U.S.C. 1867), 
as amended, FDIC supervised banks must notify the agency about the 
existence of a service relationship within thirty days after the making 
of the contract or the performance of the service, whichever occurs 
first. Form FDIC 6120/06 may be used to satisfy the notice requirement. 
The form contains identification, location and contact information for 
the bank, the servicer, and a description of the services provided. In 
lieu of the form, notification may be provided by letter. Either the 
form or the letter containing the notice information must be submitted 
to the regional director--Division of Supervision and Consumer 
Protection (DSC) of the region in which the bank's main office is 
located.

(Approved by the Office of Management and Budget under control number 
3064-0029)

                        PARTS 305-306 [RESERVED]



PART 307_CERTIFICATION OF ASSUMPTION OF DEPOSITS AND NOTIFICATION OF CHANGES 

OF INSURED STATUS--Table of Contents




Sec.
307.1 Scope and purpose.
307.2 Certification of assumption of deposit liabilities.
307.3 Notice to depositors when insured status is voluntarily terminated 
          and deposits are not assumed.

Appendix A to Part 307--Transferring Institution Letterhead
Appendix B to Part 307--Institution Letterhead

    Authority: 12 U.S.C. 1818(a)(6); 1818(q); and 1819(a) [Tenth].

    Source: 71 FR 8791, Feb. 21, 2006, unless otherwise noted.



Sec. 307.1  Scope and purpose.

    (a) Scope. This Part applies to all insured depository institutions, 
as defined in section 3(c)(2) of the Federal Deposit Insurance Act (FDI 
Act) (12 U.S.C. 1813(c)(2)).
    (b) Purpose. This Part sets forth the rules governing:
    (1) The time and manner for providing certification to the FDIC 
regarding the assumption of all of the deposit liabilities of an insured 
depository institution by one or more insured depository institutions; 
and
    (2) The notification that an insured depository institution shall 
provide its depositors when a depository institution's insured status is 
being voluntarily terminated without its deposits being assumed by one 
or more insured depository institutions.

[[Page 50]]



Sec. 307.2  Certification of assumption of deposit liabilities.

    (a) When certification is required. Whenever all of the deposit 
liabilities of an insured depository institution are assumed by one or 
more insured depository institutions by merger, consolidation, other 
statutory assumption, or by contract, the transferring insured 
depository institution, or its legal successor, shall provide an 
accurate written certification to the FDIC that its deposit liabilities 
have been assumed. No certification shall be required when deposit 
liabilities are assumed by an operating insured depository institution 
from an insured depository institution in default, as defined in section 
3(x)(1) of the FDI Act (12 U.S.C. 1813(x)(1)), and that has been placed 
under FDIC receivership.
    (b) Certification requirements. The certification required by 
paragraph (a) of this section shall be provided on official letterhead 
of the transferring insured depository institution or its legal 
successor, signed by a duly authorized official, and state the date the 
assumption took effect. The certification shall indicate the date on 
which the transferring institution's authority to engage in banking has 
terminated or will terminate as well as the method of termination (e.g., 
whether by the surrender of its charter, by the cancellation of its 
charter or license to conduct a banking business, or otherwise). The 
certification may follow the form contained in Appendix A of this part. 
In a merger or consolidation where there is only one surviving entity 
which is the legal successor to both the transferring and assuming 
institutions, the surviving entity shall provide any required 
certification.
    (c) Filing. The certification required by paragraph (a) of this 
section shall be provided within 30 calendar days after the assumption 
takes effect, and shall be submitted to the appropriate Regional 
Director of the FDIC's Division of Supervision and Consumer Protection, 
as defined in 12 CFR 303.2(g).
    (d) Evidence of assumption. The receipt by the FDIC of an accurate 
certification for a total assumption as required by paragraphs (a), (b) 
and (c) of this section shall constitute satisfactory evidence of such 
deposit assumption, as required by section 8(q) of the FDI Act (12 
U.S.C. 1818(q)), and the insured status of the transferring institution 
shall terminate on the date of the receipt of the certification. In 
appropriate circumstances, the FDIC, in its sole discretion, may require 
additional information, or may consider other evidence of a deposit 
assumption to constitute satisfactory evidence of such assumption for 
purposes of section 8(q).
    (e) Issuance of an order. The Executive Secretary, upon request from 
the Director of the Division of Supervision and Consumer Protection and 
with the concurrence of the General Counsel, or their respective 
designees, shall issue an order terminating the insured status of the 
transferring insured depository institution as of the date of receipt by 
the FDIC of satisfactory evidence of such assumption, pursuant to 
section 8(q) of the FDI Act and this regulation. Generally, no order 
shall be issued, under this paragraph, and insured status shall be 
cancelled by operation of law:
    (1) If the charter of the transferring institution has been 
cancelled, revoked, rescinded, or otherwise terminated by operation of 
applicable state or federal statutes or regulations, or by action of the 
chartering authority for the transferring institution essentially 
contemporaneously, that is, generally within five business days after 
all deposits have been assumed; or
    (2) If the transferring institution is an insured depository 
institution in default and for which the FDIC has been appointed 
receiver.



Sec. 307.3  Notice to depositors when insured status is voluntarily terminated 

and deposits are not assumed.

    (a) Notice required. An insured depository institution that has 
obtained authority from the FDIC to terminate its insured status under 
sections 8(a), 8(p) or 18(i)(3) of the FDI Act without its deposit 
liabilities being assumed by one or more insured depository institutions 
shall provide to each of its depositors, at the depositor's last known 
address of record on the books of the institution, prior written 
notification of the date the institution's insured status shall 
terminate.

[[Page 51]]

    (b) Prior approval of notice. The insured depository institution 
shall provide the appropriate Regional Director of the FDIC's Division 
of Supervision and Consumer Protection, as defined in 12 CFR 303.2(g), a 
copy of the proposed notice for approval. After being approved, the 
notice shall be provided to depositors by the insured depository 
institution at the time and in the manner specified by the appropriate 
Regional Director.
    (c) Form of notice. The notice to depositors required by paragraph 
(a) of this section shall be provided on the official letterhead of the 
insured depository institution, shall bear the signature of a duly 
authorized officer, and, unless otherwise specified by the appropriate 
Regional Director, may follow the form of the notice contained in 
Appendix B of this part.
    (d) Other requirements possible. The FDIC may require the insured 
depository institution to take such other actions as the FDIC considers 
necessary and appropriate for the protection of depositors.



    Sec. Appendix A to Part 307--Transferring Institution Letterhead

[Date]

[Name and Address of appropriate FDIC Regional Director]

SUBJECT: Certification of Total Assumption of Deposits

    This certification is being provided pursuant to 12 U.S.C. 1818(q) 
and 12 CFR 307.2. On [state the date the deposit assumption took 
effect], [state the name of the depository institution assuming the 
deposit liabilities] assumed all of the deposits of [state the name and 
location of the transferring institution whose deposits were assumed]. 
[If applicable, state the date and method by which the transferring 
institution's authority to engage in banking was or will be terminated.] 
Please contact the undersigned, at [telephone number], if additional 
information is needed.

Sincerely,

By:

[Name and Title of Authorized Representative]



           Sec. Appendix B to Part 307--Institution Letterhead

[Date]

[Name and Address of Depositor]

SUBJECT: Notice to Depositor of Voluntary Termination of Insured Status

    The insured status of [name of insured depository institution], 
under the provisions of the Federal Deposit Insurance Act, will 
terminate as of the close of business on [state the date] (``termination 
date''). Insured deposits in the [name of insured depository 
institution] on the termination date, less all withdrawals from such 
deposits made subsequent to that date, will continue to be insured by 
the Federal Deposit Insurance Corporation, to the extent provided by 
law, until [state the date]. The Federal Deposit Insurance Corporation 
will not insure any new deposits or additions to existing deposits made 
by you after the termination date.
    This Notice is being provided pursuant to 12 CFR 307.3.
    Please contact [name of institution official in charge of depositor 
inquiries], at [name and address of insured depository institution] if 
additional information is needed regarding this Notice or the insured 
status of your account(s).

Sincerely,

By:

[Name and Title of Authorized Representative]



PART 308_RULES OF PRACTICE AND PROCEDURE--Table of Contents




            Subpart A_Uniform Rules of Practice and Procedure

Sec.
308.1 Scope.
308.2 Rules of construction.
308.3 Definitions.
308.4 Authority of Board of Directors.
308.5 Authority of the administrative law judge.
308.6 Appearance and practice in adjudicatory proceedings.
308.7 Good faith certification.
308.8 Conflicts of interest.
308.9 Ex parte communications.
308.10 Filing of papers.
308.11 Service of papers.
308.12 Construction of time limits.
308.13 Change of time limits.
308.14 Witness fees and expenses.
308.15 Opportunity for informal settlement.
308.16 FDIC's right to conduct examination.
308.17 Collateral attacks on adjudicatory proceeding.
308.18 Commencement of proceeding and contents of notice.
308.19 Answer.
308.20 Amended pleadings.
308.21 Failure to appear.
308.22 Consolidation and severance of actions.
308.23 Motions.
308.24 Scope of document discovery.

[[Page 52]]

308.25 Request for document discovery from parties.
308.26 Document subpoenas to nonparties.
308.27 Deposition of witness unavailable for hearing.
308.28 Interlocutory review.
308.29 Summary disposition.
308.30 Partial summary disposition.
308.31 Scheduling and prehearing conferences.
308.32 Prehearing submissions.
308.33 Public hearings.
308.34 Hearing subpoenas.
308.35 Conduct of hearings.
308.36 Evidence.
308.37 Post-hearing filings.
308.38 Recommended decision and filing of record.
308.39 Exceptions to recommended decision.
308.40 Review by Board of Directors.
308.41 Stays pending judicial review.

                  Subpart B_General Rules of Procedure

308.101 Scope of Local Rules.
308.102 Authority of Board of Directors and Executive Secretary.
308.103 Appointment of administrative law judge.
308.104 Filings with the Board of Directors.
308.105 Custodian of the record.
308.106 Written testimony in lieu of oral hearing.
308.107 Document discovery.

  Subpart C_Rules of Practice Before the FDIC and Standards of Conduct

308.108 Sanctions.
308.109 Suspension and disbarment.

  Subpart D_Rules and Procedures Applicable to Proceedings Relating to 
                  Disapproval of Acquisition of Control

308.110 Scope.
308.111 Grounds for disapproval.
308.112 Notice of disapproval.
308.113 Answer to notice of disapproval.
308.114 Burden of proof.

  Subpart E_Rules and Procedures Applicable to Proceedings Relating to 
 Assessment of Civil Penalties for Willful Violations of the Change in 
                            Bank Control Act

308.115 Scope.
308.116 Assessment of penalties.
308.117 Effective date of, and payment under, an order to pay.
308.118 Collection of penalties.

Subpart F_Rules and Procedures Applicable to Proceedings for Involuntary 
                      Termination of Insured Status

308.119 Scope.
308.120 Grounds for termination of insurance.
308.121 Notification to primary regulator.
308.122 Notice of intent to terminate.
308.123 Notice to depositors.
308.124 Involuntary termination of insured status for failure to receive 
          deposits.
308.125 Temporary suspension of deposit insurance.
308.126 Special supervisory associations.

  Subpart G_Rules and Procedures Applicable to Proceedings Relating to 
                         Cease-and-Desist Orders

308.127 Scope.
308.128 Grounds for cease-and-desist orders.
308.129 Notice to state supervisory authority.
308.130 Effective date of order and service on bank.
308.131 Temporary cease-and-desist order.

  Subpart H_Rules and Procedures Applicable to Proceedings Relating to 

  Assessment and Collection of Civil Money Penalties for Violation of 

Cease-and-Desist Orders and of Certain Federal Statutes, Including Call 

                            Report Penalties

308.132 Assessment of penalties.
308.133 Effective date of, and payment under, an order to pay.

    Subpart I_Rules and Procedures for Imposition of Sanctions Upon 
    Municipal Securities Dealers or Persons Associated With Them and 
                  Clearing Agencies or Transfer Agents

308.134 Scope.
308.135 Grounds for imposition of sanctions.
308.136 Notice to and consultation with the Securities and Exchange 
          Commission.
308.137 Effective date of order imposing sanctions.

 Subpart J_Rules and Procedures Relating to Exemption Proceedings Under 
          Section 12(h) of the Securities Exchange Act of 1934

308.138 Scope.
308.139 Application for exemption.
308.140 Newspaper notice.
308.141 Notice of hearing.
308.142 Hearing.
308.143 Decision of Board of Directors.

 Subpart K_Procedures Applicable to Investigations Pursuant to Section 
                            10(c) of the FDIA

308.144 Scope.
308.145 Conduct of investigation.

[[Page 53]]

308.146 Powers of person conducting investigation.
308.147 Investigations confidential.
308.148 Rights of witnesses.
308.149 Service of subpoena.
308.150 Transcripts.

 Subpart L_Procedures and Standards Applicable to a Notice of Change in 
 Senior Executive Officer or Director Pursuant to Section 32 of the FDIA

308.151 Scope.
308.152 Grounds for disapproval of notice.
308.153 Procedures where notice of disapproval issues pursuant to Sec. 
          303.103(c) of this chapter.
308.154 Decision on review.
308.155 Hearing.

Subpart M_Procedures and Standards Applicable to an Application Pursuant 
                        to Section 19 of the FDIA

308.156 Scope.
308.157 Relevant considerations.
308.158 Filing papers and effective date.
308.159 Denial of applications.
308.160 Hearings.

  Subpart N_Rules and Procedures Applicable to Proceedings Relating to 
     Suspension, Removal, and Prohibition Where a Felony Is Charged

308.161 Scope.
308.162 Relevant considerations.
308.163 Notice of suspension or prohibition, and orders of removal or 
          prohibition.
308.164 Hearings.

   Subpart O_Liability of Commonly Controlled Depository Institutions

308.165 Scope.
308.166 Grounds for assessment of liability.
308.167 Notice of assessment of liability.
308.168 Effective date of and payment under an order to pay.

Subpart P_Rules and Procedures Relating to the Recovery of Attorney Fees 
                           and Other Expenses

308.169 Scope.
308.170 Filing, content, and service of documents.
308.171 Responses to application.
308.172 Eligibility of applicants.
308.173 Prevailing party.
308.174 Standards for awards.
308.175 Measure of awards.
308.176 Application for awards.
308.177 Statement of net worth.
308.178 Statement of fees and expenses.
308.179 Settlement negotiations.
308.180 Further proceedings.
308.181 Recommended decision.
308.182 Board of Directors action.
308.183 Payment of awards.

     Subpart Q_Issuance and Review of Orders Pursuant to the Prompt 
    Corrective Action Provisions of the Federal Deposit Insurance Act

308.200 Scope.
308.201 Directives to take prompt corrective action.
308.202 Procedures for reclassifying a bank based on criteria other than 
          capital.
308.203 Order to dismiss a director or senior executive officer.
308.204 Enforcement of directives.

Subpart R_Submission and Review of Safety and Soundness Compliance Plans 
   and Issuance of Orders To Correct Safety and Soundness Deficiencies

308.300 Scope.
308.301 Purpose.
308.302 Determination and notification of failure to meet a safety and 
          soundness standard and request for compliance plan.
308.303 Filing of safety and soundness compliance plan.
308.304 Issuance of orders to correct deficiencies and to take or 
          refrain from taking other actions.
308.305 Enforcement of orders.

Subpart S_Applications for a Stay or Review of Actions of Bank Clearing 
                                Agencies

308.400 Scope.
308.401 Applications for stays of disciplinary sanctions or summary 
          suspensions by a bank clearing agency.
308.402 Applications for review of final disciplinary sanctions, denials 
          of participation, or prohibitions or limitations of access to 
          services imposed by bank clearing agencies.

          Subpart T_Program Fraud Civil Remedies and Procedures

308.500 Basis, purpose, and scope.
308.501 Definitions.
308.502 Basis for civil penalties and assessments.
308.503 Investigations.
308.504 Review by the reviewing official.
308.505 Prerequisites for issuing a complaint.
308.506 Complaint.
308.507 Service of complaint.
308.508 Answer.
308.509 Default upon failure to file an answer.

[[Page 54]]

308.510 Referral of complaint and answer to the ALJ.
308.511 Notice of hearing.
308.512 Parties to the hearing.
308.513 Separation of functions.
308.514 Ex parte contacts.
308.515 Disqualification of reviewing official or ALJ.
308.516 Rights of parties.
308.517 Authority of the ALJ.
308.518 Prehearing conferences.
308.519 Disclosure of documents.
308.520 Discovery.
308.521 Exchange of witness lists, statements, and exhibits.
308.522 Subpoenas for attendance at hearing.
308.523 Protective order.
308.524 Witness fees.
308.525 Form, filing, and service of papers.
308.526 Computation of time.
308.527 Motions.
308.528 Sanctions.
308.529 The hearing and burden of proof.
308.530 Determining the amount of penalties and assessments.
308.531 Location of hearing.
308.532 Witnesses.
308.533 Evidence.
308.534 The record.
308.535 Post-hearing briefs.
308.536 Initial decision.
308.537 Reconsideration of initial decision.
308.538 Appeal to the Board of Directors.
308.539 Stays ordered by the Department of Justice.
308.540 Stay pending appeal.
308.541 Judicial review.
308.542 Collection of civil penalties and assessments.
308.543 Right to administrative offset.
308.544 Deposit in Treasury of United States.
308.545 Compromise or settlement.
308.546 Limitations.

    Subpart U_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

308.600 Scope.
308.601 Definitions.
308.602 Removal, suspension, or debarment.
308.603 Automatic removal, suspension, and debarment.
308.604 Notice of removal, suspension, or debarment.
308.605 Application for reinstatement.

    Authority: 5 U.S.C. 504, 554-557; 12 U.S.C. 93(b), 164, 505, 
1815(e), 1817, 1818, 1820, 1828, 1829, 1829b, 1831i, 1831m(g)(4), 1831o, 
1831p-1, 1832(c), 1884(b), 1972, 3102, 3108(a), 3349, 3909, 4717, 15 
U.S.C. 78(h) and (i), 78o-4(c), 78o-5, 78q-1, 78s, 78u, 78u-2, 78u-3, 
and 78w, 6801(b), 6805(b)(1); 28 U.S.C. 2461 note; 31 U.S.C. 330, 5321; 
42 U.S.C. 4012a; Sec. 3100(s), Pub. L. 104-134, 110 Stat. 1321-358; and 
Pub. L. 109-351.

    Source: 56 FR 37975, Aug. 9, 1991, unless otherwise noted.



            Subpart A_Uniform Rules of Practice and Procedure



Sec. 308.1  Scope.

    This subpart prescribes rules of practice and procedure applicable 
to adjudicatory proceedings as to which hearings on the record are 
provided for by the following statutory provisions:
    (a) Cease-and-desist proceedings under section 8(b) of the Federal 
Deposit Insurance Act (``FDIA'') (12 U.S.C. 1818(b));
    (b) Removal and prohibition proceedings under section 8(e) of the 
FDIA (12 U.S.C. 1818(e));
    (c) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) to determine whether the Federal Deposit 
Insurance Corporation (``FDIC''), should issue an order to approve or 
disapprove a person's proposed acquisition of an institution and/or 
institution holding company;
    (d) Proceedings under section 15C(c)(2) of the Securities Exchange 
Act of 1934 (``Exchange Act'') (15 U.S.C. 78o-5), to impose sanctions 
upon any government securities broker or dealer or upon any person 
associated or seeking to become associated with a government securities 
broker or dealer for which the FDIC is the appropriate regulatory 
agency;
    (e) Assessment of civil money penalties by the FDIC against 
institutions, institution-affiliated parties, and certain other persons 
for which it is the appropriate regulatory agency for any violation of:
    (1) Sections 22(h) and 23 of the Federal Reserve Act (``FRA''), or 
any regulation issued thereunder, and certain unsafe or unsound 
practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 1828(j);
    (2) Section 106(b) of the Bank Holding Company Act Amendments of 
1970 (``BHCA Amendments of 1970''), and certain unsafe or unsound 
practices or breaches of fiduciary duty, pursuant to 12 U.S.C. 
1972(2)(F);
    (3) Any provision of the Change in Bank Control Act of 1978, as 
amended (the ``CBCA''), or any regulation or order issued thereunder, 
and certain

[[Page 55]]

unsafe or unsound practices, or breaches of fiduciary duty, pursuant to 
12 U.S.C. 1817(j)(16);
    (4) Section 7(a)(1) of the FDIA, pursuant to 12 U.S.C. 1817(a)(1);
    (5) Any provision of the International Lending Supervision Act of 
1983 (``ILSA''), or any rule, regulation or order issued thereunder, 
pursuant to 12 U.S.C. 3909;
    (6) Any provision of the International Banking Act of 1978 
(``IBA''), or any rule, regulation or order issued thereunder, pursuant 
to 12 U.S.C. 3108;
    (7) Certain provisions of the Exchange Act, pursuant to section 21B 
of the Exchange Act (15 U.S.C. 78u-2);
    (8) Section 1120 of the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (``FIRREA'') (12 U.S.C. 3349), or any order or 
regulation issued thereunder;
    (9) The terms of any final or temporary order issued under section 8 
of the FDIA or of any written agreement executed by the FDIC, the terms 
of any condition imposed in writing by the FDIC in connection with the 
grant of an application or request, certain unsafe or unsound practices 
or breaches of fiduciary duty, or any law or regulation not otherwise 
provided herein pursuant to 12 U.S.C. 1818(i)(2);
    (10) Any provision of law referenced in section 102(f) of the Flood 
Disaster Protection Act of 1973 (42 U.S.C. 4012a(f)) or any order or 
regulation issued thereunder; and
    (11) Any provision of law referenced in 31 U.S.C. 5321 or any order 
or regulation issued thereunder;
    (f) Remedial action under section 102(g) of the Flood Disaster 
Protection Act of 1973 (42 U.S.C. 4012a(g));
    (g) Proceedings under section 10(k) of the FDIA (12 U.S.C. 1820(k)) 
to impose penalties for violations of the post-employment restrictions 
under that subsection; and
    (h) This subpart also applies to all other adjudications required by 
statute to be determined on the record after opportunity for an agency 
hearing, unless otherwise specifically provided for in the Local Rules.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996; 70 
FR 69639, Nov. 17, 2005]



Sec. 308.2  Rules of construction.

    For purposes of this subpart:
    (a) Any term in the singular includes the plural, and the plural 
includes the singular, if such use would be appropriate;
    (b) Any use of a masculine, feminine, or neuter gender encompasses 
all three, if such use would be appropriate;
    (c) The term counsel includes a non-attorney representative; and
    (d) Unless the context requires otherwise, a party's counsel of 
record, if any, may, on behalf of that party, take any action required 
to be taken by the party.



Sec. 308.3  Definitions.

    For purposes of this subpart, unless explicitly stated to the 
contrary:
    (a) Administrative law judge means one who presides at an 
administrative hearing under authority set forth at 5 U.S.C. 556.
    (b) Adjudicatory proceeding means a proceeding conducted pursuant to 
these rules and leading to the formulation of a final order other than a 
regulation.
    (c) Board of Directors or Board means the Board of Directors of the 
Federal Deposit Insurance Corporation or its designee.
    (d) Decisional employee means any member of the Federal Deposit 
Insurance Corporation's or administrative law judge's staff who has not 
engaged in an investigative or prosecutorial role in a proceeding and 
who may assist the Board of Directors or the administrative law judge, 
respectively, in preparing orders, recommended decisions, decisions, and 
other documents under the Uniform Rules.
    (e) Designee of the Board of Directors means officers or officials 
of the Federal Deposit Insurance Corporation acting pursuant to 
authority delegated by the Board of Directors as provided in 12 CFR part 
303 of this chapter or by specific resolution of the Board of Directors.
    (f) Enforcement Counsel means any individual who files a notice of 
appearance as counsel on behalf of the FDIC in an adjudicatory 
proceeding.

[[Page 56]]

    (g) Executive Secretary means the Executive Secretary of the Federal 
Deposit Insurance Corporation or his or her designee.
    (h) FDIC means the Federal Deposit Insurance Corporation.
    (i) Final order means an order issued by the FDIC with or without 
the consent of the affected institution or the institution-affiliated 
party, that has become final, without regard to the pendency of any 
petition for reconsideration or review.
    (j) Institution includes:
    (1) Any bank as that term is defined in section 3(a) of the FDIA (12 
U.S.C. 1813(a));
    (2) Any bank holding company or any subsidiary (other than a bank) 
of a bank holding company as those terms are defined in the BHCA (12 
U.S.C. 1841 et seq.);
    (3) Any savings association as that term is defined in section 3(b) 
of the FDIA (12 U.S.C. 1813(b)), any savings and loan holding company or 
any subsidiary thereof (other than a bank) as those terms are defined in 
section 10(a) of the HOLA (12 U.S.C. 1467(a));
    (4) Any organization operating under section 25 of the FRA (12 
U.S.C. 601 et seq.);
    (5) Any foreign bank or company to which section 8 of the IBA (12 
U.S.C. 3106), applies or any subsidiary (other than a bank) thereof; and
    (6) Any federal agency as that term is defined in section 1(b) of 
the IBA (12 U.S.C. 3101(5)).
    (k) Institution-affiliated party means any institution-affiliated 
party as that term is defined in section 3(u) of the FDIA (12 U.S.C. 
1813(u)).
    (l) Local Rules means those rules promulgated by the FDIC in those 
subparts of this part other than subpart A.
    (m) Office of Financial Institution Adjudication (``OFIA'') means 
the executive body charged with overseeing the administration of 
administrative enforcement proceedings of the Office of the Comptroller 
of the Currency (``OCC''), the Board of Governors of the Federal Reserve 
Board (``FRB''), the FDIC, the Office of Thrift Supervision (``OTS'') 
and the National Credit Union Administration (``NCUA'').
    (n) Party means the FDIC and any person named as a party in any 
notice.
    (o) Person means an individual, sole proprietor, partnership, 
corporation, unincorporated association, trust, joint venture, pool, 
syndicate, agency or other entity or organization, including an 
institution as defined in paragraph (j) of this section.
    (p) Respondent means any party other than the FDIC.
    (q) Uniform Rules means those rules in subpart A of this part that 
pertain to the types of formal administrative enforcement actions set 
forth at Sec. 308.01 and as specified in subparts B through P of this 
part.
    (r) Violation includes any action (alone or with another or others) 
for or toward causing, bringing about, participating in, counseling, or 
aiding or abetting a violation.



Sec. 308.4  Authority of Board of Directors.

    The Board of Directors may, at any time during the pendency of a 
proceeding, perform, direct the performance of, or waive performance of, 
any act which could be done or ordered by the administrative law judge.



Sec. 308.5  Authority of the administrative law judge.

    (a) General rule. All proceedings governed by this part shall be 
conducted in accordance with the provisions of chapter 5 of title 5 of 
the United States Code. The administrative law judge shall have all 
powers necessary to conduct a proceeding in a fair and impartial manner 
and to avoid unnecessary delay.
    (b) Powers. The administrative law judge shall have all powers 
necessary to conduct the proceeding in accordance with paragraph (a) of 
this section, including the following powers:
    (1) To administer oaths and affirmations;
    (2) To issue subpoenas, subpoenas duces tecum, and protective 
orders, as authorized by this part, and to quash or modify any such 
subpoenas and orders;
    (3) To receive relevant evidence and to rule upon the admission of 
evidence and offers of proof;
    (4) To take or cause depositions to be taken as authorized by this 
subpart;

[[Page 57]]

    (5) To regulate the course of the hearing and the conduct of the 
parties and their counsel;
    (6) To hold scheduling and/or pre-hearing conferences as set forth 
in Sec. 308.31;
    (7) To consider and rule upon all procedural and other motions 
appropriate in an adjudicatory proceeding, provided that only the Board 
of Directors shall have the power to grant any motion to dismiss the 
proceeding or to decide any other motion that results in a final 
determination of the merits of the proceeding;
    (8) To prepare and present to the Board of Directors a recommended 
decision as provided herein;
    (9) To recuse himself or herself by motion made by a party or on his 
or her own motion;
    (10) To establish time, place and manner limitations on the 
attendance of the public and the media for any public hearing; and
    (11) To do all other things necessary and appropriate to discharge 
the duties of a presiding officer.



Sec. 308.6  Appearance and practice in adjudicatory proceedings.

    (a) Appearance before the FDIC or an administrative law judge--(1) 
By attorneys. Any member in good standing of the bar of the highest 
court of any state, commonwealth, possession, territory of the United 
States, or the District of Columbia may represent others before the FDIC 
if such attorney is not currently suspended or debarred from practice 
before the FDIC.
    (2) By non-attorneys. An individual may appear on his or her own 
behalf; a member of a partnership may represent the partnership; a duly 
authorized officer, director, or employee of any government unit, 
agency, institution, corporation or authority may represent that unit, 
agency, institution, corporation or authority if such officer; director, 
or employee is not currently suspended or debarred from practice before 
the FDIC.
    (3) Notice of appearance. Any individual acting as counsel on behalf 
of a party, including the FDIC, shall file a notice of appearance with 
OFIA at or before the time that individual submits papers or otherwise 
appears on behalf of a party in the adjudicatory proceeding. The notice 
of appearance must include a written declaration that the individual is 
currently qualified as provided in paragraph (a)(1) or (a)(2) of this 
section and is authorized to represent the particular party. By filing a 
notice of appearance on behalf of a party in an adjudicatory proceeding, 
the counsel agrees and represents that he or she is authorized to accept 
service on behalf of the represented party and that, in the event of 
withdrawal from representation, he or she will, if required by the 
administrative law judge, continue to accept service until new counsel 
has filed a notice of appearance or until the represented party 
indicates that he or she will proceed on a pro se basis.
    (b) Sanctions. Dilatory, obstructionist, egregious, contemptuous or 
contumacious conduct at any phase of any adjudicatory proceeding may be 
grounds for exclusion or suspension of counsel from the proceeding.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.7  Good faith certification.

    (a) General requirement. Every filing or submission of record 
following the issuance of a notice shall be signed by at least one 
counsel of record in his or her individual name and shall state that 
counsel's address and telephone number. A party who acts as his or her 
own counsel shall sign his or her individual name and state his or her 
address and telephone number on every filing or submission of record.
    (b) Effect of signature. (1) The signature of counsel or a party 
shall constitute a certification that: The counsel or party has read the 
filing or submission of record; to the best of his or her knowledge, 
information, and belief formed after reasonable inquiry, the filing or 
submission of record is well-grounded in fact and is warranted by 
existing law or a good faith argument for the extension, modification, 
or reversal of existing law; and the filing or submission of record is 
not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.

[[Page 58]]

    (2) If a filing or submission of record is not signed, the 
administrative law judge shall strike the filing or submission of 
record, unless it is signed promptly after the omission is called to the 
attention of the pleader or movant.
    (c) Effect of making oral motion or argument. The act of making any 
oral motion or oral argument by any counsel or party constitutes a 
certification that to the best of his or her knowledge, information, and 
belief formed after reasonable inquiry, his or her statements are well-
grounded in fact and are warranted by existing law or a good faith 
argument for the extension, modification, or reversal of existing law, 
and are not made for any improper purpose, such as to harass or to cause 
unnecessary delay or needless increase in the cost of litigation.



Sec. 308.8  Conflicts of interest.

    (a) Conflict of interest in representation. No person shall appear 
as counsel for another person in an adjudicatory proceeding if it 
reasonably appears that such representation may be materially limited by 
that counsel's responsibilities to a third person or by the counsel's 
own interests. The administrative law judge may take corrective measures 
at any stage of a proceeding to cure a conflict of interest in 
representation, including the issuance of an order limiting the scope of 
representation or disqualifying an individual from appearing in a 
representative capacity for the duration of the proceeding.
    (b) Certification and waiver. If any person appearing as counsel 
represents two or more parties to an adjudicatory proceeding or also 
represents a non-party on a matter relevant to an issue in the 
proceeding, counsel must certify in writing at the time of filing the 
notice of appearance required by Sec. 308.6(a):
    (1) That the counsel has personally and fully discussed the 
possibility of conflicts of interest with each such party and non-party; 
and
    (2) That each such party and non-party waives any right it might 
otherwise have had to assert any known conflicts of interest or to 
assert any non-material conflicts of interest during the course of the 
proceeding.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.9  Ex parte communications.

    (a) Definition--(1) Ex parte communication means any material oral 
or written communication relevant to the merits of an adjudicatory 
proceeding that was neither on the record nor on reasonable prior notice 
to all parties that takes place between:
    (i) An interested person outside the FDIC (including such person's 
counsel); and
    (ii) The administrative law judge handling that proceeding, the 
Board of Directors, or a decisional employee.
    (2) Exception. A request for status of the proceeding does not 
constitute an ex parte communication.
    (b) Prohibition of ex parte communications. From the time the notice 
is issued by the FDIC until the date that the Board of Directors issues 
its final decision pursuant to Sec. 308.40(c):
    (1) No interested person outside the FDIC shall make or knowingly 
cause to be made an ex parte communication to any member of the Board of 
Directors, the administrative law judge, or a decisional employee; and
    (2) No member of the Board of Directors, no administrative law 
judge, or decisional employee shall make or knowingly cause to be made 
to any interested person outside the FDIC any ex parte communication.
    (c) Procedure upon occurrence of ex parte communication. If an ex 
parte communication is received by the administrative law judge, any 
member of the Board of Directors or other person identified in paragraph 
(a) of this section, that person shall cause all such written 
communications (or, if the communication is oral, a memorandum stating 
the substance of the communication) to be placed on the record of the 
proceeding and served on all parties. All other parties to the 
proceeding shall have an opportunity, within ten days of receipt of 
service of the ex parte communication, to file responses thereto and to 
recommend any sanctions that they believe to be appropriate under the 
circumstances. The administrative law judge or the Board

[[Page 59]]

of Directors shall then determine whether any action should be taken 
concerning the ex parte communication in accordance with paragraph (d) 
of this section.
    (d) Sanctions. Any party or his or her counsel who makes a 
prohibited ex parte communication, or who encourages or solicits another 
to make any such communication, may be subject to any appropriate 
sanction or sanctions imposed by the Board of Directors or the 
administrative law judge including, but not limited to, exclusion from 
the proceedings and an adverse ruling on the issue which is the subject 
of the prohibited communication.
    (e) Separation of functions. Except to the extent required for the 
disposition of ex parte matters as authorized by law, the administrative 
law judge may not consult a person or party on any matter relevant to 
the merits of the adjudication, unless on notice and opportunity for all 
parties to participate. An employee or agent engaged in the performance 
of investigative or prosecuting functions for the FDIC in a case may 
not, in that or a factually related case, participate or advise in the 
decision, recommended decision, or agency review of the recommended 
decision under Sec. 308.40 except as witness or counsel in public 
proceedings.

[56 FR 37975, Aug. 9, 1991, as amended at 60 FR 24762, May 10, 1995]



Sec. 308.10  Filing of papers.

    (a) Filing. Any papers required to be filed, excluding documents 
produced in response to a discovery request pursuant to Sec. Sec. 
308.25 and 308.26, shall be filed with the OFIA, except as otherwise 
provided.
    (b) Manner of filing. Unless otherwise specified by the Board of 
Directors or the administrative law judge, filing may be accomplished 
by:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if expressly authorized, 
and upon any conditions specified, by the Board of Directors or the 
administrative law judge. All papers filed by electronic media shall 
also concurrently be filed in accordance with paragraph (c) of this 
section.
    (c) Formal requirements as to papers filed--(1) Form. All papers 
filed must set forth the name, address, and telephone number of the 
counsel or party making the filing and must be accompanied by a 
certification setting forth when and how service has been made on all 
other parties. All papers filed must be double-spaced and printed or 
typewritten on 8\1/2\x11 inch paper, and must be clear and legible.
    (2) Signature. All papers must be dated and signed as provided in 
Sec. 308.7.
    (3) Caption. All papers filed must include at the head thereof, or 
on a title page, the name of the FDIC and of the filing party, the title 
and docket number of the proceeding, and the subject of the particular 
paper.
    (4) Number of copies. Unless otherwise specified by the Board of 
Directors, or the administrative law judge, an original and one copy of 
all documents and papers shall be filed, except that only one copy of 
transcripts of testimony and exhibits shall be filed.



Sec. 308.11  Service of papers.

    (a) By the parties. Except as otherwise provided, a party filing 
papers shall serve a copy upon the counsel of record for all other 
parties to the proceeding so represented, and upon any party not so 
represented.
    (b) Method of service. Except as provided in paragraphs (c)(2) and 
(d) of this section, a serving party shall use one or more of the 
following methods of service:
    (1) Personal service;
    (2) Delivering the papers to a reliable commercial courier service, 
overnight delivery service, or to the U.S. Post Office for Express Mail 
delivery;
    (3) Mailing the papers by first class, registered, or certified 
mail; or
    (4) Transmission by electronic media, only if the parties mutually 
agree. Any papers served by electronic media shall also concurrently be 
served in accordance with the requirements of Sec. 308.10(c).
    (c) By the Board of Directors. (1) All papers required to be served 
by the

[[Page 60]]

Board of Directors or the administrative law judge upon a party who has 
appeared in the proceeding in accordance with Sec. 308.6, shall be 
served by any means specified in paragraph (b) of this section.
    (2) If a party has not appeared in the proceeding in accordance with 
Sec. 308.6, the Board of Directors or the administrative law judge 
shall make service by any of the following methods:
    (i) By personal service;
    (ii) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (iii) If the person to be served is a corporation or other 
association, by delivery to an officer, managing or general agent, or to 
any other agent authorized by appointment or by law to receive service 
and, if the agent is one authorized by statute to receive service and 
the statute so requires, by also mailing a copy to the party;
    (iv) By registered or certified mail addressed to the party's last 
known address; or
    (v) By any other method reasonably calculated to give actual notice.
    (d) Subpoenas. Service of a subpoena may be made:
    (1) By personal service;
    (2) If the person to be served is an individual, by delivery to a 
person of suitable age and discretion at the physical location where the 
individual resides or works;
    (3) By delivery to an agent which, in the case of a corporation or 
other association, is delivery to an officer, managing or general agent, 
or to any other agent authorized by appointment or by law to receive 
service and, if the agent is one authorized by statute to receive 
service and the statute so requires, by also mailing a copy to the 
party;
    (4) By registered or certified mail addressed to the person's last 
known address; or
    (5) In such other manner as is reasonably calculated to give actual 
notice.
    (e) Area of service. Service in any state, territory, possession of 
the United States, or the District of Columbia, on any person or company 
doing business in any state, territory, possession of the United States, 
or the District of Columbia, or on any person as otherwise provided by 
law, is effective without regard to the place where the hearing is held, 
provided that if service is made on a foreign bank in connection with an 
action or proceeding involving one or more of its branches or agencies 
located in any state, territory, possession of the United States, or the 
District of Columbia, service shall be made on at least one branch or 
agency so involved.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20347, May 6, 1996]



Sec. 308.12  Construction of time limits.

    (a) General rule. In computing any period of time prescribed by this 
subpart, the date of the act or event that commences the designated 
period of time is not included. The last day so computed is included 
unless it is a Saturday, Sunday, or Federal holiday. When the last day 
is a Saturday, Sunday, or Federal holiday, the period runs until the end 
of the next day that is not a Saturday, Sunday, or Federal holiday. 
Intermediate Saturdays, Sundays, and Federal holidays are included in 
the computation of time. However, when the time period within which an 
act is to be performed is ten days or less, not including any additional 
time allowed for in paragraph (c) of this section, intermediate 
Saturdays, Sundays, and Federal holidays are not included.
    (b) When papers are deemed to be filed or served. (1) Filing and 
service are deemed to be effective:
    (i) In the case of personal service or same day commercial courier 
delivery, upon actual service;
    (ii) In the case of overnight commercial delivery service, U.S. 
Express Mail delivery, or first class, registered, or certified mail, 
upon deposit in or delivery to an appropriate point of collection;
    (iii) In the case of transmission by electronic media, as specified 
by the authority receiving the filing, in the case of filing, and as 
agreed among the parties, in the case of service.
    (2) The effective filing and service dates specified in paragraph 
(b) (1) of this section may be modified by the Board of Directors or 
administrative law judge in the case of filing or by

[[Page 61]]

agreement of the parties in the case of service.
    (c) Calculation of time for service and filing of responsive papers. 
Whenever a time limit is measured by a prescribed period from the 
service of any notice or paper, the applicable time limits are 
calculated as follows:
    (1) If service is made by first class, registered, or certified 
mail, add three calendar days to the prescribed period;
    (2) If service is made by express mail or overnight delivery 
service, add one calendar day to the prescribed period; or
    (3) If service is made by electronic media transmission, add one 
calendar day to the prescribed period, unless otherwise determined by 
the Board of Directors or the administrative law judge in the case of 
filing, or by agreement among the parties in the case of service.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.13  Change of time limits.

    Except as otherwise provided by law, the administrative law judge 
may, for good cause shown, extend the time limits prescribed by the 
Uniform Rules or by any notice or order issued in the proceedings. After 
the referral of the case to the Board of Directors pursuant to Sec. 
308.38, the Board of Directors may grant extensions of the time limits 
for good cause shown. Extensions may be granted at the motion of a party 
or of the Board of Directors after notice and opportunity to respond is 
afforded all non-moving parties, or on the administrative law judge's 
own motion.



Sec. 308.14  Witness fees and expenses.

    Witnesses subpoenaed for testimony or depositions shall be paid the 
same fees for attendance and mileage as are paid in the United States 
district courts in proceedings in which the United States is a party, 
provided that, in the case of a discovery subpoena addressed to a party, 
no witness fees or mileage need be paid. Fees for witnesses shall be 
tendered in advance by the party requesting the subpoena, except that 
fees and mileage need not be tendered in advance where the FDIC is the 
party requesting the subpoena. The FDIC shall not be required to pay any 
fees to, or expenses of, any witness not subpoenaed by the FDIC.



Sec. 308.15  Opportunity for informal settlement.

    Any respondent may, at any time in the proceeding, unilaterally 
submit to Enforcement Counsel written offers or proposals for settlement 
of a proceeding, without prejudice to the rights of any of the parties. 
No such offer or proposal shall be made to any FDIC representative other 
than Enforcement Counsel. Submission of a written settlement offer does 
not provide a basis for adjourning or otherwise delaying all or any 
portion of a proceeding under this part. No settlement offer or 
proposal, or any subsequent negotiation or resolution, is admissible as 
evidence in any proceeding.



Sec. 308.16  FDIC's right to conduct examination.

    Nothing contained in this subpart limits in any manner the right of 
the FDIC to conduct any examination, inspection, or visitation of any 
institution or institution-affiliated party, or the right of the FDIC to 
conduct or continue any form of investigation authorized by law.



Sec. 308.17  Collateral attacks on adjudicatory proceeding.

    If an interlocutory appeal or collateral attack is brought in any 
court concerning all or any part of an adjudicatory proceeding, the 
challenged adjudicatory proceeding shall continue without regard to the 
pendency of that court proceeding. No default or other failure to act as 
directed in the adjudicatory proceeding within the times prescribed in 
this subpart shall be excused based on the pendency before any court of 
any interlocutory appeal or collateral attack.



Sec. 308.18  Commencement of proceeding and contents of notice.

    (a) Commencement of proceeding. (1)(i) Except for change-in-control 
proceedings under section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), a 
proceeding governed by this subpart is commenced by issuance of a notice 
by the FDIC.

[[Page 62]]

    (ii) The notice must be served by the Executive Secretary upon the 
respondent and given to any other appropriate financial institution 
supervisory authority where required by law.
    (iii) The notice must be filed with the OFIA.
    (2) Change-in-control proceedings under section 7(j)(4) of the FDIA 
(12 U.S.C. 1817(j)(4)) commence with the issuance of an order by the 
FDIC.
    (b) Contents of notice. The notice must set forth:
    (1) The legal authority for the proceeding and for the FDIC's 
jurisdiction over the proceeding;
    (2) A statement of the matters of fact or law showing that the FDIC 
is entitled to relief;
    (3) A proposed order or prayer for an order granting the requested 
relief;
    (4) The time, place, and nature of the hearing as required by law or 
regulation;
    (5) The time within which to file an answer as required by law or 
regulation;
    (6) The time within which to request a hearing as required by law or 
regulation; and
    (7) That the answer and/or request for a hearing shall be filed with 
OFIA.



Sec. 308.19  Answer.

    (a) When. Within 20 days of service of the notice, respondent shall 
file an answer as designated in the notice. In a civil money penalty 
proceeding, respondent shall also file a request for a hearing within 20 
days of service of the notice.
    (b) Content of answer. An answer must specifically respond to each 
paragraph or allegation of fact contained in the notice and must admit, 
deny, or state that the party lacks sufficient information to admit or 
deny each allegation of fact. A statement of lack of information has the 
effect of a denial. Denials must fairly meet the substance of each 
allegation of fact denied; general denials are not permitted. When a 
respondent denies part of an allegation, that part must be denied and 
the remainder specifically admitted. Any allegation of fact in the 
notice which is not denied in the answer must be deemed admitted for 
purposes of the proceeding. A respondent is not required to respond to 
the portion of a notice that constitutes the prayer for relief or 
proposed order. The answer must set forth affirmative defenses, if any, 
asserted by the respondent.
    (c) Default--(1) Effect of failure to answer. Failure of a 
respondent to file an answer required by this section within the time 
provided constitutes a waiver of his or her right to appear and contest 
the allegations in the notice. If no timely answer is filed, Enforcement 
Counsel may file a motion for entry of an order of default. Upon a 
finding that no good cause has been shown for the failure to file a 
timely answer, the administrative law judge shall file with the Board of 
Directors a recommended decision containing the findings and the relief 
sought in the notice. Any final order issued by the Board of Directors 
based upon a respondent's failure to answer is deemed to be an order 
issued upon consent.
    (2) Effect of failure to request a hearing in civil money penalty 
proceedings. If respondent fails to request a hearing as required by law 
within the time provided, the notice of assessment constitutes a final 
and unappealable order.



Sec. 308.20  Amended pleadings.

    (a) Amendments. The notice or answer may be amended or supplemented 
at any stage of the proceeding. The respondent must answer an amended 
notice within the time remaining for the respondent's answer to the 
original notice, or within ten days after service of the amended notice, 
whichever period is longer, unless the Board of Directors or 
administrative law judge orders otherwise for good cause.
    (b) Amendments to conform to the evidence. When issues not raised in 
the notice or answer are tried at the hearing by express or implied 
consent of the parties, they will be treated in all respects as if they 
had been raised in the notice or answer, and no formal amendments are 
required. If evidence is objected to at the hearing on the ground that 
it is not within the issues raised by the notice or answer, the 
administrative law judge may admit the evidence when admission is likely 
to assist in adjudicating the merits of the action and the objecting 
party fails to satisfy the administrative law judge

[[Page 63]]

that the admission of such evidence would unfairly prejudice that 
party's action or defense upon the merits. The administrative law judge 
may grant a continuance to enable the objecting party to meet such 
evidence.

[61 FR 20348, May 6, 1996]



Sec. 308.21  Failure to appear.

    Failure of a respondent to appear in person at the hearing or by a 
duly authorized counsel constitutes a waiver of respondent's right to a 
hearing and is deemed an admission of the facts as alleged and consent 
to the relief sought in the notice. Without further proceedings or 
notice to the respondent, the administrative law judge shall file with 
the Board of Directors a recommended decision containing the findings 
and the relief sought in the notice.



Sec. 308.22  Consolidation and severance of actions.

    (a) Consolidation. (1) On the motion of any party, or on the 
administrative law judge's own motion, the administrative law judge may 
consolidate, for some or all purposes, any two or more proceedings, if 
each such proceeding involves or arises out of the same transaction, 
occurrence or series of transactions or occurrences, or involves at 
least one common respondent or a material common question of law or 
fact, unless such consolidation would cause unreasonable delay or 
injustice.
    (2) In the event of consolidation under paragraph (a)(1) of this 
section, appropriate adjustment to the prehearing schedule must be made 
to avoid unnecessary expense, inconvenience, or delay.
    (b) Severance. The administrative law judge may, upon the motion of 
any party, sever the proceeding for separate resolution of the matter as 
to any respondent only if the administrative law judge finds that:
    (1) Undue prejudice or injustice to the moving party would result 
from not severing the proceeding; and
    (2) Such undue prejudice or injustice would outweigh the interests 
of judicial economy and expedition in the complete and final resolution 
of the proceeding.



Sec. 308.23  Motions.

    (a) In writing. (1) Except as otherwise provided herein, an 
application or request for an order or ruling must be made by written 
motion.
    (2) All written motions must state with particularity the relief 
sought and must be accompanied by a proposed order.
    (3) No oral argument may be held on written motions except as 
otherwise directed by the administrative law judge. Written memoranda, 
briefs, affidavits or other relevant material or documents may be filed 
in support of or in opposition to a motion.
    (b) Oral motions. A motion may be made orally on the record unless 
the administrative law judge directs that such motion be reduced to 
writing.
    (c) Filing of motions. Motions must be filed with the administrative 
law judge, except that following the filing of the recommended decision, 
motions must be filed with the Executive Secretary for disposition by 
the Board of Directors.
    (d) Responses. (1) Except as otherwise provided herein, within ten 
days after service of any written motion, or within such other period of 
time as may be established by the administrative law judge or the 
Executive Secretary, any party may file a written response to a motion. 
The administrative law judge shall not rule on any oral or written 
motion before each party has had an opportunity to file a response.
    (2) The failure of a party to oppose a written motion or an oral 
motion made on the record is deemed a consent by that party to the entry 
of an order substantially in the form of the order accompanying the 
motion.
    (e) Dilatory motions. Frivolous, dilatory or repetitive motions are 
prohibited. The filing of such motions may form the basis for sanctions.
    (f) Dispositive motions. Dispositive motions are governed by 
Sec. Sec. 308.29 and 308.30.



Sec. 308.24  Scope of document discovery.

    (a) Limits on discovery. (1) Subject to the limitations set out in 
paragraphs (b), (c), and (d) of this section, a party to a proceeding 
under this subpart may obtain document discovery by serving

[[Page 64]]

a written request to produce documents. For purposes of a request to 
produce documents, the term ``documents'' may be defined to include 
drawings, graphs, charts, photographs, recordings, data stored in 
electronic form, and other data compilations from which information can 
be obtained, or translated, if necessary, by the parties through 
detection devices into reasonably usable form, as well as written 
material of all kinds.
    (2) Discovery by use of deposition is governed by subpart I of this 
part.
    (3) Discovery by use of interrogatories is not permitted.
    (b) Relevance. A party may obtain document discovery regarding any 
matter, not privileged, that has material relevance to the merits of the 
pending action. Any request to produce documents that calls for 
irrelevant material, that is unreasonable, oppressive, excessive in 
scope, unduly burdensome, or repetitive of previous requests, or that 
seeks to obtain privileged documents will be denied or modified. A 
request is unreasonable, oppressive, excessive in scope or unduly 
burdensome if, among other things, it fails to include justifiable 
limitations on the time period covered and the geographic locations to 
be searched, the time provided to respond in the request is inadequate, 
or the request calls for copies of documents to be delivered to the 
requesting party and fails to include the requestor's written agreement 
to pay in advance for the copying, in accordance with Sec. 308.25.
    (c) Privileged matter. Privileged documents are not discoverable. 
Privileges include the attorney-client privilege, work-product 
privilege, any government's or government agency's deliberative-process 
privilege, and any other privileges the Constitution, any applicable act 
of Congress, or the principles of common law provide.
    (d) Time limits. All discovery, including all responses to discovery 
requests, shall be completed at least 20 days prior to the date 
scheduled for the commencement of the hearing. No exceptions to this 
time limit shall be permitted, unless the administrative law judge finds 
on the record that good cause exists for waiving the requirements of 
this paragraph.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.25  Request for document discovery from parties.

    (a) General rule. Any party may serve on any other party a request 
to produce for inspection any discoverable documents that are in the 
possession, custody, or control of the party upon whom the request is 
served. The request must identify the documents to be produced either by 
individual item or by category, and must describe each item and category 
with reasonable particularity. Documents must be produced as they are 
kept in the usual course of business or must be organized to correspond 
with the categories in the request.
    (b) Production or copying. The request must specify a reasonable 
time, place, and manner for production and performing any related acts. 
In lieu of inspecting the documents, the requesting party may specify 
that all or some of the responsive documents be copied and the copies 
delivered to the requesting party. If copying of fewer than 250 pages is 
requested, the party to whom the request is addressed shall bear the 
cost of copying and shipping charges. If a party requests 250 pages or 
more of copying, the requesting party shall pay for the copying and 
shipping charges. Copying charges are the current per-page copying rate 
imposed by 12 CFR part 310 implementing the Freedom of Information Act 
(5 U.S.C. 552). The party to whom the request is addressed may require 
payment in advance before producing the documents.
    (c) Obligation to update responses. A party who has responded to a 
discovery request with a response that was complete when made is not 
required to supplement the response to include documents thereafter 
acquired, unless the responding party learns that:
    (1) The response was materially incorrect when made; or
    (2) The response, though correct when made, is no longer true and a 
failure to amend the response is, in substance, a knowing concealment.

[[Page 65]]

    (d) Motions to limit discovery. (1) Any party that objects to a 
discovery request may, within ten days of being served with such 
request, file a motion in accordance with the provisions of Sec. 308.23 
to strike or otherwise limit the request. If an objection is made to 
only a portion of an item or category in a request, the portion objected 
to shall be specified. Any objections not made in accordance with this 
paragraph and Sec. 308.23 are waived.
    (2) The party who served the request that is the subject of a motion 
to strike or limit may file a written response within five days of 
service of the motion. No other party may file a response.
    (e) Privilege. At the time other documents are produced, the 
producing party must reasonably identify all documents withheld on the 
grounds of privilege and must produce a statement of the basis for the 
assertion of privilege. When similar documents that are protected by 
deliberative process, attorney-work-product, or attorney-client 
privilege are voluminous, these documents may be identified by category 
instead of by individual document. The administrative law judge retains 
discretion to determine when the identification by category is 
insufficient.
    (f) Motions to compel production. (1) If a party withholds any 
documents as privileged or fails to comply fully with a discovery 
request, the requesting party may, within ten days of the assertion of 
privilege or of the time the failure to comply becomes known to the 
requesting party, file a motion in accordance with the provisions of 
Sec. 308.23 for the issuance of a subpoena compelling production.
    (2) The party who asserted the privilege or failed to comply with 
the request may file a written response to a motion to compel within 
five days of service of the motion. No other party may file a response.
    (g) Ruling on motions. After the time for filing responses pursuant 
to this section has expired, the administrative law judge shall rule 
promptly on all motions filed pursuant to this section. If the 
administrative law judge determines that a discovery request, or any of 
its terms, calls for irrelevant material, is unreasonable, oppressive, 
excessive in scope, unduly burdensome, or repetitive of previous 
requests, or seeks to obtain privileged documents, he or she may deny or 
modify the request, and may issue appropriate protective orders, upon 
such conditions as justice may require. The pendency of a motion to 
strike or limit discovery or to compel production is not a basis for 
staying or continuing the proceeding, unless otherwise ordered by the 
administrative law judge. Notwithstanding any other provision in this 
part, the administrative law judge may not release, or order a party to 
produce, documents withheld on grounds of privilege if the party has 
stated to the administrative law judge its intention to file a timely 
motion for interlocutory review of the administrative law judge's order 
to produce the documents, and until the motion for interlocutory review 
has been decided.
    (h) Enforcing discovery subpoenas. If the administrative law judge 
issues a subpoena compelling production of documents by a party, the 
subpoenaing party may, in the event of noncompliance and to the extent 
authorized by applicable law, apply to any appropriate United States 
district court for an order requiring compliance with the subpoena. A 
party's right to seek court enforcement of a subpoena shall not in any 
manner limit the sanctions that may be imposed by the administrative law 
judge against a party who fails to produce subpoenaed documents.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20348, May 6, 1996]



Sec. 308.26  Document subpoenas to nonparties.

    (a) General rules. (1) Any party may apply to the administrative law 
judge for the issuance of a document discovery subpoena addressed to any 
person who is not a party to the proceeding. The application must 
contain a proposed document subpoena and a brief statement showing the 
general relevance and reasonableness of the scope of documents sought. 
The subpoenaing party shall specify a reasonable time, place, and manner 
for making production in response to the document subpoena.

[[Page 66]]

    (2) A party shall only apply for a document subpoena under this 
section within the time period during which such party could serve a 
discovery request under Sec. 308.24(d). The party obtaining the 
document subpoena is responsible for serving it on the subpoenaed person 
and for serving copies on all parties. Document subpoenas may be served 
in any state, territory, or possession of the United States, the 
District of Columbia, or as otherwise provided by law.
    (3) The administrative law judge shall promptly issue any document 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon such conditions as may be consistent with the Uniform Rules.
    (b) Motion to quash or modify. (1) Any person to whom a document 
subpoena is directed may file a motion to quash or modify such subpoena, 
accompanied by a statement of the basis for quashing or modifying the 
subpoena. The movant shall serve the motion on all parties, and any 
party may respond to such motion within ten days of service of the 
motion.
    (2) Any motion to quash or modify a document subpoena must be filed 
on the same basis, including the assertion of privilege, upon which a 
party could object to a discovery request under Sec. 308.25(d), and 
during the same time limits during which such an objection could be 
filed.
    (c) Enforcing document subpoenas. If a subpoenaed person fails to 
comply with any subpoena issued pursuant to this section or any order of 
the administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may, to the extent authorized by applicable law, apply 
to an appropriate United States district court for an order requiring 
compliance with so much of the document subpoena as the administrative 
law judge has not quashed or modified. A party's right to seek court 
enforcement of a document subpoena shall in no way limit the sanctions 
that may be imposed by the administrative law judge on a party who 
induces a failure to comply with subpoenas issued under this section.



Sec. 308.27  Deposition of witness unavailable for hearing.

    (a) General rules. (1) If a witness will not be available for the 
hearing, a party desiring to preserve that witness' testimony for the 
record may apply in accordance with the procedures set forth in 
paragraph (a)(2) of this section, to the administrative law judge for 
the issuance of a subpoena, including a subpoena duces tecum, requiring 
the attendance of the witness at a deposition. The administrative law 
judge may issue a deposition subpoena under this section upon showing 
that:
    (i) The witness will be unable to attend or may be prevented from 
attending the hearing because of age, sickness or infirmity, or will 
otherwise be unavailable;
    (ii) The witness' unavailability was not procured or caused by the 
subpoenaing party;
    (iii) The testimony is reasonably expected to be material; and
    (iv) Taking the deposition will not result in any undue burden to 
any other party and will not cause undue delay of the proceeding.
    (2) The application must contain a proposed deposition subpoena and 
a brief statement of the reasons for the issuance of the subpoena. The 
subpoena must name the witness whose deposition is to be taken and 
specify the time and place for taking the deposition. A deposition 
subpoena may require the witness to be deposed at any place within the 
country in which that witness resides or has a regular place of 
employment or such other convenient place as the administrative law 
judge shall fix.
    (3) Any requested subpoena that sets forth a valid basis for its 
issuance must be promptly issued, unless the administrative law judge on 
his or her own motion, requires a written response or requires 
attendance at a conference concerning whether the requested subpoena 
should be issued.

[[Page 67]]

    (4) The party obtaining a deposition subpoena is responsible for 
serving it on the witness and for serving copies on all parties. Unless 
the administrative law judge orders otherwise, no deposition under this 
section shall be taken on fewer than ten days' notice to the witness and 
all parties. Deposition subpoenas may be served in any state, territory, 
possession of the United States, or the District of Columbia, on any 
person or company doing business in any state, territory, possession of 
the United States, or the District of Columbia, or as otherwise 
permitted by law.
    (b) Objections to deposition subpoenas. (1) The witness and any 
party who has not had an opportunity to oppose a deposition subpoena 
issued under this section may file a motion with the administrative law 
judge to quash or modify the subpoena prior to the time for compliance 
specified in the subpoena, but not more than ten days after service of 
the subpoena.
    (2) A statement of the basis for the motion to quash or modify a 
subpoena issued under this section must accompany the motion. The motion 
must be served on all parties.
    (c) Procedure upon deposition. (1) Each witness testifying pursuant 
to a deposition subpoena must be duly sworn, and each party shall have 
the right to examine the witness. Objections to questions or documents 
must be in short form, stating the grounds for the objection. Failure to 
object to questions or documents is not deemed a waiver except where the 
ground for the objection might have been avoided if the objection had 
been timely presented. All questions, answers, and objections must be 
recorded.
    (2) Any party may move before the administrative law judge for an 
order compelling the witness to answer any questions the witness has 
refused to answer or submit any evidence the witness has refused to 
submit during the deposition.
    (3) The deposition must be subscribed by the witness, unless the 
parties and the witness, by stipulation, have waived the signing, or the 
witness is ill, cannot be found, or has refused to sign. If the 
deposition is not subscribed by the witness, the court reporter taking 
the deposition shall certify that the transcript is a true and complete 
transcript of the deposition.
    (d) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any order of the administrative law judge which directs compliance with 
all or any portion of a deposition subpoena under paragraph (b) or 
(c)(3) of this section, the subpoenaing party or other aggrieved party 
may, to the extent authorized by applicable law, apply to an appropriate 
United States district court for an order requiring compliance with the 
portions of the subpoena that the administrative law judge has ordered 
enforced. A party's right to seek court enforcement of a deposition 
subpoena in no way limits the sanctions that may be imposed by the 
administrative law judge on a party who fails to comply with, or 
procures a failure to comply with, a subpoena issued under this section.



Sec. 308.28  Interlocutory review.

    (a) General rule. The Board of Directors may review a ruling of the 
administrative law judge prior to the certification of the record to the 
Board of Directors only in accordance with the procedures set forth in 
this section and Sec. 308.23.
    (b) Scope of review. The Board of Directors may exercise 
interlocutory review of a ruling of, the administrative law judge if the 
Board of Directors finds that:
    (1) The ruling involves a controlling question of law or policy as 
to which substantial grounds exist for a difference of opinion;
    (2) Immediate review of the ruling may materially advance the 
ultimate termination of the proceeding;
    (3) Subsequent modification of the ruling at the conclusion of the 
proceeding would be an inadequate remedy; or
    (4) Subsequent modification of the ruling would cause unusual delay 
or expense.
    (c) Procedure. Any request for interlocutory review shall be filed 
by a party with the administrative law judge within ten days of his or 
her ruling and shall otherwise comply with Sec. 308.23. Any party may 
file a response to a request for interlocutory review in

[[Page 68]]

accordance with Sec. 308.23(d). Upon the expiration of the time for 
filing all responses, the administrative law judge shall refer the 
matter to the Board of Directors for final disposition.
    (d) Suspension of proceeding. Neither a request for interlocutory 
review nor any disposition of such a request by the Board of Directors 
under this section suspends or stays the proceeding unless otherwise 
ordered by the administrative law judge or the Board of Directors.



Sec. 308.29  Summary disposition.

    (a) In general. The administrative law judge shall recommend that 
the Board of Directors issue a final order granting a motion for summary 
disposition if the undisputed pleaded facts, admissions, affidavits, 
stipulations, documentary evidence, matters as to which official notice 
may be taken, and any other evidentiary materials properly submitted in 
connection with a motion for summary disposition show that:
    (1) There is no genuine issue as to any material fact; and
    (2) The moving party is entitled to a decision in its favor as a 
matter of law.
    (b) Filing of motions and responses. (1) Any party who believes that 
there is no genuine issue of material fact to be determined and that he 
or she is entitled to a decision as a matter of law may move at any time 
for summary disposition in its favor of all or any part of the 
proceeding. Any party, within 20 days after service of such a motion, or 
within such time period as allowed by the administrative law judge, may 
file a response to such motion.
    (2) A motion for summary disposition must be accompanied by a 
statement of the material facts as to which the moving party contends 
there is no genuine issue. Such motion must be supported by documentary 
evidence, which may take the form of admissions in pleadings, 
stipulations, depositions, investigatory depositions, transcripts, 
affidavits and any other evidentiary materials that the moving party 
contends support his or her position. The motion must also be 
accompanied by a brief containing the points and authorities in support 
of the contention of the moving party. Any party opposing a motion for 
summary disposition must file a statement setting forth those material 
facts as to which he or she contends a genuine dispute exists. Such 
opposition must be supported by evidence of the same type as that 
submitted with the motion for summary disposition and a brief containing 
the points and authorities in support of the contention that summary 
disposition would be inappropriate.
    (c) Hearing on motion. At the request of any party or on his or her 
own motion, the administrative law judge may hear oral argument on the 
motion for summary disposition.
    (d) Decision on motion. Following receipt of a motion for summary 
disposition and all responses thereto, the administrative law judge 
shall determine whether the moving party is entitled to summary 
disposition. If the administrative law judge determines that summary 
disposition is warranted, the administrative law judge shall submit a 
recommended decision to that effect to the Board of Directors. If the 
administrative law judge finds that no party is entitled to summary 
disposition, he or she shall make a ruling denying the motion.



Sec. 308.30  Partial summary disposition.

    If the administrative law judge determines that a party is entitled 
to summary disposition as to certain claims only, he or she shall defer 
submitting a recommended decision as to those claims. A hearing on the 
remaining issues must be ordered. Those claims for which the 
administrative law judge has determined that summary disposition is 
warranted will be addressed in the recommended decision filed at the 
conclusion of the hearing.



Sec. 308.31  Scheduling and prehearing conferences.

    (a) Scheduling conference. Within 30 days of service of the notice 
or order commencing a proceeding or such other time as parties may 
agree, the administrative law judge shall direct counsel for all parties 
to meet with him or her in person at a specified time and place prior to 
the hearing or to confer by telephone for the purpose of scheduling the 
course and conduct of the proceeding. This meeting or telephone

[[Page 69]]

conference is called a ``scheduling conference.'' The identification of 
potential witnesses, the time for and manner of discovery, and the 
exchange of any prehearing materials including witness lists, statements 
of issues, stipulations, exhibits and any other materials may also be 
determined at the scheduling conference.
    (b) Prehearing conferences. The administrative law judge may, in 
addition to the scheduling conference, on his or her own motion or at 
the request of any party, direct counsel for the parties to meet with 
him or her (in person or by telephone) at a prehearing conference to 
address any or all of the following:
    (1) Simplification and clarification of the issues;
    (2) Stipulations, admissions of fact, and the contents, authenticity 
and admissibility into evidence of documents;
    (3) Matters of which official notice may be taken;
    (4) Limitation of the number of witnesses;
    (5) Summary disposition of any or all issues;
    (6) Resolution of discovery issues or disputes;
    (7) Amendments to pleadings; and
    (8) Such other matters as may aid in the orderly disposition of the 
proceeding.
    (c) Transcript. The administrative law judge, in his or her 
discretion, may require that a scheduling or prehearing conference be 
recorded by a court reporter. A transcript of the conference and any 
materials filed, including orders, becomes part of the record of the 
proceeding. A party may obtain a copy of the transcript at his or her 
expense.
    (d) Scheduling or prehearing orders. At or within a reasonable time 
following the conclusion of the scheduling conference or any prehearing 
conference, the administrative law judge shall serve on each party an 
order setting forth any agreements reached and any procedural 
determinations made.



Sec. 308.32  Prehearing submissions.

    (a) Within the time set by the administrative law judge, but in no 
case later than 14 days before the start of the hearing, each party 
shall serve on every other party, his or her:
    (1) Prehearing statement;
    (2) Final list of witnesses to be called to testify at the hearing, 
including name and address of each witness and a short summary of the 
expected testimony of each witness;
    (3) List of the exhibits to be introduced at the hearing along with 
a copy of each exhibit; and
    (4) Stipulations of fact, if any.
    (b) Effect of failure to comply. No witness may testify and no 
exhibits may be introduced at the hearing if such witness or exhibit is 
not listed in the prehearing submissions pursuant to paragraph (a) of 
this section, except for good cause shown.



Sec. 308.33  Public hearings.

    (a) General rule. All hearings shall be open to the public, unless 
the FDIC, in its discretion, determines that holding an open hearing 
would be contrary to the public interest. Within 20 days of service of 
the notice or, in the case of change-in-control proceedings under 
section 7(j)(4) of the FDIA (12 U.S.C. 1817(j)(4)), within 20 days from 
service of the hearing order, any respondent may file with the Executive 
Secretary a request for a private hearing, and any party may file a 
reply to such a request. A party must serve on the administrative law 
judge a copy of any request or reply the party files with the Executive 
Secretary. The form of, and procedure for, these requests and replies 
are governed by Sec. 308.23. A party's failure to file a request or a 
reply constitutes a waiver of any objections regarding whether the 
hearing will be public or private.
    (b) Filing document under seal. Enforcement Counsel, in his or her 
discretion, may file any document or part of a document under seal if 
disclosure of the document would be contrary to the public interest. The 
administrative law judge shall take all appropriate steps to preserve 
the confidentiality of such documents or parts thereof, including 
closing portions of the hearing to the public.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.34  Hearing subpoenas.

    (a) Issuance. (1) Upon application of a party showing general 
relevance and

[[Page 70]]

reasonableness of scope of the testimony or other evidence sought, the 
administrative law judge may issue a subpoena or a subpoena duces tecum 
requiring the attendance of a witness at the hearing or the production 
of documentary or physical evidence at the hearing. The application for 
a hearing subpoena must also contain a proposed subpoena specifying the 
attendance of a witness or the production of evidence from any state, 
territory, or possession of the United States, the District of Columbia, 
or as otherwise provided by law at any designated place where the 
hearing is being conducted. The party making the application shall serve 
a copy of the application and the proposed subpoena on every other 
party.
    (2) A party may apply for a hearing subpoena at any time before the 
commencement of a hearing. During a hearing, a party may make an 
application for a subpoena orally on the record before the 
administrative law judge.
    (3) The administrative law judge shall promptly issue any hearing 
subpoena requested pursuant to this section. If the administrative law 
judge determines that the application does not set forth a valid basis 
for the issuance of the subpoena, or that any of its terms are 
unreasonable, oppressive, excessive in scope, or unduly burdensome, he 
or she may refuse to issue the subpoena or may issue it in a modified 
form upon any conditions consistent with this subpart. Upon issuance by 
the administrative law judge, the party making the application shall 
serve the subpoena on the person named in the subpoena and on each 
party.
    (b) Motion to quash or modify. (1) Any person to whom a hearing 
subpoena is directed or any party may file a motion to quash or modify 
the subpoena, accompanied by a statement of the basis for quashing or 
modifying the subpoena. The movant must serve the motion on each party 
and on the person named in the subpoena. Any party may respond to the 
motion within ten days of service of the motion.
    (2) Any motion to quash or modify a hearing subpoena must be filed 
prior to the time specified in the subpoena for compliance, but not more 
than ten days after the date of service of the subpoena upon the movant.
    (c) Enforcing subpoenas. If a subpoenaed person fails to comply with 
any subpoena issued pursuant to this section or any order of the 
administrative law judge which directs compliance with all or any 
portion of a document subpoena, the subpoenaing party or any other 
aggrieved party may seek enforcement of the subpoena pursuant to Sec. 
308.26(c).

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.35  Conduct of hearings.

    (a) General rules. (1) Hearings shall be conducted so as to provide 
a fair and expeditious presentation of the relevant disputed issues. 
Each party has the right to present its case or defense by oral and 
documentary evidence and to conduct such cross examination as may be 
required for full disclosure of the facts.
    (2) Order of hearing. Enforcement Counsel shall present its case-in-
chief first, unless otherwise ordered by the administrative law judge, 
or unless otherwise expressly specified by law or regulation. 
Enforcement Counsel shall be the first party to present an opening 
statement and a closing statement, and may make a rebuttal statement 
after the respondent's closing statement. If there are multiple 
respondents, respondents may agree among themselves as to their order of 
presentation of their cases, but if they do not agree the administrative 
law judge shall fix the order.
    (3) Examination of witnesses. Only one counsel for each party may 
conduct an examination of a witness, except that in the case of 
extensive direct examination, the administrative law judge may permit 
more than one counsel for the party presenting the witness to conduct 
the examination. A party may have one counsel conduct the direct 
examination and another counsel conduct re-direct examination of a 
witness, or may have one counsel conduct the cross examination of a 
witness and another counsel conduct the re-cross examination of a 
witness.
    (4) Stipulations. Unless the administrative law judge directs 
otherwise, all stipulations of fact and law previously

[[Page 71]]

agreed upon by the parties, and all documents, the admissibility of 
which have been previously stipulated, will be admitted into evidence 
upon commencement of the hearing.
    (b) Transcript. The hearing must be recorded and transcribed. The 
reporter will make the transcript available to any party upon payment by 
that party to the reporter of the cost of the transcript. The 
administrative law judge may order the record corrected, either upon 
motion to correct, upon stipulation of the parties, or following notice 
to the parties upon the administrative law judge's own motion.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.36  Evidence.

    (a) Admissibility. (1) Except as is otherwise set forth in this 
section, relevant, material, and reliable evidence that is not unduly 
repetitive is admissible to the fullest extent authorized by the 
Administrative Procedure Act and other applicable law.
    (2) Evidence that would be admissible under the Federal Rules of 
Evidence is admissible in a proceeding conducted pursuant to this 
subpart.
    (3) Evidence that would be inadmissible under the Federal Rules of 
Evidence may not be deemed or ruled to be inadmissible in a proceeding 
conducted pursuant to this subpart if such evidence is relevant, 
material, reliable and not unduly repetitive.
    (b) Official notice. (1) Official notice may be taken of any 
material fact which may be judicially noticed by a United States 
district court and any material information in the official public 
records of any Federal or state government agency.
    (2) All matters officially noticed by the administrative law judge 
or Board of Directors shall appear on the record.
    (3) If official notice is requested or taken of any material fact, 
the parties, upon timely request, shall be afforded an opportunity to 
object.
    (c) Documents. (1) A duplicate copy of a document is admissible to 
the same extent as the original, unless a genuine issue is raised as to 
whether the copy is in some material respect not a true and legible copy 
of the original.
    (2) Subject to the requirements of paragraph (a) of this section, 
any document, including a report of examination, supervisory activity, 
inspection or visitation, prepared by an appropriate Federal financial 
institution regulatory agency or state regulatory agency, is admissible 
either with or without a sponsoring witness.
    (3) Witnesses may use existing or newly created charts, exhibits, 
calendars, calculations, outlines or other graphic material to 
summarize, illustrate, or simplify the presentation of testimony. Such 
materials may, subject to the administrative law judge's discretion, be 
used with or without being admitted into evidence.
    (d) Objections. (1) Objections to the admissibility of evidence must 
be timely made and rulings on all objections must appear on the record.
    (2) When an objection to a question or line of questioning 
propounded to a witness is sustained, the examining counsel may make a 
specific proffer on the record of what he or she expected to prove by 
the expected testimony of the witness, either by representation of 
counsel or by direct interrogation of the witness.
    (3) The administrative law judge shall retain rejected exhibits, 
adequately marked for identification, for the record, and transmit such 
exhibits to the Board of Directors.
    (4) Failure to object to admission of evidence or to any ruling 
constitutes a waiver of the objection.
    (e) Stipulations. The parties may stipulate as to any relevant 
matters of fact or the authentication of any relevant documents. Such 
stipulations must be received in evidence at a hearing, and are binding 
on the parties with respect to the matters therein stipulated.
    (f) Depositions of unavailable witnesses. (1) If a witness is 
unavailable to testify at a hearing, and that witness has testified in a 
deposition to which all parties in a proceeding had notice and an 
opportunity to participate, a party may offer as evidence all or any 
part of the transcript of the deposition, including deposition exhibits, 
if any.
    (2) Such deposition transcript is admissible to the same extent that 
testimony would have been admissible had that person testified at the 
hearing,

[[Page 72]]

provided that if a witness refused to answer proper questions during the 
depositions, the administrative law judge may, on that basis, limit the 
admissibility of the deposition in any manner that justice requires.
    (3) Only those portions of a deposition received in evidence at the 
hearing constitute a part of the record.



Sec. 308.37  Post-hearing filings.

    (a) Proposed findings and conclusions and supporting briefs. (1) 
Using the same method of service for each party, the administrative law 
judge shall serve notice upon each party, that the certified transcript, 
together with all hearing exhibits and exhibits introduced but not 
admitted into evidence at the hearing, has been filed. Any party may 
file with the administrative law judge proposed findings of fact, 
proposed conclusions of law, and a proposed order within 30 days 
following service of this notice by the administrative law judge or 
within such longer period as may be ordered by the administrative law 
judge.
    (2) Proposed findings and conclusions must be supported by citation 
to any relevant authorities and by page references to any relevant 
portions of the record. A post-hearing brief may be filed in support of 
proposed findings and conclusions, either as part of the same document 
or in a separate document. Any party who fails to file timely with the 
administrative law judge any proposed finding or conclusion is deemed to 
have waived the right to raise in any subsequent filing or submission 
any issue not addressed in such party's proposed finding or conclusion.
    (b) Reply briefs. Reply briefs may be filed within 15 days after the 
date on which the parties' proposed findings, conclusions, and order are 
due. Reply briefs must be strictly limited to responding to new matters, 
issues, or arguments raised in another party's papers. A party who has 
not filed proposed findings of fact and conclusions of law or a post-
hearing brief may not file a reply brief.
    (c) Simultaneous filing required. The administrative law judge shall 
not order the filing by any party of any brief or reply brief in advance 
of the other party's filing of its brief.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 20349, May 6, 1996]



Sec. 308.38  Recommended decision and filing of record.

    (a) Filing of recommended decision and record. Within 45 days after 
expiration of the time allowed for filing reply briefs under Sec. 
308.37(b), the administrative law judge shall file with and certify to 
the Executive Secretary, for decision, the record of the proceeding. The 
record must include the administrative law judge's recommended decision, 
recommended findings of fact, recommended conclusions of law, and 
proposed order; all prehearing and hearing transcripts, exhibits, and 
rulings; and the motions, briefs, memoranda, and other supporting papers 
filed in connection with the hearing. The administrative law judge shall 
serve upon each party the recommended decision, findings, conclusions, 
and proposed order.
    (b) Filing of index. At the same time the administrative law judge 
files with and certifies to the Executive Secretary for final 
determination the record of the proceeding, the administrative law judge 
shall furnish to the Executive Secretary a certified index of the entire 
record of the proceeding. The certified index shall include, at a 
minimum, an entry for each paper, document or motion filed with the 
administrative law judge in the proceeding, the date of the filing, and 
the identity of the filer. The certified index shall also include an 
exhibit index containing, at a minimum, an entry consisting of exhibit 
number and title or description for: Each exhibit introduced and 
admitted into evidence at the hearing; each exhibit introduced but not 
admitted into evidence at the hearing; each exhibit introduced and 
admitted into evidence after the completion of the hearing; and each 
exhibit introduced but not admitted into evidence after the completion 
of the hearing.

[61 FR 20350, May 6, 1996]

[[Page 73]]



Sec. 308.39  Exceptions to recommended decision.

    (a) Filing exceptions. Within 30 days after service of the 
recommended decision, findings, conclusions, and proposed order under 
Sec. 308.38, a party may file with the Executive Secretary written 
exceptions to the administrative law judge's recommended decision, 
findings, conclusions or proposed order, to the admission or exclusion 
of evidence, or to the failure of the administrative law judge to make a 
ruling proposed by a party. A supporting brief may be filed at the time 
the exceptions are filed, either as part of the same document or in a 
separate document.
    (b) Effect of failure to file or raise exceptions. (1) Failure of a 
party to file exceptions to those matters specified in paragraph (a) of 
this section within the time prescribed is deemed a waiver of objection 
thereto.
    (2) No exception need be considered by the Board of Directors if the 
party taking exception had an opportunity to raise the same objection, 
issue, or argument before the administrative law judge and failed to do 
so.
    (c) Contents. (1) All exceptions and briefs in support of such 
exceptions must be confined to the particular matters in, or omissions 
from, the administrative law judge's recommendations to which that party 
takes exception.
    (2) All exceptions and briefs in support of exceptions must set 
forth page or paragraph references to the specific parts of the 
administrative law judge's recommendations to which exception is taken, 
the page or paragraph references to those portions of the record relied 
upon to support each exception, and the legal authority relied upon to 
support each exception.



Sec. 308.40  Review by Board of Directors.

    (a) Notice of submission to Board of Directors. When the Executive 
Secretary determines that the record in the proceeding is complete, the 
Executive Secretary shall serve notice upon the parties that the 
proceeding has been submitted to the Board of Directors for final 
decision.
    (b) Oral argument before the Board of Directors. Upon the initiative 
of the Board of Directors or on the written request of any party filed 
with the Executive Secretary within the time for filing exceptions, the 
Board of Directors may order and hear oral argument on the recommended 
findings, conclusions, decision, and order of the administrative law 
judge. A written request by a party must show good cause for oral 
argument and state reasons why arguments cannot be presented adequately 
in writing. A denial of a request for oral argument may be set forth in 
the Board of Directors' final decision. Oral argument before the Board 
of Directors must be on the record.
    (c) Final decision. (1) Decisional employees may advise and assist 
the Board of Directors in the consideration and disposition of the case. 
The final decision of the Board of Directors will be based upon review 
of the entire record of the proceeding, except that the Board of 
Directors may limit the issues to be reviewed to those findings and 
conclusions to which opposing arguments or exceptions have been filed by 
the parties.
    (2) The Board of Directors shall render a final decision within 90 
days after notification of the parties that the case has been submitted 
for final decision, or 90 days after oral argument, whichever is later, 
unless the Board of Directors orders that the action or any aspect 
thereof be remanded to the administrative law judge for further 
proceedings. Copies of the final decision and order of the Board of 
Directors shall be served upon each party to the proceeding, upon other 
persons required by statute, and, if directed by the Board of Directors 
or required by statute, upon any appropriate state or Federal 
supervisory authority.



Sec. 308.41  Stays pending judicial review.

    The commencement of proceedings for judicial review of a final 
decision and order of the FDIC may not, unless specifically ordered by 
the Board of Directors or a reviewing court, operate as a stay of any 
order issued by the FDIC. The Board of Directors may, in its discretion, 
and on such terms as it finds just, stay the effectiveness of all or any 
part of its order pending a final decision on a petition for review of 
that order.

[[Page 74]]



                  Subpart B_General Rules of Procedure



Sec. 308.101  Scope of Local Rules.

    (a) Subparts B and C of the Local Rules prescribe rules of practice 
and procedure to be followed in the administrative enforcement 
proceedings initiated by the FDIC as set forth in Sec. 308.01 of the 
Uniform Rules.
    (b) Except as otherwise specifically provided, the Uniform Rules and 
subpart B of the Local Rules shall not apply to subparts D through T of 
the Local Rules.
    (c) Subpart C of the Local Rules shall apply to any administrative 
proceeding initiated by the FDIC.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 66 
FR 9189, Feb. 7, 2001]



Sec. 308.102  Authority of Board of Directors and Executive Secretary.

    (a) The Board of Directors. (1) The Board of Directors may, at any 
time during the pendency of a proceeding, perform, direct the 
performance of, or waive performance of, any act which could be done or 
ordered by the Executive Secretary.
    (2) Nothing contained in this part 308 shall be construed to limit 
the power of the Board of Directors granted by applicable statutes or 
regulations.
    (b) The Executive Secretary. (1) When no administrative law judge 
has jurisdiction over a proceeding, the Executive Secretary may act in 
place of, and with the same authority as, an administrative law judge, 
except that the Executive Secretary may not hear a case on the merits or 
make a recommended decision on the merits to the Board of Directors.
    (2) Pursuant to authority delegated by the Board of Directors, the 
Executive Secretary and Assistant Executive Secretary, upon the advice 
and recommendation of the Deputy General Counsel for Litigation or, in 
his absence, the Assistant General Counsel, Trial Litigation Section, 
may issue rulings in proceedings under sections 7(j), 8, 18(j), 19, 32 
and 38 of the FDIA (12 USC 1817(j), 1818, 1828(j), 1829, 1831i and 1831o 
concerning:
    (i) Denials of requests for private hearing;
    (ii) Interlocutory appeals;
    (iii) Stays pending judicial review;
    (iv) Reopenings of the record and/or remands of the record to the 
ALJ;
    (v) Supplementation of the evidence in the record;
    (vi) All remands from the courts of appeals not involving 
substantive issues;
    (vii) Extensions of stays of orders terminating deposit insurance; 
and
    (viii) All matters, including final decisions, in proceedings under 
section 8(g) of the FDIA (12 U.S.C. 1818(g)).

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 67 
FR 71071, Nov. 29, 2002]



Sec. 308.103  Appointment of administrative law judge.

    (a) Appointment. Unless otherwise directed by the Board of Directors 
or as otherwise provided in the Local Rules, a hearing within the scope 
of this part 308 shall be held before an administrative law judge of the 
Office of Financial Institution Adjudication (``OFIA'').
    (b) Procedures. (1) The Executive Secretary shall promptly after 
issuance of the notice refer the matter to the OFIA which shall secure 
the appointment of an administrative law judge to hear the proceeding.
    (2) OFIA shall advise the parties, in writing, that an 
administrative law judge has been appointed.



Sec. 308.104  Filings with the Board of Directors.

    (a) General rule. All materials required to be filed with or 
referred to the Board of Directors in any proceedings under this part 
308 shall be filed with the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429.
    (b) Scope. Filings to be made with the Executive Secretary include 
pleadings and motions filed during the proceeding; the record filed by 
the administrative law judge after the issuance of a recommended 
decision; the recommended decision filed by the administrative law judge 
following a motion for summary disposition; referrals by the 
administrative law judge of motions for interlocutory review; motions 
and responses to motions filed by the

[[Page 75]]

parties after the record has been certified to the Board of Directors; 
exceptions and requests for oral argument; and any other papers required 
to be filed with the Board of Directors under this part 308.



Sec. 308.105  Custodian of the record.

    The Executive Secretary is the official custodian of the record when 
no administrative law judge has jurisdiction over the proceeding. As the 
official custodian, the Executive Secretary shall maintain the official 
record of all papers filed in each proceeding.



Sec. 308.106  Written testimony in lieu of oral hearing.

    (a) General rule. (1) At any time more than fifteen days before the 
hearing is to commence, on the motion of any party or on his or her own 
motion, the administrative law judge may order that the parties present 
part or all of their case-in-chief and, if ordered, their rebuttal, in 
the form of exhibits and written statements sworn to by the witness 
offering such statements as evidence, provided that if any party 
objects, the administrative law judge shall not require such a format if 
that format would violate the objecting party's right under the 
Administrative Procedure Act, or other applicable law, or would 
otherwise unfairly prejudice that party.
    (2) Any such order shall provide that each party shall, upon 
request, have the same right of oral cross-examination (or redirect 
examination) as would exist had the witness testified orally rather than 
through a written statement. Such order shall also provide that any 
party has a right to call any hostile witness or adverse party to 
testify orally.
    (b) Scheduling of submission of written testimony. (1) If written 
direct testimony and exhibits are ordered under paragraph (a) of this 
section, the administrative law judge shall require that it be filed 
within the time period for commencement of the hearing, and the hearing 
shall be deemed to have commenced on the day such testimony is due.
    (2) Absent good cause shown, written rebuttal, if any, shall be 
submitted and the oral portion of the hearing begun within 30 days of 
the date set for filing written direct testimony.
    (3) The administrative law judge shall direct, unless good cause 
requires otherwise, that--
    (i) All parties shall simultaneously file any exhibits and written 
direct testimony required under paragraph (b)(1) of this section; and
    (ii) All parties shall simultaneously file any exhibits and written 
rebuttal required under paragraph (b)(2) of this section.
    (c) Failure to comply with order to file written testimony. (1) The 
failure of any party to comply with an order to file written testimony 
or exhibits at the time and in the manner required under this section 
shall be deemed a waiver of that party's right to present any evidence, 
except testimony of a previously identified adverse party or hostile 
witness. Failure to file written testimony or exhibits is, however, not 
a waiver of that party's right of cross-examination or a waiver of the 
right to present rebuttal evidence that was not required to be submitted 
in written form.
    (2) Late filings of papers under this section may be allowed and 
accepted only upon good cause shown.



Sec. 308.107  Document discovery.

    (a) Parties to proceedings set forth at Sec. 308.01 of the Uniform 
Rules and as provided in the Local Rules may obtain discovery only 
through the production of documents. No other form of discovery shall be 
allowed.
    (b) Any questioning at a deposition of a person producing documents 
pursuant to a document subpoena shall be strictly limited to the 
identification of documents produced by that person and a reasonable 
examination to determine whether the subpoenaed person made an adequate 
search for, and has produced, all subpoenaed documents.



  Subpart C_Rules of Practice Before the FDIC and Standards of Conduct



Sec. 308.108  Sanctions.

    (a) General rule. Appropriate sanctions may be imposed when any 
counsel or party has acted, or failed to act, in a manner required by 
applicable

[[Page 76]]

statute, regulations, or order, and that act or failure to act:
    (1) Constitutes contemptuous conduct;
    (2) Has in a material way injured or prejudiced some other party in 
terms of substantive injury, incurring additional expenses including 
attorney's fees, prejudicial delay, or otherwise;
    (3) Is a clear and unexcused violation of an applicable statute, 
regulation, or order; or
    (4) Has unduly delayed the proceeding.
    (b) Sanctions. Sanctions which may be imposed include any one or 
more of the following:
    (1) Issuing an order against the party;
    (2) Rejecting or striking any testimony or documentary evidence 
offered, or other papers filed, by the party;
    (3) Precluding the party from contesting specific issues or 
findings;
    (4) Precluding the party from offering certain evidence or from 
challenging or contesting certain evidence offered by another party;
    (5) Precluding the party from making a late filing or conditioning a 
late filing on any terms that are just; and
    (6) Assessing reasonable expenses, including attorney's fees, 
incurred by any other party as a result of the improper action or 
failure to act.
    (c) Limits on dismissal as a sanction. No recommendation of 
dismissal shall be made by the administrative law judge or granted by 
the Board of Directors based on the failure to hold a hearing within the 
time period called for in this part 308, or on the failure of an 
administrative law judge to render a recommended decision within the 
time period called for in this part 308, absent a finding:
    (1) That the delay resulted solely or principally from the conduct 
of the FDIC enforcement counsel;
    (2) That the conduct of the FDIC enforcement counsel is unexcused;
    (3) That the moving respondent took all reasonable steps to oppose 
and prevent the subject delay;
    (4) That the moving respondent has been materially prejudiced or 
injured; and
    (5) That no lesser or different sanction is adequate.
    (d) Procedure for imposition of sanctions. (1) The administrative 
law judge, upon the request of any party, or on his or her own motion, 
may impose sanctions in accordance with this section, provided that the 
administrative law judge may only recommend to the Board of Directors 
the sanction of entering a final order determining the case on the 
merits.
    (2) No sanction, other than refusing to accept late papers, 
authorized by this section shall be imposed without prior notice to all 
parties and an opportunity for any counsel or party against whom 
sanctions would be imposed to be heard. Such opportunity to be heard may 
be on such notice, and the response may be in such form, as the 
administrative law judge directs. The opportunity to be heard may be 
limited to an opportunity to respond orally immediately after the act or 
inaction covered by this section is noted by the administrative law 
judge.
    (3) Requests for the imposition of sanctions by any party, and the 
imposition of sanctions, shall be treated for interlocutory review 
purposes in the same manner as any other ruling by the administrative 
law judge.
    (4) Section not exclusive. Nothing in this section shall be read as 
precluding the administrative law judge or the Board of Directors from 
taking any other action, or imposing any restriction or sanction, 
authorized by applicable statute or regulation.



Sec. 308.109  Suspension and disbarment.

    (a) Discretionary suspension and disbarment. (1) The Board of 
Directors may suspend or revoke the privilege of any counsel to appear 
or practice before the FDIC if, after notice of and opportunity for 
hearing in the matter, that counsel is found by the Board of Directors:
    (i) Not to possess the requisite qualifications to represent others;
    (ii) To be seriously lacking in character or integrity or to have 
engaged in material unethical or improper professional conduct;
    (iii) To have engaged in, or aided and abetted, a material and 
knowing violation of the FDIA; or

[[Page 77]]

    (iv) To have engaged in contemptuous conduct before the FDIC. 
Suspension or revocation on the grounds set forth in paragraphs (a)(1) 
(ii), (iii), and (iv) of this section shall only be ordered upon a 
further finding that the counsel's conduct or character was sufficiently 
egregious as to justify suspension or revocation.
    (2) Unless otherwise ordered by the Board of Directors, an 
application for reinstatement by a person suspended or disbarred under 
paragraph (a)(1) of this section may be made in writing at any time more 
than three years after the effective date of the suspension or 
disbarment and, thereafter, at any time more than one year after the 
person's most recent application for reinstatement. The suspension or 
disbarment shall continue until the applicant has been reinstated by the 
Board of Directors for good cause shown or until, in the case of a 
suspension, the suspension period has expired. An applicant for 
reinstatement under this provision may, in the Board of Directors' sole 
discretion, be afforded a hearing.
    (b) Mandatory suspension and disbarment. (1) Any counsel who has 
been and remains suspended or disbarred by a court of the United States 
or of any state, territory, district, commonwealth, or possession; or 
any person who has been and remains suspended or barred from practice 
before the OCC, Board of Governors, the OTS, the NCUA, the Securities 
and Exchange Commission, or the Commodity Futures Trading Commission; or 
any person who has been convicted of a felony, or of a misdemeanor 
involving moral turpitude, within the last ten years, shall be suspended 
automatically from appearing or practicing before the FDIC. A 
disbarment, suspension, or conviction within the meaning of this 
paragraph (b) shall be deemed to have occurred when the disbarring, 
suspending, or convicting agency or tribunal enters its judgment or 
order, regardless of whether an appeal is pending or could be taken, and 
includes a judgment or an order on a plea of nolo contendere or on 
consent, regardless of whether a violation is admitted in the consent.
    (2) Any person appearing or practicing before the FDIC who is the 
subject of an order, judgment, decree, or finding of the types set forth 
in paragraph (b)(1) of this section shall promptly file with the 
Executive Secretary a copy thereof, together with any related opinion or 
statement of the agency or tribunal involved. Failure to file any such 
paper shall not impair the operation of any other provision of this 
section.
    (3) A suspension or disbarment under paragraph (b)(1) of this 
section from practice before the FDIC shall continue until the applicant 
has been reinstated by the Board of Directors for good cause shown, 
provided that any person suspended or disbarred under paragraph (b)(1) 
of this section shall be automatically reinstated by the Executive 
Secretary, upon appropriate application, if all the grounds for 
suspension or disbarment under paragraph (b)(1) of this section are 
subsequently removed by a reversal of the conviction (or the passage of 
time since the conviction) or termination of the underlying suspension 
or disbarment. An application for reinstatement on any other grounds by 
any person suspended or disbarred under paragraph (b)(1) of this section 
may be filed no sooner than one year after the suspension or disbarment, 
and thereafter, a new request for reinstatement may be made no sooner 
than one year after the counsel's most recent reinstatement application. 
The application must comply with the requirements of Sec. 303.3 of this 
chapter. An applicant for reinstatement under this provision may, in the 
Board of Directors' sole discretion, be afforded a hearing.
    (c) Hearings under this section. Hearings conducted under this 
section shall be conducted in substantially the same manner as other 
hearings under the Uniform Rules, provided that in proceedings to 
terminate an existing FDIC suspension or disbarment order, the person 
seeking the termination of the order shall bear the burden of going 
forward with an application and with the burden of proving the grounds 
supporting the application, and that the Board of Directors may, in its 
sole discretion, direct that any proceeding to terminate an existing 
suspension or disbarment by the FDIC be limited to written submissions.

[[Page 78]]

    (d) Summary suspension for contemptuous conduct. A finding by the 
administrative law judge of contemptuous conduct during the course of 
any proceeding shall be grounds for summary suspension by the 
administrative law judge of a counsel or other representative from any 
further participation in that proceeding for the duration of that 
proceeding.
    (e) Practice defined. Unless the Board of Directors orders 
otherwise, for the purposes of this section, practicing before the FDIC 
includes, but is not limited to, transacting any business with the FDIC 
as counsel or agent for any other person and the preparation of any 
statement, opinion, or other paper by a counsel, which statement, 
opinion, or paper is filed with the FDIC in any registration statement, 
notification, application, report, or other document, with the consent 
of such counsel.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 68 
FR 48270, Aug. 13, 2003]



  Subpart D_Rules and Procedures Applicable to Proceedings Relating to 
                  Disapproval of Acquisition of Control



Sec. 308.110  Scope.

    Except as specifically indicated in this subpart, the rules and 
procedures in this subpart, subpart B of the Local Rules, and the 
Uniform Rules shall apply to proceedings in connection with the 
disapproval by the Board of Directors or its designee of a proposed 
acquisition of control of an insured nonmember bank.



Sec. 308.111  Grounds for disapproval.

    The following are grounds for disapproval of a proposed acquisition 
of control of an insured nonmember bank:
    (a) The proposed acquisition of control would result in a monopoly 
or would be in furtherance of any combination or conspiracy to 
monopolize or attempt to monopolize the banking business in any part of 
the United States;
    (b) The effect of the proposed acquisition of control in any section 
of the United States may be to substantially lessen competition or to 
tend to create a monopoly or would in any other manner be in restraint 
of trade, and the anticompetitive effects of the proposed acquisition of 
control are not clearly outweighed in the public interest by the 
probable effect of the transaction in meeting the convenience and needs 
of the community to be served;
    (c) Either the financial condition of any acquiring person or the 
future prospects of the institution might jeopardize the financial 
stability of the bank or prejudice the interest of the depositors of the 
bank.
    (d) The competence, experience, or integrity of any acquiring person 
or of any of the proposed management personnel indicates that it would 
not be in the interest of the depositors of the bank, or in the interest 
of the public, to permit such person to control the bank;
    (e) Any acquiring person neglects, fails, or refuses to furnish to 
the FDIC all the information required by the FDIC; or
    (f) The FDIC determines that the proposed acquisition would result 
in an adverse effect on the Deposit Insurance Fund.

[56 FR 37975, Aug. 9, 1991, as amended at 71 FR 20526, Apr. 21, 2006; 73 
FR 2145, Jan. 14, 2008]



Sec. 308.112  Notice of disapproval.

    (a) General rule. (1) Within three days of the decision by the Board 
of Directors or its designee to disapprove a proposed acquisition of 
control of an insured nonmember bank, a written notice of disapproval 
shall be mailed by first class mail to, or otherwise served upon, the 
party seeking acquire control.
    (2) The notice of disapproval shall:
    (i) Contain a statement of the basis for the disapproval; and
    (ii) Indicate that a hearing may be requested by filing a written 
request with the Executive Secretary within ten days after service of 
the notice of disapproval; and if a hearing is requested, that an answer 
to the notice of disapproval, as required by Sec. 308.113, must be 
filed within 20 days after service of the notice of disapproval.
    (b) Waiver of hearing. Failure to request a hearing pursuant to this 
section shall constitute a waiver of the

[[Page 79]]

opportunity for a hearing and the notice of disapproval shall constitute 
a final and unappealable order.
    (c) Section 308.18(b) of the Uniform Rules shall not apply to the 
content of the Notice of Disapproval.



Sec. 308.113  Answer to notice of disapproval.

    (a) Contents. (1) An answer to the notice of disapproval of a 
proposed acquisition of control shall be filed within 20 days after 
service of the notice of disapproval and shall specifically deny those 
portions of the notice of disapproval which are disputed. Those portions 
of the notice of disapproval which are not specifically denied are 
deemed admitted by the applicant.
    (2) Any hearing under this subpart shall be limited to those parts 
of the notice of disapproval that are specifically denied.
    (b) Failure to answer. Failure of a respondent to file an answer 
required by this section within the time provided constitutes a waiver 
of his or her right to appear and contest the allegations in the notice 
of disapproval. If no timely answer is filed, Enforcement Counsel may 
file a motion for entry of an order of default. Upon a finding that no 
good cause has been shown for the failure to file a timely answer, the 
administrative law judge shall file a recommended decision containing 
the findings and relief sought in the notice. A final order issued by 
the Board of Directors based upon a respondent's failure to answer is 
deemed to be an order issued upon consent.



Sec. 308.114  Burden of proof.

    The ultimate burden of proof shall be upon the person proposing to 
acquire a depository institution. The burden of going forward with a 
prima facie case shall be upon the FDIC.



  Subpart E_Rules and Procedures Applicable to Proceedings Relating to 
 Assessment of Civil Penalties for Willful Violations of the Change in 
                            Bank Control Act



Sec. 308.115  Scope.

    The rules and procedures of this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings to assess civil 
penalties against any person for willful violation of the Change in Bank 
Control Act of 1978 (12 U.S.C. 1817(j)), or any regulation or order 
issued pursuant thereto, in connection with the affairs of an insured 
nonmember bank.



Sec. 308.116  Assessment of penalties.

    (a) In general. The civil money penalty shall be assessed upon the 
service of a Notice of Assessment which shall become final and 
unappealable unless the respondent requests a hearing pursuant to Sec. 
308.19(c)(2).
    (b) Amount. (1) Any person who violates any provision of the Change 
in Bank Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto, shall forfeit and pay a civil money penalty of not 
more than $5,000 for each day the violation continues.
    (2) Any person who violates any provision of the Change in Bank 
Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto; or recklessly engages in any unsafe or unsound 
practice in conducting the affairs of a depository institution; or 
breaches any fiduciary duty; which violation, practice or breach is part 
of a pattern of misconduct; or causes or is likely to cause more than a 
minimal loss to such institution; or results in pecuniary gain or other 
benefit to such person, shall forfeit and pay a civil money penalty of 
not more than $25,000 for each day such violation, practice or breach 
continues.
    (3) Any person who knowingly violates any provision of the Change in 
Bank Control Act or any rule, regulation, or order issued by the FDIC 
pursuant thereto; or engages in any unsafe or unsound practice in 
conducting the affairs of a depository institution; or

[[Page 80]]

breaches any fiduciary duty; and knowingly or recklessly causes a 
substantial loss to such institution or a substantial pecuniary gain or 
other benefit to such institution or a substantial pecuniary gain or 
other benefit to such person by reason of such violation, practice or 
breach, shall forfeit and pay a civil money penalty not to exceed:
    (i) In the case of a person other than a depository institution--
$1,000,000 per day for each day the violation, practice or breach 
continues; or
    (ii) In the case of a depository institution--an amount not to 
exceed the lesser of $1,000,000 or one percent of the total assets of 
such institution for each day the violation, practice or breach 
continues.
    (4) Adjustment of civil money penalties by the rate of inflation 
pursuant to section 31001(s) of the Debt Collection Improvement Act. 
After December 31, 2008:
    (i) Any person who engages in a violation as set forth in paragraph 
(b)(1) of this section shall forfeit and pay a civil money penalty of 
not more than $7,500 for each day the violation continues.
    (ii) Any person who engages in a violation, unsafe or unsound 
practice or breach of fiduciary duty, as set forth in paragraph (b)(2) 
of this section, shall forfeit and pay a civil money penalty of not more 
than $37,500 for each day such violation, practice or breach continues.
    (iii) Any person who knowingly engages in a violation, unsafe or 
unsound practice or breach of fiduciary duty, as set forth in paragraph 
(b)(3) of this section, shall forfeit and pay a civil money penalty not 
to exceed:
    (A) In the case of a person other than a depository institution--
$1,375,000 per day for each day the violation, practice or breach 
continues; or
    (B) In the case of a depository institution--an amount not to exceed 
the lesser of $1,375,000 or one percent of the total assets of such 
institution for each day the violation, practice or breach continues.
    (c) Mitigating factors. In assessing the amount of the penalty, the 
Board of Directors or its designee shall consider the gravity of the 
violation, the history of previous violations, respondent's financial 
resources, good faith, and any other matters as justice may require.
    (d) Failure to answer. Failure of a respondent to file an answer 
required by this section within the time provided constitutes a waiver 
of his or her right to appear and contest the allegations in the notice 
of disapproval. If no timely answer is filed, Enforcement Counsel may 
file a motion for entry of an order of default. Upon a finding that no 
good cause has been shown for the failure to file a timely answer, the 
administrative law judge shall file a recommended decision containing 
the findings and relief sought in the notice. A final order issued by 
the Board of Directors based upon a respondent's failure to answer is 
deemed to be an order issued upon consent.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 57990, Nov. 12, 1996; 65 
FR 64887, Oct. 31, 2000; 69 FR 61305, Oct. 18, 2004; 73 FR 73157, Dec. 
2, 2008]



Sec. 308.117  Effective date of, and payment under, an order to pay.

    If the respondent both requests a hearing and serves an answer, 
civil penalties assessed pursuant to this subpart are due and payable 60 
days after an order to pay, issued after the hearing or upon default, is 
served upon the respondent, unless the order provides for a different 
period of payment. Civil penalties assessed pursuant to an order to pay 
issued upon consent are due and payable within the time specified 
therein.



Sec. 308.118  Collection of penalties.

    The FDIC may collect any civil penalty assessed pursuant to this 
subpart by agreement with the respondent, or the FDIC may bring an 
action against the respondent to recover the penalty amount in the 
appropriate United States district court. All penalties collected under 
this section shall be paid over to the Treasury of the United States.



Subpart F_Rules and Procedures Applicable to Proceedings for Involuntary 
                      Termination of Insured Status



Sec. 308.119  Scope.

    (a) Involuntary termination of insurance pursuant to section 8(a) of 
the

[[Page 81]]

FDIA. The rules and procedures in this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings in connection 
with the involuntary termination of the insured status of an insured 
bank depository institution or an insured branch of a foreign bank 
pursuant to section 8(a) of the FDIA (12 U.S.C. 1818(a)), except that 
the Uniform Rules and subpart B of the Local Rules shall not apply to 
the temporary suspension of insurance pursuant to section 8(a)(8) of the 
FDIA (12 U.S.C. 1818(a)(8)).
    (b) Involuntary termination of insurance pursuant to section 8(p) of 
the Act. The rules and procedures in Sec. 308.124 of this subpart F 
shall apply to proceedings in connection with the involuntary 
termination of the insured status of an insured depository institution 
or an insured branch of a foreign bank pursuant to section 8(p) of the 
FDIA (12 U.S.C. 1818(p)). The Uniform Rules shall not apply to 
proceedings under section 8(p) of the FDIA.



Sec. 308.120  Grounds for termination of insurance.

    (a) General rule. The following are grounds for involuntary 
termination of insurance pursuant to section 8(a) of the FDIA:
    (1) An insured depository institution or its directors or trustees 
have engaged or are engaging in unsafe or unsound practices in 
conducting the business of such depository institution;
    (2) An insured depository institution is in an unsafe or unsound 
condition such that it should not continue operations as an insured 
depository institution; or
    (3) An insured depository institution or its directors or trustees 
have violated an applicable law, rule, regulation, order, condition 
imposed in writing by the FDIC in connection with the granting of any 
application or other request by the insured depository institution or 
have violated any written agreement entered into between the insured 
depository institution and the FDIC.
    (b) Extraterritorial acts of foreign banks. An act or practice 
committed outside the United States by a foreign bank or its directors 
or trustees which would otherwise be a ground for termination of insured 
status under this section shall be a ground for termination if the Board 
of Directors finds:
    (1) The act or practice has been, is, or is likely to be a cause of, 
or carried on in connection with or in furtherance of, an act or 
practice committed within any state, territory, or possession of the 
United States or the District of Columbia that, in and of itself, would 
be an appropriate basis for action by the FDIC; or
    (2) The act or practice committed outside the United States, if 
proven, would adversely affect the insurance risk of the FDIC.
    (c) Failure of foreign bank to secure removal of personnel. The 
failure of a foreign bank to comply with any order of removal or 
prohibition issued by the Board of Directors or the failure of any 
person associated with a foreign bank to appear promptly as a party to a 
proceeding pursuant to section 8(e) of the FDIA (12 U.S.C. 1818(e)), 
shall be a ground for termination of insurance of deposits in any branch 
of the bank.



Sec. 308.121  Notification to primary regulator.

    (a) Service of notification. (1) Upon a determination by the Board 
of Directors or its designee pursuant to Sec. 308.120 of an unsafe or 
unsound practice or condition or of a violation, a notification shall be 
served upon the appropriate Federal banking agency of the insured 
depository institution, or the State banking supervisor if the FDIC is 
the appropriate Federal banking agency.


The notification shall be served not less than 30 days before the Notice 
of Intent to Terminate Insured Status required by section 8(a)(2)(B) of 
the FDIA (12 U.S.C. 1818(a)(2)(B)), and Sec. 308.122, except that this 
period for notification may be reduced or eliminated with the agreement 
of the appropriate Federal banking agency.
    (2) Appropriate Federal banking agency shall have the meaning given 
that term in section 3(q) of the FDIA (12 U.S.C. 1813(q)), and shall be 
the OCC in the case of a national bank, a District bank or an insured 
Federal branch of a foreign bank; the FDIC in the case of an insured 
nonmember bank, including an insured State branch of a foreign

[[Page 82]]

bank; the Board of Governors in the case of a state member bank; or the 
OTS in the case of an insured Federal or state savings association.
    (3) In the case of a state nonmember bank, insured Federal branch of 
a foreign bank, or state member bank, in addition to service of the 
notification upon the appropriate Federal banking agency, a copy of the 
notification shall be sent to the appropriate State banking supervisor.
    (4) In instances in which a Temporary Order Suspending Insurance is 
issued pursuant to section 8(a)(8) of the FDIA (12 U.S.C. 1818(a)(8)), 
the notification may be served concurrently with such order.
    (b) Contents of notification. The notification shall contain the 
FDIC's determination, and the facts and circumstances upon which such 
determination is based, for the purpose of securing correction of such 
practice, condition, or violation.



Sec. 308.122  Notice of intent to terminate.

    (a) If, after serving the notification under Sec. 308.121, the 
Board of Directors determines that any unsafe or unsound practices, 
condition, or violation, specified in the notification, requires the 
termination of the insured status of the insured depository institution, 
the Board of Directors or its designee, if it determines to proceed 
further, shall cause to be served upon the insured depository 
institution a notice of its intention to terminate insured status not 
less than 30 days after service of the notification, unless a shorter 
time period has been agreed upon by the appropriate Federal banking 
agency.
    (b) The Board of Directors or its designee shall cause a copy of the 
notice to be sent to the appropriate Federal banking agency and to the 
appropriate state banking supervisor, if any.



Sec. 308.123  Notice to depositors.

    If the Board of Directors enters an order terminating the insured 
status of an insured depository institution or branch, the insured 
depository institution shall, on the day that order becomes final, or on 
such other day as that order prescribes, mail a notification of 
termination of insured status to each depositor at the depositor's last 
address of record on the books of the insured depository institution or 
branch. The insured depository institution shall also publish the 
notification in two issues of a local newspaper of general circulation 
and shall furnish the FDIC with proof of such publications. The 
notification to depositors shall include information provided in 
substantially the following form:

                                 Notice

    (Date)----------.
    1. The status of the ----------, as an (insured depository 
institution) (insured branch) under the provisions of the Federal 
Deposit Insurance Act, will terminate as of the close of business on the 
-------- day of------------, 19----.
    2. Any deposits made by you after that date, either new deposits or 
additions to existing deposits, will not be insured by the Federal 
Deposit Insurance Corporation.
    3. Insured deposits in the (depository institution) (branch) on the 
-------- day of------------, 19----, will continue to be insured, as 
provided by Federal Deposit Insurance Act, for 2 years after the close 
of business on the -------- day of ------------, 19----. Provided, 
however, that any withdrawals after the close of business on the ------
-- day of ------------, 19----, will reduce the insurance coverage by 
the amount of such withdrawals.
________________________________________________________________________
(Name of (depository institution or branch)
________________________________________________________________________
(Address)

The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



Sec. 308.124  Involuntary termination of insured status for failure to receive 

deposits.

    (a) Notice to show cause. When the Board of Directors or its 
designee has evidence that an insured depository institution is not 
engaged in the business of receiving deposits, other than trust funds, 
the Board of Directors or its designee shall give written notice of this 
evidence to the depository institution and shall direct the depository 
institution to show cause why its insured status should not be 
terminated under the provisions of section 8(p) of the FDIA (12 U.S.C. 
1818(p)). The insured depository institution shall have 30 days after 
receipt of the notice, or such

[[Page 83]]

longer period as is prescribed in the notice, to submit affidavits, 
other written proof, and any legal arguments that it is engaged in the 
business of receiving deposits other than trust funds.
    (b) Notice of termination date. If, upon consideration of the 
affidavits, other written proof, and legal arguments, the Board of 
Directors determines that the depository institution is not engaged in 
the business of receiving deposits, other than trust funds, the finding 
shall be conclusive and the Board of Directors shall notify the 
depository institution that its insured status will terminate at the 
expiration of the first full semiannual assessment period following 
issuance of that notification.
    (c) Notification to depositors of termination of insured status. 
Within the time specified by the Board of Directors and prior to the 
date of termination of its insured status, the depository institution 
shall mail a notification of termination of insured status to each 
depositor at the depositor's last address of record on the books of the 
depository institution. The depository institution shall also publish 
the notification in two issues of a local newspaper of general 
circulation and shall furnish the FDIC with proof of such publications. 
The notification to depositors shall include information provided in 
substantially the following form:

                                 Notice

    (Date)----------.
    The status of the ----------, as an (insured depository institution) 
(insured branch) under the Federal Deposit Insurance Act, will terminate 
on the -------- day of------------, 19----, and its deposits will 
thereupon cease to be insured.
________________________________________________________________________
(Name of depository institution or branch)
________________________________________________________________________
(Address)


The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



Sec. 308.125  Temporary suspension of deposit insurance.

    (a) If, while an action is pending under section 8(a)(2) of the FDIA 
(12 U.S.C. 1818(a)(2)), the Board of Directors, after consultation with 
the appropriate Federal banking agency, finds that an insured depository 
institution (other than a special supervisory association to which Sec. 
308.126 of this subpart applies) has no tangible capital under the 
capital guidelines or regulations of the appropriate Federal banking 
agency, the Board of Directors may issue a Temporary Order Suspending 
Deposit Insurance, pending completion of the proceedings under section 
8(a)(2) of the FDIA (12 U.S.C. 1818(a)(2)).
    (b) The temporary order shall be served upon the insured institution 
and a copy sent to the appropriate Federal banking agency and to the 
appropriate State banking supervisor.
    (c) The temporary order shall become effective ten days from the 
date of service upon the insured depository institution. Unless set 
aside, limited, or suspended in proceedings under section 8(a)(8)(D) of 
the FDIA (12 U.S.C. 1818 (a)(8)(D)), the temporary order shall remain 
effective and enforceable until an order terminating the insured status 
of the institution is entered by the Board of Directors and becomes 
final, or the Board of Directors dismisses the proceedings.
    (d) Notification to depositors of suspension of insured status. 
Within the time specified by the Board of Directors and prior to the 
suspension of insured status, the depository institution shall mail a 
notification of suspension of insured status to each depositor at the 
depositor's last address of record on the books of the depository 
institution. The depository institution shall also publish the 
notification in two issues of a local newspaper of general circulation 
and shall furnish the FDIC with proof of such publications. The 
notification to depositors shall include information provided in 
substantially the following form:

                                 Notice

    (Date)------------.
    1. The status of the ----------, as an (insured depository 
institution) (insured branch) under the provisions of the Federal 
Deposit Insurance Act, will be suspended as of the close of business on 
the -------- day of ------------, 19----, pending the completion of 
administrative proceedings under section 8(a) of the Federal Deposit 
Insurance Act.

[[Page 84]]

    2. Any deposits made by you after that date, either new deposits or 
additions to existing deposits, will not be insured by the Federal 
Deposit Insurance Corporation.
    3. Insured deposits in the (depository institution) (branch) on the 
-------- day of ------------, 19----, will continue to be insured for --
---------- after the close of business on the---------- day of --------
--, 19----. Provided, however, that any withdrawals after the close of 
business on the -------- day of------------, 19----, will reduce the 
insurance coverage by the amount of such withdrawals.
________________________________________________________________________
(Name of depository institution or branch)
________________________________________________________________________
(Address)


The notification may include any additional information the depository 
institution deems advisable, provided that the information required by 
this section shall be set forth in a conspicuous manner on the first 
page of the notification.



Sec. 308.126  Special supervisory associations.

    If the Board of Directors finds that a savings association is a 
special supervisory association under the provisions of section 
8(a)(8)(B) of the FDIA (12 U.S.C. 1818(a)(8)(B)) for purposes of 
temporary suspension of insured status, the Board of Directors shall 
serve upon the association its findings with regard to the determination 
that the capital of the association, as computed using applicable 
accounting standards, has suffered a material decline; that such 
association or its directors or officers, is engaging in an unsafe or 
unsound practice in conducting the business of the association; that 
such association is in an unsafe or unsound condition to continue 
operating as an insured association; or that such association or its 
directors or officers, has violated any law, rule, regulation, order, 
condition imposed in writing by any Federal banking agency, or any 
written agreement, or that the association failed to enter into a 
capital improvement plan acceptable to the Corporation prior to January, 
1990.



  Subpart G_Rules and Procedures Applicable to Proceedings Relating to 
                         Cease-and-Desist Orders



Sec. 308.127  Scope.

    (a) Cease-and-desist proceedings under sections 8 and 50 of the 
FDIA. The rules and procedures of this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings to order an 
insured nonmember bank or an institution-affiliated party to cease and 
desist from practices and violations described in section 8(b) of the 
FDIA, 12 U.S.C. 1818(b), and section 50 of the FDIA, 12 U.S.C. 1831aa.
    (b) Proceedings under the Securities Exchange Act of 1934. (1) The 
rules and procedures of this subpart, subpart B of the Local Rules and 
the Uniform Rules shall apply to proceedings by the Board of Directors 
to order a municipal securities dealer to cease and desist from any 
violation of law or regulation specified in section 15B(c)(5) of the 
Securities Exchange Act, as amended (15 U.S.C. 78o-4(c)(5)) where the 
municipal securities dealer is an insured nonmember bank or a subsidiary 
thereof.
    (2) The rules and procedures of this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings by the Board of 
Directors to order a clearing agency or transfer agent to cease and 
desist from failure to comply with the applicable provisions of section 
17, 17A and 19 of the Securities Exchange Act of 1934, as amended (15 
U.S.C. 78q, 78q-l, 78s), and the applicable rules and regulations 
thereunder, where the clearing agency or transfer agent is an insured 
nonmember bank or a subsidiary thereof.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999; 72 
FR 67235, Nov. 28, 2007]



Sec. 308.128  Grounds for cease-and-desist orders.

    (a) General rule. The Board of Directors or its designee may issue 
and have served upon any insured nonmember bank or an institution-
affiliated party a notice, as set forth in Sec. 308.18 of the Uniform 
Rules for practices and violations as described in Sec. 308.127.

[[Page 85]]

    (b) Extraterritorial acts of foreign banks. An act, violation or 
practice committed outside the United States by a foreign bank or an 
institution-affiliated party that would otherwise be a ground for 
issuing a cease-and-desist order under paragraph (a) of this section or 
a temporary cease-and-desist order under Sec. 308.131 of this subpart, 
shall be a ground for an order if the Board of Directors or its designee 
finds that:
    (1) The act, violation or practice has been, is, or is likely to be 
a cause of, or carried on in connection with or in furtherance of, an 
act, violation or practice committed within any state, territory, or 
possession of the United States or the District of Columbia which act, 
violation or practice, in and of itself, would be an appropriate basis 
for action by the FDIC; or
    (2) The act, violation or practice, if proven, would adversely 
affect the insurance risk of the FDIC.



Sec. 308.129  Notice to state supervisory authority.

    The Board of Directors or its designee shall give the appropriate 
state supervisory authority notification of its intent to institute a 
proceeding pursuant to subpart G of this part, and the grounds thereof. 
Any proceedings shall be conducted according to subpart G of this part, 
unless, within the time period specified in such notification, the state 
supervisory authority has effected satisfactory corrective action. No 
insured institution or other party who is the subject of any notice or 
order issued by the FDIC under this section shall have standing to raise 
the requirements of this subpart as grounds for attacking the validity 
of any such notice or order.



Sec. 308.130  Effective date of order and service on bank.

    (a) Effective date. A cease-and-desist order issued by the Board of 
Directors after a hearing, and a cease-and-desist order issued based 
upon a default, shall become effective at the expiration of 30 days 
after the service of the order upon the bank or its official. A cease-
and-desist order issued upon consent shall become effective at the time 
specified therein. All cease-and-desist orders shall remain effective 
and enforceable, except to the extent they are stayed, modified, 
terminated, or set aside by the Board of Directors or its designee or by 
a reviewing court.
    (b) Service on banks. In cases where the bank is not the respondent, 
the cease-and-desist order shall also be served upon the bank.



Sec. 308.131  Temporary cease-and-desist order.

    (a) Issuance. (1) When the Board of Directors or its designee 
determines that the violation, or the unsafe or unsound practice, as 
specified in the notice, or the continuation thereof, is likely to cause 
insolvency or significant dissipation of assets or earnings of the bank, 
or is likely to weaken the condition of the bank or otherwise prejudice 
the interests of its depositors prior to the completion of the 
proceedings under section 8(b) of the FDIA (12 U.S.C. 1818(b)) and Sec. 
308.128 of this subpart, the Board of Directors or its designee may 
issue a temporary order requiring the bank or an institution-affiliated 
party to immediately cease and desist from any such violation, practice 
or to take affirmative action to prevent such insolvency, dissipation, 
condition or prejudice pending completion of the proceedings under 
section 8(b) of the FDIA (12 U.S.C. 1818(b)).
    (2) When the Board of Directors or its designee issues a Notice of 
charges pursuant to 12 U.S.C. 1818(b)(1) which specifies on the basis of 
particular facts and circumstances that a bank's books and records are 
so incomplete or inaccurate that the FDIC is unable, through the normal 
supervisory process, to determine the financial condition of the bank or 
the details or purpose of any transaction or transactions that may have 
a material effect on the financial condition of the bank, then the Board 
of Directors or its designee may issue a temporary order requiring:
    (i) The cessation of any activity or practice which gave rise, 
whether in whole or in part, to the incomplete or inaccurate state of 
the books or records; or
    (ii) Affirmative action to restore such books or records to a 
complete

[[Page 86]]

and accurate state, until the completion of the proceedings under 
section 8(b) of the FDIA (12 U.S.C. 1818(b)).
    (3) The temporary order shall be served upon the bank or the 
institution-affiliated party named therein and shall also be served upon 
the bank in the case where the temporary order applies only to an 
institution-affiliated party.
    (b) Effective date. A temporary order shall become effective when 
served upon the bank or the institution-affiliated party. Unless the 
temporary order is set aside, limited, or suspended by a court in 
proceedings authorized under section 8(c)(2) of the FDIA (12 U.S.C. 
1818(c)(2)), the temporary order shall remain effective and enforceable 
pending completion of administrative proceedings pursuant to section 
8(b) of the FDIA (12 U.S.C. 1818(b)) and entry of an order which has 
become final, or with respect to paragraph (a)(2) of this section the 
FDIC determines by examination or otherwise that the bank's books and 
records are accurate and reflect the financial condition of the bank.
    (c) Uniform Rules do not apply. The Uniform Rules and subpart B of 
the Local Rules shall not apply to the issuance of temporary orders 
under this section.



  Subpart H_Rules and Procedures Applicable to Proceedings Relating to 

  Assessment and Collection of Civil Money Penalties for Violation of 

Cease-and-Desist Orders and of Certain Federal Statutes, Including Call 

                            Report Penalties



Sec. 308.132  Assessment of penalties.

    (a) Scope. The rules and procedures of this subpart, subpart B of 
the Local Rules, and the Uniform Rules shall apply to proceedings to 
assess and collect civil money penalties, including civil money 
penalties for violation of section 7(a) of the FDIA (12 U.S.C. 1817(a)).
    (b) Relevant considerations. In determining the amount of the civil 
penalty to be assessed, the Board of Directors or its designee shall 
consider the financial resources and good faith of the bank or official, 
the gravity of the violation, the history of previous violations, and 
any such other matters as justice may require.
    (c) Amount. (1) The Board of Directors or its designee may assess 
civil money penalties pursuant to section 8(i) of the FDIA (12 U.S.C. 
1818(i)), and Sec. 308.01(e)(1) of the Uniform Rules.
    (2) The Board of Directors or its designee may assess civil money 
penalties pursuant to section 7(a) of the FDIA (12 U.S.C. 1817(a)) as 
follows:
    (i) Late filing--Tier One penalties. In cases in which a bank fails 
to make or publish its Report of Condition and Income (Call Report) 
within the appropriate time periods, a civil money penalty of not more 
than $2,200 per day may be assessed where the bank maintains procedures 
in place reasonably adapted to avoid inadvertent error and the late 
filing occurred unintentionally and as a result of such error; or the 
bank inadvertently transmitted a Call Report which is minimally late. 
Pursuant to the Debt Collection Improvement Act of 1996, for violations 
of paragraph (c)(2)(i) which occur after December 31, 2008, the 
following maximum Tier One penalty amounts contained in paragraphs 
(c)(2)(i)(A) and (B) of this section shall apply for each day that the 
violation continues.
    (A) First offense. Generally, in such cases, the amount assessed 
shall be $330 per day for each of the first 15 days for which the 
failure continues, and $660 per day for each subsequent day the failure 
continues, beginning on the sixteenth day. For banks with less than 
$25,000,000 in assets, the amount assessed shall be the greater of $110 
per day or \1/1000\th of the bank's total assets (\1/10\th of a basis 
point) for each of the first 15 days for which the failure continues, 
and $220 or \1/500\th of the bank's total assets, \1/5\ of a basis 
point) for each subsequent day the failure continues, beginning on the 
sixteenth day.
    (B) Subsequent offenses. Where the bank has been delinquent in 
making or publishing its Call Report within the preceding five quarters, 
the amount assessed for the most current failure shall generally be $550 
per day for each of the first 15 days for which the failure continues, 
and $1,100 per day for each subsequent day the failure continues, 
beginning on the sixteenth day. For

[[Page 87]]

banks with less than $25,000,000 in assets, those amounts, respectively, 
shall be \1/500\th of the bank's total assets and \1/250\th of the 
bank's total assets.
    (C) Mitigating factors. The amounts set forth in paragraph 
(c)(2)(i)(A) of this section may be reduced based upon the factors set 
forth in paragraph (b) of this section.
    (D) Lengthy or repeated violations. The amounts set forth in this 
paragraph (c)(2)(i) will be assessed on a case-by-case basis where the 
amount of time of the bank's delinquency is lengthy or the bank has been 
delinquent repeatedly in making or publishing its Call Reports.
    (E) Waiver. Absent extraordinary circumstances outside the control 
of the bank, penalties assessed for late filing shall not be waived.
    (ii) Late filing--Tier Two penalties. Where a bank fails to make or 
publish its Call Report within the appropriate time period, the Board of 
Directors or its designee may assess a civil money penalty of not more 
than $20,000 per day for each day the failure continues. Pursuant to the 
Debt Collection Improvement Act of 1996, for violations which occur 
after December 31, 2008, the maximum Tier Two penalty amount will 
increase to $32,000 per day for each day the failure continues.
    (iii) False or misleading reports or information--(A) Tier One 
penalties. In cases in which a bank submits or publishes any false or 
misleading Call Report or information, the Board of Directors or its 
designee may assess a civil money penalty of not more than $2,200 per 
day for each day the information is not corrected, where the bank 
maintains procedures in place reasonably adapted to avoid inadvertent 
error and the violation occurred unintentionally and as a result of such 
error; or the bank inadvertently transmits a Call Report or information 
which is false or misleading.
    (B) Tier Two penalties. Where a bank submits or publishes any false 
or misleading Call Report or other information, the Board of Directors 
or its designee may assess a civil money penalty of not more than 
$20,000 per day for each day the information is not corrected. Pursuant 
to the Debt Collection Improvement Act of 1996, for violations which 
occur after December 31, 2008, the maximum Tier Two penalty amount will 
increase to $32,000 per day for each day the information is not 
corrected.
    (C) Tier Three penalties. Where a bank knowingly or with reckless 
disregard for the accuracy of any Call Report or information submits or 
publishes any false or misleading Call Report or other information, the 
Board of Directors or its designee may assess a civil money penalty of 
not more than the lesser of $1,375,000 or 1 percent of the bank's total 
assets per day for each day the information is not corrected. Pursuant 
to the Debt Collection Improvement Act of 1996, for violations which 
occur after December 31, 2008, the maximum Tier Three penalty amount 
will increase to the lesser of $1,250,000 per day or 1 percent of the 
bank's total assets per day for each day the information is not 
corrected.
    (D) Mitigating factors. The amounts set forth in this paragraph 
(c)(2) may be reduced based upon the factors set forth in paragraph (b) 
of this section.
    (3) Adjustment of civil money penalties by the rate of inflation 
pursuant to section 31001(s) of the Debt Collection Improvement Act. 
Pursuant to section 31001(s) of the Debt Collection Improvement Act, for 
violations which occur after December 31, 2008, the Board of Directors 
or its designee may assess civil money penalties in the maximum amounts 
as follows:
    (i) Civil money penalties assessed pursuant to section 8(i)(2) of 
the FDIA. Tier One civil money penalties may be assessed pursuant to 
section 8(i)(2)(A) of the FDIA (12 U.S.C. 1818(i)(2)(A)) in an amount 
not to exceed $7,500 for each day during which the violation continues. 
Tier Two civil money penalties may be assessed pursuant to section 
8(i)(2)(B) of the FDIA (12 U.S.C. 1818(i)(2)(B)) in an amount not to 
exceed $37,500 for each day during which the violation, practice or 
breach continues. Tier Three civil money penalties may be assessed 
pursuant to section 8(i)(2)(C)(12 U.S.C. 1818(i)(2)(C)) in an amount not 
to exceed, in the case of any person other than an insured depository 
institution $1,375,000 or, in the

[[Page 88]]

case of any insured depository institution, an amount not to exceed the 
lesser of $1,375,000 or 1 percent of the total assets of such 
institution for each day during which the violation, practice, or breach 
continues.
    (A) Civil money penalties may be assessed pursuant to section 
8(i)(2) of the FDIA in the amounts set forth in this paragraph (c)(3)(i) 
for violations of various consumer laws, including, the Home Mortgage 
Disclosure Act (12 U.S.C. 2804 et seq. and 12 CFR 203.6), the Expedited 
Funds Availability Act (12 U.S.C. 4001 et seq.), the Truth in Savings 
Act (12 U.S.C. 4301 et seq.), the Real Estate Settlement Procedures Act 
(12 U.S.C. 2601 et seq. and 12 CFR part 3500), the Truth in Lending Act 
(15 U.S.C. 1601 et seq.), the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), the Equal Credit Opportunity Act (15 U.S.C. 1691 et seq.), the 
Fair Debt Collection Practices Act (15 U.S.C. 1692 et seq.), the 
Electronic Funds Transfer Act (15 U.S.C. 1693 et seq.) and the Fair 
Housing Act (42 U.S.C. 3601 et seq.) in the amounts set forth in 
paragraphs (c)(3)(i) through (c)(3)(iii) of this section.
    (ii) Civil money penalties assessed pursuant to section 7(c) of the 
FDIA for late filing or the submission false or misleading certified 
statements. Tier One civil money penalties may be assessed pursuant to 
section 7(c)(4)(A) of the FDIA (12 U.S.C. 1817(c)(4)(A)) in an amount 
not to exceed 2,200 for each day during which the failure to file 
continues or the false or misleading information is not corrected. Tier 
Two civil money penalties may be assessed pursuant to section 7(c)(4)(B) 
of the FDIA (12 U.S.C. 1817(c)(4)(B)) in an amount not to exceed $32,000 
for each day during which the failure to file continues or the false or 
misleading information is not corrected. Tier Three civil money 
penalties may be assessed pursuant to section 7(c)(4)(C) in an amount 
not to exceed the lesser of $1,375,000 or 1 percent of the total assets 
of the institution for each day during which the failure to file 
continues or the false or misleading information is not corrected.
    (iii) Civil money penalties assessed pursuant to section 10(e)(4) of 
the FDIA for refusal to allow examination or to provide required 
information during an examination. Pursuant to section 10(e)(4) of the 
FDIA (12 U.S.C. 1820(e)(4)), civil money penalties may be assessed 
against any affiliate of an insured depository institution which refuses 
to permit a duly-appointed examiner to conduct an examination or to 
provide information during the course of an examination as set forth in 
section 20(b) of the FDIA (12 U.S.C. 1820(b)), in an amount not to 
exceed $7,500 for each day the refusal continues.
    (iv) Civil money penalties assessed pursuant to section 18(a)(3) of 
the FDIA for incorrect display of insurance logo. Pursuant to section 
18(a)(3) of the FDIA (12 U.S.C. 1828(a)(3)), civil money penalties may 
be assessed against an insured depository institution which fails to 
correctly display its insurance logo pursuant to that section, in an 
amount not to exceed $110 for each day the violation continues.
    (v) Civil money penalties assessed pursuant to section 18(h) of the 
FDI Act for failure to timely pay assessment.
    (A) In General. Subject to paragraph (c)(3)(v)(C) of this section, 
any insured depository institution which fails or refuses to pay any 
assessment shall be subject to a penalty in an amount of not more than 1 
percent of the amount of the assessment due for each day that such 
violation continues.
    (B) Exception In Case Of Dispute. Paragraph (A) of this section 
shall not apply if--
    (1) The failure to pay an assessment is due to a dispute between the 
insured depository institution and the Corporation over the amount of 
such assessment; and
    (2) The insured depository institution deposits security 
satisfactory to the Corporation for payment upon final determination of 
the issue.
    (C) Special Rule For Small Assessment Amounts. If the amount of the 
assessment which an insured depository institution fails or refuses to 
pay is less than $10,000 at the time of such failure or refusal, the 
amount of any penalty to which such institution is subject under 
paragraph (A) of this section shall not exceed $100 for each day that 
such violation continues.

[[Page 89]]

    (D) Authority To Modify Or Remit Penalty. The Corporation, in the 
sole discretion of the Corporation, may compromise, modify or remit any 
penalty which the Corporation may assess or has already assessed under 
paragraph (c)(3)(v)(A) of this section upon a finding that good cause 
prevented the timely payment of an assessment.
    (vi) Civil money penalties assessed pursuant to section 19b(j) of 
the FDIA for recordkeeping violations. Pursuant to section 19b(j) of the 
FDIA (12 U.S.C. 1829b(j)), civil money penalties may be assessed against 
an insured depository institution and any director, officer or employee 
thereof who wilfully or through gross negligence violates or causes a 
violation of the recordkeeping requirements of that section or its 
implementing regulations in an amount not to exceed $16,000 per 
violation.
    (vii) Civil fine pursuant to 12 U.S.C. 1832(c) for violation of 
provisions forbidding interest-bearing demand deposit accounts. Pursuant 
to 12 U.S.C. 1832(c), any depository institution which violates the 
prohibition on deposit or withdrawal from interest-bearing accounts via 
negotiable or transferable instruments payable to third parties shall be 
subject to a fine of $1,100 per violation.
    (viii) Civil penalties for violations of security measure 
requirements under 12 U.S.C. 1884. Pursuant to 12 U.S.C. 1884, an 
institution which violates a rule establishing minimum security 
requirements as set forth in 12 U.S.C. 1882, shall be subject to a civil 
penalty not to exceed $110 for each day of the violation.
    (ix) Civil money penalties assessed pursuant to the Bank Holding 
Company Act of 1970 for prohibited tying arrangements. Pursuant to the 
Bank Holding Company Act of 1970, Tier One civil money penalties may be 
assessed pursuant to 12 U.S.C. 1972(2)(F)(i) in an amount not to exceed 
$7,500 for each day during which the violation continues. Tier Two civil 
money penalties may be assessed pursuant to 12 U.S.C. 1972(2)(F)(ii) in 
an amount not to exceed $37,500 for each day during which the violation, 
practice or breach continues. Tier Three civil money penalties may be 
assessed pursuant to 12 U.S.C. 1972(2)(F)(iii) in an amount not to 
exceed, in the case of any person other than an insured depository 
institution $1,375,000 for each day during which the violation, 
practice, or breach continues or, in the case of any insured depository 
institution, an amount not to exceed the lesser of $1,375,000 or 1 
percent of the total assets of such institution for each day during 
which the violation, practice, or breach continues.
    (x) Civil money penalties assessed pursuant to the International 
Banking Act of 1978. Pursuant to the International Banking Act of 1978 
(IBA) (12 U.S.C. 3108(b)), civil money penalties may be assessed for 
failure to comply with the requirements of the IBA pursuant to section 
8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)), in the amounts set forth in 
paragraph (c)(3)(i) of this section.
    (xi) Civil money penalties assessed for appraisal violations. 
Pursuant to 12 U.S.C. 3349(b), where a financial institution seeks, 
obtains, or gives any other thing of value in exchange for the 
performance of an appraisal by a person that the institution knows is 
not a state certified or licensed appraiser in connection with a 
federally related transaction, a civil money penalty may be assessed 
pursuant to section 8(i)(2) of the FDIA (12 U.S.C. 1818(i)(2)) in the 
amounts set forth in paragraph (c)(3)(i) of this section.
    (xii) Civil money penalties assessed pursuant to International 
Lending Supervision Act. Pursuant to the International Lending 
Supervision Act (ILSA) (12 U.S.C. 3909(d)), the CMP that may be assessed 
against any banking institution or any officer, director, employee, 
agent or other person participating in the conduct of the affairs of 
such banking institution is amount not to exceed $1,100 for each day a 
violation of the ILSA or any rule, regulation or order issued pursuant 
to ILSA continues.
    (xiii) Civil money penalties assessed for violations of the 
Community Development Banking and Financial Institution Act. Pursuant to 
the Community Development Banking and Financial Institution Act 
(Community Development Banking Act) (12 U.S.C. 4717(b)) a civil money 
penalty may be assessed for violations of the Community Development 
Banking Act pursuant to section 8(i)(2)

[[Page 90]]

of the FDIA (12 U.S.C. 1818(i)(2)), in the amounts set forth in 
paragraph (c)(3)(i) of this section.
    (xiv) Civil money penalties assessed for violations of the 
Securities Exchange Act of 1934. Pursuant to section 21B of the 
Securities Exchange Act of 1934 (Exchange Act) (15 U.S.C. 78u-2), civil 
money penalties may be assessed for violations of certain provisions of 
the Exchange Act, where such penalties are in the public interest. Tier 
One civil money penalties may be assessed pursuant to 15 U.S.C. 78u-
2(b)(1) in an amount not to exceed $7,500 for a natural person or 
$70,000 for any other person for violations set forth in 15 U.S.C. 78u-
2(a). Tier Two civil money penalties may be assessed pursuant to 15 
U.S.C. 78u-2(b)(2) in an amount not to exceed--for each violation set 
forth in 15 U.S.C. 78u-2(a)--$70,000 for a natural person or $350,000 
for any other person if the act or omission involved fraud, deceit, 
manipulation, or deliberate or reckless disregard of a regulatory 
requirement. Tier Three civil money penalties may be assessed pursuant 
to 15 U.S.C. 78u-2(b)(3) for each violation set forth in 15 U.S.C. 78u-
2(a), in an amount not to exceed $140,000 for a natural person or 
$675,000 for any other person, if the act or omission involved fraud, 
deceit, manipulation, or deliberate or reckless disregard of a 
regulatory requirement; and such act or omission directly or indirectly 
resulted in substantial losses, or created a significant risk of 
substantial losses to other persons or resulted in substantial pecuniary 
gain to the person who committed the act or omission.
    (xv) Civil money penalties assessed for false claims and statements 
pursuant to the Program Fraud Civil Remedies Act. Pursuant to the 
Program Fraud Civil Remedies Act (31 U.S.C. 3802), civil money penalties 
of not more than $7,500 per claim or statement may be assessed for 
violations involving false claims and statements.
    (xvi) Civil money penalties assessed for violations of the Flood 
Disaster Protection Act. Pursuant to the Flood Disaster Protection Act 
(FDPA)(42 U.S.C. 4012a(f)), civil money penalties may be assessed 
against any regulated lending institution that engages in a pattern or 
practice of violations of the FDPA in an amount not to exceed $385 per 
violation, and not to exceed a total of $135,000 annually.
    (xvii) Civil money penalties assessed for violation of one-year 
restriction on Federal examiners of financial institutions. Pursuant to 
section 10(k) of the Federal Deposit Insurance Act (12 U.S.C. 1820(k)), 
the Board of Directors or its designee may assess a civil money penalty 
of up to $250,000 against any covered former Federal examiner of a 
financial institution who, in violation of section 1820(k) and within 
the one-year period following termination of government service as an 
employee, serves as an officer, director, or consultant of a financial 
or depository institution, a holding company, or of any other entity 
listed in section 10(k), without the written waiver or permission by the 
appropriate Federal banking agency or authority under section 
1820(k)(5). Pursuant to the Debt Collection Improvement Act of 1996, for 
any violation of section 10(k) which occurs after December 31, 2008, the 
maximum penalty amount will increase to $275,000.

[56 FR 37975, Aug. 9, 1991, as amended at 61 FR 57991, Nov. 12, 1996; 64 
FR 62100, Nov. 16, 1999; 65 FR 64887, Oct. 31, 2000; 66 FR 9189, Feb. 7, 
2001; 69 FR 61305, Oct. 18, 2004; 71 FR 65713, Nov. 9, 2006; 73 FR 
73157, Dec. 2, 2008]



Sec. 308.133  Effective date of, and payment under, an order to pay.

    (a) Effective date. (1) Unless otherwise provided in the Notice, 
except in situations covered by paragraph (a)(2) of this section, civil 
penalties assessed pursuant to this subpart are due and payable 60 days 
after the Notice is served upon the respondent.
    (2) If the respondent both requests a hearing and serves an answer, 
civil penalties assessed pursuant to this subpart are due and payable 60 
days after an order to pay, issued after the hearing or upon default, is 
served upon the respondent, unless the order provides for a different 
period of payment. Civil penalties assessed pursuant to an order to pay 
issued upon consent are due and payable within the time specified 
therein.
    (b) Payment. All penalties collected under this section shall be 
paid over to the Treasury of the United States.

[[Page 91]]



    Subpart I_Rules and Procedures for Imposition of Sanctions Upon 
    Municipal Securities Dealers or Persons Associated With Them and 
                  Clearing Agencies or Transfer Agents



Sec. 308.134  Scope.

    The rules and procedures in this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings by the Board of 
Directors or its designee:
    (a) To censure, limit the activities of, suspend, or revoke the 
registration of, any municipal securities dealer for which the FDIC is 
the appropriate regulatory agency;
    (b) To censure, suspend, or bar from being associated with such a 
municipal securities dealer, any person associated with such a municipal 
securities dealer; and
    (c) To deny registration, to censure limit the activities of, 
suspend, or revoke the registration of, any transfer agent or clearing 
agency for which the FDIC is the appropriate regulatory agency. This 
subpart and the Uniform Rules shall not apply to proceedings to postpone 
or suspend registration of a transfer agent or clearing agency pending 
final determination of denial or revocation of registration.



Sec. 308.135  Grounds for imposition of sanctions.

    (a) Action under section 15(b)(4) of the Exchange Act. The Board of 
Directors or its designee may issue and have served upon any municipal 
securities dealer for which the FDIC is the appropriate regulatory 
agency, or any person associated or seeking to become associated with a 
municipal securities dealer for which the FDIC is the appropriate 
regulatory agency, a written notice of its intention to censure, limit 
the activities or functions or operations of, suspend, or revoke the 
registration of, such municipal securities dealer, or to censure, 
suspend, or bar the person from being associated with the municipal 
securities dealer, when the Board of Directors or its designee 
determines:
    (1) That such municipal securities dealer or such person
    (i) Has committed any prohibited act or omitted any required act 
specified in subparagraph (A), (D), or (E) of section 15(b)(4) of the 
Exchange Act, as amended (15 U.S.C. 78o);
    (ii) Has been convicted of any offense specified in section 
15(b)(4)(B) of the Exchange Act within ten years of commencement of 
proceedings under this subpart; or
    (iii) Is enjoined from any act, conduct, or practice specified in 
section 15(b)(4)(C) of the Exchange Act; and
    (2) That it is in the public interest to impose any of the sanctions 
set forth in paragraph (a) of this section.
    (b) Action under sections 17 and 17A of the Exchange Act. The Board 
of Directors or its designee may issue, and have served upon any 
transfer agent or clearing agency for which the FDIC is the appropriate 
regulatory agency, a written Notice of its intention to deny 
registration to, censure, place limitations on the activities or 
function or operations of, suspend, or revoke the registration of, the 
transfer agent or clearing agency, when the Board of Directors or its 
designee determines:
    (1) That the transfer agent or clearing agency has willfully 
violated, or is unable to comply with, any applicable provision of 
section 17 or 17A of the Exchange Act, as amended, or any applicable 
rule or regulation issued pursuant thereto; and
    (2) That it is in the public interest to impose any of the sanctions 
set forth in paragraph (b) of this section.



Sec. 308.136  Notice to and consultation with the Securities and Exchange 

Commission.

    Before initiating any proceedings under Sec. 308.135, the FDIC 
shall:
    (a) Notify the Securities and Exchange Commission of the identity of 
the municipal securities dealer or associated person against whom 
proceedings are to be initiated, and the nature of and basis for the 
proposed action; and
    (b) Consult with the Commission concerning the effect of the 
proposed action on the protection of investors and the possibility of 
coordinating the action with any proceeding by the Commission against 
the municipal securities dealer or associated person.

[[Page 92]]



Sec. 308.137  Effective date of order imposing sanctions.

    An order issued by the Board of Directors after a hearing or an 
order issued upon default shall become effective at the expiration of 30 
days after the service of the order, except that an order of censure, 
denial, or revocation of registration is effective when served. An order 
issued upon consent shall become effective at the time specified 
therein. All orders shall remain effective and enforceable except to the 
extent they are stayed, modified, terminated, or set aside by the Board 
of Directors, its designee, or a reviewing court, provided that orders 
of suspension shall continue in effect no longer than 12 months.



 Subpart J_Rules and Procedures Relating to Exemption Proceedings Under 
          Section 12(h) of the Securities Exchange Act of 1934



Sec. 308.138  Scope.

    The rules and procedures of this subpart J shall apply to 
proceedings by the Board of Directors or its designee to exempt, in 
whole or in part, an issuer of securities from the provisions of 
sections 12(g), 13, 14(a), 14(c), 14(d), or 14(f) of the Exchange Act, 
as amended (15 U.S.C. 781, 78m, 78n (a), (c) (d) or (f)), or to exempt 
an officer or a director or beneficial owner of securities of such an 
issuer from the provisions of section 16 of the Exchange Act (15 U.S.C. 
78p).



Sec. 308.139  Application for exemption.

    Any interested person may file a written application for an 
exemption under this subpart with the Executive Secretary, Federal 
Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 
20429. The application shall specify the exemption sought and the reason 
therefor, and shall include a statement indicating why the exemption 
would be consistent with the public interest or the protection of 
investors.



Sec. 308.140  Newspaper notice.

    (a) General rule. If the Board of Directors or its designee, in its 
sole discretion, decides to further consider an application for 
exemption, there shall be served upon the applicant instructions to 
publish one notification in a newspaper of general circulation in the 
community where the main office of the issuer is located. The applicant 
shall furnish proof of such publication to the Executive Secretary or 
such other person as may be directed in the instructions.
    (b) Contents. The notification shall contain the name and address of 
the issuer and the name and title of the applicant, the exemption 
sought, a statement that a hearing will be held, and a statement that 
within 30 days of publication of the newspaper notice, interested 
persons may submit to the FDIC written comments on the application for 
exemption and a written request for an opportunity to be heard. The 
address of the FDIC must appear in the notice.



Sec. 308.141  Notice of hearing.

    Within ten days after expiration of the period for receipt of 
comments pursuant to Sec. 308.140, the Executive Secretary shall serve 
upon the applicant and any person who has requested an opportunity to be 
heard written notification indicating the place and time of the hearing. 
The hearing shall be held not later than 30 days after service of the 
notification of hearing. The notification shall contain the name and 
address of the presiding officer designated by the Executive Secretary 
and a statement of the matters to be considered.



Sec. 308.142  Hearing.

    (a) Proceedings are informal. Formal rules of evidence, the 
adjudicative procedures of the APA (5 U.S.C. 554-557), the Uniform Rules 
and Sec. 308.108 of subpart B of the Local Rules shall not apply to 
hearings under this subpart.
    (b) Hearing Procedure. (1) Parties to the hearing may appear 
personally or through counsel and shall have the right to introduce 
relevant and material documents and to make an oral statement.
    (2) There shall be no discovery in proceeding under this subpart J.
    (3) The presiding officer shall have discretion to permit 
presentation of

[[Page 93]]

witnesses within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer prior to the hearing. 
Witnesses shall be sworn, unless otherwise directed by the presiding 
officer. The presiding officer may ask questions of any witness and each 
party may cross-examine any witness presented by an opposing party.
    (4) The proceedings shall be on the record and the transcript shall 
be promptly submitted to the Board of Directors. The presiding officer 
shall make recommendations to the Board of Directors, unless the Board 
of Directors, in its sole discretion, directs otherwise.



Sec. 308.143  Decision of Board of Directors.

    Following submission of the hearing transcript to the Board of 
Directors, the Board of Directors may grant the exemption where it 
determines, by reason of the number of public investors, the amount of 
trading interest in the securities, the nature and extent of the 
issuer's activities, the issuer's income or assets, or otherwise, that 
the exemption is consistent with the public interest or the protection 
of investors. Any exemption shall be set forth in an order specifying 
the terms of the exemption, the person to whom it is granted, and the 
period for which it is granted. A copy of the order shall be served upon 
each party to the proceeding.



 Subpart K_Procedures Applicable to Investigations Pursuant to Section 
                            10(c) of the FDIA



Sec. 308.144  Scope.

    The procedures of this subpart shall be followed when an 
investigation is instituted and conducted in connection with any open or 
failed insured depository institution, any institutions making 
application to become insured depository institutions, and affiliates 
thereof, or with other types of investigations to determine compliance 
with applicable law and regulations, pursuant to section 10(c) of the 
FDIA (12 U.S.C. 1820(c)). The Uniform Rules and subpart B of the Local 
Rules shall not apply to investigations under this subpart.



Sec. 308.145  Conduct of investigation.

    An investigation conducted pursuant to section 10(c) of the FDIA 
shall be initiated only upon issuance of an order by the Board of 
Directors; or by the General Counsel, the Director of the Division of 
Supervision and Consumer Protection (DSC), the Director of the Division 
of Depositor and Asset Services, or their respective designees as set 
forth at Sec. 303.272 of this chapter. The order shall indicate the 
purpose of the investigation and designate FDIC's representative(s) to 
direct the conduct of the investigation. Upon application and for good 
cause shown, the persons who issue the order of investigation may limit, 
quash, modify, or withdraw it. Upon the conclusion of the investigation, 
an order of termination of the investigation shall be issued by the 
persons issuing the order of investigation.

[56 FR 37975, Aug. 9, 1991, as amended at 60 FR 31384, June 15, 1995; 64 
FR 62100, Nov. 16, 1999]



Sec. 308.146  Powers of person conducting investigation.

    The person designated to conduct a section 10(c) investigation shall 
have the power, among other things, to administer oaths and 
affirmations, to take and preserve testimony under oath, to issue 
subpoenas and subpoenas duces tecum and to apply for their enforcement 
to the United States District Court for the judicial district or the 
United States court in any territory in which the main office of the 
bank, institution, or affiliate is located or in which the witness 
resides or conducts business. The person conducting the investigation 
may obtain the assistance of counsel or others from both within and 
outside the FDIC. The persons who issue the order of investigation may 
limit, quash, or modify any subpoena or subpoena duces tecum, upon 
application and for good cause shown. The person conducting an 
investigation may report to the Board of Directors any instance where 
any attorney has been guilty of contemptuous conduct. The Board of 
Directors, upon motion of the person conducting the investigation, or on 
its own motion, may make a finding of contempt and may then summarily 
suspend,

[[Page 94]]

without a hearing, any attorney representing a witness from further 
participation in the investigation.



Sec. 308.147  Investigations confidential.

    lnvestigations conducted pursuant to section 10(c) shall be 
confidential. Information and documents obtained by the FDIC in the 
course of such investigations shall not be disclosed, except as provided 
in part 309 of this chapter and as otherwise required by law.



Sec. 308.148  Rights of witnesses.

    In an investigation pursuant to section 10(c):
    (a) Any person compelled or requested to furnish testimony, 
documentary evidence, or other information, shall upon request be shown 
and provided with a copy of the order initiating the proceeding;
    (b) Any person compelled or requested to provide testimony as a 
witness or to furnish documentary evidence may be represented by a 
counsel who meets the requirements of Sec. 308.6 of the Uniform Rules. 
That counsel may be present and may:
    (1) Advise the witness before, during, and after such testimony;
    (2) Briefly question the witness at the conclusion of such testimony 
for clarification purposes; and
    (3) Make summary notes during such testimony solely for the use and 
benefit of the witness;
    (c) All persons testifying shall be sequestered. Such persons and 
their counsel shall not be present during the testimony of any other 
person, unless permitted in the discretion of the person conducting the 
investigation;
    (d) In cases of a perceived or actual conflict of interest arising 
out of an attorney's or law firm's representation of multiple witnesses, 
the person conducting the investigation may require the attorney to 
comply with the provisions of Sec. 308.8 of the Uniform Rules; and
    (e) Witness fees shall be paid in accordance with Sec. 308.14 of 
the Uniform Rules.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62100, Nov. 16, 1999]



Sec. 308.149  Service of subpoena.

    Service of a subpoena shall be accomplished in accordance with Sec. 
308.11 of the Uniform Rules.



Sec. 308.150  Transcripts.

    (a) General rule. Transcripts of testimony, if any, in an 
investigation pursuant to section 10(c) shall be recorded by an official 
reporter, or by any other person or means designated by the person 
conducting the investigation. A witness may, solely for the use and 
benefit of the witness, obtain a copy of the transcript of his or her 
testimony at the conclusion of the investigation or, at the discretion 
of the person conducting the investigation, at an earlier time, provided 
the transcript is available. The witness requesting a copy of his or her 
testimony shall bear the cost thereof.
    (b) Subscription by witness. The transcript of testimony shall be 
subscribed by the witness, unless the person conducting the 
investigation and the witness, by stipulation, have waived the signing, 
or the witness is ill, cannot be found, or has refused to sign. If the 
transcript of the testimony is not subscribed by the witness, the 
official reporter taking the testimony shall certify that the transcript 
is a true and complete transcript of the testimony.



 Subpart L_Procedures and Standards Applicable to a Notice of Change in 
 Senior Executive Officer or Director Pursuant to Section 32 of the FDIA



Sec. 308.151  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the notice filed by a state nonmember bank pursuant to section 32 of the 
FDIA (12 U.S.C. 1831i) and Sec. 303.102 of this chapter for the consent 
of the FDIC to add or replace an individual on the Board of Directors, 
or to employ any individual as a senior executive officer, or change the 
responsibilities of any individual to a position of senior executive 
officer where:
    (a) The bank is not in compliance with all minimum capital 
requirements applicable to it as determined

[[Page 95]]

by the FDIC on the basis of such institution's most recent report of 
condition or report of examination or inspection;
    (b) The bank is in a troubled condition as defined in Sec. 
303.101(c) of this chapter; or
    (c) The FDIC determines, in connection with the review of a capital 
restoration plan required under section 38(e)(2) of the FDIA (12 U.S.C. 
1831o(e)(2)) or otherwise, that such prior notice is appropriate.

[64 FR 62100, Nov. 16, 1999]



Sec. 308.152  Grounds for disapproval of notice.

    The Board of Directors or its designee may issue a notice of 
disapproval with respect to a notice submitted by a state nonmember bank 
pursuant to section 32 of the FDIA (12 U.S.C. 1831i) where:
    (a) The competence, experience, character, or integrity of the 
individual with respect to whom such notice is submitted indicates that 
it would not be in the best interests of the depositors of the state 
nonmember bank to permit the individual to be employed by or associated 
with such bank; or
    (b) The competence, experience, character, or integrity of the 
individual with respect to whom such notice is submitted indicates that 
it would not be in the best interests of the public to permit the 
individual to be employed by, or associated with, the state nonmember 
bank.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.153  Procedures where notice of disapproval issues pursuant to Sec. 

303.103(c) of this chapter.

    (a) The Notice of Disapproval shall be served upon the insured state 
nonmember bank and the candidate for director or senior executive 
officer. The Notice of Disapproval shall:
    (1) Summarize or cite the relevant considerations specified in Sec. 
308.152;
    (2) Inform the individual and the bank that a request for review of 
the disapproval may be filed within fifteen days of receipt of the 
Notice of Disapproval; and
    (3) Specify that additional information, if any, must be contained 
in the request for review.
    (b) The request for review must be filed at the appropriate regional 
office.
    (c) The request for review must be in writing and should:
    (1) Specify the reasons why the FDIC should reconsider its 
disapproval; and
    (2) Set forth relevant, substantive and material documents, if any, 
that for good cause were not previously set forth in the notice required 
to be filed pursuant to section 32 of the FDIA (12 U.S.C. 1831i).

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.154  Decision on review.

    (a) Within 30 days of receipt of the request for review, the Board 
of Directors or its designee, shall notify the bank and/or the 
individual filing the reconsideration (hereafter ``petitioner'') of the 
FDIC's decision on review.
    (b) If the decision is to grant the review and approve the notice, 
the bank and the individual involved shall be so notified.
    (c) A denial of the request for review pursuant to section 32 of the 
FDIA shall:
    (1) Inform the petitioner that a written request for a hearing, 
stating the relief desired and the grounds therefore, may be filed with 
the Executive Secretary within 15 days after the receipt of the denial; 
and
    (2) Summarize or cite the relevant considerations specified in Sec. 
308.152.
    (d) If a decision is not rendered within 30 days, the petitioner may 
file a request for a hearing within fifteen days from the date of 
expiration.



Sec. 308.155  Hearing.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 30 days after receipt of a request for a hearing 
filed pursuant to Sec. 308.154. Upon request of the petitioner or the 
FDIC, the presiding officer or the Executive Secretary may order a later 
hearing date.
    (b) Burden of proof. The ultimate burden of proof shall be upon the 
candidate for director or senior executive officer. The burden of going 
forward

[[Page 96]]

with a prima facie case shall be upon the FDIC.
    (c) Hearing procedure. (1) The hearing shall be held in Washington, 
DC or at another designated place, before a presiding officer designated 
by the Executive Secretary.
    (2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102, and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The petitioner may appear at the hearing and shall have the 
right to introduce relevant and material documents and make an oral 
presentation. Members of the FDIC enforcement staff may attend the 
hearing and participate as representatives of the FDIC enforcement 
staff.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the petitioner afforded the hearing.
    (6) In the course of or in connection with any hearing under 
paragraph (c) of this section the presiding officer shall have the power 
to administer oaths and affirmations, to take or cause to be taken 
depositions of unavailable witnesses, and to issue, revoke, quash, or 
modify subpoenas and subpoenas duces tecum. Where the presentation of 
witnesses is permitted, the presiding officer may require the attendance 
of witnesses from any state, territory, or other place subject to the 
jurisdiction of the United States at any location where the proceeding 
is being conducted. Witness fees shall be paid in accordance with Sec. 
308.14 of the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or the 
members of the FDIC enforcement staff, the record shall remain open for 
five business days following the hearing for the parties to make 
additional submissions to the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors or its designee, where possible, within fifteen days after the 
last day for the parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors or its designee. 
The Executive Secretary's certification shall close the record.
    (d) Written submissions in lieu of hearing. The petitioner may in 
writing waive a hearing and elect to have the matter determined on the 
basis of written submissions.
    (e) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the order shall be final and unappealable, and shall remain in 
full force and effect.
    (f) Decision by Board of Directors or its designee. Within 45 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected individual whether the denial of the 
notice will be continued, terminated, or otherwise modified. The 
notification shall state the basis for any decision of the Board of 
Directors or its designee that is adverse to the petitioner. The Board 
of Directors or its designee shall promptly rescind or modify the denial 
where the decision is favorable to the petitioner.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]

[[Page 97]]



Subpart M_Procedures and Standards Applicable to an Application Pursuant 
                        to Section 19 of the FDIA



Sec. 308.156  Scope.

    The rules and procedures set forth in this subpart shall apply to an 
application filed pursuant to section 19 of the FDIA (12 U.S.C. 1829) by 
an insured depository institution and/or an individual, who has been 
convicted of any criminal offense involving dishonesty or a breach of 
trust or money laundering or who has agreed to enter into a pretrial 
diversion or similar program in connection with the prosecution of such 
offense, to seek the prior written consent of the FDIC to become or 
continue as an institution-affiliated party with respect to an insured 
depository institution; to own or control directly or indirectly an 
insured depository institution; or to participate directly or indirectly 
in any manner in the conduct of the affairs of an insured depository 
institution.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999; 64 
FR 72913, Dec. 29, 1999]



Sec. 308.157  Relevant considerations.

    (a) In proceedings under Sec. 308.156 on an application to become 
or continue as an institution-affiliated party with respect to an 
insured depository institution; to own or control directly or indirectly 
an insured depository institution; or to participate directly or 
indirectly in any manner in the conduct of the affairs of an insured 
depository institution, the following shall be considered:
    (1) Whether the conviction or entry into a pretrial diversion or 
similar program is for a criminal offense involving dishonesty or breach 
of trust or money laundering;
    (2) Whether participation directly or indirectly by the person in 
any manner in the conduct of the affairs of the insured depository 
institution constitutes a threat to the safety or soundness of the 
insured depository institution or the interests of its depositors, or 
threatens to impair public confidence in the insured depository 
institution;
    (3) Evidence of the applicant's rehabilitation;
    (4) The position to be held by the applicant;
    (5) The amount of influence and control the applicant will be able 
to exercise over the affairs and operations of the insured depository 
institution;
    (6) The ability of the management at the insured depository 
institution to supervise and control the activities of the applicant;
    (7) The level of ownership which the applicant will have at the 
insured depository institution;
    (8) Applicable fidelity bond coverage for the applicant; and
    (9) Additional factors in the specific case that appear relevant.
    (b) The question of whether a person, who was convicted of a crime 
or who agreed to enter a pretrial diversion or similar program, was 
guilty of that crime shall not be at issue in a proceeding under this 
subpart.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



Sec. 308.158  Filing papers and effective date.

    (a) Filing with the regional office. Applications pursuant to 
section 19 shall be filed by in the appropriate regional office. Unless 
a waiver has been granted pursuant to paragraph (c) of this section, 
only an insured depository institution may file an application. Persons 
meeting the de minimis criteria set forth in the FDIC's Statement of 
Policy on Section 19 of the FDIA (63 FR 66177 (1998)) need not file an 
application.
    (b) Effective date. An application pursuant to section 19 may be 
made in writing at any time more than one year after the issuance of a 
decision denying an application pursuant to section 19. The removal and/
or prohibition pursuant to section 19 shall continue until the 
individual has been reinstated by the Board of Directors or its designee 
for good cause shown.
    (c) Waiver applications. If an institution does not file an 
application regarding an individual, the individual may file a request 
for a waiver of the

[[Page 98]]

institution filing requirement for section 19 of the FDIA. Such a waiver 
application shall be filed with the appropriate regional office and 
shall set forth substantial good cause why the application should be 
granted. The Director of the Division of Supervision and Consumer 
Protection (DSC) and, where confirmed in writing by the director, a 
deputy director or an associate director may grant or deny applications 
requesting waivers of the institution filing requirement. The authority 
delegated under this section shall be exercised only upon the concurrent 
certification of the General Counsel or his designee that the action to 
be taken is not inconsistent with section 19 of the FDIA.

[64 FR 62101, Nov. 16, 1999]



Sec. 308.159  Denial of applications.

    A denial of an application pursuant to section 19 shall:
    (a) Inform the applicant that a written request for a hearing, 
stating the relief desired and the grounds therefor and any supporting 
evidence, may be filed with the Executive Secretary within 60 days after 
the denial; and
    (b) Summarize or cite the relevant considerations specified in Sec. 
308.157 of this subpart.



Sec. 308.160  Hearings.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 60 days after receipt of a request for hearing on an 
application filed pursuant to Sec. 308.159. Upon the request of the 
applicant or FDIC enforcement counsel, the presiding officer or the 
Executive Secretary may order a later hearing date.
    (b) Burden of proof. The ultimate burden of proof shall be upon the 
person proposing to become or continue as an institution-affiliated 
party with respect to an insured depository institution; to own or 
control directly or indirectly an insured depository institution; or to 
participate directly or indirectly in any manner in the conduct of the 
affairs of an insured depository institution. The burden of going 
forward with a prima facie case shall be upon the FDIC.
    (c) Hearing procedure. (1) The hearing shall be held in Washington, 
DC, or at another designated place, before a presiding officer 
designated by the Executive Secretary.
    (2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102 and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The applicant may appear at the hearing and shall have the right 
to introduce relevant and material documents and oral argument. Members 
of the FDIC enforcement staff may attend the hearing and participate as 
a party.
    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the applicant afforded the hearing.
    (6) In the course of or in connection with any hearing under this 
subsection, the presiding officer shall have the power to administer 
oaths and affirmations, to take or cause to be taken depositions of 
unavailable witnesses, and to issue, revoke, quash, or modify subpoenas 
and subpoenas duces tecum. Where the presentation of witnesses is 
permitted, the presiding officer may require the attendance of witnesses 
from any state, territory, or other place subject to the jurisdiction of 
the United States at any location where the proceeding is being 
conducted. Witness fees shall be paid in accordance with Sec. 308.14 of 
the Uniform Rules.
    (7) Upon the request of the applicant afforded the hearing, or FDIC 
enforcement staff, the record shall remain open for five business days 
following the hearing for the parties to make additional submissions to 
the record.

[[Page 99]]

    (8) The presiding officer shall make recommendations to the Board of 
Directors, where possible, within 20 days after the last day for the 
parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors or its designee. 
The Executive Secretary's certification shall close the record.
    (d) Written submissions in lieu of hearing. The applicant or the 
bank may in writing waive a hearing and elect to have the matter 
determined on the basis of written submissions.
    (e) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the person shall remain barred under section 19.
    (f) Decision by Board of Directors or its designee. Within 60 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the affected person whether the person shall 
remain barred under section 19. The notification shall state the basis 
for any decision of the Board of Directors or its designee that is 
adverse to the applicant.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62101, Nov. 16, 1999]



  Subpart N_Rules and Procedures Applicable to Proceedings Relating to 
     Suspension, Removal, and Prohibition Where a Felony ls Charged

    Source: 72 FR 67235, Nov. 28, 2007, unless otherwise noted.



Sec. 308.161  Scope.

    The rules and procedures set forth in this subpart shall apply to 
the following:
    (a) Proceedings to suspend an institution-affiliated party of an 
insured state nonmember bank, or to prohibit such party from further 
participation in the conduct of the affairs of any depository 
institution, if continued service or participation by such party posed, 
poses, or may pose a threat to the interests of the depositors of, or 
threatened, threatens, or may threaten to impair public confidence in, 
any relevant depository institution (as defined at section 1818(g)(1)(E) 
of Title 12), where the individual is the subject of any state or 
federal information, indictment, or complaint, involving the commission 
of, or participation in:
    (1) A crime involving dishonesty or breach of trust punishable by 
imprisonment exceeding one year under state or federal law; or
    (2) A criminal violation of section 1956, 1957, or 1960 of Title 18 
or section 5322 or 5324 of Title 31.
    (b) Proceedings to remove from office or to prohibit an institution-
affiliated party from further participation in the conduct of the 
affairs of any depository institution without the consent of the Board 
of Directors or its designee where:
    (1) A judgment of conviction or an agreement to enter a pre-trial 
diversion or other similar program has been entered against such party 
in connection with a crime described in paragraph (a)(1) of this section 
that is not subject to further appellate review, if continued service or 
participation by such party posed, poses, or may pose a threat to the 
interests of the depositors of, or threatened, threatens, or may 
threaten to impair public confidence in, any relevant depository 
institution (as defined at section 1818(g)(1)(E) of Title 12); or
    (2) A judgment of conviction or an agreement to enter a pre-trial 
diversion or other similar program has been entered against such party 
in connection with a crime described in paragraph (a)(2) of this 
section.



Sec. 308.162  Relevant considerations.

    (a)(1) In proceedings under Sec. 308.161(a) and (b) for a notice of 
suspension or prohibition, or a removal or prohibition order, the 
following shall be considered:
    (i) Whether the alleged offense is a crime which is punishable by 
imprisonment for a term exceeding one year

[[Page 100]]

under state or federal law and which involves dishonesty or breach of 
trust; and
    (ii) Whether the alleged offense is a criminal violation of section 
1956, 1957, or 1960 of Title 18 or section 5322 or 5324 of Title 31; and
    (iii) Whether continued service or participation by the institution-
affiliated party posed, poses, or may pose a threat to the interests of 
the depositors of, or threatened, threatens, or may threaten to impair 
public confidence in, any relevant depository institution (as defined at 
section 1818(g)(1)(E) of Title 12).
    (b) The question of whether an institution-affiliated party is 
guilty of the subject crime shall not be tried or considered in a 
proceeding under this subpart.



Sec. 308.163  Notice of suspension or prohibition, and orders of removal or 

prohibition.

    (a) Notice of suspension or prohibition.
    (1) The Board of Directors or its designee may suspend or prohibit 
from further participation in the conduct of the affairs of any 
depository institution an institution-affiliated party by written notice 
of suspension or prohibition upon a determination by the Board of 
Directors or its designee that the grounds for such suspension or 
prohibition exist. The written notice of suspension or prohibition shall 
be served upon the institution-affiliated party and any depository 
institution that the subject of the action is affiliated with at the 
time the notice is issued.
    (2) The suspension or prohibition shall be effective immediately 
upon service on the institution-affiliated party, and shall remain in 
effect until final disposition of the information, indictment, 
complaint, or until it is terminated by the Board of Directors or its 
designee under the provisions of Sec. 308.164 or otherwise.
    (b) Order of removal or prohibition.
    (1) The Board of Directors or its designee may issue an order 
removing or prohibiting from further participation in the conduct of the 
affairs of any depository institution an institution-affiliated party, 
when a final judgment of conviction not subject to further appellate 
review is entered against the institution-affiliated party for a crime 
referred to in Sec. 308.161(a)(1) and continued service or 
participation by such party posed, poses, or may pose a threat to the 
interests of the depositors of, or threatened, threatens, or may 
threaten to impair public confidence in, any relevant depository 
institution (as defined at section 1818(g)(1)(E) of Title 12).
    (2) An order of removal or prohibition shall be entered if a 
judgment of conviction is entered against the institution-affiliated 
party for a crime described in Sec. 308.161(a)(2).
    (c) The notice of suspension or prohibition or the order of removal 
or prohibition shall:
    (1) Inform the institution-affiliated party that a written request 
for a hearing, stating the relief desired and grounds therefore, and any 
supporting evidence, may be filed with the Executive Secretary within 30 
days after receipt of the written notice or order; and
    (2) Summarize or cite to the relevant considerations specified in 
Sec. 308.162 of this subpart.



Sec. 308.164  Hearings.

    (a) Hearing dates. The Executive Secretary shall order a hearing to 
be commenced within 30 days after receipt of a request for hearing filed 
pursuant to Sec. 308.163. Upon the request of the institution-
affiliated party, the presiding officer or the Executive Secretary may 
order a later hearing date.
    (b) Hearing procedure. (1) The hearing shall be held in Washington, 
DC, or at another designated place, before a presiding officer 
designated by the Executive Secretary.
    (2) The provisions of Sec. Sec. 308.6 through 308.12, 308.16, and 
308.21 of the Uniform Rules and Sec. Sec. 308.101 through 308.102 and 
308.104 through 308.106 of subpart B of the Local Rules shall apply to 
hearings held pursuant to this subpart.
    (3) The institution-affiliated party may appear at the hearing and 
shall have the right to introduce relevant and material documents and 
oral argument. Members of the FDIC enforcement staff may attend the 
hearing and participate as representatives of the FDIC enforcement 
staff.

[[Page 101]]

    (4) There shall be no discovery in proceedings under this subpart.
    (5) At the discretion of the presiding officer, witnesses may be 
presented within specified time limits, provided that a list of 
witnesses is furnished to the presiding officer and to all other parties 
prior to the hearing. Witnesses shall be sworn, unless otherwise 
directed by the presiding officer. The presiding officer may ask 
questions of any witness. Each party shall have the opportunity to 
cross-examine any witness presented by an opposing party. The transcript 
of the proceedings shall be furnished, upon request and payment of the 
cost thereof, to the institution-affiliated party afforded the hearing.
    (6) In the course of or in connection with any hearing under 
paragraph (b) of this section, the presiding officer shall have the 
power to administer oaths and affirmations, to take or cause to be taken 
depositions of unavailable witnesses, and to issue, revoke, quash, or 
modify subpoenas and subpoenas duces tecum. Where the presentation of 
witnesses is permitted, the presiding officer may require the attendance 
of witnesses from any state, territory, or other place subject to the 
jurisdiction of the United States at any location where the proceeding 
is being conducted. Witness fees shall be paid in accordance with Sec. 
308.14 of the Uniform Rules.
    (7) Upon the request of the institution-affiliated party afforded 
the hearing, or the members of the FDIC enforcement staff, the record 
shall remain open for five business days following the hearing for the 
parties to make additional submissions to the record.
    (8) The presiding officer shall make recommendations to the Board of 
Directors, where possible, within 10 days after the last day for the 
parties to submit additions to the record.
    (9) The presiding officer shall forward his or her recommendation to 
the Executive Secretary who shall promptly certify the entire record, 
including the recommendation to the Board of Directors. The Executive 
Secretary's certification shall close the record.
    (c) Written submissions in lieu of hearing. The institution-
affiliated party may in writing waive a hearing and elect to have the 
matter determined on the basis of written submissions.
    (d) Failure to request or appear at hearing. Failure to request a 
hearing shall constitute a waiver of the opportunity for a hearing. 
Failure to appear at a hearing in person or through an authorized 
representative shall constitute a waiver of hearing. If a hearing is 
waived, the order shall be final and unappealable, and shall remain in 
full force and effect pursuant to Sec. 308.163.
    (e) Decision by Board of Directors or its designee. Within 60 days 
following the Executive Secretary's certification of the record to the 
Board of Directors or its designee, the Board of Directors or its 
designee shall notify the institution-affiliated party whether the 
notice of suspension or prohibition or the order of removal or 
prohibition will be continued, terminated, or otherwise modified. The 
notification shall state the basis for any decision of the Board of 
Directors or its designee that is adverse to the institution-affiliated 
party. The Board of Directors or its designee shall promptly rescind or 
modify a notice of suspension or prohibition or an order of removal or 
prohibition where the decision is favorable to the institution-
affiliated party.



   Subpart O_Liability of Commonly Controlled Depository Institutions



Sec. 308.165  Scope.

    The rules and procedures in this subpart, subpart B of the Local 
Rules and the Uniform Rules shall apply to proceedings in connection 
with the assessment of cross-guaranty liability against commonly 
controlled depository institutions.



Sec. 308.166  Grounds for assessment of liability.

    Any insured depository institution shall be liable for any loss 
incurred or reasonably anticipated to be incurred by the corporation, 
subsequent to August 9, 1989, in connection with the default of a 
commonly controlled insured depository institution, or any loss incurred 
or reasonably anticipated to be incurred in connection with any 
assistance provided by the Corporation to any commonly controlled 
depository institution in danger of default.

[[Page 102]]



Sec. 308.167  Notice of assessment of liability.

    (a) The amount of liability shall be assessed upon service of a 
Notice of Assessment of Liability upon the liable depository 
institution, within two years of the date the Corporation incurred the 
loss.
    (b) Contents of Notice. (1) The Notice of Assessment of Liability 
shall set forth:
    (i) The basis for the FDIC's jurisdiction over the proceeding;
    (ii) A statement of the Corporation's good faith estimate of the 
amount of loss it has incurred or anticipates incurring;
    (iii) A statement of the method by which the estimated loss was 
calculated;
    (iv) A proposed order directing payment by the liable institution of 
the FDIC's estimated amount of loss, and the schedule under which the 
payment will be due;
    (v) In cases involving more than one liable institution, the 
estimated amount of each institution's share of the liability.
    (2) The Notice of Assessment of Liability shall advise the liable 
institution(s):
    (i) That an answer must be filed within 20 days after service of the 
Notice;
    (ii) That, if a hearing is requested, a request for a hearing must 
be filed within 20 days after service of the Notice;
    (iii) That if a hearing is requested, such hearing will be held 
within the judicial district in which the liable institution is found, 
or, in cases involving more than one liable institution, within a 
judicial district in which at least one liable institution is found;
    (iv) That, unless the administrative law judge sets a different 
date, the hearing will commence 120 days after service of the Notice of 
Assessment of Liability; and
    (v) That failure to request a hearing shall render the Notice of 
Assessment a final and unappealable order.



Sec. 308.168  Effective date of and payment under an order to pay.

    (a) Unless otherwise provided in the Notice of Assessment of 
Liability, payment of the assessment shall be due on or before the 21st 
day after service of the Assessment of Liability, under the terms of the 
schedule for payment set forth therein.
    (b) All payments collected shall be paid to the Corporation.
    (c) Failure to request a hearing as prescribed herein shall render 
the order to pay final and unappealable.



Subpart P_Rules and Procedures Relating to the Recovery of Attorney Fees 
                           and Other Expenses



Sec. 308.169  Scope.

    This subpart, and the Equal Access to Justice Act (5 U.S.C. 504), 
which it implements, apply to adversary adjudications before the FDIC. 
The types of adjudication covered by this subpart are those listed in 
Sec. 308.01 of the Uniform Rules. The Uniform Rules and subpart B of 
the Local Rules apply to any proceedings to recover fees and expenses 
under this subpart.



Sec. 308.170  Filing, content, and service of documents.

    (a) Time to file. An application and any other pleading or document 
related to the application shall be filed with the Executive Secretary 
within 30 days after service of the final order of the Board of 
Directors in disposition of the proceeding whenever:
    (1) The applicant seeks an award pursuant to 5 U.S.C. 504(a)(1) as 
the prevailing party in the adversary adjudication or in a discrete 
significant substantive portion of the proceeding; or
    (2) The applicant, in an adversary adjudication arising from an 
action to enforce compliance with a statutory or regulatory requirement, 
asserts pursuant to 5 U.S.C. 504(a)(4) that the demand by the FDIC is 
substantially in excess of the decision of the administrative law judge 
and is unreasonable when compared with such decision under the facts and 
circumstances of the case.
    (b) Content. The application and related documents shall conform to 
the requirements of Sec. 308.10(b) and (c) of the Uniform Rules.

[[Page 103]]

    (c) Service. The application and related documents shall be served 
on all parties to the adversary adjudication in accordance with Sec. 
308.11 of the Uniform Rules, except that statements of net worth shall 
be served only on counsel for the FDIC.
    (d) Upon receipt of an application, the Executive Secretary shall 
refer the matter to the administrative law judge who heard the 
underlying adversary proceeding, provided that if the original 
administrative law judge is unavailable, or the Executive Secretary 
determines, in his or her sole discretion, that there is cause to refer 
the matter to a different administrative law judge, the matter shall be 
referred to a different administrative law judge.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.171  Responses to application.

    (a) By FDIC. (1) Within 20 days after service of an application, 
counsel for the FDIC may file with the Executive Secretary and serve on 
all parties an answer to the application. Unless counsel for the FDIC 
requests and is granted an extension of time for filing or files a 
statement of intent to negotiate under Sec. 308.179 of this subpart, 
failure to file an answer within the 20-day period will be treated as a 
consent to the award requested.
    (2) The answer shall explain in detail any objections to the award 
requested and identify the facts relied on in support of the FDIC's 
position. If the answer is based on any alleged facts not already in the 
record of the proceeding, the answer shall include either supporting 
affidavits or a request for further proceedings under Sec. 308.180.
    (b) Reply to answer. The applicant may file a reply with regard to 
an application filed pursuant to 5 U.S.C. 504 (a)(1), if the FDIC has 
addressed in its answer any of the following issues: that the position 
of the FDIC was substantially justified, that the applicant unduly 
protracted the proceedings, or that special circumstances make an award 
unjust. The applicant may file a reply with regard to an application 
filed pursuant to 5 U.S.C. 504 (a)(4), if the FDIC has addressed in its 
answer any of the following issues: that the applicant has committed a 
willful violation of law or otherwise acted in bad faith, that the 
FDIC's demand is reasonable when compared to the decision of the 
administrative law judge or that special circumstances make an award 
unjust. The reply shall be filed within 15 days after service of the 
answer. If the reply is based on any alleged facts not already in the 
record of the proceeding, the reply shall include either supporting 
affidavits or a request for further proceedings under Sec. 308.180.
    (c) By other parties. Any party to the adversary adjudication, other 
than the applicant and the FDIC, may file comments on an application 
within 20 days after service of the application. If the applicant is 
entitled to file a reply to the FDIC's answer under paragraph (b) of 
this section, another party may file comments on the answer within 15 
days after service of the answer. A commenting party may not participate 
in any further proceedings on the application unless the administrative 
law judge determines that the public interest requires such 
participation in order to permit additional exploration of matters 
raised in the comments.
    (d) Additional response. Additional filings in the nature of 
pleadings may be submitted only by leave of the administrative law 
judge.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.172  Eligibility of applicants.

    (a) Genera1 rule. To be eligible for an award under this subpart, an 
applicant must have been named or admitted as a party to the proceeding. 
In addition, the applicant must show that it meets all other conditions 
of eligibility set out in paragraph (b) of this section.
    (b) Types of eligible applicant. The types of eligible applicant 
are:
    (1) An individual with a net worth of not more than $2,000,000 at 
the time the adversary adjudication was initiated; or
    (2) Any owner of an unincorporated business, or any partnership, 
corporation, associations, unit of local government or organization, the 
net worth of which did not exceed $7,000,000 and which did not have more 
than 500 employees at the time the adversary adjudication was initiated.

[[Page 104]]

    (3) For purposes of an application filed pursuant to 5 U.S.C. 
504(a)(4), a small entity as defined in 5 U.S.C. 601.
    (c) Factors to be considered. In determining the types of eligible 
applicants:
    (1) An applicant who owns an unincorporated business shall be 
considered as an individual rather than a sole owner of an 
unincorporated business if the issues on which he or she prevails are 
related to personal interests rather than to business interests.
    (2) An applicant's net worth includes the value of any assets 
disposed of for the purpose of meeting an eligibility standard and 
excludes the value of any obligations incurred for this purpose. 
Transfers of assets or obligations incurred for less than reasonably 
equivalent value will be presumed to have been made for this purpose.
    (3) The net worth of a bank shall be established by the net worth 
information reported in conformity with applicable instructions and 
guidelines on the bank's Consolidated Report of Condition and Income 
filed for the last reporting date before the initiation of the adversary 
adjudication.
    (4) The employees of an applicant include all those persons who were 
regularly providing services for remuneration for the applicant, under 
its direction and control, on the date the adversary adjudication was 
initiated. Part-time employees are included as though they were full-
time employees.
    (5) The net worth and number of employees of the applicant and all 
of its affiliates shall be aggregated to determine eligibility. The 
aggregated net worth shall be adjusted if necessary to avoid counting 
the net worth of any entity twice. As used in this subpart, affiliates 
are individuals, corporations, and entities that directly or indirectly 
or acting through one or more entities control a majority of the voting 
shares of the applicant; and corporations and entities of which the 
applicant directly or indirectly owns or controls a majority of the 
voting shares. The Board of Directors may, however, on the 
recommendation of the administrative law judge, or otherwise, determine 
that such aggregation with regard to one or more of the applicant's 
affiliates would be unjust and contrary to the purposes of this subpart 
in light of the actual relationship between the affiliated entities. In 
such a case the net worth and employees of the relevant affiliate or 
affiliates will not be aggregated with those of the applicant. In 
addition, the Board of Directors may determine that financial 
relationships of the applicant other than those described in this 
paragraph constitute special circumstances that would make an award 
unjust.
    (6) An applicant that participates in a proceeding primarily on 
behalf of one or more other persons or entities that would be ineligible 
is not itself eligible for an award.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.173  Prevailing party.

    (a) General rule. An eligible applicant who, following an adversary 
adjudication has gained victory on the merits in the proceeding is a 
``prevailing party''. An eligible applicant may be a ``prevailing 
party'' if a settlement of the proceeding was effected on terms 
favorable to it or if the proceeding against it has been dismissed. In 
appropriate situations an applicant may also have prevailed if the 
outcome of the proceeding has substantially vindicated the applicant's 
position on the significant substantive matters at issue, even though 
the applicant has not totally avoided adverse final action.
    (b) Segregation of costs. When a proceeding has presented a number 
of discrete substantive issues, an applicant may have prevailed even 
though all the issues were not resolved in its favor. If such an 
applicant is deemed to have prevailed, any award shall be based on the 
fees and expenses incurred in connection with the discrete significant 
substantive issue or issues on which the applicant's position has been 
upheld. If such segregation of costs is not practicable, the award may 
be based on a fair proration of those fees and expenses incurred in the 
entire proceeding which would be recoverable under Sec. 308.175 if 
proration were not performed, whether separate or prorated treatment is 
appropriate, and the appropriate proration percentage, shall be 
determined on the facts of the particular case. Attention shall be given 
to the significance and nature of the

[[Page 105]]

respective issues and their separability and interrelationship.



Sec. 308.174  Standards for awards.

    (a) For applications filed pursuant to 5 U.S.C. 504(a)(1), a 
prevailing applicant may receive an award for fees and expenses unless 
the position of the FDIC during the proceeding was substantially 
justified or special circumstances make the award unjust. An award will 
be reduced or denied if the applicant has unduly or unreasonably 
protracted the proceedings. Awards for fees and expenses incurred before 
the date on which the adversary adjudication was initiated are allowable 
if their incurrence was necessary to prepare for the proceeding.
    (b) For applications filed pursuant to 5 U.S.C. 504(a)(4), an 
applicant may receive an award unless the demand by the FDIC was 
reasonable when compared with the decision of the administrative law 
judge, the applicant has committed a willful violation of law or 
otherwise acted in bad faith, or special circumstances make an award 
unjust.

[64 FR 62102, Nov. 16, 1999]



Sec. 308.175  Measure of awards.

    (a) General rule. Awards will be based on rates customarily charged 
by persons engaged in the business of acting as attorneys, agents, and 
expert witnesses, even if the services were made available without 
charge or at a reduced rate, provided that no award under this subpart 
for the fee of an attorney or agent may exceed $125 per hour. No award 
to compensate an expert witness may exceed the highest rate at which the 
FDIC pays expert witnesses. An award may include the reasonable expenses 
of the attorney, agent, or expert witness as a separate item, if the 
attorney, agent, or expert witness ordinarily charges clients separately 
for such expenses. Fees and expenses awarded under 5 U.S.C. 504(a)(4) 
related to defending against an excessive demand shall be paid only as a 
consequence of appropriations paid in advance.
    (b) Determination of reasonableness of fees. In determining the 
reasonableness of the fee sought for an attorney, agent, or expert 
witness, the administrative law judge shall consider the following:
    (1) If the attorney, agent, or expert witness is in private 
practice, his or her customary fee for like services, or, if he or she 
is an employee of the applicant, the fully allocated cost of the 
services;
    (2) The prevailing rate for similar services in the community in 
which the attorney, agent, or expert witness ordinarily performs 
services;
    (3) The time actually spent in the representation of the applicant;
    (4) The time reasonably spent in light of the difficulty or 
complexity of the issues in the proceeding; and
    (5) Such other factors as may bear on the value of the services 
provided.
    (c) Awards for studies. The reasonable cost of any study, analysis, 
test, project, or similar matter prepared on behalf of an applicant may 
be awarded to the extent that the charge for the service does not exceed 
the prevailing rate payable for similar services, and the study or other 
matter was necessary for preparation of the applicant's case and not 
otherwise required by law or sound business or financial practice.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.176  Application for awards.

    (a) Contents. An application for an award of fees and expenses under 
this subpart shall contain:
    (1) The name of the applicant and an identification of the 
proceeding;
    (2) For applications filed pursuant to 5 U.S.C. 504(a)(1), a showing 
that the applicant has prevailed, and an identification of each issue 
with regard to which the applicant believes that the position of the 
FDIC in the proceeding was not substantially justified;
    (3) For applications filed pursuant to 5 U.S.C. 504(a)(4), a showing 
that the demand by the FDIC is substantially in excess of the decision 
of the administrative law judge and is unreasonable when compared with 
such decision under the facts and circumstances of the case;
    (4) A statement of the amount of fees and expenses for which an 
award is sought;

[[Page 106]]

    (5) For applications filed pursuant to 5 U.S.C. 504(a)(4), a 
statement of the amount of fees and expenses which constitute 
appropriations paid in advance;
    (6) If the applicant is not an individual, a statement of the number 
of its employees on the date the proceeding was initiated;
    (7) A description of any affiliated individuals or entities, as 
defined in Sec. 308.172(c)(5), or a statement that none exist;
    (8) A declaration that the applicant, together with any affiliates, 
had a net worth not more than the ceiling established for it by Sec. 
308.172(b) as of the date the proceeding was initiated;
    (9) For applications filed pursuant to 5 U.S.C. 504(a)(1), a 
statement whether the applicant is a small entity as defined in 5 U.S.C. 
601; and
    (10) Any other matters that the applicant wishes the FDIC to 
consider in determining whether and in what amount an award should be 
made.
    (b) Verification. The application shall be signed by the applicant 
or an authorized officer or attorney of the applicant. It shall also 
contain or be accompanied by a written verification under oath or under 
penalty of perjury that the information provided in the application and 
supporting documents is true and correct.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.177  Statement of net worth.

    (a) General rule. A statement of net worth must be filed with the 
application for an award of fees. The statement shall reflect the net 
worth of the applicant and all affiliates of the applicant.
    (b) Contents. (1) The statement of net worth may be in any form 
convenient to the applicant which fully discloses all the assets and 
liabilities of the applicant and all the assets and liabilities of its 
affiliates, as of the time of the initiation of the adversary 
adjudication. Unaudited financial statements are acceptable unless the 
administrative law judge or the Board of Directors otherwise requires. 
Financial statements or reports to a Federal or state agency, prepared 
before the initiation of the adversary adjudication for other purposes, 
and accurate as of a date not more than three months prior to the 
initiation of the proceeding, are acceptable in establishing net worth 
as of the time of the initiation of the proceeding, unless the 
administrative law judge or the Board of Directors otherwise requires.
    (2) In the case of applicants or affiliates that are not banks, net 
worth shall be considered for the purposes of this subpart to be the 
excess of total assets over total liabilities, as of the date the 
underlying proceeding was initiated, except as adjusted under Sec. 
308.172(c)(2). Assets and liabilities of individuals shall include those 
beneficially owned within the meaning of the FDIC's rules and 
regulations.
    (3) If the applicant or any of its affiliates is a bank, the portion 
of the statement of net worth which relates to the bank shall consist of 
a copy of the bank's last Consolidated Report of Condition and Income 
filed before the initiation of the adversary adjudication. In all cases 
the administrative law judge or the Board of Directors may call for 
additional information needed to establish the applicant's net worth as 
of the initiation of the proceeding. Except as adjusted by additional 
information that was called for under the preceding sentence, net worth 
shall be considered for the purposes of this subpart to be the total 
equity capital (or, in the case of mutual savings banks, the total 
surplus accounts) as reported, in conformity with applicable 
instructions and guidelines, on the bank's Consolidated Report of 
Condition and Income filed for the last reporting date before the 
initiation of the proceeding.
    (c) Statement confidential. Unless otherwise ordered by the Board of 
Directors or required by law, the statement of net worth shall be for 
the confidential use of counsel for the FDIC, the Board of Directors, 
and the administrative law judge.



Sec. 308.178  Statement of fees and expenses.

    The application shall be accompanied by a statement fully 
documenting the fees and expenses for which an award is sought. A 
separate itemized statement shall be submitted for each professional 
firm or individual whose services are covered by the application,

[[Page 107]]

showing the hours spent in work in connection with the proceeding by 
each individual, a description of the specific services performed, the 
rate at which each fee has been computed, any expenses for which 
reimbursement is sought, the total amount claimed, and the total amount 
paid or payable by the applicant or by any other person or entity for 
the services performed. The administrative law judge or the Board of 
Directors may require the applicant to provide vouchers, receipts, or 
other substantiation for any expenses claimed.



Sec. 308.179  Settlement negotiations.

    If counsel for the FDIC and the applicant believe that the issues in 
a fee application can be settled, they may jointly file with the 
Executive Secretary with a copy to the administrative law judge a 
statement of their intent to negotiate a settlement. The filing of this 
statement shall extend the time for filing an answer under Sec. 308.171 
for an additional 30 days, and further extensions may be granted by the 
administrative law judge upon the joint request of counsel for the FDIC 
and the applicant.

[56 FR 37975, Aug. 9, 1991, as amended at 64 FR 62102, Nov. 16, 1999]



Sec. 308.180  Further proceedings.

    (a) General rule. Ordinarily, the determination of a recommended 
award will be made by the administrative law judge on the basis of the 
written record. However, on request of either the applicant or the FDIC, 
or on his or her own initiative, the administrative law judge may order 
further proceedings such as an informal conference, oral argument, 
additional written submissions, or an evidentiary hearing. Such further 
proceedings will be held only when necessary for full and fair 
resolution of the issues arising from the application and will be 
conducted promptly and expeditiously.
    (b) Request for further proceedings. A request for further 
proceedings under this section shall specifically identify the 
information sought or the issues in dispute and shall explain why 
additional proceedings are necessary.
    (c) Hearing. Ordinarily, the administrative law judge shall hold an 
oral evidentiary hearing only on disputed issues of material fact which 
cannot be adequately resolved through written submissions.



Sec. 308.181  Recommended decision.

    The administrative law judge shall file with the Executive Secretary 
a recommended decision on the fee application not later than 90 days 
after the filing of the application or 30 days after the conclusion of 
the hearing, whichever is later. The recommended decision shall include 
written proposed findings and conclusions on the applicant's eligibility 
and its status as a prevailing party and an explanation of the reasons 
for any difference between the amount requested and the amount of the 
recommended award. The recommended decision shall also include, if at 
issue, proposed findings on whether the FDIC's position was 
substantially justified, whether the applicant unduly protracted the 
proceedings, or whether special circumstances make an award unjust. The 
administrative law judge shall file the record of the proceeding on the 
fee application and, at the same time, serve upon each party a copy of 
the recommended decision, findings, conclusions, and proposed order.



Sec. 308.182  Board of Directors action.

    (a) Exceptions to recommended decision. Within 20 days after service 
of the recommended decision, findings, conclusions, and proposed order, 
the applicant or counsel for the FDIC may file with the Executive 
Secretary written exceptions thereto. A supporting brief may also be 
filed.
    (b) Decision of Board of Directors. The Board of Directors shall 
render its decision within 60 days after the matter is submitted to it 
by the Executive Secretary. The Executive Secretary shall furnish copies 
of the decision and order of the Board of Directors to the parties. 
Judicial review of the decision and order may be obtained as provided in 
5 U.S.C. 504(c)(2).



Sec. 308.183  Payment of awards.

    An applicant seeking payment of an award made by the Board of 
Directors shall submit to the Executive Secretary a statement that the 
applicant

[[Page 108]]

will not seek judicial review of the decision and order or that the time 
for seeking further review has passed and no further review has been 
sought. The FDIC will pay the amount awarded within 30 days after 
receiving the applicant's statement, unless judicial review of the award 
or of the underlying decision of the adversary adjudication has been 
sought by the applicant or any other party to the proceeding.



     Subpart Q_Issuance and Review of Orders Pursuant to the Prompt 
    Corrective Action Provisions of the Federal Deposit Insurance Act

    Source: 57 FR 44897, Sept. 29, 1992, unless otherwise noted.



Sec. 308.200  Scope.

    The rules and procedures set forth in this subpart apply to banks, 
insured branches of foreign banks and senior executive officers and 
directors of banks that are subject to the provisions of section 38 of 
the Federal Deposit Insurance Act (section 38) (12 U.S.C. 1831o) and 
subpart B of part 325 of this chapter.

[57 FR 44897, Sept. 29, 1992; 57 FR 48426, Oct. 23, 1992]



Sec. 308.201  Directives to take prompt corrective action.

    (a) Notice of intent to issue directive--(1) In general. The FDIC 
shall provide an undercapitalized, significantly undercapitalized, or 
critically undercapitalized bank prior written notice of the FDIC's 
intention to issue a directive requiring such bank to take actions or to 
follow proscriptions described in section 38 that are within the FDIC's 
discretion to require or impose under section 38 of the FDI Act, 
including sections 38 (e)(5), (f)(2), (f)(3), or (f)(5). The bank shall 
have such time to respond to a proposed directive as provided by the 
FDIC under paragraph (c) of this section.
    (2) Immediate issuance of final directive. If the FDIC finds it 
necessary in order to carry out the purposes of section 38 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue a directive requiring a bank immediately 
to take actions or to follow proscriptions described in section 38 that 
are within the FDIC's discretion to require or impose under section 38 
of the FDI Act, including section 38 (e)(5), (f)(2), (f)(3), or (f)(5). 
A bank that is subject to such an immediately effective directive may 
submit a written appeal of the directive to the FDIC. Such an appeal 
must be received by the FDIC within 14 calendar days of the issuance of 
the directive, unless the FDIC permits a longer period. The FDIC shall 
consider any such appeal, if filed in a timely matter, within 60 days of 
receiving the appeal. During such period of review, the directive shall 
remain in effect unless the FDIC, in its sole discretion, stays the 
effectiveness of the directive.
    (b) Contents of notice. A notice of intention to issue a directive 
shall include:
    (1) A statement of the bank's capital measures and capital levels;
    (2) A description of the restrictions, prohibitions or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of such affirmative 
actions; and
    (4) The date by which the bank subject to the directive may file 
with the FDIC a written response to the notice.
    (c) Response to notice--(1) Time for response. A bank may file a 
written response to a notice of intent to issue a directive within the 
time period set by the FDIC. The date shall be at least 14 calendar days 
from the date of the notice unless the FDIC determines that a shorter 
period is appropriate in light of the financial condition of the bank or 
other relevant circumstances.
    (2) Content of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 38;
    (ii) Any recommended modification of the proposed directive; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of

[[Page 109]]

the position of the bank regarding the proposed directive.
    (d) FDIC consideration of response. After considering the response, 
the FDIC may:
    (1) Issue the directive as proposed or in modified form;
    (2) Determine not to issue the directive and so notify the bank; or
    (3) Seek additional information or clarification of the response 
from the bank or any other relevant source.
    (e) Failure to file response. Failure by a bank to file with the 
FDIC, within the specified time period, a written response to a proposed 
directive shall constitute a waiver of the opportunity to respond and 
shall constitute consent to the issuance of the directive.
    (f) Request for modification or rescission of directive. Any bank 
that is subject to a directive under this subpart may, upon a change in 
circumstances, request in writing that the FDIC reconsider the terms of 
the directive, and may propose that the directive be rescinded or 
modified. Unless otherwise ordered by the FDIC, the directive shall 
continue in place while such request is pending before the FDIC.



Sec. 308.202  Procedures for reclassifying a bank based on criteria other than 

capital.

    (a) Reclassification based on unsafe or unsound condition or 
practice--(1) Issuance of notice of proposed reclassification--(i) 
Grounds for reclassification. (A) Pursuant to Sec. 325.103(d) of this 
chapter, the FDIC may reclassify a well capitalized bank as adequately 
capitalized or subject an adequately capitalized or undercapitalized 
institution to the supervisory actions applicable to the next lower 
capital category if:
    (1) The FDIC determines that the bank is in unsafe or unsound 
condition; or
    (2) The FDIC, pursuant to section 8(b)(8) of the FDI Act (12 U.S.C. 
1818(b)(8)), deems the bank to be engaged in an unsafe or unsound 
practice and not to have corrected the deficiency.
    (B) Any action pursuant to this paragraph (a)(1)(i) shall 
hereinafter be referred to as reclassification.
    (ii) Prior notice to institution. Prior to taking action pursuant to 
Sec. 325.103(d) of this chapter, the FDIC shall issue and serve on the 
bank a written notice of the FDIC's intention to reclassify the bank.
    (2) Contents of notice. A notice of intention to reclassify a bank 
based on unsafe or unsound condition shall include:
    (i) A statement of the bank's capital measures and capital levels 
and the category to which the bank would be reclassified;
    (ii) The reasons for reclassification of the bank;
    (iii) The date by which the bank subject to the notice of 
reclassification may file with the FDIC a written appeal of the proposed 
reclassification and a request for a hearing, which shall be at least 14 
calendar days from the date of service of the notice unless the FDIC 
determines that a shorter period is appropriate in light of the 
financial condition of the bank or other relevant circumstances.
    (3) Response to notice of proposed reclassification. A bank may file 
a written response to a notice of proposed reclassification within the 
time period set by the FDIC. The response should include:
    (i) An explanation of why the bank is not in an unsafe or unsound 
condition or otherwise should not be reclassified; and
    (ii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the reclassification.
    (4) Failure to file response. Failure by a bank to file, within the 
specified time period, a written response with the FDIC to a notice of 
proposed reclassification shall constitute a waiver of the opportunity 
to respond and shall constitute consent to the reclassification.
    (5) Request for hearing and presentation of oral testimony or 
witnesses. The response may include a request for an informal hearing 
before the FDIC under this section. If the bank desires to present oral 
testimony or witnesses at the hearing, the bank shall include a request 
to do so with the request for an informal hearing. A request to present 
oral testimony or witnesses shall specify the names of the witnesses and 
the

[[Page 110]]

general nature of their expected testimony. Failure to request a hearing 
shall constitute a waiver of any right to a hearing, and failure to 
request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right to present oral testimony or witnesses.
    (6) Order for informal hearing. Upon receipt of a timely written 
request that includes a request for a hearing, the FDIC shall issue an 
order directing an informal hearing to commence no later than 30 days 
after receipt of the request, unless the bank requests a later date. The 
hearing shall be held in Washington, DC or at such other place as may be 
designated by the FDIC, before a presiding officer(s) designated by the 
FDIC to conduct the hearing.
    (7) Hearing procedures. (i) The bank shall have the right to 
introduce relevant written materials and to present oral argument at the 
hearing. The bank may introduce oral testimony and present witnesses 
only if expressly authorized by the FDIC or the presiding officer(s). 
Neither the provisions of the Administrative Procedure Act (5 U.S.C. 
554-557) governing adjudications required by statute to be determined on 
the record nor the Uniform Rules of Practice and Procedure in this part 
apply to an informal hearing under this section unless the FDIC orders 
that such procedures shall apply.
    (ii) The informal hearing shall be recorded, and a transcript shall 
be furnished to the bank upon request and payment of the cost thereof. 
Witnesses need not be sworn, unless specifically requested by a party or 
the presiding officer(s). The presiding officer(s) may ask questions of 
any witness.
    (iii) The presiding officer(s) may order that the hearing be 
continued for a reasonable period (normally five business days) 
following completion of oral testimony or argument to allow additional 
written submissions to the hearing record.
    (8) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the FDIC 
on the reclassification.
    (9) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the FDIC will decide whether to reclassify the 
bank and notify the bank of the FDIC's decision.
    (b) Request for rescission of reclassification. Any bank that has 
been reclassified under this section, may, upon a change in 
circumstances, request in writing that the FDIC reconsider the 
reclassification, and may propose that the reclassification be rescinded 
and that any directives issued in connection with the reclassification 
be modified, rescinded, or removed. Unless otherwise ordered by the 
FDIC, the bank shall remain subject to the reclassification and to any 
directives issued in connection with that reclassification while such 
request is pending before the FDIC.



Sec. 308.203  Order to dismiss a director or senior executive officer.

    (a) Service of notice. When the FDIC issues and serves a directive 
on a bank pursuant to Sec. 308.201 of this part requiring the bank to 
dismiss from office any director or senior executive officer under Sec. 
38(f)(2)(F)(ii) of the FDI Act, the FDIC shall also serve a copy of the 
directive, or the relevant portions of the directive where appropriate, 
upon the person to be dismissed.
    (b) Response to directive--(1) Request for reinstatement. A director 
or senior executive officer who has been served with a directive under 
paragraph (a) of this section (Respondent) may file a written request 
for reinstatement. The request for reinstatement shall be filed within 
10 calendar days of the receipt of the directive by the Respondent, 
unless further time is allowed by the FDIC at the request of the 
Respondent.
    (2) Contents of request; informal hearing. The request for 
reinstatement shall include reasons why the Respondent should be 
reinstated, and may include a request for an informal hearing before the 
FDIC under this section. If the Respondent desires to present oral 
testimony or witnesses at the hearing, the Respondent shall include a 
request to do so with the request for an informal hearing. The request 
to present

[[Page 111]]

oral testimony or witnesses shall specify the names of the witnesses and 
the general nature of their expected testimony. Failure to request a 
hearing shall constitute a waiver of any right to a hearing and failure 
to request the opportunity to present oral testimony or witnesses shall 
constitute a waiver of any right or opportunity to present oral 
testimony or witnesses.
    (3) Effective date. Unless otherwise ordered by the FDIC, the 
dismissal shall remain in effect while a request for reinstatement is 
pending.
    (c) Order for informal hearing. Upon receipt of a timely written 
request from a Respondent for an informal hearing on the portion of a 
directive requiring a bank to dismiss from office any director or senior 
executive officer, the FDIC shall issue an order directing an informal 
hearing to commence no later than 30 days after receipt of the request, 
unless the Respondent requests a later date. The hearing shall be held 
in Washington, DC, or at such other place as may be designated by the 
FDIC, before a presiding officer(s) designated by the FDIC to conduct 
the hearing.
    (d) Hearing procedures. (1) A Respondent may appear at the hearing 
personally or through counsel. A Respondent shall have the right to 
introduce relevant written materials and to present oral argument. A 
Respondent may introduce oral testimony and present witnesses only if 
expressly authorized by the FDIC or the presiding officer(s). Neither 
the provisions of the Administrative Procedure Act governing 
adjudications required by statute to be determined on the record nor the 
Uniform Rules of Practice and Procedure in this part apply to an 
informal hearing under this section unless the FDIC orders that such 
procedures shall apply.
    (2) The informal hearing shall be recorded, and a transcript shall 
be furnished to the Respondent upon request and payment of the cost 
thereof. Witnesses need not be sworn, unless specifically requested by a 
party or the presiding officer(s). The presiding officer(s) may ask 
questions of any witness.
    (3) The presiding officer(s) may order that the hearing be continued 
for a reasonable period (normally five business days) following 
completion of oral testimony or argument to allow additional written 
submissions to the hearing record.
    (e) Standard for review. A Respondent shall bear the burden of 
demonstrating that his or her continued employment by or service with 
the bank would materially strengthen the bank's ability:
    (1) To become adequately capitalized, to the extent that the 
directive was issued as a result of the bank's capital level or failure 
to submit or implement a capital restoration plan; and
    (2) To correct the unsafe or unsound condition or unsafe or unsound 
practice, to the extent that the directive was issued as a result of 
classification of the bank based on supervisory criteria other than 
capital, pursuant to section 38(g) of the FDI Act.
    (f) Recommendation of presiding officers. Within 20 calendar days 
following the date the hearing and the record on the proceeding are 
closed, the presiding officer(s) shall make a recommendation to the FDIC 
concerning the Respondent's request for reinstatement with the bank.
    (g) Time for decision. Not later than 60 calendar days after the 
date the record is closed or the date of the response in a case where no 
hearing was requested, the FDIC shall grant or deny the request for 
reinstatement and notify the Respondent of the FDIC's decision. If the 
FDIC denies the request for reinstatement, the FDIC shall set forth in 
the notification the reasons for the FDIC's action.



Sec. 308.204  Enforcement of directives.

    (a) Judicial remedies. Whenever a bank fails to comply with a 
directive issued under section 38, the FDIC may seek enforcement of the 
directive in the appropriate United States district court pursuant to 
section 8(i)(1) of the FDI Act (12 U.S.C. 1818(i)(1)).
    (b) Administrative remedies--(1) Failure to comply with directive. 
Pursuant to section 8(i)(2)(A) of the FDI Act, the FDIC may assess a 
civil money penalty against any bank that violates or otherwise fails to 
comply with any final directive issued under section 38 and against any 
institution-affiliated party

[[Page 112]]

who participates in such violation or noncompliance.
    (2) Failure to implement capital restoration plan. The failure of a 
bank to implement a capital restoration plan required under section 38, 
or subpart B of part 325 of this chapter, or the failure of a company 
having control of a bank to fulfill a guarantee of a capital restoration 
plan made pursuant to section 38(e)(2) of the FDI Act shall subject the 
bank to the assessment of civil money penalties pursuant to section 
8(i)(2)(A) of the FDI Act.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the FDIC may seek enforcement 
of the provisions of section 38 or subpart B of part 325 of this chapter 
through any other judicial or administrative proceeding authorized by 
law.

[57 FR 44897, Sept. 29, 1992; 57 FR 48426, Oct. 23, 1992]



Subpart R_Submission and Review of Safety and Soundness Compliance Plans 
   and Issuance of Orders To Correct Safety and Soundness Deficiencies

    Source: 60 FR 35684, July 10, 1995, unless otherwise noted.



Sec. 308.300  Scope.

    The rules and procedures set forth in this subpart apply to insured 
state nonmember banks and to state-licensed insured branches of foreign 
banks, that are subject to the provisions of section 39 of the Federal 
Deposit Insurance Act (section 39) (12 U.S.C. 1831p-1).



Sec. 308.301  Purpose.

    Section 39 of the FDI Act requires the FDIC to establish safety and 
soundness standards. Pursuant to section 39, a bank may be required to 
submit a compliance plan if it is not in compliance with a safety and 
soundness standard established by guideline under section 39(a) or (b). 
An enforceable order under section 8 of the FDI Act may be issued if, 
after being notified that it is in violation of a safety and soundness 
standard established under section 39, the bank fails to submit an 
acceptable compliance plan or fails in any material respect to implement 
an accepted plan. This subpart establishes procedures for requiring 
submission of a compliance plan and issuing an enforceable order 
pursuant to section 39.



Sec. 308.302  Determination and notification of failure to meet a safety and 

soundness standard and request for compliance plan.

    (a) Determination. The FDIC may, based upon an examination, 
inspection or any other information that becomes available to the FDIC, 
determine that a bank has failed to satisfy the safety and soundness 
standards set out in part 364 of this chapter and in the Interagency 
Guidelines Establishing Standards for Safety and Soundness in appendix A 
and the Interagency Guidelines Establishing Standards for Safeguarding 
Customer Information in appendix B to part 364 of this chapter.
    (b) Request for compliance plan. If the FDIC determines that a bank 
has failed a safety and soundness standard pursuant to paragraph (a) of 
this section, the FDIC may request, by letter or through a report of 
examination, the submission of a compliance plan and the bank shall be 
deemed to have notice of the request three days after mailing of the 
letter by the FDIC or delivery of the report of examination.

[60 FR 35684, July 10, 1995, as amended at 66 FR 8638, Feb. 1, 2001]



Sec. 308.303  Filing of safety and soundness compliance plan.

    (a) Schedule for filing compliance plan--(1) In general. A bank 
shall file a written safety and soundness compliance plan with the FDIC 
within 30 days of receiving a request for a compliance plan pursuant to 
Sec. 308.302(b), unless the FDIC notifies the bank in writing that the 
plan is to be filed within a different period.
    (2) Other plans. If a bank is obligated to file, or is currently 
operating under, a capital restoration plan submitted pursuant to 
section 38 of the FDI Act (12 U.S.C. 1831o), a cease-and-desist order 
entered into pursuant to section 8 of the FDI Act, a formal or informal 
agreement, or a response to a report of examination or report of 
inspection, it

[[Page 113]]

may, with the permission of the FDIC, submit a compliance plan under 
this section as part of that plan, order, agreement, or response, 
subject to the deadline provided in paragraph (a)(1) of this section.
    (b) Contents of plan. The compliance plan shall include a 
description of the steps the bank will take to correct the deficiency 
and the time within which those steps will be taken.
    (c) Review of safety and soundness compliance plans. Within 30 days 
after receiving a safety and soundness compliance plan under this 
subpart, the FDIC shall provide written notice to the bank of whether 
the plan has been approved or seek additional information from the bank 
regarding the plan. The FDIC may extend the time within which notice 
regarding approval of a plan will be provided.
    (d) Failure to submit or implement a compliance plan--(1) 
Supervisory actions. If a bank fails to submit an acceptable plan within 
the time specified by the FDIC or fails in any material respect to 
implement a compliance plan, then the FDIC shall, by order, require the 
bank to correct the deficiency and may take further actions provided in 
section 39(e)(2)(B). Pursuant to section 39(e)(3), the FDIC may be 
required to take certain actions if the bank commenced operations or 
experienced a change in control within the previous 24-month period, or 
the bank experienced extraordinary growth during the previous 18-month 
period.
    (2) Extraordinary growth. For purposes of paragraph (d)(1) of this 
section, extraordinary growth means an increase in assets of more than 
7.5 percent during any quarter within the 18-month period preceding the 
issuance of a request for submission of a compliance plan, by a bank 
that is not well capitalized for purposes of section 38 of the FDI Act. 
For purposes of calculating an increase in assets, assets acquired 
through merger or acquisition approved pursuant to the Bank Merger Act 
(12 U.S.C. 1828(c)) will be excluded.
    (e) Amendment of compliance plan. A bank that has filed an approved 
compliance plan may, after prior written notice to and approval by the 
FDIC, amend the plan to reflect a change in circumstance. Until such 
time as a proposed amendment has been approved, the bank shall implement 
the compliance plan as previously approved.



Sec. 308.304  Issuance of orders to correct deficiencies and to take or 

refrain from taking other actions.

    (a) Notice of intent to issue order--(1) In general. The FDIC shall 
provide a bank prior written notice of the FDIC's intention to issue an 
order requiring the bank to correct a safety and soundness deficiency or 
to take or refrain from taking other actions pursuant to section 39 of 
the FDI Act. The bank shall have such time to respond to a proposed 
order as provided by the FDIC under paragraph (c) of this section.
    (2) Immediate issuance of final order. If the FDIC finds it 
necessary in order to carry out the purposes of section 39 of the FDI 
Act, the FDIC may, without providing the notice prescribed in paragraph 
(a)(1) of this section, issue an order requiring a bank immediately to 
take actions to correct a safety and soundness deficiency or take or 
refrain from taking other actions pursuant to section 39. A bank that is 
subject to such an immediately effective order may submit a written 
appeal of the order to the FDIC. Such an appeal must be received by the 
FDIC within 14 calendar days of the issuance of the order, unless the 
FDIC permits a longer period. The FDIC shall consider any such appeal, 
if filed in a timely matter, within 60 days of receiving the appeal. 
During such period of review, the order shall remain in effect unless 
the FDIC, in its sole discretion, stays the effectiveness of the order.
    (b) Contents of notice. A notice of intent to issue an order shall 
include:
    (1) A statement of the safety and soundness deficiency or 
deficiencies that have been identified at the bank;
    (2) A description of any restrictions, prohibitions, or affirmative 
actions that the FDIC proposes to impose or require;
    (3) The proposed date when such restrictions or prohibitions would 
be effective or the proposed date for completion of any required action; 
and
    (4) The date by which the bank subject to the order may file with 
the FDIC a written response to the notice.

[[Page 114]]

    (c) Response to notice--(1) Time for response. A bank may file a 
written response to a notice of intent to issue an order within the time 
period set by the FDIC. Such a response must be received by the FDIC 
within 14 calendar days from the date of the notice unless the FDIC 
determines that a different period is appropriate in light of the safety 
and soundness of the bank or other relevant circumstances.
    (2) Contents of response. The response should include:
    (i) An explanation why the action proposed by the FDIC is not an 
appropriate exercise of discretion under section 39;
    (ii) Any recommended modification of the proposed order; and
    (iii) Any other relevant information, mitigating circumstances, 
documentation, or other evidence in support of the position of the bank 
regarding the proposed order.
    (d) Agency consideration of response. After considering the 
response, the FDIC may:
    (1) Issue the order as proposed or in modified form;
    (2) Determine not to issue the order and so notify the bank; or
    (3) Seek additional information or clarification of the response 
from the bank, or any other relevant source.
    (e) Failure to file response. Failure by a bank to file with the 
FDIC, within the specified time period, a written response to a proposed 
order shall constitute a waiver of the opportunity to respond and shall 
constitute consent to the issuance of the order.
    (f) Request for modification or rescission of order. Any bank that 
is subject to an order under this subpart may, upon a change in 
circumstances, request in writing that the FDIC reconsider the terms of 
the order, and may propose that the order be rescinded or modified. 
Unless otherwise ordered by the FDIC, the order shall continue in place 
while such request is pending before the FDIC.



Sec. 308.305  Enforcement of orders.

    (a) Judicial remedies. Whenever a bank fails to comply with an order 
issued under section 39, the FDIC may seek enforcement of the order in 
the appropriate United States district court pursuant to section 8(i)(1) 
of the FDI Act.
    (b) Failure to comply with order. Pursuant to section 8(i)(2)(A) of 
the FDI Act, the FDIC may assess a civil money penalty against any bank 
that violates or otherwise fails to comply with any final order issued 
under section 39 and against any institution-affiliated party who 
participates in such violation or noncompliance.
    (c) Other enforcement action. In addition to the actions described 
in paragraphs (a) and (b) of this section, the FDIC may seek enforcement 
of the provisions of section 39 or this part through any other judicial 
or administrative proceeding authorized by law.



Subpart S_Applications for a Stay or Review of Actions of Bank Clearing 
                                Agencies

    Source: 61 FR 48403, Sept. 11, 1996, unless otherwise noted.



Sec. 308.400  Scope.

    This subpart is issued by the Corporation pursuant to sections 
17A(b)(3)(g), 17A(b)(5)(C), 19 and 23 of the Securities Exchange Act of 
1934 (Exchange Act), as amended (15 U.S.C. 78q-1 (b)(3)(g), (b)(5)(C), 
78s, 78w). It applies to applications by banks insured by the 
Corporation (other than members of the Federal Reserve System) for a 
stay or review of certain actions by clearing agencies registered under 
the Exchange Act, for which the Securities and Exchange Commission 
(Commission) is not the appropriate regulatory agency under section 
3(a)(34)(B) of the Exchange Act (bank clearing agencies).



Sec. 308.401  Applications for stays of disciplinary sanctions or summary 

suspensions by a bank clearing agency.

    Applications to the Corporation for a stay of disciplinary action 
imposed by registered clearing agencies pursuant to section 17(b)(3)(G) 
of the Exchange Act, or summary suspension or limitation or prohibition 
of access under section 17(b)(5)(C) of the Exchange Act shall be made 
according to the rules adopted by the Commission (17 CFR 240.19d-2). 
References to the ``Commission'' in 17 CFR 240.19d-2 are deemed to refer 
to the ``Corporation.''

[[Page 115]]



Sec. 308.402  Applications for review of final disciplinary sanctions, denials 

of participation, or prohibitions or limitations of access to services imposed 

by bank clearing agencies.

    Proceedings on an application to the Corporation under section 
19(d)(2) of the Exchange Act for review of any final disciplinary 
sanctions, denials of participation, or prohibitions or limitations of 
access to services imposed by bank clearing agencies shall be conducted 
according to the procedures set forth in rules adopted by the Commission 
(17 CFR 240.19d-3). References to the ``Commission'' in 17 CFR 240.19d-3 
are deemed to refer to the ``Corporation.''



          Subpart T_Program Fraud Civil Remedies and Procedures

    Source: 66 FR 9189, Feb. 7, 2001, unless otherwise noted.



Sec. 308.500  Basis, purpose, and scope.

    (a) Basis. This subpart implements the Program Fraud Civil Remedies 
Act, Pub. L. 99-509, sections 6101-6104, 100 Stat. 1874 (October 21, 
1986), codified at 31 U.S.C. 3801-3812, (PFCRA) and made applicable to 
the Federal Deposit Insurance Corporation (FDIC) by section 23 of the 
Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 
2369). 31 U.S.C. 3809 of the statute requires each Authority head to 
promulgate regulations necessary to implement the provisions of the 
statute.
    (b) Purpose. This subpart:
    (1) Establishes administrative procedures for imposing civil 
penalties and assessments against persons who make, submit, or present 
or cause to be made, submitted, or presented false, fictitious, or 
fraudulent claims or written statements to the FDIC or to its agents; 
and
    (2) Specifies the hearing and appeal rights of persons subject to 
allegations of liability for such penalties and assessments.
    (c) Scope. This subpart applies only to persons who make, submit, or 
present or cause to be made, submitted, or presented false, fictitious, 
or fraudulent claims or written statements to the FDIC or to its agents 
acting on behalf of the FDIC in connection with FDIC employment matters, 
FDIC contracting activities, and the FDIC Asset Purchaser Certification 
Program. It does not apply to false claims or statements made in 
connection with programs (other than as set forth in the preceding 
sentence) related to the FDIC's regulatory, supervision, enforcement, 
insurance, receivership or liquidation responsibilities. The FDIC is 
restricting the scope of applicability of this subpart because other 
civil and administrative remedies are adequate to redress fraud in the 
areas not covered.



Sec. 308.501  Definitions.

    For purposes of this subpart:
    (a) Administrative Law Judge (ALJ) means the presiding officer 
appointed by the Office of Financial Institution Adjudication pursuant 
to 12 U.S.C. 1818 note and 5 U.S.C. 3105.
    (b) Authority means the Federal Deposit Insurance Corporation 
(FDIC).
    (c) Authority head or Board means the Board of Directors of the 
FDIC, which is herein designated by the Chairman of the FDIC to serve as 
head of the FDIC for PFCRA matters.
    (d) Benefit means, in the context of ``statement'' as defined in 31 
U.S.C. 3801(a)(9), any financial assistance received from the FDIC that 
amounts to $150,000 or less. The term does not include the FDIC's 
deposit insurance program.
    (e) Claim means any request, demand, or submission:
    (1) Made to the FDIC for property, services, or money (including 
money representing grants, loans, insurance, or benefits);
    (2) Made to a recipient of property, services, or money from the 
FDIC or to a party to a contract with the FDIC;
    (i) For property or services if the United States:
    (A) Provided such property or services;
    (B) Provided any portion of the funds for the purchase of such 
property or services; or
    (C) Will reimburse such recipient or party for the purchase of such 
property or services;
    (ii) For the payment of money (including money representing grants,

[[Page 116]]

loans, insurance, or benefits) if the United States:
    (A) Provided any portion of the money requested or demanded; or
    (B) Will reimburse such recipient or party for any portion of the 
money paid on such request or demand; or
    (3) Made to the FDIC that has the effect of decreasing an obligation 
to pay or account for property, services, or money.
    (f) Complaint means the administrative complaint served by the 
reviewing official on the defendant under Sec. 308.506 of this subpart.
    (g) Corporation means the Federal Deposit Insurance Corporation.
    (h) Defendant means any person alleged in a complaint under Sec. 
308.506 of this subpart to be liable for a civil penalty or assessment 
under Sec. 308.502 of this subpart.
    (i) Government means the United States Government.
    (j) Individual means a natural person.
    (k) Initial decision means the written decision of the ALJ required 
by Sec. 308.509 or Sec. 308.536 of this subpart, and includes a 
revised initial decision issued following a remand or a motion for 
consideration.
    (l) Investigating official means the Inspector General of the FDIC, 
or an officer or employee of the Inspector General designated by the 
Inspector General. The investigating official must serve in a position 
that has a rate of basic pay under the pay scale utilized by the FDIC 
that is equal to or greater than 120 percent of the minimum rate of 
basic pay for grade 15 under the federal government's General Schedule.
    (m) Knows or has reason to know, means that a person, with respect 
to a claim or statement:
    (1) Has actual knowledge that the claim or statement is false, 
fictitious, or fraudulent;
    (2) Acts in deliberate ignorance of the truth or falsity of the 
claim or statement; or
    (3) Acts in reckless disregard of the truth or falsity of the claim 
or statement.
    (n) Makes, wherever it appears, includes the terms ``presents'', 
``submits'', and ``causes to be made, presented, or submitted.'' As the 
context requires, ``making'' or ``made'' likewise includes the 
corresponding forms of such terms.
    (o) Person means any individual, partnership, corporation, 
association, or private organization, and includes the plural of that 
term.
    (p) Representative means an attorney, who is a member in good 
standing of the bar of any state, territory, or possession of the United 
States or of the District of Columbia or the Commonwealth of Puerto 
Rico, and designated by a party in writing.
    (q) Reviewing official means the General Counsel of the FDIC or his 
designee who is:
    (1) Not subject to supervision by, or required to report to, the 
investigating official;
    (2) Not employed in the organizational unit of the FDIC in which the 
investigating official is employed; and
    (3) Serving in a position that has a rate of basic pay under the pay 
scale utilized by the FDIC that is equal to or greater than 120 percent 
of the minimum rate of basic pay for grade 15 under the federal 
government's General Schedule.
    (r) Statement means any representation, certification, affirmation, 
document, record, or accounting or bookkeeping entry made:
    (1) With respect to a claim or to obtain the approval or payment of 
a claim (including relating to eligibility to make a claim); or
    (2) With respect to (including relating to eligibility for):
    (i) A contract with, or a bid or proposal for a contract with; or
    (ii) A grant, loan, or benefit received, directly or indirectly, 
from the FDIC, or any state, political subdivision of a state, or other 
party, if the United States government provides any portion of the money 
or property under such contract or for such grant, loan, or benefit, or 
if the government will reimburse such state, political subdivision, or 
party for any portion of the money or property under such contract or 
for such grant, loan, or benefit.



Sec. 308.502  Basis for civil penalties and assessments.

    (a) Claims. (1) A person who makes a false, fictitious, or 
fraudulent claim to the FDIC is subject to a civil penalty of

[[Page 117]]

up to $5,000 per claim. A claim is false, fictitious, or fraudulent if 
the person making the claim knows, or has reason to know, that:
    (i) The claim is false, fictitious, or fraudulent; or
    (ii) The claim includes, or is supported by, a written statement 
that asserts a material fact which is false, fictitious or fraudulent; 
or
    (iii) The claim includes, or is supported by, a written statement 
that:
    (A) Omits a material fact; and
    (B) Is false, fictitious, or fraudulent as a result of that 
omission; and
    (C) Is a statement in which the person making the statement has a 
duty to include the material fact; or
    (iv) The claim seeks payment for providing property or services that 
the person has not provided as claimed.
    (2) Each voucher, invoice, claim form, or other individual request 
or demand for property, services, or money constitutes a separate claim.
    (3) A claim will be considered made to the FDIC, recipient, or party 
when the claim is actually made to an agent, fiscal intermediary, or 
other entity, including any state or political subdivision thereof, 
acting for or on behalf of the FDIC, recipient, or party.
    (4) Each claim for property, services, or money that constitutes any 
one of the elements in paragraph (a)(1) of this section is subject to a 
civil penalty regardless of whether the property, services, or money is 
actually delivered or paid.
    (5) If the FDIC has made any payment (including transferred property 
or provided services) on a claim, a person subject to a civil penalty 
under paragraph (a)(1) of this section will also be subject to an 
assessment of not more than twice the amount of such claim (or portion 
of the claim) that is determined to constitute a false, fictitious, or 
fraudulent claim under paragraph (a)(1) of this section. The assessment 
will be in lieu of damages sustained by the FDIC because of the claims.
    (6) The amount of any penalty assessed under paragraph (a)(1) of 
this section will be adjusted for inflation in accordance with Sec. 
308.132(c)(3)(xv) of this part.
    (7) The penalty specified in paragraph (a)(1) of this section is in 
addition to any other remedy allowable by law.
    (b) Statements. (1) A person who submits to the FDIC a false, 
fictitious or fraudulent statement is subject to a civil penalty of up 
to $5,000 per statement. A statement is false, fictitious or fraudulent 
if the person submitting the statement to the FDIC knows, or has reason 
to know, that:
    (i) The statement asserts a material fact which is false, 
fictitious, or fraudulent; or
    (ii) The statement omits a material fact that the person making the 
statement has a duty to include in the statement; and
    (iii) The statement contains or is accompanied by an express 
certification or affirmation of the truthfulness and accuracy of the 
contents of the statement.
    (2) Each written representation, certification, or affirmation 
constitutes a separate statement.
    (3) A statement will be considered made to the FDIC when the 
statement is actually made to an agent, fiscal intermediary, or other 
entity, including any state or political subdivision thereof, acting for 
or on behalf of the FDIC.
    (4) The amount of any penalty assessed under paragraph (a)(1) of 
this section will be adjusted for inflation in accordance with Sec. 
308.132(c)(3)(xv) of this part.
    (5) The penalty specified in paragraph (a)(1) of this section is in 
addition to any other remedy allowable by law.
    (c) Failure to file declaration/certification. Where, as a 
prerequisite to conducting business with the FDIC, a person is required 
by law to file one or more declarations and/or certifications, and the 
person intentionally fails to file such declaration/certification, the 
person will be subject to the civil penalties as prescribed by this 
subpart.
    (d) Intent. No proof of specific intent to defraud is required to 
establish liability under this section.
    (e) Liability. (1) In any case in which it is determined that more 
than one person is liable for making a claim or statement under this 
section, each such person may be held jointly and

[[Page 118]]

severally liable for a civil penalty under this section.
    (2) In any case in which it is determined that more than one person 
is liable for making a claim under this section on which the FDIC has 
made payment (including transferred property or provided services), an 
assessment may be imposed against any such person or jointly and 
severally against any combination of such persons.



Sec. 308.503  Investigations.

    (a) If an investigating official concludes that a subpoena pursuant 
to the authority conferred by 31 U.S.C. 3804(a) is warranted:
    (1) The subpoena will identify the person to whom it is addressed 
and the authority under which the subpoena is issued and will identify 
the records or documents sought;
    (2) The investigating official may designate a person to act on his 
or her behalf to receive the documents sought; and
    (3) The person receiving such subpoena will be required to provide 
the investigating official or the person designated to receive the 
documents a certification that the documents sought have been produced, 
or that such documents are not available, and the reasons therefor, or 
that such documents, suitably identified, have been withheld based upon 
the assertion of an identified privilege.
    (b) If the investigating official concludes that an action under the 
PFCRA may be warranted, the investigating official will submit a report 
containing the findings and conclusions of such investigation to the 
reviewing official.
    (c) Nothing in this section will preclude or limit an investigating 
official's discretion to refer allegations directly to the United States 
Department of Justice (DOJ) for suit under the False Claims Act (31 
U.S.C. 3729 et seq.) or other civil relief, or to preclude or limit the 
investigating official's discretion to defer or postpone a report or 
referral to the reviewing official to avoid interference with a criminal 
investigation or prosecution.
    (d) Nothing in this section modifies any responsibility of an 
investigating official to report violations of criminal law to the 
Attorney General.



Sec. 308.504  Review by the reviewing official.

    (a) If, based on the report of the investigating official under 
Sec. 308.503(b) of this subpart, the reviewing official determines that 
there is adequate evidence to believe that a person is liable under 
Sec. 308.502 of this subpart, the reviewing official will transmit to 
the Attorney General a written notice of the reviewing official's 
intention to issue a complaint under Sec. 308.506 of this subpart.
    (b) Such notice will include:
    (1) A statement of the reviewing official's reasons for issuing a 
complaint;
    (2) A statement specifying the evidence that supports the 
allegations of liability;
    (3) A description of the claims or statements upon which the 
allegations of liability are based;
    (4) An estimate of the amount of money or the value of property, 
services, or other benefits requested or demanded in violation of Sec. 
308.502 of this subpart;
    (5) A statement of any exculpatory or mitigating circumstances that 
may relate to the claims or statements known by the reviewing official 
or the investigating official; and
    (6) A statement that there is a reasonable prospect of collecting an 
appropriate amount of penalties and assessments. Such a statement may be 
based upon information then known, or upon an absence of any information 
indicating that the person may be unable to pay such amount.



Sec. 308.505  Prerequisites for issuing a complaint.

    (a) The reviewing official may issue a complaint under Sec. 308.506 
of this subpart only if:
    (1) The DOJ approves the issuance of a complaint in a written 
statement described in 31 U.S.C. 3803(b)(1); and
    (2) In the case of allegations of liability under Sec. 308.502(a) 
of this subpart with respect to a claim (or a group of related claims 
submitted at the same time as defined in paragraph (b) of this section) 
the reviewing official determines that the amount of money or the value 
of property or services demanded or requested does not exceed $150,000.

[[Page 119]]

    (b) For the purposes of this section, a group of related claims 
submitted at the same time will include only those claims arising from 
the same transaction (e.g., grant, loan, application, or contract) that 
are submitted simultaneously as part of a single request, demand, or 
submission.
    (c) Nothing in this section will be construed to limit the reviewing 
official's authority to join in a single complaint against a person 
claims that are unrelated or were not submitted simultaneously, 
regardless of the amount of money, or the value of property or services, 
demanded or requested.



Sec. 308.506  Complaint.

    (a) On or after the date the DOJ approves the issuance of a 
complaint in accordance with 31 U.S.C. 3803(b)(1), the reviewing 
official may serve a complaint on the defendant, as provided in Sec. 
308.507 of this subpart.
    (b) The complaint will state:
    (1) The allegations of liability against the defendant, including 
the statutory basis for liability, or identification of the claims or 
statements that are the basis for the alleged liability, and the reasons 
why liability allegedly arises from such claims or statements;
    (2) The maximum amount of penalties and assessments for which the 
defendant may be held liable;
    (3) Instructions for filing an answer and to request a hearing, 
including a specific statement of the defendant's right to request a 
hearing by filing an answer and to be represented by a representative; 
and
    (4) That failure to file an answer within 30 days of service of the 
complaint will result in the imposition of the maximum amount of 
penalties and assessments without right to appeal, as provided in Sec. 
308.509 of this subpart.
    (c) At the same time the reviewing official serves the complaint, he 
or she will provide the defendant with a copy of this subpart.



Sec. 308.507  Service of complaint.

    (a) Service of a complaint will be made by certified or registered 
mail or by delivery in any manner authorized by rule 4(c) of the Federal 
Rules of Civil Procedure (28 U.S.C. App.). Service is complete upon 
receipt.
    (b) Proof of service, stating the name and address of the person on 
whom the complaint was served, and the manner and date of service, may 
be made by:
    (1) Affidavit of the individual serving the complaint by delivery;
    (2) A United States Postal Service return receipt card acknowledging 
receipt; or
    (3) Written acknowledgment of receipt by the defendant or his or her 
representative.



Sec. 308.508  Answer.

    (a) The defendant may request a hearing by filing an answer with the 
reviewing official within 30 days of service of the complaint. An answer 
will be deemed to be a request for hearing.
    (b) In the answer, the defendant:
    (1) Must admit or deny each of the allegations of liability made in 
the complaint;
    (2) Must state any defense on which the defendant intends to rely;
    (3) May state any reasons why the defendant contends that the 
penalties and assessments should be less than the statutory maximum; and
    (4) Must state the name, address, and telephone number of the person 
authorized by the defendant to act as defendant's representative, if 
any.
    (c) If the defendant is unable to file an answer meeting the 
requirements of paragraph (b) of this section within the time provided:
    (1) The defendant may, before the expiration of 30 days from service 
of the complaint, file with the reviewing official a general answer 
denying liability and requesting a hearing, and a request for an 
extension of time within which to file an answer meeting the 
requirements of paragraph (b) of this section.
    (2) The reviewing official will file promptly with the ALJ the 
complaint, the general answer denying liability, and the request for an 
extension of time as provided in Sec. 308.510 of this subpart.
    (3) For good cause shown, the ALJ may grant the defendant up to 30 
additional days within which to file an answer meeting the requirements 
of paragraph (b) of this section.

[[Page 120]]



Sec. 308.509  Default upon failure to file an answer.

    (a) If the defendant does not file an answer within the time 
prescribed in Sec. 308.508(a) of this subpart, the reviewing official 
may refer the complaint to the ALJ.
    (b) Upon the referral of the complaint, the ALJ will promptly serve 
on defendant in the manner prescribed in Sec. 308.507 of this subpart, 
a notice that an initial decision will be issued under this section.
    (c) If the defendant fails to answer, the ALJ will assume the facts 
alleged in the complaint to be true, and, if such facts establish 
liability under Sec. 308.502 of this subpart, the ALJ will issue an 
initial decision imposing the maximum amount of penalties and 
assessments allowed under the statute.
    (d) Except as otherwise provided in this section, by failing to file 
a timely answer, the defendant waives any right to further review of the 
penalties and assessments imposed under paragraph (c) of this section, 
and the initial decision will become final and binding upon the parties 
30 days after it is issued.
    (e) If, before such an initial decision becomes final, the defendant 
files a motion with the ALJ seeking to reopen on the grounds that 
extraordinary circumstances prevented the defendant from filing an 
answer, the initial decision will be stayed pending the ALJ's decision 
on the motion.
    (f) If, in the motion to reopen under paragraph (e) of this section, 
the defendant can demonstrate extraordinary circumstances excusing the 
failure to file a timely answer, the ALJ will withdraw the initial 
decision in paragraph (c) of this section, if such a decision has been 
issued, and will grant the defendant an opportunity to answer the 
complaint.
    (g) A decision of the ALJ denying a defendant's motion to reopen 
under paragraph (e) of this section is not subject to reconsideration 
under Sec. 308.537 of this subpart.
    (h) The decision denying the motion to reopen under paragraph (e) of 
this section may be appealed by the defendant to the Board by filing a 
notice of appeal with the Board within 15 days after the ALJ denies the 
motion. The timely filing of a notice of appeal will stay the initial 
decision until the Board decides the issue.
    (i) If the defendant files a timely notice of appeal with the Board, 
the ALJ will forward the record of the proceeding to the Board.
    (j) The Board will decide whether extraordinary circumstances excuse 
the defendant's failure to file a timely answer based solely on the 
record before the ALJ.
    (k) If the Board decides that extraordinary circumstances excuse the 
defendant's failure to file a timely answer, the Board will remand the 
case to the ALJ with instructions to grant the defendant an opportunity 
to answer.
    (l) If the Board decides that the defendant's failure to file a 
timely answer is not excused, the Board will reinstate the initial 
decision of the ALJ, which will become final and binding upon the 
parties 30 days after the Board issues such decision.



Sec. 308.510  Referral of complaint and answer to the ALJ.

    Upon receipt of an answer, the reviewing official will file the 
complaint and answer with the ALJ. The reviewing official will include 
the name, address, and telephone number of a representative of the 
Corporation.



Sec. 308.511  Notice of hearing.

    (a) When the ALJ receives the complaint and answer, the ALJ will 
promptly serve a notice of hearing upon the defendant in the manner 
prescribed by Sec. 308.507 of this subpart. At the same time, the ALJ 
will send a copy of such notice to the representative of the 
Corporation.
    (b) The notice will include:
    (1) The tentative time, date, and place, and the nature of the 
hearing;
    (2) The legal authority and jurisdiction under which the hearing is 
to be held;
    (3) The matters of fact and law to be asserted;
    (4) A description of the procedures for the conduct of the hearing;
    (5) The name, address, and telephone number of the representative of 
the Corporation and of the defendant, if any; and

[[Page 121]]

    (6) Other matters as the ALJ deems appropriate.



Sec. 308.512  Parties to the hearing.

    (a) The parties to the hearing will be the defendant and the 
Corporation.
    (b) Pursuant to the False Claims Act (31 U.S.C. 3730(c)(5)), a 
private plaintiff under the False Claims Act may participate in these 
proceedings to the extent authorized by the provisions of that Act.



Sec. 308.513  Separation of functions.

    (a) The investigating official, the reviewing official, and any 
employee or agent of the FDIC who takes part in investigating, 
preparing, or presenting a particular case may not, in such case or a 
factually related case:
    (1) Participate in the hearing as the ALJ;
    (2) Participate or advise in the initial decision or the review of 
the initial decision by the Board, except as a witness or a 
representative in public proceedings; or
    (3) Make the collection of penalties and assessments under 31 U.S.C. 
3806.
    (b) The ALJ will not be responsible to, or subject to the 
supervision or direction of, the investigating official or the reviewing 
official.
    (c) Except as provided in paragraph (a) of this section, the 
representative for the FDIC will be an attorney employed in the FDIC's 
Legal Division; however, the representative of the FDIC may not 
participate or advise in the review of the initial decision by the 
Board.



Sec. 308.514  Ex parte contacts.

    No party or person (except employees of the ALJ's office) will 
communicate in any way with the ALJ on any matter at issue in a case, 
unless on notice and opportunity for all parties to participate. This 
provision does not prohibit a person or party from inquiring about the 
status of a case or asking routine questions concerning administrative 
functions or procedures.



Sec. 308.515  Disqualification of reviewing official or ALJ.

    (a) A reviewing official or ALJ in a particular case may disqualify 
himself or herself at any time.
    (b) A party may file with the ALJ a motion for disqualification of a 
reviewing official or an ALJ. An affidavit alleging conflict of interest 
or other reason for disqualification must accompany the motion.
    (c) Such motion and affidavit must be filed promptly upon the 
party's discovery of reasons requiring disqualification, or such 
objections will be deemed waived.
    (d) Such affidavit must state specific facts that support the 
party's belief that personal bias or other reason for disqualification 
exists and the time and circumstances of the party's discovery of such 
facts. The representative of record must certify that the affidavit is 
made in good faith and this certification must accompany the affidavit.
    (e) Upon the filing of such a motion and affidavit, the ALJ will 
proceed no further in the case until he or she resolves the matter of 
disqualification in accordance with paragraph (f) of this section.
    (f)(1) If the ALJ determines that a reviewing official is 
disqualified, the ALJ will dismiss the complaint without prejudice.
    (2) If the ALJ disqualifies himself or herself, the case will be 
reassigned promptly to another ALJ.
    (3) If the ALJ denies a motion to disqualify, the Board may 
determine the matter only as part of the Board's review of the initial 
decision upon appeal, if any.



Sec. 308.516  Rights of parties.

    Except as otherwise limited by this subpart, all parties may:
    (a) Be accompanied, represented, and advised by a representative;
    (b) Participate in any conference held by the ALJ;
    (c) Conduct discovery;
    (d) Agree to stipulations of fact or law which will be made part of 
the record;
    (e) Present evidence relevant to the issues at the hearing;
    (f) Present and cross-examine witnesses;
    (g) Present oral arguments at the hearing as permitted by the ALJ; 
and

[[Page 122]]

    (h) Submit written briefs and proposed findings of fact and 
conclusions of law.



Sec. 308.517  Authority of the ALJ.

    (a) The ALJ will conduct a fair and impartial hearing, avoid delay, 
maintain order, and assure that a record of the proceeding is made.
    (b) The ALJ has the authority to:
    (1) Set and change the date, time, and place of the hearing upon 
reasonable notice to the parties;
    (2) Continue or recess the hearing in whole or in part for a 
reasonable period of time;
    (3) Hold conferences to identify or simplify the issues, or to 
consider other matters that may aid in the expeditious disposition of 
the proceeding;
    (4) Administer oaths and affirmations;
    (5) Issue subpoenas requiring the attendance of witnesses and the 
production of documents at depositions or at hearings;
    (6) Rule on motions and other procedural matters;
    (7) Regulate the scope and timing of discovery;
    (8) Regulate the course of the hearing and the conduct of 
representatives and parties;
    (9) Examine witnesses;
    (10) Receive, rule on, exclude, or limit evidence;
    (11) Upon motion of a party, take official notice of facts, decide 
cases, in whole or in part, by summary judgment where there is no 
disputed issue of material fact;
    (12) Conduct any conference, argument, or hearing on motions in 
person or by telephone; and
    (13) Exercise such other authority as is necessary to carry out the 
responsibilities of the ALJ under this subpart.
    (c) The ALJ does not have the authority to make any determinations 
regarding the validity of federal statutes or regulations or of 
directives, rules, resolutions, policies, orders or other such general 
pronouncements issued by the Corporation.



Sec. 308.518  Prehearing conferences.

    (a) The ALJ may schedule prehearing conferences as appropriate.
    (b) Upon the motion of any party, the ALJ will schedule at least one 
prehearing conference at a reasonable time in advance of the hearing.
    (c) The ALJ may use prehearing conferences to discuss the following:
    (1) Simplification of the issues;
    (2) The necessity or desirability of amendments to the pleading, 
including the need for a more definite statement;
    (3) Stipulations and admissions of fact as to the contents and 
authenticity of documents;
    (4) Whether the parties can agree to submission of the case on a 
stipulated record;
    (5) Whether a party chooses (subject to the objection of other 
parties) to waive appearance at an oral hearing and to submit only 
documentary evidence and written argument;
    (6) Limitation of the number of witnesses;
    (7) Scheduling dates for the exchange of witness lists and of 
proposed exhibits;
    (8) Discovery;
    (9) The time, date, and place for the hearing; and
    (10) Such other matters as may tend to expedite the fair and just 
disposition of the proceedings.
    (d) The ALJ may issue an order containing all matters agreed upon by 
the parties or ordered by the ALJ at a prehearing conference.



Sec. 308.519  Disclosure of documents.

    (a) Upon written request to the reviewing official, the defendant 
may review any relevant and material documents, transcripts, records, 
and other materials that relate to the allegations set out in the 
complaint and upon which the findings and conclusions of the 
investigating official under Sec. 308.503(b) of this subpart are based, 
unless such documents are subject to a privilege under federal law. Upon 
payment of fees for duplication, the defendant may obtain copies of such 
documents.
    (b) Upon written request to the reviewing official, the defendant 
also may obtain a copy of all exculpatory information in the possession 
of the reviewing official or investigating official relating to the 
allegations in the complaint, even if it is contained in a

[[Page 123]]

document that would otherwise be privileged. If the document would 
otherwise be privileged, only that portion containing exculpatory 
information must be disclosed.
    (c) The notice sent to the Attorney General from the reviewing 
official as described in Sec. 308.504 of this subpart is not 
discoverable under any circumstances.
    (d) The defendant may file a motion to compel disclosure of the 
documents subject to the provisions of this section. Such a motion may 
only be filed with the ALJ following the filing of an answer pursuant to 
Sec. 308.508 of this subpart.



Sec. 308.520  Discovery.

    (a) The following types of discovery are authorized:
    (1) Requests for production of documents for inspection and copying;
    (2) Requests for admission of the authenticity of any relevant 
document or of the truth of any relevant fact;
    (3) Written interrogatories; and
    (4) Depositions.
    (b) For the purpose of this section and Sec. Sec. 308.521 and 
308.522 of this subpart, the term documents includes information, 
documents, reports, answers, records, accounts, papers, and other data 
or documentary evidence. Nothing contained in this subpart will be 
interpreted to require the creation of a document.
    (c) Unless mutually agreed to by the parties, discovery is available 
only as ordered by the ALJ. The ALJ will regulate the timing of 
discovery.
    (d) Motions for discovery. (1) A party seeking discovery may file a 
motion with the ALJ and a copy of the requested discovery, or in the 
case of depositions, a summary of the scope of the proposed deposition, 
must accompany such motions.
    (2) Within 10 days of service, a party may file an opposition to the 
motion and/or a motion for protective order as provided in Sec. 308.523 
of this subpart.
    (3) The ALJ may grant a motion for discovery only if he or she finds 
that the discovery sought:
    (i) Is necessary for the expeditious, fair, and reasonable 
consideration of the issues;
    (ii) Is not unduly costly or burdensome;
    (iii) Will not unduly delay the proceeding; and
    (iv) Does not seek privileged information.
    (4) The burden of showing that discovery should be allowed is on the 
party seeking discovery.
    (5) The ALJ may grant discovery subject to a protective order under 
Sec. 308.523 of this subpart.
    (e) Dispositions. (1) If a motion for deposition is granted, the ALJ 
will issue a subpoena for the deponent, which may require the deponent 
to produce documents. The subpoena will specify the time, date, and 
place at which the deposition will be held.
    (2) The party seeking to depose must serve the subpoena in the 
manner prescribed in Sec. 308.507 of this subpart.
    (3) The deponent may file with the ALJ a motion to quash the 
subpoena or a motion for a protective order within 10 days of service.
    (4) The party seeking to depose must provide for the taking of a 
verbatim transcript of the deposition, and must make the transcript 
available to all other parties for inspection and copying.
    (f) Each party must bear its own costs of discovery.



Sec. 308.521  Exchange of witness lists, statements, and exhibits.

    (a) At least 15 days before the hearing or at such other time as may 
be ordered by the ALJ, the parties must exchange witness lists, copies 
of prior statements of proposed witnesses, and copies of proposed 
hearing exhibits, including copies of any written statements that the 
party intends to offer in lieu of live testimony in accordance with 
Sec. 308.532(b) of this subpart. At the time such documents are 
exchanged, any party that intends to rely on the transcript of 
deposition testimony in lieu of live testimony at the hearing, if 
permitted by the ALJ, must provide each party with a copy of the 
specific pages of the transcript it intends to introduce into evidence.
    (b) If a party objects, the ALJ will not admit into evidence the 
testimony of any witness whose name does not appear on the witness list 
or any exhibit

[[Page 124]]

not provided to the opposing party as provided in paragraph (a) of this 
section unless the ALJ finds good cause for the failure or that there is 
no prejudice to the objecting party.
    (c) Unless another party objects within the time set by the ALJ, 
documents exchanged in accordance with paragraph (a) of this section 
will be deemed to be authentic for the purpose of admissibility at the 
hearing.



Sec. 308.522  Subpoenas for attendance at hearing.

    (a) A party wishing to procure the appearance and testimony of any 
individual at the hearing may request that the ALJ issue a subpoena.
    (b) A subpoena requiring the attendance and testimony of an 
individual may also require the individual to produce documents at the 
hearing.
    (c) A party seeking a subpoena must file a written request not less 
than 15 days before the date fixed for the hearing unless otherwise 
allowed by the ALJ for good cause shown. Such request must specify any 
documents to be produced and must designate the witnesses and describe 
the address and location thereof with sufficient particularity to permit 
such witnesses to be found.
    (d) The subpoena must specify the time, date, and place at which the 
witness is to appear and any documents the witness is to produce.
    (e) The party seeking the subpoena must serve it in the manner 
prescribed in Sec. 308.507 of this subpart. A subpoena on a party or 
upon an individual under the control of a party may be served by first 
class mail.
    (f) A party or the individual to whom the subpoena is directed may 
file with the ALJ a motion to quash the subpoena within 10 days after 
service or on or before the time specified in the subpoena for 
compliance if it is less than 10 days after service.



Sec. 308.523  Protective order.

    (a) A party or a prospective witness or deponent may file a motion 
for a protective order with respect to discovery sought by an opposing 
party or with respect to the hearing, seeking to limit the availability 
or disclosure of evidence.
    (b) In issuing a protective order, the ALJ may make any order which 
justice requires to protect a party or person from annoyance, 
embarrassment, oppression, or undue burden or expense, including one or 
more of the following:
    (1) That the discovery will not be conducted;
    (2) That the discovery will be conducted only on specified terms and 
conditions, including a designation of the time or place;
    (3) That the discovery will be conducted only through a method of 
discovery other than that requested;
    (4) That certain matters not be inquired into, or that the scope of 
discovery be limited to certain matters;
    (5) That discovery be conducted with no one present except persons 
designated by the ALJ;
    (6) That the contents of discovery or evidence be sealed or 
otherwise kept confidential;
    (7) That a deposition after being sealed be opened only by order of 
the ALJ;
    (8) That a trade secret or other confidential research, development, 
commercial information, or facts pertaining to any criminal 
investigation, proceeding, or other administrative investigation not be 
disclosed or be disclosed only in a designated way; or
    (9) That the parties simultaneously file specified documents or 
information enclosed in sealed envelopes to be opened as directed by the 
ALJ.



Sec. 308.524  Witness fees.

    The party requesting a subpoena must pay the cost of the fees and 
mileage of any witness subpoenaed in the amounts that would be payable 
to a witness in a proceeding in United States District Court. A check 
for witness fees and mileage must accompany the subpoena when served, 
except that when a subpoena is issued on behalf of the FDIC, a check for 
witness fees and mileage need not accompany the subpoena.



Sec. 308.525  Form, filing, and service of papers.

    (a) Form. (1) Documents filed with the ALJ must include an original 
and two copies.

[[Page 125]]

    (2) Every pleading and paper filed in the proceeding must contain a 
caption setting forth the title of the action, the case number assigned 
by the ALJ, and a designation of the paper (e.g., motion to quash 
subpoena).
    (3) Every pleading and paper must be signed by, and must contain the 
address and telephone number of the party or the person on whose behalf 
the paper was filed, or his or her representative.
    (4) Papers are considered filed when they are mailed by certified or 
registered mail. Date of mailing may be established by a certificate 
from the party or its representative or by proof that the document was 
sent by certified or registered mail.
    (b) Service. A party filing a document with the ALJ must, at the 
time of filing, serve a copy of such document on every other party. 
Service upon any party of any document other than those required to be 
served as prescribed in Sec. 308.507 of this subpart must be made by 
delivering a copy or by placing a copy of the document in the United 
States mail, postage prepaid, and addressed to the party's last known 
address. When a party is represented by a representative, service must 
be made upon such representative in lieu of the actual party. The ALJ 
may authorize facsimile transmission as an acceptable form of service.
    (c) Proof of service. A certificate by the individual serving the 
document by personal delivery or by mail, setting forth the manner of 
service, will be proof of service.



Sec. 308.526  Computation of time.

    (a) In computing any period of time under this subpart or in an 
order issued thereunder, the time begins with the day following the act, 
event, or default, and includes the last day of the period, unless it is 
a Saturday, Sunday, or legal holiday observed by the federal government, 
in which event it includes the next business day.
    (b) When the period of time allowed is less than 7 days, 
intermediate Saturdays, Sundays, and legal holidays observed by the 
federal government will be excluded from the computation.
    (c) Where a document has been served or issued by placing it in the 
mail, an additional 5 days will be added to the time permitted for any 
response.



Sec. 308.527  Motions.

    (a) Any application to the ALJ for an order or ruling must be by 
motion. Motions must state the relief sought, the authority relied upon, 
and the facts alleged, and must be filed with the ALJ and served on all 
other parties. Motions may include, without limitation, motions for 
summary judgment.
    (b) Except for motions made during a prehearing conference or at the 
hearing, all motions must be in writing. The ALJ may require that oral 
motions be reduced to writing.
    (c) Within 15 days after a written motion is served, or any other 
time as may be fixed by the ALJ, any party may file a response to such 
motion.
    (d) The ALJ may not grant a written motion before the time for 
filing responses thereto has expired, except upon consent of the parties 
or following a hearing on the motion, but may overrule or deny such 
motion without awaiting a response.
    (e) The ALJ will make a reasonable effort to dispose of all 
outstanding motions prior to the beginning of the hearing.



Sec. 308.528  Sanctions.

    (a) The ALJ may sanction a person, including any party or 
representative for:
    (1) Failing to comply with an order, rule, or procedure governing 
the proceeding;
    (2) Failing to prosecute or defend an action; or
    (3) Engaging in other misconduct that interferes with the speedy, 
orderly, or fair conduct of the hearing.
    (b) Any such sanction, including but not limited to, those listed in 
paragraphs (c), (d), and (e) of this section, must reasonably relate to 
the severity and nature of the failure or misconduct.
    (c) When a party fails to comply with an order, including an order 
for taking a deposition, the production of evidence within the party's 
control, or a request for admission, the ALJ may:
    (1) Draw an inference in favor of the requesting party with regard 
to the information sought;

[[Page 126]]

    (2) In the case of requests for admission, deem each matter of which 
an admission is requested to be admitted;
    (3) Prohibit the party failing to comply with such order from 
introducing evidence concerning, or otherwise relying upon, testimony 
relating to the information sought; and
    (4) Strike any part of the related pleading or other submissions of 
the party failing to comply with such request.
    (d) If a party fails to prosecute or defend an action under this 
subpart commenced by service of a notice of hearing, the ALJ may dismiss 
the action or may issue an initial decision imposing penalties and 
assessments.
    (e) The ALJ may refuse to consider any motion, request, response, 
brief, or other document which is not filed in a timely fashion.



Sec. 308.529  The hearing and burden of proof.

    (a) The ALJ will conduct a hearing on the record in order to 
determine whether the defendant is liable for a civil penalty or 
assessment under Sec. 308.502 of this subpart, and, if so, the 
appropriate amount of any such civil penalty or assessment considering 
any aggravating or mitigating factors.
    (b) The FDIC must prove defendant's liability and any aggravating 
factors by a preponderance of the evidence.
    (c) The defendant must prove any affirmative defenses and any 
mitigating factors by a preponderance of the evidence.
    (d) The hearing will be open to the public unless otherwise ordered 
by the ALJ for good cause shown.



Sec. 308.530  Determining the amount of penalties and assessments.

    (a) In determining an appropriate amount of civil penalties and 
assessments, the ALJ and the Board, upon appeal, should evaluate any 
circumstances that mitigate or aggravate the violation and should 
articulate in their opinions the reasons that support the penalties and 
assessments they impose. Because of the intangible costs of fraud, the 
expense of investigating such conduct, and the need to deter others who 
might be similarly tempted, ordinarily double damages and a significant 
civil penalty should be imposed.
    (b) Although not exhaustive, the following factors are among those 
that may influence the ALJ and the Board in determining the amount of 
penalties and assessments to impose with respect to the misconduct 
(i.e., the false, fictitious, or fraudulent claims or statement) charged 
in the complaint:
    (1) The number of false, fictitious, or fraudulent claims or 
statements;
    (2) The time period over which such claims or statements were made;
    (3) The degree of the defendant's culpability with respect to the 
misconduct;
    (4) The amount of money or the value of the property, services, or 
benefit falsely claimed;
    (5) The value of the government's actual loss as a result of the 
misconduct, including foreseeable consequential damages and the costs of 
investigation;
    (6) The relationship of the amount imposed as civil penalties to the 
amount of the government's loss;
    (7) The potential or actual impact of the misconduct upon national 
defense, public health or safety, or public confidence in the management 
of government programs and operations, including particularly the impact 
on the intended beneficiaries of such programs;
    (8) Whether the defendant has engaged in a pattern of the same or 
similar misconduct;
    (9) Whether the defendant attempted to conceal the misconduct;
    (10) The degree to which the defendant has involved others in the 
misconduct or in concealing it;
    (11) Where the misconduct of employees or agents is imputed to the 
defendant, the extent to which the defendant's practices fostered or 
attempted to preclude such misconduct;
    (12) Whether the defendant cooperated in or obstructed an 
investigation of the misconduct;
    (13) Whether the defendant assisted in identifying and prosecuting 
other wrongdoers;
    (14) The complexity of the program or transaction, and the degree of 
the defendant's sophistication with respect to it, including the extent 
of the defendant's prior participation in the program or in a similar 
transaction;

[[Page 127]]

    (15) Whether the defendant has been found, in any criminal, civil, 
or administrative proceeding to have engaged in similar misconduct or to 
have dealt dishonestly with the Government of the United States or of a 
state, directly or indirectly; and
    (16) The need to deter the defendant and others from engaging in the 
same or similar misconduct.
    (c) Nothing in this section will be construed to limit the ALJ or 
the Board from considering any other factors that in any given case may 
mitigate or aggravate the offense for which penalties and assessments 
are imposed.
    (d) Civil money penalties that are assessed pursuant to this subpart 
are subject to adjustment on a four-year basis to account for inflation 
as required by section 4 of the Federal Civil Penalties Inflation 
Adjustment Act of 1990, as amended (codified at 28 U.S.C. 2461, note) 
(see also 12 CFR 308.132(c)(3)(xv)).



Sec. 308.531  Location of hearing.

    (a) The hearing may be held:
    (1) In any judicial district of the United States in which the 
defendant resides or transacts business;
    (2) In any judicial district of the United States in which the claim 
or statement at issue was made; or
    (3) In such other place as may be agreed upon by the defendant and 
the ALJ.
    (b) Each party will have the opportunity to present argument with 
respect to the location of the hearing.
    (c) The hearing will be held at the place and at the time ordered by 
the ALJ.



Sec. 308.532  Witnesses.

    (a) Except as provided in paragraph (b) of this section, testimony 
at the hearing will be given orally by witnesses under oath or 
affirmation.
    (b) At the discretion of the ALJ, testimony may be admitted in the 
form of a written statement or deposition. The party offering a written 
statement must provide all other parties with a copy of the written 
statement along with the last known address of the witness. Sufficient 
time must be allowed for other parties to subpoena the witness for 
cross-examination at the hearing. Prior written statements and 
deposition transcripts of witnesses identified to testify at the hearing 
must be exchanged as provided in Sec. 308.521(a) of this subpart.
    (c) The ALJ will exercise reasonable control over the mode and order 
of interrogating witnesses and presenting evidence so as to:
    (1) Make the interrogation and presentation effective for the 
ascertainment of the truth;
    (2) Avoid needless consumption of time; and
    (3) Protect witnesses from harassment or undue embarrassment.
    (d) The ALJ will permit the parties to conduct such cross-
examination as may be required for a full and true disclosure of the 
facts.
    (e) At the discretion of the ALJ, a witness may be cross-examined on 
matters relevant to the proceeding without regard to the scope of his or 
her direct examination. To the extent permitted by the ALJ, cross-
examination on matters outside the scope of direct examination will be 
conducted in the manner of direct examination and may proceed by leading 
questions only if the witness is a hostile witness, an adverse party, or 
a witness identified with an adverse party.
    (f) Upon motion of any party, the ALJ will order witnesses excluded 
so that they cannot hear the testimony of other witnesses. This rule 
does not authorize exclusion of:
    (1) A party who is an individual;
    (2) In the case of a party that is not an individual, an officer or 
employee of the party appearing for the entity pro se or designated by 
the party's representative; or
    (3) An individual whose presence is shown by a party to be essential 
to the presentation of its case, including an individual employed by the 
Corporation engaged in assisting the representative for the Corporation.



Sec. 308.533  Evidence.

    (a) The ALJ will determine the admissibility of evidence.
    (b) Except as provided in this subpart, the ALJ will not be bound by 
the Federal Rules of Evidence (28 U.S.C. App.). However, the ALJ may 
apply the

[[Page 128]]

Federal Rules of Evidence where appropriate, e.g., to exclude unreliable 
evidence.
    (c) The ALJ will exclude irrelevant and immaterial evidence.
    (d) Although relevant, evidence may be excluded if its probative 
value is substantially outweighed by the danger of unfair prejudice, 
confusion of the issues, or by considerations of undue delay or needless 
presentation of cumulative evidence.
    (e) Although relevant, evidence may be excluded if it is privileged 
under federal law.
    (f) Evidence concerning offers of compromise or settlement will be 
inadmissible to the extent provided in rule 408 of the Federal Rules of 
Evidence.
    (g) The ALJ will permit the parties to introduce rebuttal witnesses 
and evidence.
    (h) All documents and other evidence offered or taken for the record 
must be open to examination by all parties, unless otherwise ordered by 
the ALJ pursuant to Sec. 308.523 of this subpart.



Sec. 308.534  The record.

    (a) The hearing will be recorded by audio or videotape and 
transcribed. Transcripts may be obtained following the hearing from the 
ALJ at a cost not to exceed the actual cost of duplication.
    (b) The transcript of testimony, exhibits, and other evidence 
admitted at the hearing, and all papers and requests filed in the 
proceeding constitute the record for the decision by the ALJ and the 
Board.
    (c) The record may be inspected and copied (upon payment of a 
reasonable fee) by anyone, unless otherwise ordered by the ALJ pursuant 
to Sec. 308.523 of this subpart.



Sec. 308.535  Post-hearing briefs.

    The ALJ may require the parties to file post-hearing briefs. In any 
event, any party may file a post-hearing brief. The ALJ will fix the 
time for filing such briefs, not to exceed 60 days from the date the 
parties receive the transcript of the hearing or, if applicable, the 
stipulated record. Such briefs may be accompanied by proposed findings 
of fact and conclusions of law. The ALJ may permit the parties to file 
reply briefs.



Sec. 308.536  Initial decision.

    (a) The ALJ will issue an initial decision based only on the record, 
which will contain findings of fact, conclusions of law, and the amount 
of any penalties and assessments imposed.
    (b) The findings of fact will include a finding on each of the 
following issues:
    (1) Whether the claims or statements identified in the complaint, or 
any portions of such claims or statements, violate Sec. 308.502 of this 
subpart; and
    (2) If the person is liable for penalties or assessments, the 
appropriate amount of any such penalties or assessments considering any 
mitigating or aggravating factors that he or she finds in the case, such 
as those described in Sec. 308.530 of this subpart.
    (c) The ALJ will promptly serve the initial decision on all parties 
within 90 days after the time for submission of post-hearing briefs and 
reply briefs (if permitted) has expired. The ALJ will at the same time 
serve all parties with a statement describing the right of any defendant 
determined to be liable for a civil penalty or assessment to file a 
motion for reconsideration with the ALJ or a notice of appeal with the 
Board. If the ALJ fails to meet the deadline contained in this 
paragraph, he or she will notify the parties of the reason for the delay 
and will set a new deadline.
    (d) Unless the initial decision of the ALJ is timely appealed to the 
Board, or a motion for reconsideration of the initial decision is timely 
filed, the initial decision will constitute the final decision of the 
Board and will be final and binding on the parties 30 days after it is 
issued by the ALJ.



Sec. 308.537  Reconsideration of initial decision.

    (a) Except as provided in paragraph (d) of this section, any party 
may file a motion for reconsideration of the initial decision within 20 
days of receipt of the initial decision. If service is made by mail, 
receipt will be presumed to be 5 days from the date of mailing in the 
absence of proof to the contrary.
    (b) Every motion for reconsideration must set forth the matters 
claimed to

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have been erroneously decided and the nature of the alleged errors. The 
motion must be accompanied by a supporting brief.
    (c) Responses to the motions will be allowed only upon order of the 
ALJ.
    (d) No party may file a motion for reconsideration of an initial 
decision that has been revised in response to a previous motion for 
reconsideration.
    (e) The ALJ may dispose of a motion for reconsideration by denying 
it or by issuing a revised initial decision.
    (f) If the ALJ denies a motion for reconsideration, the initial 
decision will constitute the final decision of the FDIC and will be 
final and binding on all parties 30 days after the ALJ denies the 
motion, unless the final decision is timely appealed to the Board in 
accordance with Sec. 308.538 of this subpart.
    (g) If the ALJ issues a revised initial decision, that decision will 
constitute the final decision of the FDIC and will be final and binding 
on the parties 30 days after it is issued, unless it is timely appealed 
to the Board in accordance with Sec. 308.538 of this subpart.



Sec. 308.538  Appeal to the Board of Directors.

    (a) Any defendant who has filed a timely answer and who is 
determined in an initial decision to be liable for a civil penalty or 
assessment may appeal such decision to the Board by filing a notice of 
appeal with the Board in accordance with this section.
    (b)(1) No notice of appeal may be filed until the time period for 
filing a motion for reconsideration under Sec. 308.537 of this subpart 
has expired.
    (2) If a motion for reconsideration is timely filed, a notice of 
appeal must be filed within 30 days after the ALJ denies the motion or 
issues a revised initial decision, whichever applies.
    (3) If no motion for reconsideration is timely filed, a notice of 
appeal must be filed within 30 days after the ALJ issues the initial 
decision.
    (4) The Board may extend the initial 30-day period for an additional 
30 days if the defendant files with the Board a request for an extension 
within the initial 30-day period and shows good cause.
    (c) If the defendant files a timely notice of appeal with the Board, 
the ALJ will forward the record of the proceeding to the Board.
    (d) A notice of appeal will be accompanied by a written brief 
specifying exceptions to the initial decision and reasons supporting the 
exceptions.
    (e) The representative for the Corporation may file a brief in 
opposition to exceptions within 30 days of receiving the notice of 
appeal and accompanying brief.
    (f) There is no right to appear personally before the Board.
    (g) There is no right to appeal any interlocutory ruling by the ALJ.
    (h) In reviewing the initial decision, the Board will not consider 
any objection that was not raised before the ALJ unless a demonstration 
is made of extraordinary circumstances causing the failure to raise the 
objection.
    (i) If any party demonstrates to the satisfaction of the Board that 
additional evidence not presented at such hearing is material and that 
there were reasonable grounds for the failure to present such evidence 
at such hearing, the Board will remand the matter to the ALJ for 
consideration of such additional evidence.
    (j) The Board may affirm, reduce, reverse, compromise, remand, or 
settle any penalty or assessment determined by the ALJ in any initial 
decision.
    (k) The Board will promptly serve each party to the appeal with a 
copy of the decision of the Board and a statement describing the right 
of any person determined to be liable for a penalty or an assessment to 
seek judicial review.
    (l) Unless a petition for review is filed as provided in 31 U.S.C. 
3805 after a defendant has exhausted all administrative remedies under 
this subpart and within 60 days after the date on which the Board serves 
the defendant with a copy of the Board's decision, a determination that 
a defendant is liable under Sec. 308.502 of this subpart is final and 
is not subject to judicial review.



Sec. 308.539  Stays ordered by the Department of Justice.

    If at any time the Attorney General or an Assistant Attorney General 
designated by the Attorney General transmits to the Board a written 
finding

[[Page 130]]

that continuation of the administrative process described in this 
subpart with respect to a claim or statement may adversely affect any 
pending or potential criminal or civil action related to such claim or 
statement, the Board will stay the process immediately. The Board may 
order the process resumed only upon receipt of the written authorization 
of the Attorney General.



Sec. 308.540  Stay pending appeal.

    (a) An initial decision is stayed automatically pending disposition 
of a motion for reconsideration or of an appeal to the Board.
    (b) No administrative stay is available following a final decision 
of the Board.



Sec. 308.541  Judicial review.

    Section 3805 of Title 31, United States Code, authorizes judicial 
review by an appropriate United States District Court of a final 
decision of the Board imposing penalties or assessments under this 
subpart and specifies the procedures for such review.



Sec. 308.542  Collection of civil penalties and assessments.

    Sections 3806 and 3808(b) of Title 31, United States Code, authorize 
actions for collection of civil penalties and assessments imposed under 
this subpart and specify the procedures for such actions.



Sec. 308.543  Right to administrative offset.

    The amount of any penalty or assessment which has become final, or 
for which a judgment has been entered under Sec. 308.541 or Sec. 
308.542 of this subpart, or any amount agreed upon in a compromise or 
settlement under Sec. 308.545 of this subpart, may be collected by 
administrative offset under 31 U.S.C. 3716, except that an 
administrative offset may not be made under this section against a 
refund of an overpayment of federal taxes, then or later owing by the 
United States to the defendant.



Sec. 308.544  Deposit in Treasury of United States.

    All amounts collected pursuant to this subpart will be deposited as 
miscellaneous receipts in the Treasury of the United States, except as 
provided in 31 U.S.C. 3806(g).



Sec. 308.545  Compromise or settlement.

    (a) Parties may make offers of compromise or settlement at any time.
    (b) The reviewing official has the exclusive authority to compromise 
or settle a case under this subpart at any time after the date on which 
the reviewing official is permitted to issue a complaint and before the 
date on which the ALJ issues an initial decision.
    (c) The Board has exclusive authority to compromise or settle a case 
under this subpart any time after the date on which the ALJ issues an 
initial decision, except during the pendency of any review under Sec. 
308.541 of this subpart or during the pendency of any action to collect 
penalties and assessments under Sec. 308.542 of this subpart.
    (d) The Attorney General has exclusive authority to compromise or 
settle a case under this subpart during the pendency of any review under 
Sec. 308.541 of this subpart or of any action to recover penalties and 
assessments under 31 U.S.C. 3806.
    (e) The investigating official may recommend settlement terms to the 
reviewing official, the Board, or the Attorney General, as appropriate. 
The reviewing official may recommend settlement terms to the Board, or 
the Attorney General, as appropriate.
    (f) Any compromise or settlement must be in writing.



Sec. 308.546  Limitations.

    (a) The notice of hearing with respect to a claim or statement will 
be served in the manner specified in Sec. 308.507 of this subpart 
within 6 years after the date on which such claim or statement is made.
    (b) If the defendant fails to file a timely answer, service of 
notice under Sec. 308.509(b) of this subpart will be deemed a notice of 
a hearing for purposes of this section.
    (c) The statute of limitations may be extended by agreement of the 
parties.

[[Page 131]]



    Subpart U_Removal, Suspension, and Debarment of Accountants From 
                        Performing Audit Services

    Source: 68 FR 48270, Aug. 13, 2003, unless otherwise noted.



Sec. 308.600  Scope.

    This subpart, which implements section 36(g)(4) of the FDIA (12 
U.S.C. 1831m(g)(4)), provides rules and procedures for the removal, 
suspension, or debarment of independent public accountants and 
accounting firms from performing independent audit and attestation 
services required by section 36 of the FDIA (12 U.S.C. 1831m) for 
insured depository institutions for which the FDIC is the appropriate 
Federal banking agency.



Sec. 308.601  Definitions.

    As used in this subpart, the following terms shall have the meaning 
given below unless the context requires otherwise:
    (a) Accounting firm means a corporation, proprietorship, 
partnership, or other business firm providing audit services.
    (b) Audit services means any service required to be performed by an 
independent public accountant by section 36 of the FDIA and 12 CFR part 
363, including attestation services.
    (c) Independent public accountant (accountant) means any individual 
who performs or participates in providing audit services.



Sec. 308.602  Removal, suspension, or debarment.

    (a) Good cause for removal, suspension, or debarment--(1) 
Individuals. The Board of Directors may remove, suspend, or debar an 
independent public accountant under section 36 of the FDIA from 
performing audit services for insured depository institutions for which 
the FDIC is the appropriate Federal banking agency if, after service of 
a notice of intention and opportunity for hearing in the matter, the 
Board of Directors finds that the accountant:
    (i) Lacks the requisite qualifications to perform audit services;
    (ii) Has knowingly or recklessly engaged in conduct that results in 
a violation of applicable professional standards, including those 
standards and conflicts of interest provisions applicable to accountants 
through the Sarbanes-Oxley Act of 2002 (Pub. L. 107-204, 116 Stat. 745 
(2002)) (Sarbanes-Oxley Act) and developed by the Public Company 
Accounting Oversight Board and the Securities and Exchange Commission;
    (iii) Has engaged in negligent conduct in the form of:
    (A) A single instance of highly unreasonable conduct that results in 
a violation of applicable professional standards in circumstances in 
which an accountant knows, or should know, that heightened scrutiny is 
warranted; or
    (B) Repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to perform audit services;
    (iv) Has knowingly or recklessly given false or misleading 
information, or knowingly or recklessly participated in any way in the 
giving of false or misleading information, to the FDIC or any officer or 
employee of the FDIC;
    (v) Has engaged in, or aided and abetted, a material and knowing or 
reckless violation of any provision of the Federal banking or securities 
laws or the rules and regulations thereunder, or any other law;
    (vi) Has been removed, suspended, or debarred from practice before 
any Federal or state agency regulating the banking, insurance, or 
securities industries, other than by an action listed in Sec. 308.603, 
on grounds relevant to the provision of audit services; or
    (vii) Is suspended or debarred for cause from practice as an 
accountant by any duly constituted licensing authority of any state, 
possession, commonwealth, or the District of Columbia.
    (2) Accounting firms. If the Board of Directors determines that 
there is good cause for the removal, suspension, or debarment of a 
member or employee of an accounting firm under paragraph (a)(1) of this 
section, the Board of Directors also may remove, suspend, or debar such 
firm or one or more offices of such firm. In considering whether to

[[Page 132]]

remove, suspend, or debar an accounting firm or an office thereof, and 
the term of any sanction against an accounting firm under this section, 
the Board of Directors may consider, for example:
    (i) The gravity, scope, or repetition of the act or failure to act 
that constitutes good cause for the removal, suspension, or debarment;
    (ii) The adequacy of, and adherence to, applicable policies, 
practices, or procedures for the accounting firm's conduct of its 
business and the performance of audit services;
    (iii) The selection, training, supervision, and conduct of members 
or employees of the accounting firm involved in the performance of audit 
services;
    (iv) The extent to which managing partners or senior officers of the 
accounting firm have participated, directly, or indirectly through 
oversight or review, in the act or failure to act; and
    (v) The extent to which the accounting firm has, since the 
occurrence of the act or failure to act, implemented corrective internal 
controls to prevent its recurrence.
    (3) Limited scope orders. An order of removal, suspension (including 
an immediate suspension), or debarment may, at the discretion of the 
Board of Directors, be made applicable to a limited number of insured 
depository institutions for which the FDIC is the appropriate Federal 
banking agency.
    (4) Remedies not exclusive. The remedies provided in this subpart 
are in addition to any other remedies the FDIC may have under any other 
applicable provision of law, rule, or regulation.
    (b) Proceedings to remove, suspend or debar--(1) Initiation of 
formal removal, suspension, or debarment proceedings. The Board of 
Directors may initiate a proceeding to remove, suspend, or debar an 
accountant or accounting firm from performing audit services by issuing 
a written notice of intention to take such action that names the 
individual or firm as a respondent and describes the nature of the 
conduct that constitutes good cause for such action.
    (2) Hearings under paragraph (b) of this section. An accountant or 
firm named as a respondent in the notice issued under paragraph (b)(1) 
of this section may request a hearing on the allegations contained in 
the notice. Hearings conducted under this paragraph shall be conducted 
in the same manner as other hearings under the Uniform Rules of Practice 
and Procedure (12 CFR part 308, subpart A) (Uniform Rules).
    (c) Immediate suspension from performing audit services--(1) In 
general. If the Board of Directors serves a written notice of intention 
to remove, suspend, or debar an accountant or accounting firm from 
performing audit services, the Board of Directors may, with due regard 
for the public interest and without a preliminary hearing, immediately 
suspend such accountant or firm from performing audit services for 
insured depository institutions for which the FDIC is the appropriate 
Federal banking agency if the Board of Directors:
    (i) Has a reasonable basis to believe that the accountant or 
accounting firm has engaged in conduct (specified in the notice served 
upon the accountant or accounting firm under paragraph (b)(1) of this 
section) that would constitute grounds for removal, suspension, or 
debarment under paragraph (a) of this section;
    (ii) Determines that immediate suspension is necessary to avoid 
immediate harm to an insured depository institution or its depositors or 
to the depository system as a whole; and
    (iii) Serves such respondent with written notice of the immediate 
suspension.
    (2) Procedures. An immediate suspension notice issued under this 
paragraph will become effective upon service. Such suspension will 
remain in effect until the date the Board of Directors dismisses the 
charges contained in the notice of intention, or the effective date of a 
final order of removal, suspension, or debarment issued by the Board of 
Directors to the respondent.
    (3) Petition to stay. Any accountant or accounting firm immediately 
suspended from performing audit services in accordance with paragraph 
(c)(1) of this section may, within 10 calendar days after service of the 
notice of immediate suspension, file a petition with the Executive 
Secretary for a stay of

[[Page 133]]

such immediate suspension. If no petition is filed within 10 calendar 
days, the immediate suspension shall remain in effect.
    (4) Hearing on petition. Upon receipt of a stay petition, the 
Executive Secretary will designate a presiding officer who will fix a 
place and time (not more than 10 calendar days after receipt of the 
petition, unless extended at the request of petitioner) at which the 
immediately suspended party may appear, personally or through counsel, 
to submit written materials and oral argument. Any FDIC employee engaged 
in investigative or prosecuting functions for the FDIC in a case may 
not, in that or a factually related case, serve as a presiding officer 
or participate or advise in the decision of the presiding officer or of 
the FDIC, except as witness or counsel in the proceeding. In the sole 
discretion of the presiding officer, upon a specific showing of 
compelling need, oral testimony of witnesses also may be presented. 
Enforcement counsel may represent the agency at the hearing. In hearings 
held pursuant to this paragraph there shall be no discovery, and the 
provisions of Sec. Sec. 308.6 through 308.12, Sec. 308.16, and Sec. 
308.21 of the Uniform Rules will apply.
    (5) Decision on petition. Within 30 calendar days after the hearing, 
the presiding officer will issue a decision. The presiding officer will 
grant a stay upon a demonstration that a substantial likelihood exists 
of the respondent's success on the issues raised by the notice of 
intention and that, absent such relief, the respondent will suffer 
immediate and irreparable injury, loss, or damage. In the absence of 
such a demonstration, the presiding officer will notify the parties that 
the immediate suspension will be continued pending the completion of the 
administrative proceedings pursuant to the notice of intention. The 
presiding officer will serve a copy of the decision on, and 
simultaneously certify the record to, the Executive Secretary.
    (6) Review of presiding officer's decision. The parties may seek 
review of the presiding officer's decision by filing a petition for 
review with the Executive Secretary within 10 calendar days after 
service of the decision. Replies must be filed within 10 calendar days 
after the petition filing date. Upon receipt of a petition for review 
and any reply, the Executive Secretary will promptly certify the entire 
record to the Board of Directors. Within 60 calendar days of the 
Executive Secretary's certification, the Board of Directors will issue 
an order notifying the affected party whether or not the immediate 
suspension should be continued or reinstated. The order will state the 
basis of the Board's decision.



Sec. 308.603  Automatic removal, suspension, and debarment.

    (a) An independent public accountant or accounting firm may not 
perform audit services for insured depository institutions for which the 
FDIC is the appropriate Federal banking agency if the accountant or 
firm:
    (1) Is subject to a final order of removal, suspension, or debarment 
(other than a limited scope order) issued by the Board of Governors of 
the Federal Reserve System, the Office of the Comptroller of the 
Currency, or the Office of Thrift Supervision under section 36 of the 
FDIA;
    (2) Is subject to a temporary suspension or permanent revocation of 
registration or a temporary or permanent suspension or bar from further 
association with any registered public accounting firm issued by the 
Public Company Accounting Oversight Board or the Securities and Exchange 
Commission under sections 105(c)(4)(A) or (B) of the Sarbanes-Oxley Act 
(15 U.S.C. 7215(c)(4)(A) or (B)); or
    (3) Is subject to an order of suspension or denial of the privilege 
of appearing or practicing before the Securities and Exchange 
Commission.
    (b) Upon written request, the FDIC, for good cause shown, may grant 
written permission to such accountant or firm to perform audit services 
for insured depository institutions for which the FDIC is the 
appropriate Federal banking agency. The written request must comply with 
the requirements of Sec. 303.3 of this chapter.



Sec. 308.604  Notice of removal, suspension, or debarment.

    (a) Notice to the public. Upon the issuance of a final order for 
removal,

[[Page 134]]

suspension, or debarment of an independent public accountant or 
accounting firm from providing audit services, the FDIC will make the 
order publicly available and provide notice of the order to the other 
Federal banking agencies.
    (b) Notice to the FDIC by accountants and firms. An accountant or 
accounting firm that provides audit services to any insured depository 
institution for which the FDIC is the appropriate Federal banking agency 
must provide the FDIC with written notice of:
    (1) any currently effective order or other action described in 
Sec. Sec. 308.602(a)(1)(vi) through (a)(1)(vii) or Sec. Sec. 
308.603(a)(2) through (a)(3); and
    (2) any currently effective action by the Public Company Accounting 
Oversight Board under sections 105(c)(4)(C) or (G) of the Sarbanes-Oxley 
Act (15 U.S.C. 7215(c)(4)(C) or (G)).
    (c) Timing of notice. Written notice required by this paragraph 
shall be given no later than 15 calendar days following the effective 
date of an order or action, or 15 calendar days before an accountant or 
accounting firm accepts an engagement to provide audit services, 
whichever date is earlier.



Sec. 308.605  Application for reinstatement.

    (a) Form of petition. Unless otherwise ordered by the Board of 
Directors, an application for reinstatement by an independent public 
accountant, an accounting firm, or an office of a firm that was removed, 
suspended, or debarred under Sec. 308.602 may be made in writing at any 
time. The application must comply with the requirements of Sec. 303.3 
of this chapter.
    (b) Procedure. An applicant for reinstatement under this section 
may, in the sole discretion of the Board of Directors, be afforded a 
hearing. In reinstatement proceedings, the person seeking reinstatement 
shall bear the burden of going forward with an application and proving 
the grounds asserted in support of the application, and the Board of 
Directors may, in its sole discretion, direct that any reinstatement 
proceeding be limited to written submissions. The removal, suspension, 
or debarment shall continue until the Board of Directors, for good cause 
shown, has reinstated the applicant or until the suspension period has 
expired. The filing of an application for reinstatement will not stay 
the effectiveness of the removal, suspension, or debarment of an 
accountant or firm.



PART 309_DISCLOSURE OF INFORMATION--Table of Contents




Sec.
309.1 Purpose and scope.
309.2 Definitions.
309.3 Federal Register publication.
309.4 Publicly available records.
309.5 Procedures for requesting records.
309.6 Disclosure of exempt records.
309.7 Service of process.

    Authority: 5 U.S.C. 552; 12 U.S.C. 1819 ``Seventh'' and ``Tenth.''

    Source: 60 FR 61465, Nov. 30, 1995, unless otherwise noted.



Sec. 309.1  Purpose and scope.

    This part sets forth the basic policies of the Federal Deposit 
Insurance Corporation regarding information it maintains and the 
procedures for obtaining access to such information. Section 309.2 sets 
forth definitions applicable to this part 309. Section 309.3 describes 
the types of information and documents typically published in the 
Federal Register. Section 309.4 explains how to access public records 
maintained on the Federal Deposit Insurance Corporation's World Wide Web 
page and in the Federal Deposit Insurance Corporation's Public 
Information Center or ``PIC'', and describes the categories of records 
generally found there. Section 309.5 implements the Freedom of 
Information Act (5 U.S.C. 552). Section 309.6 authorizes the 
discretionary disclosure of exempt records under certain limited 
circumstances. Section 309.7 outlines procedures for serving a subpoena 
or other legal process to obtain information maintained by the FDIC.

[63 FR 16404, Apr. 3, 1998]



Sec. 309.2  Definitions.

    For purposes of this part:
    (a) The term depository institution, as used in Sec. 309.6, 
includes depository institutions that have applied to the Corporation 
for federal deposit insurance,

[[Page 135]]

closed depository institutions, presently operating federally insured 
depository institutions, foreign banks, branches of foreign banks, and 
all affiliates of any of the foregoing.
    (b) The terms Corporation or FDIC mean the Federal Deposit Insurance 
Corporation.
    (c) The words disclose or disclosure, as used in Sec. 309.6, mean 
to give access to a record, whether by producing the written record or 
by oral discussion of its contents. Where the Corporation employee 
authorized to release Corporation documents makes a determination that 
furnishing copies of the documents is necessary, the words disclose or 
disclosure include the furnishing of copies of documents or records. In 
addition, disclose or disclosure as used in Sec. 309.6 is synonymous 
with the term transfer as used in the Right to Financial Privacy Act of 
1978 (12 U.S.C. 3401 et seq.).
    (d) The term examination includes, but is not limited to, formal and 
informal investigations of irregularities involving suspected violations 
of federal or state civil or criminal laws, or unsafe and unsound 
practices as well as such other investigations as may be conducted 
pursuant to law.
    (e) The term record includes records, files, documents, reports, 
correspondence, books, and accounts, or any portion thereof, in any form 
the FDIC regularly maintains them.
    (f) The term report of examination includes, but is not limited to, 
examination reports resulting from examinations of depository 
institutions conducted jointly by Corporation examiners and state 
banking authority examiners or other federal financial institution 
examiners, as well as reports resulting from examinations conducted 
solely by Corporation examiners. The term also includes compliance 
examination reports.
    (g) The term customer financial records, as used in Sec. 309.6, 
means an original of, a copy of, or information known to have been 
derived from, any record held by a depository institution pertaining to 
a customer's relationship with the depository institution but does not 
include any record that contains information not identified with or 
identifiable as being derived from the financial records of a particular 
customer. The term customer as used in Sec. 309.6 refers to individuals 
or partnerships of five or fewer persons.
    (h) The term Director of the Division having primary authority 
includes Deputies to the Chairman and directors of FDIC Divisions and 
Offices that create, maintain custody, or otherwise have primary 
responsibility for the handling of FDIC records or information.

[60 FR 61465, Nov. 30, 1995, as amended at 63 FR 16404, Apr. 3, 1998]



Sec. 309.3  Federal Register publication.

    The FDIC publishes the following information in the Federal Register 
for the guidance of the public:
    (a) Descriptions of its central and field organization and the 
established places at which, the officers from whom, and the methods 
whereby, the public may secure information, make submittals or requests, 
or obtain decisions;
    (b) Statements of the general course and method by which its 
functions are channeled and determined, including the nature and 
requirements of all formal and informal procedures available;
    (c) Rules of procedure, descriptions of forms available or the 
places at which forms may be obtained, and instructions as to the scope 
and contents of all papers, reports or examinations;
    (d) Substantive rules of general applicability adopted as authorized 
by law, and statements of general policy or interpretations of general 
applicability formulated and adopted by the FDIC;
    (e) Every amendment, revision or repeal of the foregoing; and
    (f) General notices of proposed rule-making.



Sec. 309.4  Publicly available records.

    (a) Records available on the FDIC's World Wide Web page--(1) 
Discretionary release of documents. The FDIC encourages the public to 
explore the wealth of resources available on the FDIC's World Wide Web 
page, located at: http://www.fdic.gov. The FDIC has elected to publish a 
broad range of materials on its World Wide Web page, including consumer 
guides; financial and statistical information of interest to the

[[Page 136]]

banking industry; and information concerning the FDIC's responsibilities 
and structure.
    (2) Documents required to be made available via computer 
telecommunications. (i) The following types of documents created on or 
after November 1, 1996, and required to be made available through 
computer telecommunications, may be found on the FDIC's World Wide Web 
page located at: http://www.fdic.gov:
    (A) Final opinions, including concurring and dissenting opinions, as 
well as final orders and written agreements, made in the adjudication of 
cases;
    (B) Statements of policy and interpretations adopted by the Board of 
Directors that are not published in the Federal Register;
    (C) Administrative staff manuals and instructions to staff that 
affect the public;
    (D) Copies of all records released to any person under Sec. 309.5 
that, because of the nature of their subject matter, the FDIC has 
determined are likely to be the subject of subsequent requests;
    (E) A general index of the records referred to in paragraph 
(a)(2)(i)(D) of this section.
    (ii) To the extent permitted by law, the FDIC may delete identifying 
details when it makes available or publishes a final opinion, final 
order, statement of policy, interpretation or staff manual or 
instruction. If redaction is necessary, the FDIC will, to the extent 
technically feasible, indicate the amount of material deleted at the 
place in the record where such deletion is made unless that indication 
in and of itself will jeopardize the purpose for the redaction.
    (b) Public Information Center. The FDIC maintains a Public 
Information Center or ``PIC'' that contains Corporate records that the 
Freedom of Information Act requires be made available for regular 
inspection and copying, as well as any records or information the FDIC, 
in its discretion, has regularly made available to the public. The PIC 
has extensive materials of interest to the public, including many 
Reports, Summaries and Manuals used or published by the Corporation that 
are available for inspection and copying. The PIC is open from 9:00 AM 
to 5:00 PM, Monday through Friday, excepting federal holidays. It is 
located at 801 17th Street, NW., Washington, DC 20006. The PIC may be 
reached during business hours by calling (800) 276-6003.
    (c) Applicable fees. (i) If applicable, fees for furnishing records 
under this section are as set forth in Sec. 309.5(f) except that all 
categories of requesters shall be charged duplication costs.
    (ii) Information on the FDIC's World Wide Web page is available to 
the public without charge. If, however, information available on the 
FDIC's World Wide Web page is provided pursuant to a Freedom of 
Information Act request processed under Sec. 309.5, then fees apply and 
will be assessed pursuant to Sec. 309.5(f).

[63 FR 16404, Apr. 3, 1998]



Sec. 309.5  Procedures for requesting records.

    (a) Definitions. For purposes of this section:
    (1) Commercial use request means a request from or on behalf of a 
requester who seeks records for a use or purpose that furthers the 
commercial, trade, or profit interests of the requester or the person on 
whose behalf the request is made. In determining whether a request falls 
within this category, the FDIC will determine the use to which a 
requester will put the records requested and seek additional information 
as it deems necessary.
    (2) Direct costs means those expenditures the FDIC actually incurs 
in searching for, duplicating, and, in the case of commercial 
requesters, reviewing records in response to a request for records.
    (3) Duplication means the process of making a copy of a record 
necessary to respond to a request for records or for inspection of 
original records that contain exempt material or that cannot otherwise 
be directly inspected. Such copies can take the form of paper copy, 
microfilm, audiovisual records, or machine readable records (e.g., 
magnetic tape or computer disk).
    (4) Educational institution means a preschool, a public or private 
elementary or secondary school, an institution of undergraduate or 
graduate

[[Page 137]]

higher education, an institution of professional education, and an 
institution of vocational education, which operates a program or 
programs of scholarly research.
    (5) Noncommercial scientific institution means an institution that 
is not operated on a commercial basis as that term is defined in 
paragraph (a)(1) of this section, and which is operated solely for the 
purpose of conducting scientific research, the results of which are not 
intended to promote any particular product or industry.
    (6) Representative of the news media means any person primarily 
engaged in gathering news for, or a free-lance journalist who can 
demonstrate a reasonable expectation of having his or her work product 
published or broadcast by, an entity that is organized and operated to 
publish or broadcast news to the public. The term news means information 
that is about current events or that would be of current interest to the 
general public.
    (7) Review means the process of examining records located in 
response to a request for records to determine whether any portion of 
any record is permitted to be withheld as exempt information. It 
includes processing any record for disclosure, e.g., doing all that is 
necessary to excise them or otherwise prepare them for release.
    (8) Search includes all time spent looking for material that is 
responsive to a request, including page-by-page or line-by-line 
identification of material within records. Searches may be done manually 
and/or by computer using existing programming.
    (b) Making a request for records. (1) The request shall be submitted 
in writing to the Freedom of Information Act/Privacy Act Group (``FOIA/
PA Group''), Legal Division :
    (i) By completing the online request form located on the FDIC's 
World Wide Web page, found at: http://www.fdic.gov;
    (ii) By facsimile clearly marked Freedom of Information Act Request 
to the FOIA/PA Group: (202) 736-0547; or
    (iii) By sending a letter to: Legal Division, FDIC, ATTN: FOIA/PA 
Group,, 550 17th Street, NW., Washington, DC 20429.
    (2) The request shall contain the following information:
    (i) The name and address of the requester, an electronic mail 
address, if available, and the telephone number at which the requester 
may be reached during normal business hours;
    (ii) Whether the requester is an educational institution, 
noncommercial scientific institution, or news media representative;
    (iii) A statement agreeing to pay the applicable fees, or a 
statement identifying a maximum fee that is acceptable to the requester, 
or a request for a waiver or reduction of fees that satisfies paragraph 
(f)(1)(x) of this section; and
    (iv) The preferred form and format of any responsive information 
requested, if other than paper copies.
    (3) A request for identifiable records shall reasonably describe the 
records in a way that enables the FDIC's staff to identify and produce 
the records with reasonable effort and without unduly burdening or 
significantly interfering with any of the FDIC's operations.
    (c) Defective requests. The FDIC need not accept or process a 
request that does not reasonably describe the records requested or that 
does not otherwise comply with the requirements of this part. The FDIC 
may return a defective request, specifying the deficiency. The requester 
may submit a corrected request, which will be treated as a new request.
    (d) Processing requests--(1) Receipt of requests. Upon receipt of 
any request that satisfies paragraph (b) of this section, the FOIA/PA 
Group, Legal Division shall assign the request to the appropriate 
processing track pursuant to this section. The date of receipt for any 
request, including one that is addressed incorrectly or that is referred 
by another agency, is the date the FOIA/PA Group actually receives the 
request.
    (2) Multitrack processing. (i) The FDIC provides different levels of 
processing for categories of requests under this part. Requests for 
records that are readily identifiable by the FOIA/PA Group, and that 
have already been cleared for public release may qualify for fast-track 
processing. All other requests shall be handled under normal processing 
procedures, unless expedited processing has been granted pursuant to 
paragraph (d)(3) of this section.

[[Page 138]]

    (ii) The FDIC will make the determination whether a request 
qualifies for fast-track processing. A requester may contact the FOIA/PA 
Group to learn whether a particular request has been assigned to fast-
track processing. If the request has not qualified for fast-track 
processing, the requester will be given an opportunity to refine the 
request in order to qualify for fast-track processing. Changes made to 
requests to obtain faster processing must be in writing.
    (3) Expedited processing. (i) Where a person requesting expedited 
access to records has demonstrated a compelling need for the records, or 
where the FDIC has determined to expedite the response, the FDIC shall 
process the request as soon as practicable. To show a compelling need 
for expedited processing, the requester shall provide a statement 
demonstrating that:
    (A) The failure to obtain the records on an expedited basis could 
reasonably be expected to pose an imminent threat to the life or 
physical safety of an individual; or
    (B) The requester can establish that they are primarily engaged in 
information dissemination as their main professional occupation or 
activity, and there is urgency to inform the public of the government 
activity involved in the request; and
    (C) The requester's statement must be certified to be true and 
correct to the best of the person's knowledge and belief and explain in 
detail the basis for requesting expedited processing.
    (ii) The formality of the certification required to obtain expedited 
treatment may be waived by the FDIC as a matter of administrative 
discretion.
    (4) A requester seeking expedited processing will be notified 
whether expedited processing has been granted within ten (10) working 
days of the receipt of the request. If the request for expedited 
processing is denied, the requester may file an appeal pursuant to the 
procedures set forth in paragraph (h) of this section, and the FDIC 
shall respond to the appeal within ten (10) working days after receipt 
of the appeal.
    (5) Priority of responses. Consistent with sound administrative 
process the FDIC processes requests in the order they are received in 
the separate processing tracks. However, in the agency's discretion, or 
upon a court order in a matter to which the FDIC is a party, a 
particular request may be processed out of turn.
    (6) Notification. (i) The time for response to requests will be 
twenty (20) working days except:
    (A) In the case of expedited treatment under paragraph (d)(3) of 
this section;
    (B) Where the running of such time is suspended for the calculation 
of a cost estimate for the requester if the FDIC determines that the 
processing of the request may exceed the requester's maximum fee 
provision or if the charges are likely to exceed $250 as provided for in 
paragraph (f)(1)(v) of this section;
    (C) Where the running of such time is suspended for the payment of 
fees pursuant to the paragraphs (d)(6)(i)(B) and (f)(1) of this section; 
or
    (D) In unusual circumstances, as defined in 5 U.S.C. 552(a)(6)(B) 
and further described in paragraph (d)(6)(iii) of this section.
    (ii) In unusual circumstances as referred to in paragraph 
(d)(6)(i)(D) of this section, the time limit may be extended for a 
period of:
    (A) Ten (10) working days as provided by written notice to the 
requester, setting forth the reasons for the extension and the date on 
which a determination is expected to be dispatched; or
    (B) Such alternative time period as agreed to by the requester or as 
reasonably determined by the FDIC when the FDIC notifies the requester 
that the request cannot be processed in the specified time limit.
    (iii) Unusual circumstances may arise when:
    (A) The records are in facilities, such as field offices or storage 
centers, that are not located at the FDIC's Washington office;
    (B) The records requested are voluminous or are not in close 
proximity to one another; or
    (C) There is a need to consult with another agency or among two or 
more components of the FDIC having a substantial interest in the 
determination.

[[Page 139]]

    (7) Response to request. In response to a request that satisfies the 
requirements of paragraph (b) of this section, a search shall be 
conducted of records maintained by the FDIC in existence on the date of 
receipt of the request, and a review made of any responsive information 
located. The FDIC shall notify the requester of:
    (i) The FDIC's determination of the request;
    (ii) The reasons for the determination;
    (iii) If the response is a denial of an initial request or if any 
information is withheld, the FDIC will advise the requester in writing:
    (A) If the denial is in part or in whole;
    (B) The name and title of each person responsible for the denial 
(when other than the person signing the notification);
    (C) The exemptions relied on for the denial; and
    (D) The right of the requester to appeal the denial to the FDIC's 
General Counsel within 30 business days following receipt of the 
notification, as specified in paragraph (h) of this section.
    (e) Providing responsive records. (1) Copies of requested records 
shall be sent to the requester by regular U.S. mail to the address 
indicated in the request, unless the requester elects to take delivery 
of the documents at the FDIC or makes other acceptable arrangements, or 
the FDIC deems it appropriate to send the documents by another means.
    (2) The FDIC shall provide a copy of the record in any form or 
format requested if the record is readily reproducible by the FDIC in 
that form or format, but the FDIC need not provide more than one copy of 
any record to a requester.
    (3) By arrangement with the requester, the FDIC may elect to send 
the responsive records electronically if a substantial portion of the 
request is in electronic format. If the information requested is made 
pursuant to the Privacy Act of 1974, 5 U.S.C. 552a, it will not be sent 
by electronic means unless reasonable security measures can be provided.
    (f) Fees--(1) General rules. (i) Persons requesting records of the 
FDIC shall be charged for the direct costs of search, duplication, and 
review as set forth in paragraphs (f)(2) and (f)(3) of this section, 
unless such costs are less than the FDIC's cost of processing the 
requester's remittance.
    (ii) Requesters will be charged for search and review costs even if 
responsive records are not located or, if located, are determined to be 
exempt from disclosure.
    (iii) Multiple requests seeking similar or related records from the 
same requester or group of requesters will be aggregated for the 
purposes of this section.
    (iv) If the FDIC determines that the estimated costs of search, 
duplication, or review of requested records will exceed the dollar 
amount specified in the request, or if no dollar amount is specified, 
the FDIC will advise the requester of the estimated costs (if greater 
than the FDIC's cost of processing the requester's remittance). The 
requester must agree in writing to pay the costs of search, duplication, 
and review prior to the FDIC initiating any records search.
    (v) If the FDIC estimates that its search, duplication, and review 
costs will exceed $250.00, the requester must pay an amount equal to 20 
percent of the estimated costs prior to the FDIC initiating any records 
search.
    (vi) The FDIC shall ordinarily collect all applicable fees under the 
final invoice before releasing copies of requested records to the 
requester.
    (vii) The FDIC may require any requester who has previously failed 
to pay the charges under this section within 30 calendar days of mailing 
of the invoice to pay in advance the total estimated costs of search, 
duplication, and review. The FDIC may also require a requester who has 
any charges outstanding in excess of 30 calendar days following mailing 
of the invoice to pay the full amount due, or demonstrate that the fee 
has been paid in full, prior to the FDIC initiating any additional 
records search.
    (viii) The FDIC may begin assessing interest charges on unpaid bills 
on the 31st day following the day on which the invoice was sent. 
Interest will be at the

[[Page 140]]

rate prescribed in section 3717 of title 31 of the United States Code 
and will accrue from the date of the invoice.
    (ix) The time limit for the FDIC to respond to a request will not 
begin to run until the FDIC has received the requester's written 
agreement under paragraph (f)(1)(iv) of this section, and advance 
payment under paragraph (f)(1) (v) or (vii) of this section, or payment 
of outstanding charges under paragraph (f)(1)(vii) or (viii) of this 
section.
    (x) As part of the initial request, a requester may ask that the 
FDIC waive or reduce fees if disclosure of the records is in the public 
interest because it is likely to contribute significantly to public 
understanding of the operations or activities of the government and is 
not primarily in the commercial interest of the requester. 
Determinations as to a waiver or reduction of fees will be made by the 
FOIA/PA Group, Legal Division (or designee) and the requester will be 
notified in writing of his/her determination. A determination not to 
grant a request for a waiver or reduction of fees under this paragraph 
may be appealed to the FDIC's General Counsel (or designee) pursuant to 
the procedure set forth in paragraph (h) of this section.
    (2) Chargeable fees by category of requester. (i) Commercial use 
requesters shall be charged search, duplication and review costs.
    (ii) Educational institutions, non-commercial scientific 
institutions and news media representatives shall be charged duplication 
costs, except for the first 100 pages.
    (iii) Requesters not described in paragraph (f)(2) (i) or (ii) of 
this section shall be charged the full reasonable direct cost of search 
and duplication, except for the first two hours of search time and first 
100 pages of duplication.
    (3) Fee schedule. The dollar amount of fees which the FDIC may 
charge to records requesters will be established by the Chief Financial 
Officer of the FDIC (or designee). The FDIC may charge fees that recoup 
the full allowable direct costs it incurs. Fees are subject to change as 
costs change.
    (i) Manual searches for records. The FDIC will charge for manual 
searches for records at the basic rate of pay of the employee making the 
search plus 16 percent to cover employee benefit costs. Where a single 
class of personnel (e.g., all clerical, all professional, or all 
executive) is used exclusively, the FDIC, at its discretion, may 
establish and charge an average rate for the range of grades typically 
involved.
    (ii) Computer searches for records. The fee for searches of 
computerized records is the actual direct cost of the search, including 
computer time, computer runs, and the operator's time apportioned to the 
search. The fee for a computer printout is the actual cost. The fees for 
computer supplies are the actual costs. The FDIC may, at its discretion, 
establish and charge a fee for computer searches based upon a reasonable 
FDIC-wide average rate for central processing unit operating costs and 
the operator's basic rate of pay plus 16 percent to cover employee 
benefit costs.
    (iii) Duplication of records. (A) The per-page fee for paper copy 
reproduction of documents is the average FDIC-wide cost based upon the 
reasonable direct costs of making such copies.
    (B) For other methods of reproduction or duplication, the FDIC will 
charge the actual direct costs of reproducing or duplicating the 
documents.
    (iv) Review of records. The FDIC will charge commercial use 
requesters for the review of records at the time of processing the 
initial request to determine whether they are exempt from mandatory 
disclosure at the basic rate of pay of the employee making the search 
plus 16 percent to cover employee benefit costs. Where a single class of 
personnel (e.g., all clerical, all professional, or all executive) is 
used exclusively, the FDIC, at its discretion, may establish and charge 
an average rate for the range of grades typically involved. The FDIC 
will not charge at the administrative appeal level for review of an 
exemption already applied. When records or portions of records are 
withheld in full under an exemption which is subsequently determined not 
to apply, the FDIC may charge for a subsequent review to determine the 
applicability of other exemptions not previously considered.
    (v) Other services. Complying with requests for special services, 
other than a

[[Page 141]]

readily produced electronic form or format, is at the FDIC's discretion. 
The FDIC may recover the full costs of providing such services to the 
requester.
    (4) Publication of fee schedule and effective date of changes. (i) 
The fee schedule is made available on the FDIC's World Wide Web page, 
found at http://www.fdic.gov.
    (ii) The fee schedule will be set forth in the ``Notice of Federal 
Deposit Insurance Corporation Records Fees'' issued in December of each 
year or in such ``Interim Notice of Federal Deposit Insurance 
Corporation Records Fees'' as may be issued. Copies of such notices may 
be obtained at no charge from the FOIA/PA Group, Legal Division, 550 
17th Street NW., Washington, DC 20429, and are available on the FDIC's 
World Wide Web page as noted in paragraph (f)(4)(i) of this section.
    (iii) The fees implemented in the December or Interim Notice will be 
effective 30 days after issuance.
    (5) Use of contractors. The FDIC may contract with independent 
contractors to locate, reproduce, and/or disseminate records; provided, 
however, that the FDIC has determined that the ultimate cost to the 
requester will be no greater than it would be if the FDIC performed 
these tasks itself. In no case will the FDIC contract out 
responsibilities which the Freedom of Information Act (FOIA) (5 U.S.C. 
552) provides that the FDIC alone may discharge, such as determining the 
applicability of an exemption or whether to waive or reduce fees.
    (g) Exempt information. A request for records may be denied if the 
requested record contains information which falls into one or more of 
the following categories.\1\ If the requested record contains both 
exempt and nonexempt information, the nonexempt portions which may 
reasonably be segregated from the exempt portions will be released to 
the requester. If redaction is necessary, the FDIC will, to the extent 
technically feasible, indicate the amount of material deleted at the 
place in the record where such deletion is made unless that indication 
in and of itself will jeopardize the purpose for the redaction. The 
categories of exempt records are as follows:
---------------------------------------------------------------------------

    \1\ Classification of a record as exempt from disclosure under the 
provisions of this paragraph (g) shall not be construed as authority to 
withhold the record if it is otherwise subject to disclosure under the 
Privacy Act of 1974 (5 U.S.C. 552a) or other federal statute, any 
applicable regulation of FDIC or any other federal agency having 
jurisdiction thereof, or any directive or order of any court of 
competent jurisdiction.
---------------------------------------------------------------------------

    (1) Records that are specifically authorized under criteria 
established by an Executive Order to be kept secret in the interest of 
national defense or foreign policy and are in fact properly classified 
pursuant to such Executive Order;
    (2) Records related solely to the internal personnel rules and 
practices of the FDIC;
    (3) Records specifically exempted from disclosure by statute, 
provided that such statute:
    (i) Requires that the matters be withheld from the public in such a 
manner as to leave no discretion on the issue; or
    (ii) Establishes particular criteria for withholding or refers to 
particular types of matters to be withheld;
    (4) Trade secrets and commercial or financial information obtained 
from a person that is privileged or confidential;
    (5) Interagency or intra-agency memoranda or letters that would not 
be available by law to a private party in litigation with the FDIC;
    (6) Personnel, medical, and similar files (including financial 
files) the disclosure of which would constitute a clearly unwarranted 
invasion of personal privacy;
    (7) Records compiled for law enforcement purposes, but only to the 
extent that the production of such law enforcement records:
    (i) Could reasonably be expected to interfere with enforcement 
proceedings;
    (ii) Would deprive a person of a right to a fair trial or an 
impartial adjudication;
    (iii) Could reasonably be expected to constitute an unwarranted 
invasion of personal privacy;
    (iv) Could reasonably be expected to disclose the identity of a 
confidential

[[Page 142]]

source, including a state, local, or foreign agency or authority or any 
private institution which furnished records on a confidential basis;
    (v) Would disclose techniques and procedures for law enforcement 
investigations or prosecutions, or would disclose guidelines for law 
enforcement investigations or prosecutions if such disclosure could 
reasonably be expected to risk circumvention of the law; or
    (vi) Could reasonably be expected to endanger the life or physical 
safety of any individual;
    (8) Records that are contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the FDIC or any agency responsible for the regulation or 
supervision of financial institutions; or
    (9) geological and geophysical information and data, including maps, 
concerning wells.
    (h) Appeals. (1) Appeals should be addressed to the FOIA/PA Group, 
Legal Division, FDIC, 550 17th Street, NW., Washington, DC 20429.
    (2) A person whose initial request for records under this section, 
or whose request for a waiver of fees under paragraph (f)(1)(x) of this 
section, has been denied, either in part or in whole, has the right to 
appeal the denial to the FDIC's General Counsel (or designee) within 30 
business days after receipt of notification of the denial. Appeals of 
denials of initial requests or for a waiver of fees must be in writing 
and include any additional information relevant to consideration of the 
appeal.
    (3) Except in the case of an appeal for expedited treatment under 
paragraph (d)(3) of this section, the FDIC will notify the appellant in 
writing within 20 business days after receipt of the appeal and will 
state:
    (i) Whether it is granted or denied in whole or in part;
    (ii) The name and title of each person responsible for the denial 
(if other than the person signing the notification);
    (iii) The exemptions relied upon for the denial in the case of 
initial requests for records; and
    (iv) The right to judicial review of the denial under the FOIA.
    (4) If a requester is appealing for denial of expedited treatment, 
the FDIC will notify the appellant within 10 business days after receipt 
of the appeal of the FDIC's disposition.
    (5) Complete payment of any outstanding fee invoice will be required 
before an appeal is processed.
    (i) Records of another agency. If a requested record is the property 
of another federal agency or department, and that agency or department, 
either in writing or by regulation, expressly retains ownership of such 
record, upon receipt of a request for the record the FDIC will promptly 
inform the requester of this ownership and immediately shall forward the 
request to the proprietary agency or department either for processing in 
accordance with the latter's regulations or for guidance with respect to 
disposition.

[63 FR 16404, Apr. 3, 1998, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 309.6  Disclosure of exempt records.

    (a) Disclosure prohibited. Except as provided in paragraph (b) of 
this section or by 12 CFR part 310,\2\ no person shall disclose or 
permit the disclosure of any exempt records, or information contained 
therein, to any persons other than those officers, directors, employees, 
or agents of the Corporation who have a need for such records in the 
performance of their official duties. In any instance in which any 
person has possession, custody or control of FDIC exempt records or 
information contained therein, all copies of such records shall remain 
the property of the Corporation and under no circumstances shall any 
person, entity or agency disclose or make public in any manner the 
exempt records or information without written authorization from the 
Director of the Corporation's Division having primary authority over the 
records or information as provided in this section.
---------------------------------------------------------------------------

    \2\ The procedures for disclosing records under the Privacy Act are 
separately set forth in 12 CFR part 310.
---------------------------------------------------------------------------

    (b) Disclosure authorized. Exempt records or information of the 
Corporation may be disclosed only in accordance with the conditions and 
requirements set forth in this paragraph (b). Requests for discretionary 
disclosure of

[[Page 143]]

exempt records or information pursuant to this paragraph (b) may be 
submitted directly to the Division having primary authority over the 
exempt records or information or to the FOIA/PA Group for forwarding to 
the appropriate Division having primary authority over the records 
sought. Such administrative request must clearly state that it seeks 
discretionary disclosure of exempt records, clearly identify the records 
sought, provide sufficient information for the Corporation to evaluate 
whether there is good cause for disclosure, and meet all other 
conditions set forth in paragraph (b)(1) through (10) of this section. 
Information regarding the appropriate FDIC Division having primary 
authority over a particular record or records may be obtained from the 
FOIA/PA Group. Authority to disclose or authorize disclosure of exempt 
records of the Corporation is delegated as follows:
    (1) Disclosure to depository institutions. The Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may disclose to any director or authorized officer, 
employee or agent of any depository institution, information contained 
in, or copies of, exempt records pertaining to that depository 
institution.
    (2) Disclosure to state banking agencies. The Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may in his or her discretion and for good cause, disclose 
to any authorized officer or employee of any state banking or securities 
department or agency, copies of any exempt records to the extent the 
records pertain to a state-chartered depository institution supervised 
by the agency or authority, or where the exempt records are requested in 
writing for a legitimate depository institution supervisory or 
regulatory purpose.
    (3) Disclosure to federal financial institutions supervisory 
agencies and certain other agencies. The Director of the Corporation's 
Division having primary authority over the exempt records, or designee, 
may in his or her discretion and for good cause, disclose to any 
authorized officer or employee of any federal financial institution 
supervisory agency including the Comptroller of the Currency, the Board 
of Governors of the Federal Reserve System, the Office of Thrift 
Supervision, the Securities and Exchange Commission, the National Credit 
Union Administration, or any other agency included in section 1101(7) of 
the Right to Financial Privacy Act of 1978 (12 U.S.C. 3401 et. seq.) 
(RFPA), any exempt records for a legitimate depository institution 
supervisory or regulatory purpose. The Director, or designee, may in his 
or her discretion and for good cause, disclose exempt records, including 
customer financial records, to certain other federal agencies as 
referenced in section 1113 of the RFPA for the purposes and to the 
extent permitted therein, or to any foreign bank regulatory or 
supervisory authority as provided, and to the extent permitted, by 
section 206 of the Federal Deposit Insurance Corporation Improvement Act 
of 1991 (12 U.S.C. 3109). Finally, the Director, or designee, may in his 
or her discretion and for good cause, disclose reports of examination or 
other confidential supervisory information concerning any depository 
institution or other entity examined by the Corporation under authority 
of Federal law to: any other Federal or State agency or authority with 
supervisory or regulatory authority over the depository institution or 
other entity; any officer, director, or receiver of such depository 
institution or entity; and any other person that the Corporation 
determines to be appropriate.
    (4) Disclosure to prosecuting or investigatory agencies or 
authorities. (i) Reports of Apparent Crime pertaining to suspected 
violations of law, which may contain customer financial records, may be 
disclosed to federal or state prosecuting or investigatory authorities 
without giving notice to the customer, as permitted in the relevant 
exceptions of the RFPA.
    (ii) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may disclose to the 
proper federal or state prosecuting or investigatory authorities, or to 
any authorized officer or employee of such authority, copies of exempt 
records pertaining to irregularities discovered in depository 
institutions which are believed to constitute violations of any federal 
or

[[Page 144]]

state civil or criminal law, or unsafe or unsound banking practices, 
provided that customer financial records may be disclosed without giving 
notice to the customer, only as permitted by the relevant exceptions of 
the RFPA. Unless such disclosure is initiated by the FDIC, customer 
financial records shall be disclosed only in response to a written 
request which:
    (A) Is signed by an authorized official of the agency making the 
request;
    (B) Identifies the record or records to which access is requested; 
and
    (C) Gives the reasons for the request.
    (iii) When notice to the customer is required to be given under the 
RFPA, the Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may disclose customer 
financial records to any federal or state prosecuting or investigatory 
agency or authority, provided, that:
    (A) The General Counsel, or designee, has determined that disclosure 
is authorized or required by law; or
    (B) Disclosure is pursuant to a written request that indicates the 
information is relevant to a legitimate law enforcement inquiry within 
the jurisdiction of the requesting agency and:
    (1) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, certifies pursuant to 
section 1112(a) \3\ of the RFPA that the records are believed relevant 
to a legitimate law enforcement inquiry within the jurisdiction of the 
receiving agency; and
---------------------------------------------------------------------------

    \3\ The form of certification generally is as follows. Additional 
information may be added:
    Pursuant to section 1112(a) of the Right to Financial Privacy Act of 
1978 (12 U.S.C. 3412), I, ------ [name and appropriate title] hereby 
certify that the financial records described below were transferred to 
(agency or department) in the belief that they were relevant to a 
legitimate law enforcement inquiry, within the jurisdiction of the 
receiving agency.
---------------------------------------------------------------------------

    (2) A copy of such certification and the notice required by section 
1112(b) \4\ of the RFPA is sent within fourteen days of the disclosure 
to the customer whose records are disclosed.\5\
---------------------------------------------------------------------------

    \4\ The form of notice generally is as follows. Additional 
information may be added:
    Dear Mr./Ms. ------:
    Copies of, or information contained in, your financial records 
lawfully in the possession of the Federal Deposit Insurance Corporation 
have been furnished to (agency or department) pursuant to the Right to 
Financial Privacy Act of 1978 for the following purpose: ------. If you 
believe that this transfer has not been made to further a legitimate law 
enforcement inquiry, you may have legal rights under the Right to 
Financial Privacy Act of 1978 or the Privacy Act of 1974.
    \5\ Whenever the Corporation is subject to a court-ordered delay of 
the customer notice, the notice shall be sent immediately upon the 
expiration of the court-ordered delay.
---------------------------------------------------------------------------

    (5) Disclosure to servicers and serviced institutions. The Director 
of the Corporation's Division having primary authority over the exempt 
records, or designee, may disclose copies of any exempt record related 
to a bank data center, a depository institution service corporation or 
any other data center that provides data processing or related services 
to an insured institution (hereinafter referred to as ``data center'') 
to:
    (i) The examined data center;
    (ii) Any insured institution that receives data processing or 
related services from the examined data center;
    (iii) Any state agency or authority which exercises general 
supervision over an institution serviced by the examined data center; 
and
    (iv) Any federal financial institution supervisory agency which 
exercises general supervision over an institution serviced by the 
examined data center. The federal supervisory agency may disclose any 
such examination report received from the Corporation to an insured 
institution over which it exercises general supervision and which is 
serviced by the examined data center.
    (6) Disclosure to third parties. (i) Except as otherwise provided in 
paragraphs (c) (1) through (5) of this section, the Director of the 
Corporation's Division having primary authority over the exempt records, 
or designee, may in his or her discretion and for good cause, disclose 
copies of any exempt records to any third party where requested to do so 
in writing. Any such written request shall:
    (A) Specify, with reasonable particularity, the record or records to 
which access is requested; and

[[Page 145]]

    (B) Give the reasons for the request.
    (ii) Either prior to or at the time of any disclosure, the Director 
or designee shall require such terms and conditions as he deems 
necessary to protect the confidential nature of the record, the 
financial integrity of any depository institution to which the record 
relates, and the legitimate privacy interests of any individual named in 
such records.
    (7) Authorization for disclosure by depository institutions or other 
third parties. (i) The Director of the Corporation's Division having 
primary authority over the exempt records, or designee, may, in his or 
her discretion and for good cause, authorize any director, officer, 
employee, or agent of a depository institution to disclose copies of any 
exempt record in his custody to anyone who is not a director, officer or 
employee of the depository institution. Such authorization must be in 
response to a written request from the party seeking the record or from 
management of the depository institution to which the report or record 
pertains. Any such request shall specify, with reasonable particularity, 
the record sought, the party's interest therein, and the party's 
relationship to the depository institution to which the record relates.
    (ii) The Director of the Corporation's Division having primary 
authority over the exempt records, or designee, may, in his or her 
discretion and for good cause, authorize any third party, including a 
federal or state agency, that has received a copy of a Corporation 
exempt record, to disclose such exempt record to another party or 
agency. Such authorization must be in response to a written request from 
the party that has custody of the copy of the exempt record. Any such 
request shall specify the record sought to be disclosed and the reasons 
why disclosure is necessary.
    (iii) Any subsidiary depository institution of a bank holding 
company or a savings and loan holding company may reproduce and furnish 
a copy of any report of examination of the subsidiary depository 
institution to the parent holding company without prior approval of the 
Director of the Division having primary authority over the exempt 
records and any depository institution may reproduce and furnish a copy 
of any report of examination of the disclosing depository institution to 
a majority shareholder if the following conditions are met:
    (A) The parent holding company or shareholder owns in excess of 50% 
of the voting stock of the depository institution or subsidiary 
depository institution;
    (B) The board of directors of the depository institution or 
subsidiary depository institution at least annually by resolution 
authorizes the reproduction and furnishing of reports of examination 
(the resolution shall specifically name the shareholder or parent 
holding company, state the address to which the reports are to be sent, 
and indicate that all reports furnished pursuant to the resolution 
remain the property of the Federal Deposit Insurance Corporation and are 
not to be disclosed or made public in any manner without the prior 
written approval of the Director of the Corporation's Division having 
primary authority over the exempt records as provided in paragraph (b) 
of this section;
    (C) A copy of the resolution authorizing disclosure of the reports 
is sent to the shareholder or parent holding company; and
    (D) The minutes of the board of directors of the depository 
institution or subsidiary depository institution for the meeting 
immediately following disclosure of a report state:
    (1) That disclosure was made;
    (2) The date of the report which was disclosed;
    (3) To whom the report was sent; and
    (4) The date the report was disclosed.
    (iv) With respect to any disclosure that is authorized under this 
paragraph (b)(7), the Director of the Corporation's Division having 
primary authority over the exempt records, or designee, shall only 
permit disclosure of records upon determining that good cause exists. If 
the exempt record contains information derived from depository 
institution customer financial records, disclosure is to be authorized 
only upon the condition that the requesting party and the party 
releasing the records comply with any applicable

[[Page 146]]

provision of the RFPA. Before authorizing the disclosure, the Director 
(or designee) may require that both the party having custody of a copy 
of a Corporation exempt record and the party seeking access to the 
record agree to such limitations as the Director (or designee) deems 
necessary to protect the confidential nature of the record, the 
financial integrity of any depository institution to which the record 
relates and the legitimate privacy interests of any persons named in 
such record.
    (8) Disclosure by General Counsel. (i) The Corporation's General 
Counsel, or designee, may disclose or authorize the disclosure of any 
exempt record in response to a valid judicial subpoena, court order, or 
other legal process, and authorize any current or former officer, 
director, employee, agent of the Corporation, or third party, to appear 
and testify regarding an exempt record or any information obtained in 
the performance of such person's official duties, at any administrative 
or judicial hearing or proceeding where such person has been served with 
a valid subpoena, court order, or other legal process requiring him or 
her to testify. The General Counsel shall consider the relevancy of such 
exempt records or testimony to the litigation, and the interests of 
justice, in determining whether to disclose such records or testimony. 
Third parties seeking disclosure of exempt records or testimony in 
litigation to which the FDIC is not a party shall submit a request for 
discretionary disclosure directly to the General Counsel.\6\ Such 
request shall specify the information sought with reasonable 
particularity and shall be accompanied by a statement with supporting 
documentation showing in detail the relevance of such exempt information 
to the litigation, justifying good cause for disclosure, and a 
commitment to be bound by a protective order. Failure to exhaust such 
administrative request prior to service of a subpoena or other legal 
process may, in the General Counsel's discretion, serve as a basis for 
objection to such subpoena or legal process. Customer financial records 
may not be disclosed to any federal agency that is not a federal 
financial supervisory agency pursuant to this paragraph unless notice to 
the customer and certification as required by the RFPA have been given 
except where disclosure is subject to the relevant exceptions set forth 
in the RFPA.
---------------------------------------------------------------------------

    \6\ This administrative requirement does not apply to subpoenas, 
court orders or other legal process issued for records of depository 
institutions held by the FDIC as Receiver or Conservator. Subpoenas, 
court orders or other legal process issued for such records will be 
processed in accordance with State and Federal law, regulations, rules 
and privileges applicable to FDIC as Receiver or Conservator.
---------------------------------------------------------------------------

    (ii) The General Counsel, or designee, may in his or her discretion 
and for good cause, disclose or authorize disclosure of any exempt 
record or testimony by a current or former officer, director, employee, 
agent of the Corporation, or third party, sought in connection with any 
civil or criminal hearing, proceeding or investigation without the 
service of a judicial subpoena, or other legal process requiring such 
disclosure or testimony, if he or she determines that the records or 
testimony are relevant to the hearing, proceeding or investigation and 
that disclosure is in the best interests of justice and not otherwise 
prohibited by Federal statute. Customer financial records shall not be 
disclosed to any federal agency pursuant to this paragraph that is not a 
federal financial supervisory agency, unless the records are sought 
under the Federal Rules of Civil Procedure (28 U.S.C. appendix) or the 
Federal Rules of Criminal Procedure (18 U.S.C. appendix) or comparable 
rules of other courts and in connection with litigation to which the 
receiving federal agency, employee, officer, director, or agent, and the 
customer are parties, or disclosure is otherwise subject to the relevant 
exceptions in the RFPA. Where the General Counsel or designee authorizes 
a current or former officer, director, employee or agent of the 
Corporation to testify or disclose exempt records pursuant to this 
paragraph (b)(8), he or she may, in his or her discretion, limit the 
authorization to so much of the record or testimony as is relevant to 
the issues at such hearing, proceeding or investigation, and he or she 
shall give authorization only upon

[[Page 147]]

fulfillment of such conditions as he or she deems necessary and 
practicable to protect the confidential nature of such records or 
testimony.
    (9) Authorization for disclosure by the Chairman of the 
Corporation's Board of Directors. Except where expressly prohibited by 
law, the Chairman of the Corporation's Board of Directors may in his or 
her discretion, authorize the disclosure of any Corporation records. 
Except where disclosure is required by law, the Chairman may direct any 
current or former officer, director, employee or agent of the 
Corporation to refuse to disclose any record or to give testimony if the 
Chairman determines, in his or her discretion, that refusal to permit 
such disclosure is in the public interest.
    (10) Limitations on disclosure. All steps practicable shall be taken 
to protect the confidentiality of exempt records and information. Any 
disclosure permitted by paragraph (b) of this section is discretionary 
and nothing in paragraph (b) of this section shall be construed as 
requiring the disclosure of information. Further, nothing in paragraph 
(b) of this section shall be construed as restricting, in any manner, 
the authority of the Board of Directors, the Chairman of the Board of 
Directors, the Director of the Corporation's Division having primary 
authority over the exempt records, the Corporation's General Counsel, or 
their designees, or any other Corporation Division or Office head, in 
their discretion and in light of the facts and circumstances attendant 
in any given case, to require conditions upon and to limit the form, 
manner, and extent of any disclosure permitted by this section. Wherever 
practicable, disclosure of exempt records shall be made pursuant to a 
protective order and redacted to exclude all irrelevant or non-
responsive exempt information.

[60 FR 61465, Nov. 30, 1995, as amended at 63 FR 16408, Apr. 3, 1998; 67 
FR 71071, Nov. 29, 2002; 73 FR 2146, Jan. 14, 2008]



Sec. 309.7  Service of process.

    (a) Service. Any subpoena or other legal process to obtain 
information maintained by the FDIC shall be duly issued by a court 
having jurisdiction over the FDIC, and served upon either the Executive 
Secretary (or designee), FDIC, 550 17th Street, NW., Washington, DC 
20429, or the Regional Director or Regional Manager of the FDIC region 
where the legal action from which the subpoena or process was issued is 
pending. A list of the FDIC's regional offices is available from the 
Office of Public Affairs, FDIC, 550 17th Street, NW., Washington, DC 
20429 (telephone 202-898-6996). Where the FDIC is named as a party, 
service of process shall be made pursuant to the Federal Rules of Civil 
Procedure, and upon the Executive Secretary (or designee), FDIC, 550 
17th Street NW., Washington, DC 20429, or upon the agent designated to 
receive service of process in the state, territory, or jurisdiction in 
which any insured depository institution is located. Identification of 
the designated agent in the state, territory, or jurisdiction may be 
obtained from the Executive Secretary or from the Office of the General 
Counsel, FDIC, 550 17th Street NW., Washington, DC 20429. The Executive 
Secretary (or designee), Regional Director or designated agent shall 
immediately forward any subpoena, court order or legal process to the 
General Counsel. The Corporation may require the payment of fees, in 
accordance with the fee schedule referred to in Sec. 309.5(c)(3), prior 
to the release of any records requested pursuant to any subpoena or 
other legal process.
    (b) Notification by person served. If any current or former officer, 
director, employee or agent of the Corporation, or any other person who 
has custody of records belonging to the FDIC, is served with a subpoena, 
court order, or other process requiring that person's attendance as a 
witness concerning any matter related to official duties, or the 
production of any exempt record of the Corporation, such person shall 
promptly advise the General Counsel of such service, of the testimony 
and records described in the subpoena, and of all relevant facts which 
may be of assistance to the General Counsel in determining whether the 
individual in question should be authorized to testify or the records 
should be produced. Such person should also inform the court or tribunal 
which issued the process and the attorney for the party upon whose

[[Page 148]]

application the process was issued, if known, of the substance of this 
section.
    (c) Appearance by person served. Absent the written authorization of 
the Corporation's General Counsel, or designee, to disclose the 
requested information, any current or former officer, director, 
employee, or agent of the Corporation, and any other person having 
custody of records of the Corporation, who is required to respond to a 
subpoena or other legal process, shall attend at the time and place 
therein specified and respectfully decline to produce any such record or 
give any testimony with respect thereto, basing such refusal on this 
section.

[60 FR 61465, Nov. 30, 1995, as amended at 67 FR 71071, Nov. 29, 2002]



PART 310_PRIVACY ACT REGULATIONS--Table of Contents




Sec.
310.1 Purpose and scope.
310.2 Definitions.
310.3 Procedures for requests pertaining to individual records in a 
          system of records.
310.4 Times, places, and requirements for identification of individuals 
          making requests.
310.5 Disclosure of requested information to individuals.
310.6 Special procedures: Medical records.
310.7 Request for amendment of record.
310.8 Agency review of request for amendment of record.
310.9 Appeal of adverse initial agency determination on access or 
          amendment.
310.10 Disclosure of record to person other than the individual to whom 
          it pertains.
310.11 Fees.
310.12 Penalties.
310.13 Exemptions.

    Authority: 5 U.S.C. 552a.

    Source: 40 FR 46274, Oct. 6, 1975, unless otherwise noted.



Sec. 310.1  Purpose and scope.

    The purpose of this part is to establish regulations implementing 
the Privacy Act of 1974, 5 U.S.C. 552a. These regulations delineate the 
procedures that an individual must follow in exercising his or her 
access or amendment rights under the Privacy Act to records maintained 
by the Corporation in systems of records.

[61 FR 43419, Aug. 23, 1996]



Sec. 310.2  Definitions.

    For purposes of this part:
    (a) The term Corporation means the Federal Deposit Insurance 
Corporation;
    (b) The term individual means a natural person who is either a 
citizen of the United States or an alien lawfully admitted for permanent 
residence;
    (c) The term maintain includes maintain, collect, use, disseminate, 
or control;
    (d) The term record means any item, collection or grouping of 
information about an individual that contains his/her name, or the 
identifying number, symbol, or other identifying particular assigned to 
the individual;
    (e) The term system of records means a group of any records under 
the control of the Corporation from which information is retrieved by 
the name of the individual or some identifying number, symbol or other 
identifying particular assigned to the individual;
    (f) The term designated system of records means a system of records 
which has been listed and summarized in the Federal Register pursuant to 
the requirements of 5 U.S.C. 552a(e);
    (g) The term routine use means, with respect to disclosure of a 
record, the use of such record for a purpose which is compatible with 
the purpose for which it was created;
    (h) The terms amend or amendment mean any correction, addition to or 
deletion from a record; and
    (i) The term system manager means the agency official responsible 
for a designated system of records, as denominated in the Federal 
Register publication of ``Systems of Records Maintained by the Federal 
Deposit Insurance Corporation.''

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977]



Sec. 310.3  Procedures for requests pertaining to individual records in a 

system of records.

    (a) Any present or former employee of the Corporation seeking access 
to, or amendment of, his/her official personnel records maintained by 
the Corporation shall submit his/her request in such manner as is 
prescribed by the United States Office of Personnel Management in part 
297 of its rules and regulations (5 CFR part 297). For access

[[Page 149]]

to, or amendment of, other government-wide records systems maintained by 
the Corporation, the procedures prescribed in the respective Federal 
Register Privacy Act system notice shall be followed.
    (b) Requests by individuals for access to records pertaining to them 
and maintained within one of the Corporation's designated systems of 
records should be submitted in writing to the Freedom of Information 
Act/Privacy Act Group, Legal Division (``FOIA/PA Group''), Federal 
Deposit Insurance Corporation, 550 17th Street, N.W., Washington, D.C. 
20429. Each such request should contain a reasonable description of the 
records sought, the system or systems in which such record may be 
contained, and any additional identifying information, as specified in 
the Corporation's Federal Register ``Notice of Systems of Records'' for 
that particular system, copies of which are available upon request from 
the FOIA/PA Group .

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 61 
FR 43419, Aug. 23, 1996; 67 FR 71071, Nov. 29, 2002]



Sec. 310.4  Times, places, and requirements for identification of individuals 

making requests.

    (a) Individuals may request access to records pertaining to 
themselves by submitting a written request as provided in Sec. 310.3 of 
these regulations, or by appearing in person on weekdays, other than 
official holidays, at the FOIA/PA Group, Legal Division, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429, 
between the hours of 8:30 a.m. and 5 p.m.
    (b) Individuals appearing in person at the Corporation seeking 
access to or amendment of their records shall present two forms of 
reasonable identification, such as employment identification cards, 
driver's licenses, or other identification cards or documents typically 
used for identification purposes.
    (c) Except for records that must be publicly disclosed pursuant to 
the Freedom of Information Act, 5 U.S.C. 552, where the Corporation 
determines it to be necessary for the individual's protection, a 
certification of a duly commissioned notary public, of any state or 
territory, attesting to the requesting individual's identity, or an 
unsworn declaration subscribed to as true under the penalty of perjury 
under the laws of the United States of America, at the election of the 
individual, may be required before a written request seeking access to 
or amendment of a record will be honored. The Corporation may also 
require that individuals provide minimal identifying data such as full 
name, date and place of birth, or other personal information necessary 
to ensure proper identity before processing requests for records.

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 61 
FR 43419, Aug. 23, 1996; 67 FR 71071, Nov. 29, 2002]



Sec. 310.5  Disclosure of requested information to individuals.

    (a) Except to the extent that Corporation records pertaining to an 
individual:
    (1) Are exempt from disclosure under Sec. Sec. 310.6 and 310.13 of 
this part, or
    (2) Were compiled in reasonable anticipation of a civil action or 
proceeding, the Corporation will make such records available upon 
request for purposes of inspection and copying by the individual (after 
proper identity verification as provided in Sec. 310.4) and, upon the 
individual's request and written authorization, by another person of the 
individual's own choosing.
    (b) The FOIA/PA Group will notify, in writing, the individual making 
a request, whenever practicable within ten business days following 
receipt of the request, whether any specified designated system of 
records maintained by the Corporation contains a record pertaining to 
the individual. Where such a record does exist, the FOIA/PA Group also 
will inform the individual of the system manager's decision whether to 
grant or deny the request for access. In the event existing records are 
determined not to be disclosable, the notification will inform the 
individual of the reasons for which disclosure will not be made and will 
provide a description of the individual's right to appeal the denial, as 
more fully set forth in Sec. 310.9. Where access is to be granted, the 
notification will specify

[[Page 150]]

the procedures for verifying the individual's identity, as set forth in 
Sec. 310.4.
    (c) Individuals will be granted access to records disclosable under 
this part 310 as soon as is practicable. The FOIA/PA Group will give 
written notification of a reasonable period within which individuals may 
inspect disclosable records pertaining to themselves at the offices of 
the FOIA/PA Group during normal business hours. Alternatively, 
individuals granted access to records under this part may request that 
copies of such records be forwarded to them. Fees for copying such 
records will be assessed as provided in Sec. 310.11.

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 67 
FR 71071, Nov. 29, 2002]



Sec. 310.6  Special procedures: Medical records.

    Medical records shall be disclosed on request to the individuals to 
whom they pertain, except, if in the judgment of the Corporation, the 
transmission of the medical information directly to the requesting 
individual could have an adverse effect upon such individual. In the 
event medical information is withheld from a requesting individual due 
to any possible adverse effect such information may have upon the 
individual, the Corporation shall transmit such information to a medical 
doctor named by the requesting individual for release of the patient.

[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.7  Request for amendment of record.

    The Corporation will maintain all records it uses in making any 
determination about any individual with such accuracy, relevance, 
timeliness and completeness as is reasonably necessary to assure 
fairness to the individual in the determination. An individual may 
request that the Corporation amend any portion of a record pertaining to 
that individual which the Corporation maintains in a designated system 
of records. Such a request should be submitted in writing to the FOIA/PA 
Group, Legal Division, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429 and should contain the individual's 
reason for requesting the amendment and a description of the record 
(including the name of the appropriate designated system and category 
thereof) sufficient to enable the Corporation to identify the particular 
record or portion thereof with respect to which amendment is sought.

[40 FR 46274, Oct. 6, 1975, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 310.8  Agency review of request for amendment of record.

    (a) Requests by individuals for the amendment of records will be 
acknowledged by the Senior Attorney, FOIA/PA Group, and referred to the 
system manager of the system of records in which the record is contained 
for determination, within ten business days following receipt of such 
requests. Promptly thereafter, the Senior Attorney, FOIA/PA Group will 
notify the individual of the system manager's decision to grant or deny 
the request to amend.
    (b) If the system manager denies a request to amend a record, the 
notification of such denial shall contain the reason for the denial and 
a description of the individual's right to appeal the denial as more 
fully set forth in Sec. 310.9.

[40 FR 46274, Oct. 6, 1975, as amended at 42 FR 6796, Feb. 4, 1977; 67 
FR 71071, Nov. 29, 2002]



Sec. 310.9  Appeal of adverse initial agency determination on access or 

amendment.

    (a) A system manager's denial of an individual's request for access 
to or amendment of a record pertaining to him/her may be appealed in 
writing to the Corporation's General Counsel (or designee) within 30 
business days following receipt of notification of the denial. Such an 
appeal should be addressed to the FOIA/PA Group, Legal Division, FDIC, 
550 17th Street NW., Washington, DC 20429, and contain all the 
information specified for requests for access in Sec. 310.3 or for 
initial requests to amend in Sec. 310.7, as well as any other 
additional information the individual deems relevant for the 
consideration by the General Counsel (or designee) of the appeal.
    (b) The General Counsel (or designee) will normally make a final 
determination with respect to an appeal made under this part within 30 
business days

[[Page 151]]

following receipt by the Office of the Executive Secretary of the 
appeal. The General Counsel (or designee) may, however, extend this 30-
day time period for good cause. Where such an extension is required, the 
individual making the appeal will be notified of the reason for the 
extension and the expected date upon which a final decision will be 
given.
    (c) If the General Counsel (or designee) affirms the initial denial 
of a request for access or to amend, he or she will inform the 
individual affected of the decision, the reason therefor, and the right 
of judicial review of the decision. In addition, as pertains to a 
request for amendment, the individual may at that point submit to the 
Corporation a concise statement setting forth his or her reasons for 
disagreeing with the Corporation's refusal to amend.
    (d) Any statement of disagreement with the Corporation's refusal to 
amend, filed with the Corporation by an individual pursuant to Sec. 
310.9(c), will be included in the disclosure of any records under the 
authority of Sec. 310.10(b). The Corporation may in its discretion also 
include a copy of a concise statement of its reasons for not making the 
requested amendment.
    (e) The General Counsel (or designee) may on his or her own motion 
refer an appeal to the Board of Directors for a determination, and the 
Board of Directors on its own motion may consider an appeal.

[52 FR 34290, Sept. 10, 1987, as amended at 61 FR 43420, Aug. 23, 1996; 
67 FR 71071, Nov. 29, 2002]



Sec. 310.10  Disclosure of record to person other than the individual to whom 

it pertains.

    (a) Except as provided in paragraph (b) of this section, the 
Corporation will not disclose any record contained in a designated 
system of records to any person or agency except with the prior written 
consent of the individual to whom the record pertains.
    (b) The restrictions on disclosure in paragraph (a) of this section 
do not apply to any of the following disclosures:
    (1) To those officers and employees of the Corporation who have a 
need for the record in the performance of their duties;
    (2) Which is required under the Freedom of Information Act (5 U.S.C. 
552);
    (3) For a routine use listed with respect to a designated system of 
records;
    (4) To the Bureau of the Census for purposes of planning or carrying 
out a census or survey or related activity pursuant to the provisions of 
title 13 U.S.C.;
    (5) To a recipient who has provided the Corporation with advance 
adequate written assurance that the record will be used solely as a 
statistical research or reporting record, and the record is to be 
transferred in a form that is not individually identifiable;
    (6) To the National Archives and Records Administration as a record 
which has sufficient historical or other value to warrant its continued 
preservation by the United States Government, or for evaluation by the 
Archivist of the United States or his or her designee to determine 
whether the record has such value;
    (7) To another agency or to an instrumentality of any governmental 
jurisdiction within or under the control of the United States for a 
civil or criminal law enforcement activity if the activity is authorized 
by law, and if the head of the agency or instrumentality has made a 
written request to the Corporation specifying the particular portion 
desired and the law enforcement activity for which the record is sought;
    (8) To a person pursuant to a showing of compelling circumstances 
affecting the health or safety of an individual if, upon such 
disclosure, notification is transmitted to the last known address of 
such individual;
    (9) To either House of Congress, or, to the extent of matter within 
its jurisdiction, any committee or subcommittee thereof, any joint 
committee of Congress or subcommittee of any such joint committee;
    (10) To the Comptroller General, or any of his or her authorized 
representatives, in the course of the performance of the duties of the 
General Accounting Office;
    (11) Pursuant to the order of a court of competent jurisdiction.

[[Page 152]]

    (12) To a consumer reporting agency in accordance with section 
3711(f) of Title 31.
    (c) The Corporation will adhere to the following procedures in the 
case of disclosure of any record pursuant to the authority of paragraphs 
(b)(3) through (b)(12) of this section.
    (1) The Corporation will keep a record of the date, nature and 
purpose of each such disclosure, as well as the name and address of the 
person or agency to whom such disclosure is made; and
    (2) The Corporation will retain and, with the exception of 
disclosures made pursuant to paragraph (b)(7) of this section, make 
available to the individual named in the record for the greater of five 
years or the life of the record all material compiled under paragraph 
(d)(1) of this section with respect to disclosure of such record.
    (d) Whenever a record which has been disclosed by the Corporation 
under authority of paragraph (b) of this section is, within a reasonable 
amount of time after such disclosure, either amended by the Corporation 
or the subject of a statement of disagreement, the Corporation will 
transmit such additional information to any person or agency to whom the 
record was disclosed, if such disclosure was subject to the accounting 
requirements of paragraph (c)(1) of this section.

[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.11  Fees.

    The Corporation, upon a request for records disclosable pursuant to 
the Privacy Act of 1974 (5 U.S.C. 552a), shall charge a fee of $0.10 per 
page for duplicating, except as follows:
    (a) If the Corporation determines that it can grant access to a 
record only by providing a copy of the record, no fee will be charged 
for providing the first copy of the record or any portion thereof;
    (b) Whenever the aggregate fees computed under this section do not 
exceed $10 for any one request, the fee will be deemed waived by the 
Corporation; or
    (c) Whenever the Corporation determines that a reduction or waiver 
is warranted, it may reduce or waive any fees imposed for furnishing 
requested information pursuant to this section.

[40 FR 46274, Oct. 6, 1975, as amended at 61 FR 43420, Aug. 23, 1996]



Sec. 310.12  Penalties.

    Subsection (i)(3) of the Privacy Act of 1974 (5 U.S.C. 552a(i)(3)) 
imposes criminal penalties for obtaining Corporation records on 
individuals under false pretenses. The subsection provides as follows:

    Any person who knowingly and willfully requests or obtains any 
record concerning an individual from an agency under false pretenses 
shall be guilty of a misdemeanor and fined not more than $5,000.



Sec. 310.13  Exemptions.

    The following systems of records are exempt from Sec. Sec. 310.3 
through 310.9 and Sec. 310.10(c)(2) of these rules:
    (a) Investigatory material compiled for law enforcement purposes in 
the following systems of records is exempt from Sec. Sec. 310.3 through 
310.9 and Sec. 310.10(c)(2) of these rules;

    Provided, however, That if any individual is denied any right, 
privilege, or benefit to which he/she would otherwise be entitled under 
Federal law, or for which he/she would otherwise be eligible, as a 
result of the maintenance of such material, such material shall be 
disclosed to such individual, except to the extent that the disclosure 
of such material would reveal the identity of a source who furnished 
information to the Government under an express promise that the identity 
of the source would be held in confidence, or, prior to September 27, 
1975, under an implied promise that the identity of the source would be 
held in confidence:

    30-64-0002--Financial institutions investigative and enforcement 
records system.
    30-64-0010--Investigative files and records.

    (b) Investigatory material compiled solely for the purpose of 
determining suitability, eligibility, or qualifications for Corporation 
employment to the extent that disclosure of such material would reveal 
the identity of a source who furnished information to the Corporation 
under an express promise that the identity of the source would be held 
in confidence, or, prior to September 27, 1975, under an implied

[[Page 153]]

promise that the identity of the source would be held in confidence, in 
the following systems of records, is exempt from Sec. Sec. 310.3 
through 310.9 and Sec. 310.10(c)(2) of these rules:

    30-64-0001--Attorney-legal intern applicant system.
    30-64-0010--Investigative files and records.

    (c) Testing or examination material used solely to determine or 
assess individual qualifications for appointment or promotion in the 
Corporation's service, the disclosure of which would compromise the 
objectivity or fairness of the testing, evaluation, or examination 
process in the following system of records, is exempt from Sec. Sec. 
310.3 through 310.9 and Sec. 310.10(c)(2) of these rules:

30-64-0009--Examiner training and education records.

[42 FR 6797, Feb. 4, 1977, as amended at 42 FR 33720, July 1, 1977; 54 
FR 38507, Sept. 19, 1989; 61 FR 43420, Aug. 23, 1996]



PART 311_RULES GOVERNING PUBLIC OBSERVATION OF MEETINGS OF THE CORPORATION'S 

BOARD OF DIRECTORS--Table of Contents




Sec.
311.1 Purpose.
311.2 Definitions.
311.3 Meetings.
311.4 Procedures for announcing meetings.
311.5 Regular procedure for closing meetings.
311.6 Expedited procedure for announcing and closing certain meetings.
311.7 General Counsel certification.
311.8 Transcripts and minutes of meetings.

    Authority: 5 U.S.C. 552b and 12 U.S.C. 1819.

    Source: 42 FR 14675, Mar. 16, 1977, unless otherwise noted.



Sec. 311.1  Purpose.

    This part implements the policy of the ``Government in the Sunshine 
Act'', section 552b of title 5 U.S.C., which is to provide the public 
with as much information as possible regarding the decision making 
process of certain Federal agencies, including the Federal Deposit 
Insurance Corporation, while preserving the rights of individuals and 
the ability of the agency to carry out its responsibilities.



Sec. 311.2  Definitions.

    For purposes of this part:
    (a) Board means Board of Directors of the Federal Deposit Insurance 
Corporation and includes any subdivision of the Board authorized to act 
on behalf of the Corporation.
    (b) Meeting means the deliberations (including those conducted by 
conference telephone call, or by any other method) of at least three 
members where such deliberations determine or result in the joint 
conduct or disposition of agency business but does not include:
    (1) Deliberations to determine whether meetings will be open or 
closed or whether information pertaining to closed meetings will be 
withheld;
    (2) Informal background discussions among Board members and staff 
which clarify issues and expose varying views;
    (3) Decision-making by circulating written material to individual 
Board members;
    (4) Sessions with individuals from outside the Corporation where 
Board members listen to a presentation and may elicit additional 
information.
    (c) Member means a member of the Board.
    (d) Open to public observation and open to the public mean that 
individuals may witness the meeting, but not participate in the 
deliberations. The meeting may be recorded, photographed, or otherwise 
reproduced if the reproduction does not disturb the meeting.
    (e) Public announcement and publicly announce mean making reasonable 
effort under the particular circumstances of each case to fully inform 
the public. This may include posting notice on the Corporation's public 
notice bulletin board maintained in the lobby of its offices located at 
550 17th Street, NW., Washington, DC 20429, issuing a press release and 
employing other methods of notification that may be desirable in a 
particular situation.

[42 FR 14675, Mar. 16, 1977, as amended at 42 FR 59494, Nov. 18, 1977; 
54 FR 38965, Sept. 22, 1989; 61 FR 38357, July 24, 1996]



Sec. 311.3  Meetings.

    (a) Open meetings. Except as provided in paragraph (b) of this 
section, every portion of every meeting of the Corporation's Board will 
be open to public

[[Page 154]]

observation. Board members will not jointly conduct or dispose of 
Corporation business other than in accordance with this part.
    (b) When meetings may be closed and announcements and disclosures 
withheld. Except where the Board finds that the public interest requires 
otherwise, a meeting or portion thereof may be closed, and announcements 
and disclosure pertaining thereto may be withheld when the Board 
determines that such meeting or portion of the meeting or the disclosure 
of such information is likely to:
    (1) Disclose matters that are: (i) Specifically authorized under 
criteria established by an Executive order to be kept secret in the 
interests of national defense or foreign policy and (ii) in fact 
properly classified pursuant to such Executive order;
    (2) Relate solely to the internal personnel rules and practices of 
the Corporation;
    (3) Disclose matters specifically exempted from disclosure by 
statute (other than the Freedom of Information Act, 5 U.S.C. 552): 
Provided, That such statute: (i) Requires that the matters be withheld 
from the public in such a manner as to leave no discretion on the issue, 
or (ii) establishes particular types of matters to be withheld;
    (4) Disclose trade secrets and commercial or financial information 
obtained from a person and privileged or confidential;
    (5) Involve accusing any person of a crime, or formally censuring 
any person;
    (6) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Disclose investigatory records compiled for law enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would: (i) Interfere with enforcement proceedings, (ii) 
deprive a person of a right to a fair trial or an impartial 
adjudication, (iii) constitute an unwarranted invasion of personal 
privacy, (iv) disclose the identity of a confidential source, (v) 
disclose investigative techniques and procedures, or (vi) endanger the 
life or physical safety of law enforcement personnel;
    (8) Disclose information contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of the Corporation or any other agency responsible for the 
supervision of financial institutions;
    (9) Disclose information the premature disclosure of which would be 
likely to:
    (i)(A) Lead to significant financial speculation in currencies, 
securities, or commodities, or
    (B) Significantly endanger the stability of any financial 
institution; or
    (ii) Significantly frustrate implementation of a proposed 
Corporation action, except that this paragraph (b)(9)(ii) shall not 
apply in any instance where the Corporation has already disclosed to the 
public the content or nature of its proposed action, or where the 
Corporation is required by law to make such disclosure on its own 
initiative prior to taking final action on such proposal; or
    (10) Specifically concern the Corporation's issuance of a subpoena, 
or the Corporation's participation in a civil action or proceeding, an 
action in a foreign court or international tribunal, or an arbitration, 
or the initiation, conduct, or disposition by the Corporation of a 
particular case of formal agency adjudication pursuant to the procedures 
in 5 U.S.C. 554 or otherwise involving a determination on the record 
after opportunity for a hearing.



Sec. 311.4  Procedures for announcing meetings.

    (a) Scope. Except to the extent that such announcements are exempt 
from disclosure under Sec. 311.3(b), announcements relating to open 
meetings, and meetings closed under the regular closing procedures of 
Sec. 311.5, will be made in the manner set forth in this section.
    (b) Time and content of announcement. The Corporation will make 
public announcement at least seven days before the meeting of the time, 
place, and subject matter of the meeting, whether it is to be open or 
closed to the public, and the name and telephone number of

[[Page 155]]

the official designated by the Corporation to respond to requests for 
information about the meeting. This announcement will be made unless a 
majority of the Board determines by a recorded vote that Corporation 
business requires that a meeting be called on lesser notice. In such 
cases, the Corporation will make public announcement of the time, place, 
and subject matter of the meeting, and whether it is open or closed to 
the public, at the earliest practicable time, which may be later than 
the commencement of the meeting.
    (c) Changing time or place of meeting. The time or place of a 
meeting may be changed following the public announcement required by 
paragraph (b) of this section only if the Corporation publicly announces 
the change at the earliest practicable time, which may be later than the 
commencement of the meeting.
    (d) Changing subject matter or nature of meeting. The subject matter 
of a meeting, or the determination to open or close a meeting or a 
portion of a meeting, may be changed following the public announcement 
only if:
    (1) A majority of the entire Board determines by recorded vote that 
agency business so requires and that no earlier announcement of the 
change was possible; and,
    (2) The Corporation publicly announces the change and the vote of 
each member upon such change at the earliest practicable time, which may 
be later than the commencement of the meeting.
    (e) Publication of announcements in Federal Register. Immediately 
following each public announcement under this section, such announcement 
will be submitted for publication in the Federal Register by the 
Executive Secretary.

[42 FR 14675, Mar. 16, 1977, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 311.5  Regular procedure for closing meetings.

    (a) Scope. Unless Sec. 311.6 is applicable, the procedures for 
closing meetings will be those set forth in this section.
    (b) Procedure. (1) A decision to close a meeting or portion of a 
meeting will be taken only when a majority of the entire Board votes to 
take such action. In deciding whether to close a meeting or portion of a 
meeting, the Board will consider whether the public interest requires an 
open meeting. A separate vote of the Board will be taken with respect to 
each meeting which is proposed to be closed in whole or in part to the 
public. A single vote may be taken with respect to a series of meetings 
which are proposed to be closed in whole or in part to the public, or 
with respect to any information concerning such series of meetings, so 
long as each meeting in the series involves the same particular matters 
and is scheduled to be held no more than thirty days after the initial 
meeting in the series. The vote of each Board member will be recorded 
and no proxies will be allowed.
    (2) Any individual whose interests may be directly affected may 
request that the Corporation close any portion of a meeting for any of 
the reasons referred to in paragraph (b) (5), (6), or (b)(7) of Sec. 
311.3. Requests should be directed to the Executive Secretary, Federal 
Deposit Insurance Corporation, 550 17th Street, NW., Washington, DC 
20429. After receiving notice that an individual desires a portion of a 
meeting to be closed, the Board, upon request of any one of its members, 
will vote by recorded vote whether to close the relevant portion of the 
meeting. This procedure will apply even if the individual's request is 
made subsequent to the announcement of a decision to hold an open 
meeting.
    (3) The Corporation's General Counsel will make the public 
certification required by Sec. 311.7.
    (4) Within 1 day after any vote taken pursuant to paragraphs (b)(1) 
or (2) of this section, the Corporation will make publicly available a 
written copy of the vote, reflecting the vote of each Board member. 
Except to the extent that such information is exempt from disclosure, if 
a meeting or portion of a meeting is to be closed to the public, the 
Corporation will make publicly available within 1 day after the required 
vote a full written explanation of its action, together with a list of 
all persons expected to attend the meeting and their affiliation.
    (5) The Corporation will publicly announce the time, place, and 
subject

[[Page 156]]

matter of the meeting, with determinations as to open and closed 
portions, in the manner and within the time limits prescribed in Sec. 
311.4.

[42 FR 14675, Mar. 16, 1977; 42 FR 16616, Mar. 29, 1977, as amended at 
42 FR 59494, Nov. 18, 1977; 67 FR 71071, Nov. 29, 2002]



Sec. 311.6  Expedited procedure for announcing and closing certain meetings.

    (a) Scope. Since a majority of its meetings may properly be closed 
pursuant to paragraph (b)(4), (8), (9)(i), or (b)(10) of Sec. 311.3, 
subsection (d)(4) of the Government in the Sunshine Act (5 U.S.C. 552b) 
allows the Corporation to use expedited procedures in closing meetings 
under these four subparagraphs. Absent a compelling public interest to 
the contrary, meetings or portions of meetings that can be expected to 
be closed using these procedures include, but are not limited to: 
Administrative enforcement proceedings under section 8 of the Federal 
Deposit Insurance Act (12 U.S.C. 1818); appointment of the Corporation 
as conservator of a depository institution, or as receiver, liquidator 
or liquidating agent of a closed depository institution or a depository 
institution in danger of closing; and certain management and liquidation 
activities pursuant to such appointments; possible financial assistance 
by the Corporation under section 13 of the Federal Deposit Insurance Act 
(12 U.S.C. 1823); certain depository institution applications including 
applications to establish or move branches, applications to merge, and 
applications for insurance; and investigatory activity under section 
10(c) of the Federal Deposit Insurance Act (12 U.S.C. 1820(c)). In 
announcing and closing meetings or portions of meetings under this 
section, the following procedures will be observed.
    (b) Announcement. Except to the extent that such information is 
exempt from disclosure under the provisions of Sec. 311.3(b) the 
Corporation will make public announcement of the time, place and subject 
matter of the meeting and of each portion thereof at the earliest 
practicable time. This announcement will be published in the Federal 
Register if publication can be effected at least 1 day prior to the 
scheduled date of the meeting.
    (c) Procedure for closing. (1) The Corporation's General Counsel 
will make the public certification required by Sec. 311.7.
    (2) At the beginning of a meeting or portion of a meeting to be 
closed under this section, a recorded vote of the Board will be taken. 
The Board will determine by its vote whether to proceed with the 
closing. If a majority of the entire Board votes to close, the meeting 
will be closed to public observation. Even though a meeting or portion 
thereof could properly be closed under this section, a majority of the 
entire Board may find that the public interest requires an open session 
and vote, reflecting the vote of each Board member, will be made 
available to the public.

[42 FR 14675, Mar. 16, 1977; 42 FR 16616, Mar. 29, 1977, as amended at 
54 FR 38965, Sept. 22, 1989]



Sec. 311.7  General Counsel certification.

    For every meeting or portion thereof closed under Sec. 311.5 or 
Sec. 311.6, the Corporation's General Counsel will publicly certify 
that, in the opinion of such General Counsel, the meeting may be closed 
to the public and will state each relevant exemptive provision. In the 
absence of the General Counsel, the next ranking official in the Legal 
Division may perform the certification. If the General Counsel and such 
next ranking official in the Legal Division are both absent, the 
official in the Legal Division who is then next in rank may provide the 
required certification. A copy of this certification, together with a 
statement from the presiding officer of the meeting setting forth the 
time and place of the meeting, and the persons present, will be retained 
in the Board's permanent files.

[42 FR 14675, Mar. 16, 1977, as amended at 61 FR 38357, July 24, 1996]



Sec. 311.8  Transcripts and minutes of meetings.

    (a) When required. The Corporation will maintain a complete 
transcript, identifying each speaker, to record fully the proceedings of 
each meeting or portion of a meeting closed to the public, except that 
in the case of a

[[Page 157]]

meeting or portions of a meeting closed to the public pursuant to 
paragraph (b)(8), (9)(i), or (10) of Sec. 311.3, the Corporation may, 
in lieu of a transcript, maintain a set of minutes.
    (b) Content of minutes. If minutes are maintained, they will fully 
and clearly describe all matters discussed and will provide a full and 
accurate summary of any actions taken, and the reasons for taking such 
action. Minutes will also include a description of each of the views 
expressed by each person in attendance on any item and the record of any 
roll call vote, reflecting the vote of each member. All documents 
considered in connection with any action will be identified in the 
minutes.
    (c) Available material. The Corporation will maintain a complete 
verbatim copy of the transcript or minutes of each meeting or portion of 
a meeting closed to the public for a period of at least 2 years after 
the meeting, or until 1 year after the conclusion of any proceeding with 
respect to which the meeting or portion was held, whichever occurs 
later. The Corporation will make promptly available to the public the 
transcript, identifying each speaker, or minutes of items on the agenda 
or testimony of any witness received at the closed meeting except that 
in cases where the Privacy Act of 1974 (5 U.S.C. 552a) does not apply, 
the Corporation may withhold information exempt from disclosure under 
Sec. 311.3(b). For the convenience of members of the public who may be 
unable to attend open meetings of the Board, the Corporation will 
maintain for at least 2 years a set of minutes of each meeting of the 
Board or portion thereof open to public observation.
    (d) Procedures for inspecting or copying available material. (1) An 
individual may inspect materials made available under paragraph (c) of 
this section at the offices of the Executive Secretary, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429, 
during normal business hours. If the individual desires a copy of such 
material, the Corporation will furnish copies at a cost of 10 cents per 
page. Whenever the Corporation determines that in the public interest a 
reduction or waiver is warranted, it may reduce or waive any fees 
imposed under this section.
    (2) An individual may also submit a written request for transcripts 
or minutes, reasonably identifying the records sought, to the Executive 
Secretary, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429.
    (e) Procedures for obtaining documents identified in minutes. Copies 
of documents identified in minutes or considered by the Board in 
connection with any action identified in the minutes may be made 
available to the public upon request, to the extent permitted by the 
Freedom of Information Act, under the provisions of 12 CFR part 309, 
Disclosure of Information.

[42 FR 14675, Mar. 16, 1977, as amended at 61 FR 38357, July 24, 1996; 
67 FR 71071, Nov. 29, 2002]



PART 313_PROCEDURES FOR CORPORATE DEBT COLLECTION--Table of Contents




   Subpart A_Scope, Purpose, Definitions and Delegations of Authority

Sec.
313.1 Scope.
313.2 Purpose.
313.3 Definitions.
313.4 Delegations of authority.
313.5-313.19 [Reserved]

                     Subpart B_Administrative Offset

313.20 Applicability and scope.
313.21 Definitions.
313.22 Collection.
313.23 Offset prior to completion of procedures.
313.24 Omission of procedures.
313.25 Debtor's rights.
313.26 Interest.
313.27 Refunds.
313.28 No requirement for duplicate notice.
313.29 Requests for offset to other federal agencies.
313.30 Requests for offset from other federal agencies.
313.31-313.39 [Reserved]

                         Subpart C_Salary Offset

313.40 Scope.
313.41 Notice requirement where FDIC is creditor agency.
313.42 Procedures to request a hearing.
313.43 Failure to timely submit request for hearing.
313.44 Procedure for hearing.

[[Page 158]]

313.45 Certification of debt by FDIC as creditor agency.
313.46 Notice of salary offset where FDIC is the paying agency.
313.47 Voluntary repayment agreements as alternative to salary offset 
          where the FDIC is the creditor agency.
313.48 Special review of repayment agreement or salary offset due to 
          changed circumstances.
313.49 Coordinating salary offset with other agencies.
313.50 Interest, penalties, and administrative costs.
313.51 Refunds.
313.52 Request from a creditor agency for services of a hearing 
          official.
313.53 Non-waiver of rights by payments.
313.54 Exception to due process procedures.
313.55 Salary adjustments.
313.56-313.79 [Reserved]

                Subpart D_Administrative Wage Garnishment

313.80 Scope and purpose.
313.81 Notice.
313.82 Debtor's rights.
313.83 Form of hearing.
313.84 Effect of timely request.
313.85 Failure to timely request a hearing.
313.86 Hearing official.
313.87 Procedure.
313.88 Format of hearing.
313.89 Date of decision.
313.90 Content of decision.
313.91 Finality of agency action.
313.92 Failure to appear.
313.93 Wage garnishment order.
313.94 Certification by employer.
313.95 Amounts withheld.
313.96 Exclusions from garnishment.
313.97 Financial hardship.
313.98 Ending garnishment.
313.99 Prohibited actions by employer.
313.100 Refunds.
313.101 Right of action.
313.102-313.119 [Reserved]

                       Subpart E_Tax Refund Offset

313.120 Scope.
313.121 Definitions.
313.122 Notification of debt to FMS.
313.123 Certification and referral of debt.
313.124 Pre-offset notice and consideration of evidence.
313.125 No requirement for duplicate notice.
313.126 Referral of past-due, legally enforceable debt.
313.127 Correcting and updating referral.
313.128 Disposition of amounts collected.
313.129-313.139 [Reserved]

      Subpart F_Civil Service Retirement and Disability Fund Offset

313.140 Future benefits.
313.141 Notification to OPM.
313.142 Request for administrative offset.
313.143 Cancellation of deduction.
313.144-313.159 [Reserved]

          Subpart G_Mandatory Centralized Administrative Offset

313.160 Treasury notification.
313.161 Certification of debt.
313.162 Compliance with 31 CFR part 285.
313.163 Notification of debts of 180 days or less.
313.164-313.180 [Reserved]

    Authority: 12 U.S.C. 1819(a); 5 U.S.C. 5514; Pub. L. 104-143; 110 
Stat. 1321 (31 U.S.C. 3701, 3711, 3716).

    Source: 67 FR 48527, July 25, 2002, unless otherwise noted.



   Subpart A_Scope, Purpose, Definitions and Delegations of Authority



Sec. 313.1  Scope.

    This part establishes FDIC procedures for the collection of certain 
debts owed to the United States.
    (a) This part applies to collections by the FDIC from:
    (1) Federal employees who are indebted to the FDIC;
    (2) Employees of the FDIC who are indebted to other agencies; and
    (3) Other persons, organizations, or entities that are indebted to 
the FDIC, except those excluded in paragraph (b)(3) of this section.
    (b) This part does not apply:
    (1) To debts or claims arising under the Internal Revenue Code of 
1986 (Title 26, U.S. Code), the Social Security Act (42 U.S.C. 301 et 
seq.), or the tariff laws of the United States;
    (2) To a situation to which the Contract Disputes Act (41 U.S.C. 601 
et seq.) applies; or
    (3) In any case where collection of a debt is explicitly provided 
for or prohibited by another statute.
    (c) This part applies only to:
    (1) Debts owed to and payments made by the FDIC acting in its 
corporate capacity, that is, in connection with employee matters such as 
travel-related claims and erroneous overpayments, contracting activities 
involving corporate operations, debts related to requests to the FDIC 
for documents under the Freedom of Information Act

[[Page 159]]

(FOIA), or where a request for an offset is received by the FDIC from 
another federal agency; and
    (2) Criminal restitution debt owed to the FDIC in either its 
corporate capacity or its receivership capacity.
    (3) With the exception of criminal restitution debt noted in 
paragraph (c)(2) of this section, this part does not apply to debts owed 
to or payments made by the FDIC in connection with the FDIC's 
liquidation, supervision, enforcement, or insurance responsibilities, 
nor does it limit or affect the FDIC's authority with respect to debts 
and/or claims pursuant to 12 U.S.C. 1819(a) and 1820(a).
    (d) Nothing in this part 313 precludes the compromise, suspension, 
or termination of collection actions, where appropriate, under: 
standards implementing the Debt Collection Improvement Act (DCIA) (31 
U.S.C. 3711 et seq.), the Federal Claims Collection Standards (FCCS) (31 
CFR chapter IX and parts 900 through 904); or any other applicable law.

[67 FR 48527, July 25, 2002, as amended at 71 FR 75661, Dec. 18, 2006]



Sec. 313.2  Purpose.

    (a) The purpose of this part is to implement federal statutes and 
regulatory standards authorizing the FDIC to collect debts owed to the 
United States. This part is consistent with the following federal 
statutes and regulations:
    (1) DCIA at 31 U.S.C. 3711 (collection and compromise of claims); 
section 3716 (administrative offset), section 3717 (interest and penalty 
on claims), and section 3718 (contracts for collection services);
    (2) 5 U.S.C. 5514 (salary offset);
    (3) 5 U.S.C. 5584 (waiver of claims for overpayment);
    (4) 31 CFR chapter IX and parts 900 through 904 (Federal Claims 
Collection Standards);
    (5) 5 CFR part 550, subpart K (salary offset);
    (6) 31 U.S.C. 3720D, 31 CFR 285.11 (administrative wage 
garnishment);
    (7) 26 U.S.C. 6402(d), 31 U.S.C. 3720A and 31 CFR 285.2 (tax refund 
offset); and
    (8) 5 CFR 831.1801 through 1808 (U. S. Office of Personnel 
Management (OPM) offset).
    (b) Collectively, these statutes and regulations prescribe the 
manner in which federal agencies should proceed to establish the 
existence and validity of debts owed to the federal government and 
describe the remedies available to agencies to offset valid debts.



Sec. 313.3  Definitions.

    Except where the context clearly indicates otherwise or where the 
term is defined elsewhere in this subpart, the following definitions 
shall apply to this subpart.
    (a) Agency means a department, agency, court, court administrative 
office, or instrumentality in the executive, judicial, or legislative 
branch of government, including government corporations.
    (b) Board means the Board of Directors of the FDIC.
    (c) Centralized administrative offset means the mandatory referral 
to the Secretary of the Treasury by a creditor agency of a past due debt 
which is more than 180 days delinquent, for the purpose of collection 
under the Treasury's centralized offset program.
    (d) Certification means a written statement transmitted from a 
creditor agency to a paying agency for purposes of administrative or 
salary offset, to FMS for offset or to the Secretary of the Treasury for 
centralized administrative offset. The certification confirms the 
existence and amount of the debt and verifies that required procedural 
protections have been afforded the debtor. Where the debtor requests a 
hearing on a claimed debt, the decision by a hearing official or 
administrative law judge constitutes a certification.
    (e) Chairman means the Chairman of the FDIC.
    (f) Compromise means the settlement or forgiveness of a debt under 
31 U.S.C. 3711, in accordance with standards set forth in the FCCS and 
applicable federal law.
    (g) Creditor agency means an agency of the federal government to 
which the debt is owed, or a debt collection center when acting on 
behalf of a creditor agency to collect a debt.

[[Page 160]]

    (h) Debt means an amount owed to the United States from loans 
insured or guaranteed by the United States and all other amounts due the 
United States from fees, leases, rents, royalties, services, sales of 
real or personal property, overpayments, penalties, damages, interest, 
restitution, fines and forfeitures, and all other similar sources. For 
purposes of this part, a debt owed to the FDIC constitutes a debt owed 
to the United States.
    (i) Debt collection center means the Department of the Treasury or 
other government agency or division designated by the Secretary of the 
Treasury with authority to collect debts on behalf of creditor agencies 
in accordance with 31 U.S.C. 3711(g).
    (j) Director means the Director of the Division of Finance (DOF), 
the Director of the Division of Administration (DOA), or the Director of 
the Division of Resolutions and Receiverships (DRR), as applicable, or 
the applicable Director's delegate.
    (k) Disposable pay means that part of current adjusted basic pay, 
special pay, incentive pay, retired pay, retainer pay, and, in the case 
of an employee not entitled to adjusted basic pay, other authorized pay, 
remaining for each pay period after the deduction of any amount required 
by law to be withheld. The FDIC shall allow the following deductions in 
determining the amount of disposable pay that is subject to salary 
offset:
    (1) Federal employment taxes;
    (2) Federal, state, or local income taxes to the extent authorized 
or required by law, but no greater than would be the case if the 
employee claimed all dependents to which he or she is entitled and such 
additional amounts for which the employee presents evidence of a tax 
obligation supporting the additional withholding;
    (3) Medicare deductions;
    (4) Health insurance premiums;
    (5) Normal retirement contributions, including employee 
contributions to the Thrift Savings Plan or the FDIC 401(k) Plan;
    (6) Normal life insurance premiums (e.g., Serviceman's Group Life 
Insurance and ``Basic Life'' Federal Employee's Group Life Insurance 
premiums), not including amounts deducted for supplementary coverage;
    (7) Amounts mandatorily withheld for the United States Soldiers' and 
Airmen's Home;
    (8) Fines and forfeiture ordered by a court-martial or by a 
commanding officer.
    (l) Division of Administration (DOA) means the Division of 
Administration of the FDIC.
    (m) Division of Finance (DOF) means the Division of Finance of the 
FDIC.
    (n) Division of Resolutions and Receiverships (DRR) means the 
Division of Resolutions and Receiverships of the FDIC.
    (o) Federal Claims Collection Standards (FCCS) means standards 
published at 31 CFR chapter IX and parts 900 through 904.
    (p) Garnishment means the process of withholding amounts from the 
disposable pay of a person employed outside the federal government, and 
the paying of those amounts to a creditor in satisfaction of a 
withholding order.
    (q) Hearing official means an administrative law judge or other 
individual authorized to conduct a hearing and issue a final decision in 
response to a debtor's request for hearing. A hearing official may not 
be under the supervision or control of the Chairman or FDIC Board when 
the FDIC is the creditor agency.
    (r) Notice of Intent to Offset or Notice of Intent means a written 
notice from a creditor agency to an employee, organization, entity, or 
restitution debtor that claims a debt and informs the debtor that the 
creditor agency intends to collect the debt by administrative offset. 
The notice also informs the debtor of certain procedural rights with 
respect to the claimed debt and offset.
    (s) Notice of Salary Offset means a written notice from a paying 
agency to its employee informing the employee that salary offset to 
collect a debt due to the creditor agency will begin at the next 
officially established pay interval. The paying agency transmits this 
notice to its employee after receiving a certification from the creditor 
agency.
    (t) Paying agency means the agency of the federal government that 
employs the individual who owes a debt to an

[[Page 161]]

agency of the federal government. The same agency may be both the 
creditor agency and the paying agency.
    (u) Salary offset means an administrative offset to collect a debt 
under 5 U.S.C. 5514 by deduction(s) at one or more officially 
established pay intervals from the current pay account of an employee 
without his or her consent.
    (v) Waiver means the cancellation, remission, forgiveness or non-
recovery of a debt allegedly owed by an employee to an agency, as 
authorized or required by 5 U.S.C. 5584 or any other law.
    (w) Withholding order means any order for withholding or garnishment 
of pay issued by an agency, or judicial or administrative body. For 
purposes of administrative wage garnishment, the terms ``wage 
garnishment order'' and ``garnishment order'' have the same meaning as 
``withholding order.''

[67 FR 48527, July 25, 2002, as amended at 71 FR 75661, Dec. 18, 2006]



Sec. 313.4  Delegations of authority.

    Authority to conduct the following activities to collect debt, other 
than criminal restitution debt, on behalf of the FDIC in its corporate 
capacity is delegated to the Director of DOA or Director of DOF, as 
applicable; and authority to collect criminal restitution debt on behalf 
of the FDIC in either its receivership or corporate capacity is 
delegated to the Director of DRR; or to the applicable Director's 
delegate; to:
    (a) Initiate and carry out the debt collection process on behalf of 
the FDIC, in accordance with the FCCS;
    (b) Accept or reject compromise offers and suspend or terminate 
collection actions to the full extent of the FDIC's legal authority 
under 12 U.S.C. 1819(a) and 1820(a), 31 U.S.C. 3711(a)(2), and any other 
applicable statute or regulation, provided, however, that no such claim 
shall be compromised or collection action terminated, except upon the 
concurrence of the FDIC General Counsel or his or her designee;
    (c) Report to consumer reporting agencies certain data pertaining to 
delinquent debts, where appropriate;
    (d) Use administrative offset procedures, including salary offset, 
to collect debts; and
    (e) Take any other action necessary to promptly and effectively 
collect debts owed to the United States in accordance with the policies 
contained herein and as otherwise provided by law.

[67 FR 48527, July 25, 2002, as amended at 71 FR 75661, Dec. 18, 2006]



Sec. Sec. 313.5-313.19  [Reserved]



                     Subpart B_Administrative Offset



Sec. 313.20  Applicability and scope.

    The provisions of this subpart apply to the collection of debts owed 
to the United States arising from transactions with the FDIC. 
Administrative offset is authorized under the DCIA. This subpart is 
consistent with the FCCS on administrative offset issued by the 
Department of Justice.



Sec. 313.21  Definitions.

    (a) Administrative offset means withholding funds payable by the 
United States to, or held by the United States for, a person to satisfy 
a debt.
    (b) Person includes a natural person or persons, profit or nonprofit 
corporation, partnership, association, trust, estate, consortium, or 
other entity which is capable of owing a debt to the United States 
Government except that agencies of the United States, or any state or 
local government shall be excluded.



Sec. 313.22  Collection.

    (a) The Director may collect a claim from a person by administrative 
offset of monies payable by the Government only after:
    (1) Providing the debtor with due process required under this part; 
and
    (2) Providing the paying agency with written certification that the 
debtor owes the debt in the amount stated and that the FDIC, as creditor 
agency, has complied with this part.
    (b) Prior to initiating collection by administrative offset, the 
Director should determine that the proposed offset is within the scope 
of this remedy, as set forth in 31 CFR 901.3(a). Administrative offset 
under 31 U.S.C. 3716 may not be used to collect debts more than 10 years 
after the federal government's right to collect the debt first accrued,

[[Page 162]]

except as otherwise provided by law. In addition, administrative offset 
may not be used when a statute explicitly prohibits its use to collect 
the claim or type of claim involved.
    (c) Unless otherwise provided, debts or payments not subject to 
administrative offset under 31 U.S.C. 3716 may be collected by 
administrative offset under common law, or any other applicable 
statutory authority.



Sec. 313.23  Offset prior to completion of procedures.

    The FDIC may collect a debt by administrative offset prior to the 
completion of the procedures described in Sec. 313.25, if:
    (a) Failure to offset a payment would substantially prejudice the 
FDIC's ability to collect the debt; and
    (b) The time before the payment is to be made does not reasonably 
permit completion of the procedures described in Sec. 313.25. Such 
prior offsetting shall be followed promptly by the completion of the 
procedures described in Sec. 313.25.



Sec. 313.24  Omission of procedures.

    The FDIC shall not be required to follow the procedures described in 
Sec. 313.25 where:
    (a) The offset is in the nature of a recoupment (i.e., the FDIC may 
offset a payment due to the debtor when both the payment due to the 
debtor and the debt owed to the FDIC arose from the same transaction); 
or
    (b) The debt arises under a contract as set forth in Cecile 
Industries, Inc. v. Cheney, 995 F.2d 1052 (Fed. Cir. 1993), which 
provides that procedural protections under administrative offset do not 
supplant or restrict established procedures for contractual offsets 
accommodated by the Contracts Disputes Act; or
    (c) In the case of non-centralized administrative offsets, the FDIC 
first learns of the existence of a debt due when there would be 
insufficient time to afford the debtor due process under these 
procedures before the paying agency makes payment to the debtor; in such 
cases, the Director shall give the debtor notice and an opportunity for 
review as soon as practical and shall refund any money ultimately found 
not to be due to the U.S. Government.



Sec. 313.25  Debtor's rights.

    Unless the procedures described in Sec. 313.23 are used, prior to 
collecting any claim by administrative offset or referring such claim to 
another agency for collection through administrative offset, the 
Director shall provide the debtor with the following:
    (a) Written notification of the nature and amount of the claim, the 
intention of the Director to collect the claim through administrative 
offset, and a statement of the rights of the debtor under this 
paragraph;
    (b) An opportunity to inspect and copy the records of the FDIC with 
respect to the claim, unless such records are exempt from disclosure;
    (c) An opportunity to have the FDIC's determination of indebtedness 
reviewed by the Director:
    (1) Any request by the debtor for such review shall be in writing 
and shall be submitted to the FDIC within 30 calendar days of the date 
of the notice of the offset. The Director may waive the time limit for 
requesting review for good cause shown by the debtor;
    (2) Upon acceptance of a request for review by the debtor, the FDIC 
shall provide the debtor with a reasonable opportunity for an oral 
hearing when the determination turns on an issue of credibility or 
veracity, or the Director determines that the question of the 
indebtedness cannot be resolved by review of the documentary evidence 
alone. Unless otherwise required by law, an oral hearing under this 
section is not required to be a formal evidentiary hearing, although the 
Director shall document all significant matters discussed at the 
hearing. In cases where an oral hearing is not required by this section, 
the Director shall make his determination based on a documentary hearing 
consisting of a review of the written record; and
    (d) An opportunity to enter into a written agreement for the 
voluntary repayment of the amount of the claim at the discretion of the 
Director.

[[Page 163]]



Sec. 313.26  Interest.

    Pursuant to 31 U.S.C. 3717, the FDIC shall assess interest, 
penalties and administrative costs on debts owed to the United States. 
The FDIC is authorized to assess interest and related charges on debts 
that are not subject to 31 U.S.C. 3717 to the extent authorized under 
the common law or other applicable statutory authority.



Sec. 313.27  Refunds.

    Amounts recovered by administrative offset but later found not to be 
owed to the Government shall be promptly refunded. Unless required by 
law or contract, such refunds shall not bear interest.



Sec. 313.28  No requirement for duplicate notice.

    Where the Director has previously given a debtor any of the required 
notice and review opportunities with respect to a particular debt, the 
Director is not required to duplicate such notice and review 
opportunities prior to initiating administrative offset.



Sec. 313.29  Requests for offset to other federal agencies.

    The Director may request that a debt owed to the FDIC be 
administratively offset against funds due and payable to a debtor by 
another federal agency. In requesting administrative offset, the FDIC, 
as the creditor agency, will certify in writing to the federal agency 
holding funds payable to the debtor:
    (a) That the debtor owes the debt;
    (b) The amount and basis of the debt; and
    (c) That the FDIC has complied with the requirements of its own 
administrative offset regulations and the applicable provisions of 31 
U.S.C. 3716 with respect to providing the debtor with due process, 
unless otherwise provided.



Sec. 313.30  Requests for offset from other federal agencies.

    Any federal agency may request that funds due and payable to its 
debtor by the FDIC be administratively offset by the FDIC in order to 
collect a debt owed to such agency by the debtor. The FDIC shall 
initiate the requested offset only upon:
    (a) Receipt of written certification from the creditor agency 
stating:
    (1) That the debtor owes the debt;
    (2) The amount and basis of the debt; and
    (3) That the agency has complied with its own administrative offset 
regulations and with the applicable provisions of 31 CFR 901.3, 
including providing any required hearing or review.
    (b) A determination by the creditor agency that collection by offset 
against funds payable by the FDIC would be in the best interest of the 
United States and that such offset would not otherwise be contrary to 
law.



Sec. Sec. 313.31-313.39  [Reserved]



                         Subpart C_Salary Offset



Sec. 313.40  Scope.

    These salary offset regulations are issued in compliance with 5 
U.S.C. 5514 and 5 CFR part 550, subpart K, and apply to the collection 
of debts owed by employees of the FDIC or other federal agencies. These 
salary offset procedures do not apply where an employee consents to the 
recovery of a debt from his current pay account. These procedures do not 
apply to debts arising under the Internal Revenue Code, the tariff laws 
of the United States or to any case where collection of a debt by salary 
offset is explicitly provided for or prohibited by another statute 
(e.g., travel advances under 5 U.S.C. 5705 and employee training 
expenses under 5 U.S.C. 4108). These procedures do not preclude an 
employee from requesting waiver of an erroneous payment under 5 U.S.C. 
5584, or in any way questioning the amount or validity of a debt, in the 
manner specified by law or these agency regulations. This section also 
does not preclude an employee from requesting waiver of the collection 
of a debt under any other applicable statutory authority. When possible, 
salary offset through centralized administrative offset procedures 
should be attempted before seeking salary offset from a paying agency 
different than the creditor agency.

[[Page 164]]



Sec. 313.41  Notice requirement where FDIC is creditor agency.

    Where the FDIC seeks salary offset under 5 U.S.C. 5514 as the 
creditor agency, the FDIC shall first provide the employee with a 
written Notice of Intent to Offset at least 30 calendar days before 
salary offset is to commence. The Notice of Intent to Offset shall 
include the following information and statements:
    (a) That the Director has determined that a debt is owed to the FDIC 
and intends to collect the debt by means of deduction from the 
employee's current disposable pay account until the debt and all 
accumulated interest is paid in full or otherwise resolved;
    (b) The amount of the debt and the factual basis for the debt;
    (c) A salary offset schedule stating the frequency and amount of 
each deduction, stated as a fixed dollar amount or percentage of 
disposable pay (not to exceed 15%);
    (d) That in lieu of salary offset, the employee may propose a 
voluntary repayment plan to satisfy the debt on terms acceptable to the 
FDIC, which must be documented in writing, signed by the employee and 
the Director or the Director's designee, and documented in the FDIC's 
files;
    (e) The FDIC's policy concerning interest, penalties, and 
administrative costs, and a statement that such assessments must be 
made, unless excused in accordance with the FCCS;
    (f) That the employee has the right to inspect and copy FDIC records 
not exempt from disclosure relating to the debt claimed, or to receive 
copies of such records if the employee or the employee's representative 
is unable personally to inspect the records, due to geographical or 
other constraints:
    (1) That such requests be made in writing, and identify by name and 
address the Director or other designated individual to whom the request 
should be sent; and
    (2) That upon receipt of such a request, the Director or the 
Director's designee shall notify the employee of the time and location 
where the records may be inspected and copied;
    (g) That the employee has a right to request a hearing regarding the 
existence and amount of the debt claimed or the salary offset schedule 
proposed by the FDIC, provided that the employee files a request for 
such a hearing with the FDIC in accordance with Sec. 313.42 that such a 
hearing will be conducted by an impartial official who is an 
administrative law judge or other hearing official not under the 
supervision or control of the Board;
    (h) The procedure and deadline for requesting a hearing, including 
the name, address, and telephone number of the Director or other 
designated individual to whom a request for hearing must be sent;
    (i) That a request for hearing must be received by the FDIC on or 
before the 30th calendar day following receipt of the Notice of Intent, 
and that filing of a request for hearing will stay the collection 
proceedings;
    (j) That the FDIC will initiate salary offset procedures not less 
than 30 days from the date of the employee's receipt of the Notice of 
Intent to Offset, unless the employee files a timely request for a 
hearing;
    (k) That if a hearing is held, the administrative law judge or other 
hearing official will issue a decision at the earliest practical date, 
but not later than 60 days after the filing of the request for the 
hearing, unless the employee requests a delay in the proceedings which 
is granted by the hearing official;
    (l) That any knowingly false or frivolous statements, 
representations, or evidence may subject the employee to:
    (1) Disciplinary procedures appropriate under 5 U.S.C. chapter 75, 5 
CFR part 752, or any other applicable statutes or regulations;
    (2) Penalties under the False Claims Act, 31 U.S.C. 3729 through 
3731, or under any other applicable statutory authority; or
    (3) Criminal penalties under 18 U.S.C. 286, 287, 1001, and 1002 or 
under any other applicable statutory authority;
    (m) That the employee also has the right to request waiver of 
overpayment pursuant to 5 U.S.C. 5584, and may exercise any other rights 
and remedies available under statutes or regulations governing the 
program for which the collection is being made; and
    (n) That amounts paid on or deducted from debts that are later 
waived or

[[Page 165]]

found not to be owed to the United States will be promptly refunded to 
the employee, unless there are applicable contractual or statutory 
provisions to the contrary.



Sec. 313.42  Procedures to request a hearing.

    (a) To request a hearing, an employee must send a written request to 
the Director. The request must be received by the Director within 30 
calendar days after the employee's receipt of the Notice of Intent.
    (b) The request must be signed by the employee and must fully 
identify and explain with reasonable specificity all the facts, 
evidence, and witnesses, if any, that the employee believes support his 
or her position. The request for hearing must state whether the employee 
is requesting an oral or documentary hearing. If an oral hearing is 
requested, the request shall explain why the matter cannot be resolved 
by a review of documentary evidence alone.



Sec. 313.43  Failure to timely submit request for hearing.

    If the Director does not receive an employee's request for hearing 
within the 30-day period set forth in Sec. 313.42(a), the employee 
shall not be entitled to a hearing. However, the Director may accept an 
untimely request for hearing if the employee can show that the delay was 
the result of circumstances beyond his or her control or that he or she 
failed to receive actual notice of the filing deadline.



Sec. 313.44  Procedure for hearing.

    (a) Obtaining the services of a hearing official. When the FDIC is 
the creditor agency and the debtor is an FDIC employee, the FDIC shall 
designate an administrative law judge or contact any agent of another 
agency designated in appendix A to 5 CFR part 581 to arrange for a 
hearing official. When the FDIC is the creditor agency and the debtor is 
not an FDIC employee (i.e., the debtor is employed by another federal 
agency, also known as the paying agency), and the FDIC cannot provide a 
prompt and appropriate hearing before an administrative law judge or a 
hearing official furnished pursuant to a lawful arrangement, the FDIC 
may contact an agent of the paying agency designated in appendix A to 5 
CFR part 581 to arrange for a hearing official. The paying agency must 
cooperate with the FDIC to provide a hearing official, as required by 
the FCCS.
    (b) Notice and format of hearing--(1) Notice. The hearing official 
shall determine whether the hearing shall be oral or documentary and 
shall notify the employee of the form of the hearing. If the hearing 
will be oral, the notice shall set forth the date, time, and location of 
the hearing, which must be held within 30 calendar days after the 
request is received, unless the employee requests that the hearing be 
delayed. If the hearing will be documentary, the employee shall be 
notified to submit evidence and written arguments in support of his or 
her case to the hearing official within 30 calendar days.
    (2) Oral hearing. The hearing official may grant a request for an 
oral hearing if he or she determines that the issues raised by the 
employee cannot be resolved by review of documentary evidence alone 
(e.g., where credibility or veracity are at issue). An oral hearing is 
not required to be an adversarial adjudication, and the hearing official 
is not required to apply rules of evidence. Witnesses who testify in 
oral hearings shall do so under oath or affirmation. Oral hearings may 
take the form of, but are not limited to:
    (i) Informal conferences with the hearing official in which the 
employee and agency representative are given full opportunity to present 
evidence, witnesses, and argument;
    (ii) Informal meetings in which the hearing examiner interviews the 
employee; or
    (iii) Formal written submissions followed by an opportunity for oral 
presentation.
    (3) Documentary hearing. If the hearing official determines that an 
oral hearing is not necessary, he or she shall decide the issues raised 
by the employee based upon a review of the written record.
    (4) Record. The hearing official shall maintain a summary record of 
any hearing conducted under this section.
    (c) Rescheduling of the hearing date. The hearing official shall 
reschedule a

[[Page 166]]

hearing if requested to do so by both parties, who shall be given 
reasonable notice of the time and place of this new hearing.
    (d) Failure to appear. In the absence of good cause, an employee who 
fails to appear at a hearing shall be deemed, for the purpose of this 
subpart, to admit the existence and amount of the debt as described in 
the Notice of Intent. If the representative of the creditor agency fails 
to appear, the hearing official shall proceed with the hearing as 
scheduled, and issue a decision based upon the oral testimony presented 
and the documentation submitted by both parties.
    (e) Date of decision. The hearing official shall issue a written 
decision based upon the evidence and information developed at the 
hearing, as soon as practicable after the hearing, but not later than 60 
calendar days after the date on which the request for hearing was 
received by the FDIC, unless the hearing was delayed at the request of 
the employee. In the event of such a delay, the 60-day decision period 
shall be extended by the number of days by which the hearing was 
postponed. The decision of the hearing official shall be final.
    (f) Content of decision. The written decision shall include:
    (1) A summary of the facts concerning the origin, nature, and amount 
of the debt;
    (2) The hearing official's findings, analysis, and conclusions; and
    (3) The terms of the repayment schedule, if applicable.
    (g) Official certification of debt. The hearing official's decision 
shall constitute an official certification regarding the existence and 
amount of the debt for purposes of executing salary offset under 5 
U.S.C. 5514. Where the FDIC is the creditor agency but not the current 
paying agency, the FDIC may make a certification regarding the existence 
and amount of the debt owed to the FDIC, based on the hearing official's 
certification. The FDIC may make this certification to: the Secretary of 
the Treasury so that Treasury may offset the employee's current pay 
account by means of centralized administrative offset (5 CFR 550.1108); 
or to the current paying agency (5 CFR 550.1109). If the hearing 
official determines that a debt may not be collected through salary 
offset but the FDIC as the creditor agency determines that the debt is 
still valid, the FDIC may seek collection of the debt through other 
means, including administrative offset of other federal payments or 
litigation.



Sec. 313.45  Certification of debt by FDIC as creditor agency.

    The Director may also issue a certification of the debt where there 
has not been a hearing, if the employee has admitted the debt, or failed 
to contest the existence and amount of the debt in a timely manner 
(e.g., by failing to request a hearing). The certification shall be in 
writing and shall state:
    (a) The amount and basis of the debt owed by the employee;
    (b) The date the FDIC's right to collect the debt first accrued;
    (c) That the FDIC's debt collection regulations have been approved 
by OPM pursuant to 5 CFR part 550, subpart K;
    (d) If the collection is to be made by lump-sum payment, the amount 
and date such payment will be collected;
    (e) If the collection is to be made in installments through salary 
offset, the number of installments to be collected, the amount of each 
installment, and the date of the first installment, if a date other than 
the next officially established pay period; and
    (f) The date the employee was notified of the debt, the action(s) 
taken pursuant to the FDIC's regulations, and the dates such actions 
were taken.



Sec. 313.46  Notice of salary offset where FDIC is the paying agency.

    (a) Upon issuance of a proper certification by the Director for 
debts owed to the FDIC, or upon receipt of a proper certification from a 
creditor agency, the Director shall send the employee a written notice 
of salary offset. Such notice shall advise the employee:
    (1) That certification has been issued by the Director or received 
from another creditor agency;
    (2) Of the amount of the debt and of the deductions to be made; and
    (3) Of the initiation of salary offset at the next officially 
established pay

[[Page 167]]

interval or as otherwise provided for in the certification.
    (b) Where appropriate, the Director shall provide a copy of the 
notice to the creditor agency and advise such agency of the dollar 
amount to be offset and the pay period when the offset will begin.



Sec. 313.47  Voluntary repayment agreements as alternative to salary offset 

where the FDIC is the creditor agency.

    (a) In response to a Notice of Intent, an employee may propose to 
voluntarily repay the debt through scheduled voluntary payments, in lieu 
of salary offset. An employee who wishes to repay a debt in this manner 
shall submit to the Director a written agreement proposing a repayment 
schedule. This proposal must be received by the Director within 30 
calendar days after receipt of the Notice of Intent.
    (b) The Director shall notify the employee whether the employee's 
proposed voluntary repayment agreement is acceptable. It is within the 
discretion of the Director whether to accept or reject the debtor's 
proposal, or whether to propose to the debtor a modification of the 
proposed repayment agreement:
    (1) If the Director decides that the proposed repayment agreement is 
unacceptable, he or she shall notify the employee and the employee shall 
have 30 calendar days from the date he or she received notice of the 
decision in which to file a request for a hearing on the proposed 
repayment agreement, as provided in Sec. 313.42; or
    (2) If the Director decides that the proposed repayment agreement is 
acceptable or the debtor agrees to a modification proposed by the 
Director, the agreement shall be put in writing and signed by both the 
employee and the Director.



Sec. 313.48  Special review of repayment agreement or salary offset due to 

changed circumstances.

    (a) An employee subject to a voluntary repayment agreement or salary 
offset payable to the FDIC as creditor agency may request a special 
review by the Director of the amount of the salary offset or voluntary 
repayment, based on materially changed circumstances, including, but not 
limited to, catastrophic illness, divorce, death, or disability. A 
request for special review may be made at any time.
    (b) In support of a request for special review, the employee shall 
submit to the Director a detailed statement and supporting documents for 
the employee, his or her spouse, and dependents indicating:
    (1) Income from all sources;
    (2) Assets;
    (3) Liabilities;
    (4) Number of dependents;
    (5) Monthly expenses for food, housing, clothing, and 
transportation;
    (6) Medical expenses; and
    (7) Exceptional expenses, if any.
    (c) The employee shall also file an alternative proposed offset or 
payment schedule and a statement, with supporting documents, showing why 
the current salary offset or payments result in extreme financial 
hardship to the employee.
    (d) The Director shall evaluate the statement and supporting 
documents and determine whether the original salary offset or repayment 
schedule imposes extreme financial hardship on the employee, for 
example, by preventing the employee from meeting essential subsistence 
expenses such as food, housing, clothing, transportation, and medical 
care. The Director shall notify the employee in writing within 30 
calendar days of his or her determination.
    (e) If the special review results in a revised salary offset or 
repayment schedule, the Director shall provide a new certification to 
the paying agency.



Sec. 313.49  Coordinating salary offset with other agencies.

    (a) Responsibility of the FDIC as the creditor agency. Upon 
completion of the procedures established in Sec. 313.40 through Sec. 
313.45, the Director shall take the following actions:
    (1) Submit a debt claim to the paying agency, containing the 
information described in paragraphs (a)(2) and (a)(3) of this section, 
together with the certification of debt or an installment agreement (or 
other instruction regarding the payment schedule, if applicable).
    (2) If the collection must be made in installments, inform the 
paying agency

[[Page 168]]

of the amount or percentage of disposable pay to be collected in each 
installment. The Director may also inform the paying agency of the 
commencement date and number of installments to be paid, if a date other 
than the next officially established pay period is required.
    (3) Unless the employee has consented to the salary offset in 
writing or has signed a statement acknowledging receipt of the required 
procedures and the written consent or statement is forwarded to the 
paying agency, the Director must also advise the paying agency of the 
actions the FDIC has taken under 5 U.S.C. 5514 and state the dates such 
action was taken.
    (4) If the employee is in the process of separating from employment, 
the Director shall submit the debt claim to the employee's paying agency 
for collection by lump-sum deduction from the employee's final check. 
The paying agency shall certify the total amount of its collection and 
furnish a copy of the certification to the FDIC and to the employee.
    (5) If the employee is already separated and all payments due from 
his or her former paying agency have been paid, the Director may, unless 
otherwise prohibited, request that money due and payable to the employee 
from the federal government, including payments from the Civil Service 
Retirement and Disability Fund (5 CFR 831.1801), be administratively 
offset to collect the debt.
    (6) In the event an employee transfers to another paying agency, the 
Director shall not repeat the procedures described in Sec. 313.40 
through Sec. 313.45 in order to resume collecting the debt. Instead, 
the FDIC shall review the debt upon receiving the former paying agency's 
notice of the employee's transfer and shall ensure that collection is 
resumed by the new paying agency. The FDIC must submit a properly 
certified claim to the new paying agency before collection can be 
resumed.
    (b) Responsibility of the FDIC as the paying agency--(1) Complete 
claim. When the FDIC receives a properly certified claim from a creditor 
agency, the employee shall be given written notice of the certification, 
the date salary offset will begin, and the amount of the periodic 
deductions. The FDIC shall schedule deductions to begin at the next 
officially established pay interval or as otherwise provided for in the 
certification.
    (2) Incomplete claim. When the FDIC receives an incomplete 
certification of debt from a creditor agency, the FDIC shall return the 
debt claim with notice that procedures under 5 U.S.C. 5514 and 5 CFR 
550.1104 must be followed and that a properly certified debt claim must 
be received before action will be taken to collect from the employee's 
current pay account.
    (3) Review. The FDIC is not authorized to review the merits of the 
creditor agency's determination with respect to the amount or validity 
of the debt certified by the creditor agency.
    (4) Employees who transfer from one paying agency to another agency. 
If, after the creditor agency has submitted the debt claim to the FDIC, 
the employee transfers to a different paying agency before the debt is 
collected in full, the FDIC must certify the total amount collected on 
the debt. One copy of the certification shall be furnished to the 
employee, and one copy shall be sent to the creditor agency along with 
notice of the employee's transfer. If the FDIC is aware that the 
employee is entitled to payments from the Civil Service Retirement and 
Disability Fund, or other similar payments, it must provide written 
notification to the agency responsible for making such payments that the 
debtor owes a debt (including the amount) and that the requirements set 
forth herein and in the OPM's regulation (5 CFR part 550, subpart K) 
have been fully met.



Sec. 313.50  Interest, penalties, and administrative costs.

    Where the FDIC is the creditor agency, it shall assess interest, 
penalties, and administrative costs pursuant to 31 U.S.C. 3717 and 31 
CFR parts 900 through 904.



Sec. 313.51  Refunds.

    (a) Where the FDIC is the creditor agency, it shall promptly refund 
any amount deducted under the authority of 5 U.S.C. 5514 when the debt 
is compromised or otherwise found not to be owing to the United States, 
or when an

[[Page 169]]

administrative or judicial order directs the FDIC to make a refund.
    (b) Unless required by law or contract, such refunds shall not bear 
interest.



Sec. 313.52  Request from a creditor agency for services of a hearing 

official.

    (a) The FDIC may provide a hearing official upon request of the 
creditor agency when the debtor is employed by the FDIC and the creditor 
agency cannot provide a prompt and appropriate hearing before a hearing 
official furnished pursuant to another lawful arrangement.
    (b) The FDIC may provide a hearing official upon request of a 
creditor agency when the debtor works for the creditor agency and that 
agency cannot arrange for a hearing official.
    (c) The Director shall arrange for qualified personnel to serve as 
hearing officials.
    (d) Services rendered under paragraph (a) of this section shall be 
provided on a fully reimbursable basis pursuant to 31 U.S.C. 1535.



Sec. 313.53  Non-waiver of rights by payments.

    A debtor's payment, whether voluntary or involuntary, of all or any 
portion of a debt being collected pursuant to this section shall not be 
construed as a waiver of any rights that the debtor may have under any 
statute, regulation, or contract except as otherwise provided by law or 
contract.



Sec. 313.54  Exception to due process procedures.

    (a) The procedures set forth in this subpart shall not apply to 
routine intra-agency salary adjustments of pay, including the following:
    (1) Any adjustment to pay arising out of an employee's election of 
coverage or a change in coverage under a federal benefits program 
requiring periodic deductions from pay, if the amount to be recovered 
was accumulated over four pay periods or less;
    (2) A routine adjustment of pay that is made to correct an 
overpayment attributable to clerical or administrative errors or delays 
in processing pay documents, if the overpayment occurred within the four 
pay periods preceding the adjustment and, at the time of such adjustment 
or as soon thereafter as is practical, the individual is provided 
written notice of the nature and amount of the adjustment and the point 
of contact for contesting such adjustment; or
    (3) Any adjustment to collect a debt amount to $50 or less, if, at 
the time of such adjustment, or as soon thereafter as is practical, the 
individual is provided written notice of the nature and amount of the 
adjustment and the point of contact for contesting such adjustment.
    (b) The procedure for notice to the employee and collection of such 
adjustments is set forth in Sec. 313.55.



Sec. 313.55  Salary adjustments.

    Any negative adjustment to pay arising out of an employee's election 
of coverage, or a change in coverage, under a federal benefits program 
requiring periodic deductions from pay shall not be considered 
collection of a ``debt'' for the purposes of this section if the amount 
to be recovered was accumulated over four pay periods or less. In such 
cases, the FDIC shall not apply this subpart C, but will provide a clear 
and concise statement in the employee's earnings statement advising the 
employee of the previous overpayment at the time the adjustment is made.



Sec. Sec. 313.56-313.79  [Reserved]



                Subpart D_Administrative Wage Garnishment



Sec. 313.80  Scope and purpose.

    (a) These administrative wage garnishment regulations are issued in 
compliance with 31 U.S.C. 3720D and 31 CFR 285.11(f). The subpart 
provides procedures for the FDIC to collect money from a debtor's 
disposable pay by means of administrative wage garnishment. The receipt 
of payments pursuant to this subpart does not preclude the FDIC from 
pursuing other debt collection remedies, including the offset of federal 
payments. The FDIC may pursue such debt collection remedies separately 
or in conjunction with administrative wage garnishment. This

[[Page 170]]

subpart does not apply to the collection of delinquent debts from the 
wages of federal employees from their federal employment. Federal pay is 
subject to the federal salary offset procedures set forth in 5 U.S.C. 
5514 and other applicable laws.



Sec. 313.81  Notice.

    At least 30 days before the initiation of garnishment proceedings, 
the Director will send, by first class mail to the debtor's last known 
address, a written notice informing the debtor of:
    (a) The nature and amount of the debt;
    (b) The FDIC's intention to initiate proceedings to collect the debt 
through deductions from the debtor's pay until the debt and all 
accumulated interest penalties and administrative costs are paid in 
full;
    (c) An explanation of the debtor's rights as set forth in Sec. 
313.82(c); and
    (d) The time frame within which the debtor may exercise these 
rights. The FDIC shall retain a stamped copy of the notice indicating 
the date the notice was mailed.



Sec. 313.82  Debtor's rights.

    The FDIC shall afford the debtor the opportunity:
    (a) To inspect and copy records related to the debt;
    (b) To enter into a written repayment agreement with the FDIC, under 
terms agreeable to the FDIC; and
    (c) To the extent that a debt owed has not been established by 
judicial or administrative order, to request a hearing concerning the 
existence or amount of the debt or the terms of the repayment schedule. 
With respect to debts established by a judicial or administrative order, 
a debtor may request a hearing concerning the payment or other discharge 
of the debt. The debtor is not entitled to a hearing concerning the 
terms of the proposed repayment schedule if these terms have been 
established by written agreement.



Sec. 313.83  Form of hearing.

    (a) If the debtor submits a timely written request for a hearing as 
provided in Sec. 313.82(c), the FDIC will afford the debtor a hearing, 
which at the FDIC's option may be oral or written. The FDIC will provide 
the debtor with a reasonable opportunity for an oral hearing when the 
Director determines that the issues in dispute cannot be resolved by 
review of the documentary evidence, for example, when the validity of 
the claim turns on the issue of credibility or veracity.
    (b) If the FDIC determines that an oral hearing is appropriate, the 
time and location of the hearing shall be established by the FDIC. An 
oral hearing may, at the debtor's option, be conducted either in person 
or by telephone conference. All travel expenses incurred by the debtor 
in connection with an in-person hearing will be borne by the debtor. All 
telephonic charges incurred during the hearing will be the 
responsibility of the agency.
    (c) In cases when it is determined that an oral hearing is not 
required by this section, the FDIC will accord the debtor a ``paper 
hearing,'' that is, the FDIC will decide the issues in dispute based 
upon a review of the written record.



Sec. 313.84  Effect of timely request.

    If the FDIC receives a debtor's written request for hearing within 
15 business days of the date the FDIC mailed its notice of intent to 
seek garnishment, the FDIC shall not issue a withholding order until the 
debtor has been provided the requested hearing, and a decision in 
accordance with Sec. 313.88 and Sec. 313.89 has been rendered.



Sec. 313.85  Failure to timely request a hearing.

    If the FDIC receives a debtor's written request for hearing after 15 
business days of the date the FDIC mailed its notice of intent to seek 
garnishment, the FDIC shall provide a hearing to the debtor. However, 
the FDIC will not delay issuance of a withholding order unless it 
determines that the untimely filing of the request was caused by factors 
over which the debtor had no control, or the FDIC receives information 
that the FDIC believes justifies a delay or cancellation of the 
withholding order.



Sec. 313.86  Hearing official.

    A hearing official may be any qualified individual, as determined by 
the

[[Page 171]]

FDIC, including an administrative law judge.



Sec. 313.87  Procedure.

    After the debtor requests a hearing, the hearing official shall 
notify the debtor of:
    (a) The date and time of a telephonic hearing;
    (b) The date, time, and location of an in-person oral hearing; or
    (c) The deadline for the submission of evidence for a written 
hearing.



Sec. 313.88  Format of hearing.

    The FDIC will have the burden of proof to establish the existence or 
amount of the debt. Thereafter, if the debtor disputes the existence or 
amount of the debt, the debtor must prove by a preponderance of the 
evidence that no debt exists, or that the amount of the debt is 
incorrect. In addition, the debtor may present evidence that the terms 
of the repayment schedule are unlawful, would cause a financial hardship 
to the debtor, or that collection of the debt may not be pursued due to 
operation of law. The hearing official shall maintain a record of any 
hearing held under this section. Hearings are not required to be formal, 
and evidence may be offered without regard to formal rules of evidence. 
Witnesses who testify in oral hearings shall do so under oath or 
affirmation.



Sec. 313.89  Date of decision.

    The hearing official shall issue a written opinion stating his or 
her decision as soon as practicable, but not later than sixty (60) days 
after the date on which the request for such hearing was received by the 
FDIC. If the FDIC is unable to provide the debtor with a hearing and 
decision within sixty (60) days after the receipt of the request for 
such hearing:
    (a) The FDIC may not issue a withholding order until the hearing is 
held and a decision rendered; or
    (b) If the FDIC had previously issued a withholding order to the 
debtor's employer, the withholding order will be suspended beginning on 
the 61st day after the date the FDIC received the hearing request and 
continuing until a hearing is held and a decision is rendered.



Sec. 313.90  Content of decision.

    The written decision shall include:
    (a) A summary of the facts presented;
    (b) The hearing official's findings, analysis and conclusions; and
    (c) The terms of any repayment schedule, if applicable.



Sec. 313.91  Finality of agency action.

    Unless the FDIC on its own initiative orders review of a decision by 
a hearing official pursuant to 17 CFR 201.431(c), a decision by a 
hearing official shall become the final decision of the FDIC for the 
purpose of judicial review under the Administrative Procedure Act.



Sec. 313.92  Failure to appear.

    In the absence of good cause shown, a debtor who fails to appear at 
a scheduled hearing will be deemed as not having timely filed a request 
for a hearing.



Sec. 313.93  Wage garnishment order.

    (a) Unless the FDIC receives information that it believes justifies 
a delay or cancellation of the withholding order, the FDIC will send by 
first class mail a withholding order to the debtor's employer within 30 
days after the debtor fails to make a timely request for a hearing 
(i.e., within 15 business days after the mailing of the notice of the 
FDIC's intent to seek garnishment) or, if a timely request for a hearing 
is made by the debtor, within 30 days after a decision to issue a 
withholding order becomes final.
    (b) The withholding order sent to the employer will be in the form 
prescribed by the Secretary of the Treasury, on the FDIC's letterhead, 
and signed by the head of the agency or delegate. The order will contain 
all information necessary for the employer to comply with the 
withholding order, including the debtor's name, address, and social 
security number, as well as instructions for withholding and information 
as to where payments should be sent.
    (c) The FDIC will keep a stamped copy of the order indicating the 
date it was mailed.



Sec. 313.94  Certification by employer.

    Along with the withholding order, the FDIC will send to the employer 
a certification in a form prescribed by

[[Page 172]]

the Secretary of the Treasury. The employer shall complete and return 
the certification to the FDIC within the time frame prescribed in the 
instructions to the form. The certification will address matters such as 
information about the debtor's employment status and disposable pay 
available for withholding.



Sec. 313.95  Amounts withheld.

    (a) Upon receipt of the garnishment order issued under this section, 
the employer shall deduct from all disposable pay paid to the debtor 
during each pay period the amount of garnishment described in paragraphs 
(b) through (d) of this section.
    (b) Subject to the provisions of paragraphs (c) and (d) of this 
section, the amount of garnishment shall be the lesser of:
    (1) The amount indicated on the garnishment order up to 15% of the 
debtor's disposable pay; or
    (2) The amount set forth in 15 U.S.C. 1673(a)(2). The amount set 
forth at 15 U.S.C. 1673(a)(2) is the amount by which the debtor's 
disposable pay exceeds an amount equivalent to thirty times the minimum 
wage. See 29 CFR 870.10.
    (c) When a debtor's pay is subject to withholding orders with 
priority, the following shall apply:
    (1) Unless otherwise provided by federal law, withholding orders 
issued under this section shall be paid in the amounts set forth under 
paragraph (b) of this section and shall have priority over other 
withholding orders which are served later in time. However, withholding 
orders for family support shall have priority over withholding orders 
issued under this section.
    (2) If amounts are being withheld from a debtor's pay pursuant to a 
withholding order served on an employer before a withholding order 
issued pursuant to this section, or if a withholding order for family 
support is served on an employer at any time, the amounts withheld 
pursuant to the withholding order issued under this section shall be the 
lesser of:
    (i) The amount calculated under paragraph (b) of this section; or
    (ii) An amount equal to 25% of the debtor's disposable pay less the 
amount(s) withheld under the withholding order(s) with priority.
    (3) If a debtor owes more than one debt to the FDIC, the FDIC may 
issue multiple withholding orders. The total amount garnished from the 
debtor's pay for such orders will not exceed the amount set forth in 
paragraph (b) of this section.
    (d) An amount greater than that set forth in paragraphs (b) and (c) 
of this section may be withheld upon the written consent of the debtor.
    (e) The employer shall promptly pay to the FDIC all amounts withheld 
in accordance with the withholding order issued pursuant to this 
section.
    (f) An employer shall not be required to vary its normal pay and 
disbursement cycles in order to comply with the withholding order.
    (g) Any assignment or allotment by the employee of the employee's 
earnings shall be void to the extent it interferes with or prohibits 
execution of the withholding order under this section, except for any 
assignment or allotment made pursuant to a family support judgment or 
order.
    (h) The employer shall withhold the appropriate amount from the 
debtor's wages for each pay period until the employer receives 
notification from the FDIC to discontinue wage withholding. The 
garnishment order shall indicate a reasonable period of time within 
which the employer is required to commence wage withholding.



Sec. 313.96  Exclusions from garnishment.

    The FDIC will not garnish the wages of a debtor it knows has been 
involuntarily separated from employment until the debtor has been re-
employed continuously for at least 12 months. The debtor has the burden 
of informing the FDIC of the circumstances surrounding an involuntary 
separation from employment.



Sec. 313.97  Financial hardship.

    (a) A debtor whose wages are subject to a wage withholding order 
under this section, may, at any time, request a review by the FDIC of 
the amount garnished, based on materially changed circumstances such as 
disability, divorce, or catastrophic illness which result in financial 
hardship.

[[Page 173]]

    (b) A debtor requesting a review under this section shall submit the 
basis for claiming that the current amount of garnishment results in a 
financial hardship to the debtor, along with supporting documentation.
    (c) If a financial hardship is found, the FDIC will downwardly 
adjust, by an amount and for a period of time agreeable to the FDIC, the 
amount garnished to reflect the debtor's financial condition. The FDIC 
will notify the employer of any adjustments to the amounts to be 
withheld.



Sec. 313.98  Ending garnishment.

    (a) Once the FDIC has fully recovered the amounts owed by the 
debtor, including interest, penalties, and administrative costs 
consistent with the FCCS, the FDIC will send the debtor's employer 
notification to discontinue wage withholding.
    (b) At least annually, the FDIC will review its debtors' accounts to 
ensure that garnishment has been terminated for accounts that have been 
paid in full.



Sec. 313.99  Prohibited actions by employer.

    The DCIA prohibits an employer from discharging, refusing to employ, 
or taking disciplinary action against the debtor due to the issuance of 
a withholding order under this subpart.



Sec. 313.100  Refunds.

    (a) If a hearing official determines that a debt is not legally due 
and owing to the United States, the FDIC shall promptly refund any 
amount collected by means of administrative wage garnishment.
    (b) Unless required by federal law or contract, refunds under this 
section shall not bear interest.



Sec. 313.101  Right of action.

    The FDIC may sue any employer for any amount that the employer fails 
to withhold from wages owed and payable to its employee in accordance 
with this subpart. However, a suit will not be filed before the 
termination of the collection action involving a particular debtor, 
unless earlier filing is necessary to avoid expiration of any applicable 
statute of limitations. For purposes of this subpart, ``termination of 
the collection action'' occurs when the agency has terminated collection 
action in accordance with the FCCS (31 CFR 903.1 through 903.5) or other 
applicable standards. In any event, termination of the collection action 
will have been deemed to occur if the FDIC has not received any payments 
to satisfy the debt from the particular debtor whose wages were subject 
to garnishment, in whole or in part, for a period of one (1) year.



Sec. Sec. 313.102-313.119  [Reserved]



                       Subpart E_Tax Refund Offset



Sec. 313.120  Scope.

    The provisions of 26 U.S.C. 6402(d) and 31 U.S.C. 3720A authorize 
the Secretary of the Treasury to offset a delinquent debt owed to the 
United States Government from the tax refund due a taxpayer when other 
collection efforts have failed to recover the amount due. In addition, 
the FDIC is authorized to collect debts by means of administrative 
offset under 31 U.S.C. 3716 and, as part of the debt collection process, 
to notify the Financial Management Service (FMS), a bureau of the 
Department of the Treasury, of the amount of such debt for collection by 
tax refund offset.



Sec. 313.121  Definitions.

    For purposes of this subpart E:
    (a) Debt or claim means an amount of money, funds or property which 
has been determined by the FDIC to be due to the United States from any 
person, organization, or entity, except another federal agency.
    (b) Debtor means a person who owes a debt or a claim. The term 
``person'' includes any individual, organization or entity, except 
another federal agency.
    (c) Tax refund offset means withholding or reducing a tax refund 
payment by an amount necessary to satisfy a debt owed by the payee(s) of 
a tax refund payment.
    (d) Tax refund payment means any overpayment of federal taxes to be 
refunded to the person making the overpayment after the Internal Revenue 
Service (IRS) makes the appropriate credits.

[[Page 174]]



Sec. 313.122  Notification of debt to FMS.

    The FDIC shall notify FMS of the amount of any past due, legally 
enforceable non-tax debt owed to it by a person, for the purpose of 
collecting such debt by tax refund offset. Notification and referral to 
FMS of such debts does not preclude FDIC's use of any other debt 
collection procedures, such as wage garnishment, either separately or in 
conjunction with tax refund offset.



Sec. 313.123  Certification and referral of debt.

    When the FDIC refers a past-due, legally enforceable debt to FMS for 
tax refund offset, it will certify to FMS that:
    (a) The debt is past due and legally enforceable in the amount 
submitted to FMS and that the FDIC will ensure that collections are 
properly credited to the debt;
    (b) Except in the case of a judgment debt or as otherwise allowed by 
law, the debt is referred for offset within ten years after the FDIC's 
right of action accrues;
    (c) The FDIC has made reasonable efforts to obtain payment of the 
debt, in that it has:
    (1) Submitted the debt to FMS for collection by administrative 
offset and complied with the provisions of 31 U.S.C. 3716(a) and related 
regulations;
    (2) Notified, or has made a reasonable attempt to notify, the debtor 
that the debt is past-due, and unless repaid within 60 days after the 
date of the notice, will be referred to FMS for tax refund offset;
    (3) Given the debtor at least 60 days to present evidence that all 
or part of the debt is not past-due or legally enforceable, considered 
any evidence presented by the debtor, and determined that the debt is 
past-due and legally enforceable; and
    (4) Provided the debtor with an opportunity to make a written 
agreement to repay the debt; and
    (d) The debt is at least $25.



Sec. 313.124  Pre-offset notice and consideration of evidence.

    (a) For purposes of Sec. 313.123(c)(2), the FDIC has made a 
reasonable effort to notify the debtor if it uses the current address 
information contained in its records related to the debt. The FDIC may, 
but is not required to, obtain address information from the IRS pursuant 
to 26 U.S.C. 6103(m)(2), (4), (5).
    (b) For purposes of Sec. 313.123(c)(3), if evidence presented by a 
debtor is considered by an agent of the FDIC, or other entities or 
persons acting on behalf of the FDIC, the debtor must be accorded at 
least 30 days from the date the agent or other entity or person 
determines that all or part of the debt is past-due and legally 
enforceable to request review by an officer or employee of the FDIC of 
any unresolved dispute. The FDIC must then notify the debtor of its 
decision.



Sec. 313.125  No requirement for duplicate notice.

    Where the director has previously given a debtor any of the required 
notice and review opportunities with respect to a particular debt, the 
Director is not required to duplicate such notice and review 
opportunities prior to initiating tax refund offset.

[71 FR 75661, Dec. 18, 2006]



Sec. 313.126  Referral of past-due, legally enforceable debt.

    The FDIC shall submit past-due, legally enforceable debt information 
for tax refund offset to FMS, as prescribed by FMS. For each debt, the 
FDIC will include the following information:
    (a) The name and taxpayer identification number (as defined in 26 
U.S.C. 6109) of the debtor;
    (b) The amount of the past-due and legally enforceable debt;
    (c) The date on which the debt became past-due; and
    (d) The designation of FDIC as the agency referring the debt.

[67 FR 48527, July 25, 2002. Redesignated at 71 FR 75661, Dec. 18, 2006]



Sec. 313.127  Correcting and updating referral.

    If, after referring a past-due legally enforceable debt to FMS as 
provided in Sec. 313.125, the FDIC determines that an error has been 
made with respect to the information transmitted to FMS, or if the FDIC 
receives a payment or credits a payment to the account of the

[[Page 175]]

debtor referred to FMS for offset, or if the debt amount is otherwise 
incorrect, the FDIC shall promptly notify FMS and make the appropriate 
correction of the FDIC's records. FDIC will provide certification as 
required under Sec. 313.123 for any increases to amounts owed. In the 
event FMS rejects an FDIC certification for failure to comply with Sec. 
323.123, the FDIC may resubmit the debt with a corrected certification.

[67 FR 48527, July 25, 2002. Redesignated at 71 FR 75661, Dec. 18, 2006]



Sec. 313.128  Disposition of amounts collected.

    FMS will transmit amounts collected for past-due, legally 
enforceable debts, less fees charged under this section, to the FDIC's 
account. The FDIC will reimburse FMS and the IRS for the cost of 
administering the tax refund offset program. FMS will deduct the fees 
from amounts collected prior to disposition and transmit a portion of 
the fees deducted to reimburse the IRS for its share of the cost of 
administering the tax refund offset program. To the extent allowed by 
law, the FDIC may add the offset fees to the debt.

[67 FR 48527, July 25, 2002. Redesignated at 71 FR 75661, Dec. 18, 2006]



Sec. Sec. 313.129-313.139  [Reserved]



      Subpart F_Civil Service Retirement and Disability Fund Offset



Sec. 313.140  Future benefits.

    Unless otherwise prohibited by law, the FDIC may request that a 
debtor's anticipated or future benefit payments under the Civil Service 
Retirement and Disability Fund (Fund) be administratively offset in 
accordance with regulations at 5 CFR 831.1801 through 831.1808.



Sec. 313.141  Notification to OPM.

    When making a request for administrative offset under Sec. 313.140, 
the FDIC shall provide OPM with a written certification that:
    (a) The debtor owes the FDIC a debt, including the amount of the 
debt;
    (b) The FDIC has complied with the applicable statutes, regulations, 
and procedures of OPM; and
    (c) The FDIC has complied with the requirements of 31 CFR parts 900 
through 904, including any required hearing or review.



Sec. 313.142  Request for administrative offset.

    The Director shall request administrative offset under Sec. 
313.140, as soon as practical after completion of the applicable 
procedures in order to help ensure that offset be initiated prior to 
expiration of the applicable statute of limitations. At such time as the 
debtor makes a claim for payments from the Fund, if at least a year has 
elapsed since the offset request was originally made, the debtor shall 
be permitted to offer a satisfactory repayment plan in lieu of offset 
upon establishing that changed financial circumstances would render the 
offset unjust.



Sec. 313.143  Cancellation of deduction.

    If the FDIC collects part or all of the debt by other means before 
deductions are made or completed pursuant to Sec. 313.140, the FDIC 
shall act promptly to modify or terminate its request for such offset.



          Subpart G_Mandatory Centralized Administrative Offset



Sec. 313.160  Treasury notification.

    (a) In accordance with 31 U.S.C. 3716, the FDIC as a creditor agency 
must notify the Secretary of the Treasury of all debts that are 
delinquent (over 180 days past due), as defined in the FCCS, to enable 
the Secretary to seek collection by centralized administrative offset. 
This includes debts the FDIC seeks to recover from the pay account of an 
employee of another agency by means of salary offset.
    (b) For purposes of centralized administrative offset, a claim or 
debt is not delinquent if:
    (1) It is in litigation or foreclosure;
    (2) It will be disposed of under an asset sale program within one 
year after becoming eligible for sale;
    (3) It has been referred to a private collection contractor for 
collection;
    (4) It has been referred to a debt collection center;

[[Page 176]]

    (5) It will be collected under internal offset, if such offset is 
sufficient to collect the claim within three years after the date the 
debt or claim is first delinquent; and
    (6) It is within a specific class of claims or debts which the 
Secretary of the Treasury has determined to be exempt, at the request of 
an agency.



Sec. 313.161  Certification of debt.

    Prior to referring a delinquent debt to the Secretary of the 
Treasury, the Director must have complied with the requirements of 5 
U.S.C. 5514, and 5 CFR part 550, subpart K, governing salary offset, and 
the FDIC regulations. The Director shall certify, in a form acceptable 
to the Secretary, that:
    (a) The debt is past due and legally enforceable; and
    (b) The FDIC has complied with all due process requirements under 31 
U.S.C. 3716 and the FDIC's administrative offset regulations.



Sec. 313.162  Compliance with 31 CFR part 285.

    The Director shall also comply with applicable procedures for 
referring a delinquent debt for purposes of centralized offset which are 
set forth at 31 CFR part 285 and the FCCS.



Sec. 313.163  Notification of debts of 180 days or less.

    The Director, in his discretion, may also notify the Secretary of 
the Treasury of debts that have been delinquent for 180 days or less, 
including debts the FDIC seeks to recover by means of salary offset.



Sec. Sec. 313.164-313.180  [Reserved]

[[Page 177]]



        SUBCHAPTER B_REGULATIONS AND STATEMENTS OF GENERAL POLICY


PART 323_APPRAISALS--Table of Contents




Sec.
323.1 Authority, purpose, and scope.
323.2 Definitions.
323.3 Appraisals required; transactions requiring a State certified or 
          licensed appraiser.
323.4 Minimum appraisal standards.
323.5 Appraiser independence.
323.6 Professional association membership; competency.
323.7 Enforcement.

    Authority: 12 U.S.C. 1818, 1819 [``Seventh'' and ``Tenth''], and 
3331-3352.

    Source: 55 FR 33888, Aug. 20, 1990, unless otherwise noted.



Sec. 323.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under 12 U.S.C. 1818, 1819 
[``Seventh'' and ``Tenth''] and title XI of the Financial Institutions 
Reform, Recovery, and Enforcement Act of 1989 (``FIRREA'') (Pub. L. 101-
73, 103 Stat. 183, 12 U.S.C. 3331 et seq. (1989)).
    (b) Purpose and scope. (1) Title XI provides protection for federal 
financial and public policy interests in real estate related 
transactions by requiring real estate appraisals used in connection with 
federally related transactions to be performed in writing, in accordance 
with uniform standards, by appraisers whose competency has been 
demonstrated and whose professional conduct will be subject to effective 
supervision. This part implements the requirements of title XI and 
applies to all federally related transactions entered into by the FDIC 
or by institutions regulated by the FDIC (regulated institutions).
    (2) This part: (i) Identifies which real estate-related financial 
transactions require the services of an appraiser;
    (ii) Prescribes which categories of federally related transactions 
shall be appraised by a State certified appraiser and which by a State 
licensed appraiser; and
    (iii) Prescribes minimum standards for the performance of real 
estate appraisals in connection with federally related transactions 
under the jurisdiction of the FDIC.



Sec. 323.2  Definitions.

    (a) Appraisal means a written statement independently and 
impartially prepared by a qualified appraiser setting forth an opinion 
as to the market value of an adequately described property as of a 
specific date(s), supported by the presentation and analysis of relevant 
market information.
    (b) Appraisal Foundation means the Appraisal Foundation established 
on November 30, 1987, as a not-for-profit corporation under the laws of 
Illinois.
    (c) Appraisal Subcommittee means the Appraisal Subcommittee of the 
Federal Financial Institutions Examination Council.
    (d) Business loan means a loan or extension of credit to any 
corporation, general or limited partnership, business trust, joint 
venture, pool, syndicate, sole proprietorship, or other business entity.
    (e) Complex 1-to-4 family residential property appraisal means one 
in which the property to be appraised, the form of ownership, or market 
conditions are atypical.
    (f) Federally related transaction means any real estate-related 
financial transactions entered into after the effective date hereof 
that:
    (1) The FDIC or any regulated institution engages in or contracts 
for; and
    (2) Requires the services of an appraiser.
    (g) Market value means the most probable price which a property 
should bring in a competitive and open market under all conditions 
requisite to a fair sale, the buyer and seller each acting prudently and 
knowledgeably, and assuming the price is not affected by undue stimulus. 
Implicit in this definition is the consummation of a sale as of a 
specified date and the passing of title from seller to buyer under 
conditions whereby:
    (1) Buyer and seller are typically motivated;

[[Page 178]]

    (2) Both parties are well informed or well advised, and acting in 
what they consider their own best interests;
    (3) A reasonable time is allowed for exposure in the open market;
    (4) Payment is made in terms of cash in U.S. dollars or in terms of 
financial arrangements comparable thereto; and
    (5) The price represents the normal consideration for the property 
sold unaffected by special or creative financing or sales concessions 
granted by anyone associated with the sale.
    (h) Real estate or real property means an identified parcel or tract 
of land, with improvements, and includes easements, rights of way, 
undivided or future interests and similar rights in a tract of land, but 
does not include mineral rights, timber rights, growing crops, water 
rights and similar interests severable from the land when the 
transaction does not involve the associated parcel or tract of land.
    (i) Real estate-related financial transaction means any transaction 
involving:
    (1) The sale, lease, purchase, investment in or exchange of real 
property, including interests in property, or the financing thereof; or
    (2) The refinancing of real property or interests in real property; 
or
    (3) The use of real property or interests in property as security 
for a loan or investment, including mortgage-backed securities.
    (j) State certified appraiser means any individual who has satisfied 
the requirements for certification in a State or territory whose 
criteria for certification as a real estate appraiser currently meet the 
minimum criteria for certification issued by the Appraiser 
Qualifications Board of the Appraisal Foundation. No individual shall be 
a State certified appraiser unless such individual has achieved a 
passing grade upon a suitable examination administered by a State or 
territory that is consistent with and equivalent to the Uniform State 
Certification Examination issued or endorsed by the Appraiser 
Qualifications Board. In addition, the Appraisal Subcommittee must not 
have issued a finding that the policies, practices, or procedures of a 
State or territory are inconsistent with title XI of FIRREA. The FDIC 
may, from time to time, impose additional qualification criteria for 
certified appraisers performing appraisals in connection with federally 
related transactions within its jurisdiction.
    (k) State licensed appraiser means any individual who has satisfied 
the requirements for licensing in a State or territory where the 
licensing procedures comply with title XI of FIRREA and where the 
Appraisal Subcommittee has not issued a finding that the policies, 
practices, or procedures of the State or territory are inconsistent with 
title XI. The FDIC may, from time to time, impose additional 
qualification criteria for licensed appraisers performing appraisals in 
connection with federally related transactions within its jurisdiction.
    (l) Tract development means a project of five units or more that is 
constructed or is to be constructed as a single development.
    (m) Transaction value means: (1) For loans or other extensions of 
credit, the amount of the loan or extension of credit;
    (2) For sales, leases, purchases, and investments in or exchanges of 
real property, the market value of the real property interest involved; 
and
    (3) For the pooling of loans or interests in real property for 
resale or purchase, the amount of the loan or market value of the real 
property calculated with respect to each such loan or interest in real 
property.

[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9049, Mar. 16, 1992; 59 
FR 29501, June 7, 1994]



Sec. 323.3  Appraisals required; transactions requiring a State certified or 

licensed appraiser.

    (a) Appraisals required. An appraisal performed by a State certified 
or licensed appraiser is required for all real estate-related financial 
transactions except those in which:
    (1) The transaction value is $250,000 or less;
    (2) A lien on real estate has been taken as collateral in an 
abundance of caution;
    (3) The transaction is not secured by real estate;

[[Page 179]]

    (4) A lien on real estate has been taken for purposes other than the 
real estate's value;
    (5) The transaction is a business loan that:
    (i) Has a transaction value of $1 million or less; and
    (ii) Is not dependent on the sale of, or rental income derived from, 
real estate as the primary source of repayment;
    (6) A lease of real estate is entered into, unless the lease is the 
economic equivalent of a purchase or sale of the leased real estate;
    (7) The transaction involves an existing extension of credit at the 
lending institution, provided that:
    (i) There has been no obvious and material change in market 
conditions or physical aspects of the property that threatens the 
adequacy of the institution's real estate collateral protection after 
the transaction, even with the advancement of new monies; or
    (ii) There is no advancement of new monies, other than funds 
necessary to cover reasonable closing costs;
    (8) The transaction involves the purchase, sale, investment in, 
exchange of, or extension of credit secured by, a loan or interest in a 
loan, pooled loans, or interests in real property, including mortgaged-
backed securities, and each loan or interest in a loan, pooled loan, or 
real property interest met FDIC regulatory requirements for appraisals 
at the time of origination;
    (9) The transaction is wholly or partially insured or guaranteed by 
a United States government agency or United States government sponsored 
agency;
    (10) The transaction either:
    (i) Qualifies for sale to a United States government agency or 
United States government sponsored agency; or
    (ii) Involves a residential real estate transaction in which the 
appraisal conforms to the Federal National Mortgage Association or 
Federal Home Loan Mortgage Corporation appraisal standards applicable to 
that category of real estate;
    (11) The regulated institution is acting in a fiduciary capacity and 
is not required to obtain an appraisal under other law; or
    (12) The FDIC determines that the services of an appraiser are not 
necessary in order to protect Federal financial and public policy 
interests in real estate-related financial transactions or to protect 
the safety and soundness of the institution.
    (b) Evaluations required. For a transaction that does not require 
the services of a State certified or licensed appraiser under paragraph 
(a)(1), (a)(5) or (a)(7) of this section, the institution shall obtain 
an appropriate evaluation of real property collateral that is consistent 
with safe and sound banking practices.
    (c) Appraisals to address safety and soundness concerns. The FDIC 
reserves the right to require an appraisal under this part whenever the 
agency believes it is necessary to address safety and soundness 
concerns.
    (d) Transactions requiring a State certified appraiser--(1) All 
transactions of $1,000,000 or more. All federally related transactions 
having a transaction value of $1,000,000 or more shall require an 
appraisal prepared by a State certified appraiser.
    (2) Nonresidential transactions of $250,000 or more. All federally 
related transactions having a transaction value of $250,000 or more, 
other than those involving appraisals of 1-to-4 family residential 
properties, shall require an appraisal prepared by a State certified 
appraiser.
    (3) Complex residential transactions of $250,000 or more. All 
complex 1-to-4 family residential property appraisals rendered in 
connection with federally related transactions shall require a State 
certified appraiser if the transaction value is $250,000 or more. A 
regulated institution may presume that appraisals of 1-to-4 family 
residential properties are not complex, unless the institution has 
readily available information that a given appraisal will be complex. 
The regulated institution shall be responsible for making the final 
determination of whether the appraisal is complex. If during the course 
of the appraisal a licensed appraiser identifies factors that would 
result in the property, form of ownership, or market conditions being 
considered atypical, then either:

[[Page 180]]

    (i) The regulated institution may ask the licensed appraiser to 
complete the appraisal and have a certified appraiser approve and co-
sign the appraisal; or
    (ii) The institution may engage a certified appraiser to complete 
the appraisal.
    (e) Transactions requiring either a State certified or licensed 
appraiser. All appraisals for federally related transactions not 
requiring the services of a State certified appraiser shall be prepared 
by either a State certified appraiser or a State licensed appraiser.
    (f) Effective date. Regulated institutions are required to use state 
certified or licensed appraisers as set forth in this section no later 
than December 31, 1992, unless otherwise required by law.

[55 FR 33888, Aug. 20, 1990, as amended at 57 FR 9050, Mar. 16, 1992; 59 
FR 29501, June 7, 1994]



Sec. 323.4  Minimum appraisal standards.

    For federally related transactions, all appraisals shall, at a 
minimum:
    (a) Conform to generally accepted appraisal standards as evidenced 
by the Uniform Standards of Professional Appraisal Practice (USPAP) 
promulgated by the Appraisal Standards Board of the Appraisal 
Foundation, 1029 Vermont Ave., NW., Washington, DC 20005, unless 
principles of safe and sound banking require compliance with stricter 
standards;
    (b) Be written and contain sufficient information and analysis to 
support the institution's decision to engage in the transaction;
    (c) Analyze and report appropriate deductions and discounts for 
proposed construction or renovation, partially leased buildings, non-
market lease terms, and tract developments with unsold units;
    (d) Be based upon the definition of market value as set forth in 
this part; and
    (e) Be performed by State licensed or certified appraisers in 
accordance with requirements set forth in this part.

[59 FR 29502, June 7, 1994]



Sec. 323.5  Appraiser independence.

    (a) Staff appraisers. If an appraisal is prepared by a staff 
appraiser, that appraiser must be independent of the lending, 
investment, and collection functions and not involved, except as an 
appraiser, in the federally related transaction, and have no direct or 
indirect interest, financial or otherwise, in the property. If the only 
qualified persons available to perform an appraisal are involved in the 
lending, investment, or collection functions of the regulated 
institution, the regulated institution shall take appropriate steps to 
ensure that the appraisers exercise independent judgment and that the 
appraisal is adequate. Such steps include, but are not limited to, 
prohibiting an individual from performing appraisals in connection with 
federally related transactions in which the appraiser is otherwise 
involved and prohibiting directors and officers from participating in 
any vote or approval involving assets on which they performed an 
appraisal.
    (b) Fee appraisers. (1) If an appraisal is prepared by a fee 
appraiser, the appraiser shall be engaged directly by the regulated 
institution or its agent, and have no direct or indirect interest, 
financial or otherwise, in the property or the transaction.
    (2) A regulated institution also may accept an appraisal that was 
prepared by an appraiser engaged directly by another financial services 
institution, if:
    (i) The appraiser has no direct or indirect interest, financial or 
otherwise, in the property or the transaction; and
    (ii) The regulated institution determines that the appraisal 
conforms to the requirements of this part and is otherwise acceptable.

[55 FR 33888, Aug. 20, 1990, as amended by 59 FR 29502, June 7, 1994]



Sec. 323.6  Professional association membership; competency.

    (a) Membership in appraisal organizations. A State certified 
appraiser or a State licensed appraiser may not be excluded from 
consideration for an assignment for a federally related transaction 
solely by virtue of membership or lack of membership in any particular 
appraisal organization.
    (b) Competency. All staff and fee appraisers performing appraisals 
in connection with federally related transactions must be State 
certified or licensed, as appropriate. However, a

[[Page 181]]

State certified or licensed appraiser may not be considered competent 
solely by virtue of being certified or licensed. Any determination of 
competency shall be based upon the individual's experience and 
educational background as they relate to the particular appraisal 
assignment for which he or she is being considered.



Sec. 323.7  Enforcement.

    Institutions and institution-affiliated parties, including staff 
appraisers and fee appraisers, may be subject to removal and/or 
prohibition orders, cease and desist orders, and the imposition of civil 
money penalties pursuant to the Federal Deposit Insurance Act, 12 U.S.C. 
1811 et seq., as amended, or other applicable law.

                           PART 324 [RESERVED]



PART 325_CAPITAL MAINTENANCE--Table of Contents




                 Subpart A_Minimum Capital Requirements

Sec.
325.1 Scope.
325.2 Definitions.
325.3 Minimum leverage capital requirement.
325.4 Inadequate capital as an unsafe or unsound practice or condition.
325.5 Miscellaneous.
325.6 Issuance of directives.

                   Subpart B_Prompt Corrective Action

325.101 Authority, purpose, scope, other supervisory authority, and 
          disclosure of capital categories.
325.102 Notice of capital category.
325.103 Capital measures and capital category definitions.
325.104 Capital restoration plans.
325.105 Mandatory and discretionary supervisory actions under section 
          38.

Appendix A to Part 325--Statement of Policy on Risk-Based Capital
Appendix B to Part 325--Statement of Policy on Capital Adequacy
Appendix C to Part 325--Risk-Based Capital for State Non-Member Banks: 
          Market Risk
Appendix D to Part 325--Capital Adequacy Guidelines for Banks: Internal-
          Ratings-Based and Advanced Measurement Approaches

    Authority: 12 U.S.C. 1815(a), 1815(b), 1816, 1818(a), 1818(b), 
1818(c), 1818(t), 1819(Tenth), 1828(c), 1828(d), 1828(i), 1828(n), 
1828(o), 1831o, 1835, 3907, 3909, 4808; Pub. L. 102-233, 105 Stat. 1761, 
1789, 1790 (12 U.S.C. 1831n note); Pub. L. 102-242, 105 Stat. 2236, 
2355, as amended by Pub. L. 103-325, 108 Stat. 2160, 2233 (12 U.S.C. 
1828 note); Pub. L. 102-242, 105 Stat. 2236, 2386, as amended by Pub. L. 
102-550, 106 Stat. 3672, 4089 (12 U.S.C. 1828 note).



                 Subpart A_Minimum Capital Requirements



Sec. 325.1  Scope.

    The provisions of this subpart A apply to those circumstances for 
which the Federal Deposit Insurance Act or this chapter requires an 
evaluation of the adequacy of an insured depository institution's 
capital structure. The FDIC is required to evaluate capital before 
approving various applications by insured depository institutions. The 
FDIC also must evaluate capital, as an essential component, in 
determining the safety and soundness of state nonmember banks it insures 
and supervises and in determining whether depository institutions are in 
an unsafe or unsound condition. This subpart A establishes the criteria 
and standards the FDIC will use in calculating the minimum leverage 
capital requirement and in determining capital adequacy. In addition, 
appendix A to this subpart sets forth the FDIC's risk-based capital 
policy statement and appendix B to this subpart includes a statement of 
policy on capital adequacy that provides interpretational guidance as to 
how this subpart will be administered and enforced. In accordance with 
subpart B of part 325, the FDIC also must evaluate an institution's 
capital for purposes of determining whether the institution is subject 
to the prompt corrective action provisions set forth in section 38 of 
the Federal Deposit Insurance Act (12 U.S.C. 1831o).

[58 FR 8219, Feb. 12, 1993]



Sec. 325.2  Definitions.

    (a) Allowance for loan and lease losses means those general 
valuation allowances that have been established through charges against 
earnings to absorb losses on loans and lease financing receivables. 
Allowances for loan and lease losses exclude allocated

[[Page 182]]

transfer risk reserves established pursuant to 12 U.S.C. 3904 and 
specific reserves created against identified losses.
    (b) Assets classified loss means:
    (1) When measured as of the date of examination of an insured 
depository institution, those assets that have been determined by an 
evaluation made by a state or federal examiner as of that date to be a 
loss; and
    (2) When measured as of any other date, those assets:
    (i) That have been determined--
    (A) By an evaluation made by a state or federal examiner at the most 
recent examination of an insured depository institution to be a loss; or
    (B) By evaluations made by the insured depository institution since 
its most recent examination to be a loss; and
    (ii) That have not been charged off from the insured depository 
institution's books or collected.
    (c) Bank means an FDIC-insured, state-chartered commercial or 
savings bank that is not a member of the Federal Reserve System and for 
which the FDIC is the appropriate federal banking agency pursuant to 
section 3(q) of the FDI Act (12 U.S.C. 1813(q)).
    (d) Common stockholders' equity means the sum of common stock and 
related surplus, undivided profits, disclosed capital reserves that 
represent a segregation of undivided profits, and foreign currency 
translation adjustments, less net unrealized holding losses on 
available-for-sale equity securities with readily determinable fair 
values.
    (e)(1) Control has the same meaning assigned to it in section 2 of 
the Bank Holding Company Act (12 U.S.C. 1841), and the term controlled 
shall be construed consistently with the term control.
    (2) Exclusion for fiduciary ownership. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares in a 
fiduciary capacity. Shares shall not be deemed to have been acquired in 
a fiduciary capacity if the acquiring insured depository institution or 
company has sole discretionary authority to exercise voting rights with 
respect thereto.
    (3) Exclusion for debts previously contracted. No insured depository 
institution or company controls another insured depository institution 
or company by virtue of its ownership or control of shares acquired in 
securing or collecting a debt previously contracted in good faith, until 
two years after the date of acquisition. The two-year period may be 
extended at the discretion of the appropriate federal banking agency for 
up to three one-year periods.
    (f) Controlling person means any person having control of an insured 
depository institution and any company controlled by that person.
    (g)(1) Credit-enhancing interest-only strip means an on-balance 
sheet asset that, in form or in substance:
    (i) Represents the contractual right to receive some or all of the 
interest due on transferred assets; and
    (ii) Exposes the bank to credit risk directly or indirectly 
associated with the transferred assets that exceeds a pro rata share of 
the bank's claim on the assets, whether through subordination provisions 
or other credit enhancement techniques.
    (2) Reservation of authority. In determining whether a particular 
interest cash flow functions, directly or indirectly, as a credit-
enhancing interest-only strip, the FDIC will consider the economic 
substance of the transaction. The FDIC, through the Director of 
Supervision, or other designated FDIC official reserves the right to 
identify other interest cash flows or related assets as credit-enhancing 
interest-only strips.
    (h) Face amount means the notional principal, or face value, amount 
of an off-balance sheet item; the amortized cost of an asset not held 
for trading purposes; and the fair value of a trading asset.
    (i)(1) Highly leveraged transaction means an extension of credit to 
or investment in a business by an insured depository institution where 
the financing transaction involves a buyout, acquisition, or 
recapitalization of an existing business and one of the following 
criteria is met:
    (i) The transaction results in a liabilities-to-assets leverage 
ratio higher than 75 percent; or

[[Page 183]]

    (ii) The transaction at least doubles the subject company's 
liabilities and results in a liabilities-to-assets leverage ratio higher 
than 50 percent; or
    (iii) The transaction is designated an HLT by a syndication agent or 
a federal bank regulator.
    (2) Notwithstanding paragraph (g)(1) of this section, loans and 
exposures to any obligor in which the total financing package, including 
all obligations held by all participants is $20 million or more, or such 
lower level as the FDIC may establish by order on a case-by-case basis, 
will be excluded from this definition.
    (j) Identified losses means:
    (1) When measured as of the date of examination of an insured 
depository institution, those items that have been determined by an 
evaluation made by a state or federal examiner as of that date to be 
chargeable against income, capital and/or general valuation allowances 
such as the allowance for loan and lease losses (examples of identified 
losses would be assets classified loss, off-balance sheet items 
classified loss, any provision expenses that are necessary for the 
institution to record in order to replenish its general valuation 
allowances to an adequate level, liabilities not shown on the 
institution's books, estimated losses in contingent liabilities, and 
differences in accounts which represent shortages); and
    (2) When measured as of any other date, those items:
    (i) That have been determined--
    (A) By an evaluation made by a state or federal examiner at the most 
recent examination of an insured depository institution to be chargeable 
against income, capital and/or general valuation allowances; or
    (B) By evaluations made by the insured depository institution since 
its most recent examination to be chargeable against income, capital 
and/or general valuation allowances; and
    (ii) For which the appropriate accounting entries to recognize the 
loss have not yet been made on the insured depository institution's 
books nor has the item been collected or otherwise settled.
    (k) Insured depository institution means any depository institution 
(except for a foreign bank having an insured branch) the deposits of 
which are insured in accordance with the provisions of the Federal 
Deposit Insurance Act (12 U.S.C. 1811 et seq.)
    (l) Intangible assets means those assets that are required to be 
reported as intangible assets in a banking institution's ``Reports of 
Condition and Income'' (Call Report) or in a savings association's 
``Thrift Financial Report.''
    (m) Leverage ratio means the ratio of Tier 1 capital to total 
assets, as calculated under this part.
    (n) Management fee means any payment of money or provision of any 
other thing of value to a company or individual for the provision of 
management services or advice to the bank or related overhead expenses, 
including payments related to supervisory, executive, managerial, or 
policymaking functions, other than compensation to an individual in the 
individual's capacity as an officer or employee of the bank.
    (o) Minority interests in consolidated subsidiaries means minority 
interests in equity capital accounts of those subsidiaries that have 
been consolidated for the purpose of computing regulatory capital under 
this part, except that minority interests which fail to provide 
meaningful capital support are excluded from this definition.
    (p) Mortgage servicing assets means those assets (net of any related 
valuation allowances) that result from contracts to service loans 
secured by real estate (that have been securitized or are owned by 
others) for which the benefits of servicing are expected to more than 
adequately compensate the servicer for performing the servicing. For 
purposes of determining regulatory capital under this part, mortgage 
servicing assets will be recognized only to the extent that the assets 
meet the conditions, limitations, and restrictions described in Sec. 
325.5 (f).
    (q) Noncumulative perpetual preferred stock means perpetual 
preferred stock (and related surplus) where the issuer has the option to 
waive payment of dividends and where the dividends so waived do not 
accumulate to future periods nor do they represent a contingent claim on 
the issuer. Preferred stock issues where the dividend is reset 
periodically based, in whole or in part,

[[Page 184]]

upon the bank's current credit standing, including but not limited to, 
auction rate, money market and remarketable preferred stock, are 
excluded from this definition of noncumulative perpetual preferred 
stock, regardless of whether the dividends are cumulative or 
noncumulative.
    (r) Perpetual preferred stock means a preferred stock that does not 
have a maturity date, that cannot be redeemed at the option of the 
holder, and that has no other provisions that will require future 
redemption of the issue. It includes those issues of preferred stock 
that automatically convert into common stock at a stated date. It 
excludes those issues, the rate on which increases, or can increase, in 
such a manner that would effectively require the issuer to redeem the 
issue.
    (s) Risk-weighted assets means total risk-weighted assets, as 
calculated in accordance with the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to part 325).
    (t) Savings association means any federally-chartered savings 
association, any state-chartered savings association, and any 
corporation (other than a bank) that the Board of Directors of the FDIC 
and the Director of the Office of Thrift Supervision jointly determine 
to be operating in substantially the same manner as a savings 
association.
    (u) Tangible equity means the amount of core capital elements as 
defined in Section I.A.1. of the FDIC's Statement of Policy on Risk-
Based Capital (appendix A to this Part 325), plus the amount of 
outstanding cumulative perpetual preferred stock (including related 
surplus), minus all intangible assets except mortgage servicing assets 
to the extent that the FDIC determines pursuant to Sec. 325.5(f) of 
this part that mortgage servicing assets may be included in calculating 
the bank's Tier 1 capital.
    (v) Tier 1 capital or core capital means the sum of common 
stockholders' equity, noncumulative perpetual preferred stock (including 
any related surplus), and minority interests in consolidated 
subsidiaries, minus all intangible assets (other than mortgage servicing 
assets, nonmortgage servicing assets, and purchased credit card 
relationships eligible for inclusion in core capital pursuant to Sec. 
325.5(f)), minus credit-enhancing interest-only strips that are not 
eligible for inclusion in core capital pursuant to Sec. 325.5(f), minus 
deferred tax assets in excess of the limit set forth in Sec. 325.5(g), 
minus identified losses (to the extent that Tier 1 capital would have 
been reduced if the appropriate accounting entries to reflect the 
identified losses had been recorded on the insured depository 
institution's books), minus investments in financial subsidiaries 
subject to 12 CFR part 362, subpart E, and minus the amount of the total 
adjusted carrying value of nonfinancial equity investments that is 
subject to a deduction from Tier 1 capital as set forth in section 
II.B.(6) of appendix A to this part.
    (w) Tier 1 risk-based capital ratio means the ratio of Tier 1 
capital to risk-weighted assets, as calculated in accordance with the 
FDIC's Statement of Policy on Risk-Based Capital (appendix A to part 
325).
    (x) Total assets means the average of total assets required to be 
included in a banking institution's ``Reports of Condition and Income'' 
(Call Report) or, for savings associations, the consolidated total 
assets required to be included in the ``Thrift Financial Report,'' as 
these reports may from time to time be revised, as of the most recent 
report date (and after making any necessary subsidiary adjustments for 
state nonmember banks as described in Sec. Sec. 325.5(c) and 325.5(d) 
of this part), minus intangible assets (other than mortgage servicing 
assets, nonmortgage servicing assets, and purchased credit card 
relationships eligible for inclusion in core capital pursuant to Sec. 
325.5(f)), minus credit-enhancing interest-only strips that are not 
eligible for inclusion in core capital pursuant to Sec. 325.5(f), minus 
deferred tax assets in excess of the limit set forth in Sec. 325.5(g), 
minus assets classified loss and any other assets that are deducted in 
determining Tier 1 capital, and minus the amount of the total adjusted 
carrying value of nonfinancial equity investments that is subject to a 
deduction from Tier 1 capital as set forth in section II.B.(6) of 
appendix A to this part. For banking institutions, the average of total 
assets is found in the

[[Page 185]]

Call Report schedule of quarterly averages. For savings associations, 
the consolidated total assets figure is found in Schedule CSC of the 
Thrift Financial Report.
    (y) Total risk-based capital ratio means the ratio of qualifying 
total capital to risk-weighted assets, as calculated in accordance with 
the FDIC's Statement of Policy on Risk-Based Capital (appendix A to part 
325).
    (z) Written agreement means an agreement in writing executed by 
authorized representatives entered into with the FDIC by an insured 
depository institution which is enforceable by an action under section 
8(a) and/or section 8(b) of the Federal Deposit Insurance Act (12 U.S.C. 
1818 (a), (b)).

[56 FR 10160, Mar. 11, 1991, as amended at 57 FR 44899, Sept. 29, 1992; 
58 FR 6368, 6369, Jan. 28, 1993; 58 FR 8219, Feb. 12, 1993; 58 FR 60103, 
Nov. 15, 1993; 59 FR 66666, Dec. 28, 1994; 60 FR 8187, Feb. 13, 1995; 60 
FR 39232, Aug. 1, 1995; 63 FR 42677, Aug. 10, 1998; 66 FR 59652; Nov. 
29, 2001; 67 FR 3804, Jan. 25, 2002]



Sec. 325.3  Minimum leverage capital requirement.

    (a) General. Banks must maintain at least the minimum leverage 
capital requirement set forth in this section. The capital standards in 
this part are the minimum acceptable for banks whose overall financial 
condition is fundamentally sound, which are well-managed and which have 
no material or significant financial weaknesses. Thus, the FDIC is not 
precluded from requiring an institution to maintain a higher capital 
level based on the institution's particular risk profile. Where the FDIC 
determines that the financial history or condition, managerial resources 
and/or the future earnings prospects of a bank are not adequate, or 
where a bank has sizable off-balance sheet or funding risks, significant 
risks from concentrations of credit or nontraditional activities, 
excessive interest rate risk exposure, or a significant volume of assets 
classified substandard, doubtful or loss or otherwise criticized, the 
FDIC will take these other factors into account in analyzing the bank's 
capital adequacy and may determine that the minimum amount of capital 
for that bank is greater than the minimum standards stated in this 
section. These same criteria will apply to any insured depository 
institution making an application to the FDIC that requires the FDIC to 
consider the adequacy of the institution's capital structure.
    (b) Minimum leverage capital requirement. (1) The minimum leverage 
capital requirement for a bank (or an insured depository institution 
making application to the FDIC) shall consist of a ratio of Tier 1 
capital to total assets of not less than 3 percent if the FDIC 
determines that the institution is not anticipating or experiencing 
significant growth and has well-diversified risk, including no undue 
interest rate risk exposure, excellent asset quality, high liquidity, 
good earnings and in general is considered a strong banking 
organization, rated composite 1 under the Uniform Financial Institutions 
Rating System (the CAMELS rating system) established by the Federal 
Financial Institutions Examination Council.
    (2) For all but the most highly-rated institutions meeting the 
conditions set forth in paragraph (b)(1) of this section, the minimum 
leverage capital requirement for a bank (or for an insured depository 
institution making an application to the FDIC) shall consist of a ratio 
of Tier 1 capital to total assets of not less than 4 percent.
    (c) Insured depository institutions with less than the minimum 
leverage capital requirement. (1) A bank (or an insured depository 
institution making an application to the FDIC) operating with less than 
the minimum leverage capital requirement does not have adequate capital 
and therefore has inadequate financial resources.
    (2) Any insured depository institution operating with an inadequate 
capital structure, and therefore inadequate financial resources, will 
not receive approval for an application requiring the FDIC to consider 
the adequacy of its capital structure or its financial resources.
    (3) As required under Sec. 325.104(a)(1) of this part, a bank must 
file a written capital restoration plan with the appropriate FDIC 
regional director within 45 days of the date that the bank receives 
notice or is deemed to have notice that the bank is undercapitalized, 
significantly undercapitalized or critically undercapitalized, unless 
the FDIC

[[Page 186]]

notifies the bank in writing that the plan is to be filed within a 
different period.
    (4) In any merger, acquisition or other type of business combination 
where the FDIC must give its approval, where it is required to consider 
the adequacy of the financial resources of the existing and proposed 
institutions, and where the resulting entity is either insured by the 
FDIC or not otherwise federally insured, approval will not be granted 
when the resulting entity does not meet the minimum leverage capital 
requirement.
    (d) Exceptions. Notwithstanding the provisions of paragraphs (a), 
(b) and (c) of this section:
    (1) The FDIC, in its discretion, may approve an application pursuant 
to the Federal Deposit Insurance Act where it is required to consider 
the adequacy of capital if it finds that such approval must be taken to 
prevent the closing of a depository institution or to facilitate the 
acquisition of a closed depository institution, or, when severe 
financial conditions exist which threaten the stability of an insured 
depository institution or of a significant number of depository 
institutions insured by the FDIC or of insured depository institutions 
possessing significant financial resources, such action is taken to 
lessen the risk to the FDIC posed by an insured depository institution 
under such threat of instability.
    (2) The FDIC, in its discretion, may approve an application pursuant 
to the Federal Deposit Insurance Act where it is required to consider 
the adequacy of capital or the financial resources of the insured 
depository institution where it finds that the applicant has committed 
to and is in compliance with a reasonable plan to meet its minimum 
leverage capital requirements within a reasonable period of time.

(Approved by the Office of Management and Budget under control number 
3064-0075 for use through December 31, 1993)

[56 FR 10162, Mar. 11, 1991, as amended at 58 FR 8219, Feb. 12, 1993; 59 
FR 64564, Dec. 15, 1994; 60 FR 45609, Aug. 31, 1995; 62 FR 55493, Oct. 
24, 1997; 64 FR 10200, Mar. 2, 1999; 66 FR 59652, Nov. 29, 2001]



Sec. 325.4  Inadequate capital as an unsafe or unsound practice or condition.

    (a) General. As a condition of federal deposit insurance, all 
insured depository institutions must remain in a safe and sound 
condition.
    (b) Unsafe or unsound practice. Any bank which has less than its 
minimum leverage capital requirement is deemed to be engaged in an 
unsafe or unsound practice pursuant to section 8(b)(1) and/or 8(c) of 
the Federal Deposit Insurance Act (12 U.S.C. 1818(b)(1) and/or 1818(c)). 
Except that such a bank which has entered into and is in compliance with 
a written agreement with the FDIC or has submitted to the FDIC and is in 
compliance with a plan approved by the FDIC to increase its Tier 1 
leverage capital ratio to such level as the FDIC deems appropriate and 
to take such other action as may be necessary for the bank to be 
operated so as not to be engaged in such an unsafe or unsound practice 
will not be deemed to be engaged in an unsafe or unsound practice 
pursuant to section 8(b)(1) and/or 8(c) of the Federal Deposit Insurance 
Act (12 U.S.C. 1818(b)(1) and/or 1818(c)) on account of its capital 
ratios. The FDIC is not precluded from taking section 8(b)(1), section 
8(c) or any other enforcement action against a bank with capital above 
the minimum requirement if the specific circumstances deem such action 
to be appropriate. Under the conditions set forth in section 8(t) of the 
Federal Deposit Insurance Act (12 U.S.C. 1818(t)), the FDIC also may 
take section 8(b)(1) and/or 8(c) enforcement action against any savings 
association that is deemed to be engaged in an unsafe or unsound 
practice on account of its inadequate capital structure.
    (c) Unsafe or unsound condition. Any insured depository institution 
with a ratio of Tier 1 capital to total assets that is less than two 
percent is deemed to be operating in an unsafe or unsound condition 
pursuant to section 8(a) of the Federal Deposit Insurance Act (12 U.S.C. 
1818(a)).
    (1) A bank with a ratio of Tier 1 capital to total assets of less 
than two percent which has entered into and is in compliance with a 
written agreement with the FDIC (or any other insured depository 
institution with a ratio of

[[Page 187]]

Tier 1 capital to total assets of less than two percent which has 
entered into and is in compliance with a written agreement with its 
primary federal regulator and to which agreement the FDIC is a party) to 
increase its Tier 1 leverage capital ratio to such level as the FDIC 
deems appropriate and to take such other action as may be necessary for 
the insured depository institution to be operated in a safe and sound 
manner, will not be subject to a proceeding by the FDIC pursuant to 12 
U.S.C. 1818(a) on account of its capital ratios.
    (2) An insured depository institution with a ratio of Tier 1 capital 
to total assets that is equal to or greater than two percent may be 
operating in an unsafe or unsound condition. The FDIC is not precluded 
from bringing an action pursuant to 12 U.S.C. 1818(a) where an insured 
depository institution has a ratio of Tier 1 capital to total assets 
that is equal to or greater than two percent.

[56 FR 10162, Mar. 11, 1991]



Sec. 325.5  Miscellaneous.

    (a) Intangible assets. Any intangible assets that were explicitly 
approved by the FDIC as part of the bank's regulatory capital on a 
specific case basis will be included in capital under the terms and 
conditions that were approved by the FDIC, provided that the intangible 
asset is being amortized over a period not to exceed 15 years or its 
estimated useful life, whichever is shorter. However, pursuant to 
section 18(n) of the Federal Deposit Insurance Act (12 U.S.C. 1828(n)), 
an unidentifiable intangible asset such as goodwill, if acquired after 
April 12, 1989, cannot be included in calculating regulatory capital 
under this part.
    (b) Reservation of authority. Notwithstanding the definition of Tier 
1 capital in Sec. 325.2(t) of this subpart and the risk-based capital 
definitions of Tier 1 and Tier 2 capital in appendix A to this subpart, 
the Director of the Division of Supervision and Consumer Protection 
(DSC) may, if the Director finds a newly developed or modified capital 
instrument or a particular balance sheet entry or account to be the 
functional equivalent of a component of Tier 1 or Tier 2 capital, permit 
one or more insured depository institutions to include all or a portion 
of such instrument, entry, or account as Tier 1 or Tier 2 capital, 
permanently, or on a temporary basis, for purposes of this part. 
Similarly, the Director of the Division of Supervision and Consumer 
Protection (DSC) may, if the Director finds that a particular Tier 1 or 
Tier 2 capital component or balance sheet entry or account has 
characteristics or terms that diminish its contribution to an insured 
depository institution's ability to absorb losses, require the deduction 
of all or a portion of such component, entry, or account from Tier 1 or 
Tier 2 capital.
    (c) Securities subsidiary. For purposes of this part, any securities 
subsidiary subject to 12 CFR 337.4 shall not be consolidated with its 
bank parent and any investment therein shall be deducted from the bank 
parent's Tier 1 capital and total assets.
    (d) Depository institution subsidiary. Any domestic depository 
institution subsidiary that is not consolidated in the ``Reports of 
Condition and Income'' (Call Report) of its insured parent bank shall be 
consolidated with the insured parent bank for purposes of this part. The 
financial statements of the subsidiary that are to be used for this 
consolidation must be prepared in the same manner as the ``Reports of 
Condition and Income'' (Call Report). A domestic depository institution 
subsidiary of a savings association shall be consolidated for purposes 
of this part if such consolidation also is required pursuant to the 
capital requirements of the association's primary federal regulator.
    (e) Restrictions relating to capital components. To qualify as Tier 
1 capital under this part or Tier 1 or Tier 2 capital under appendix A 
to this part, a capital instrument must not contain or be subject to any 
conditions, covenants, terms, restrictions, or provisions that are 
inconsistent with safe and sound banking practices. A condition, 
covenant, term, restriction, or provision is inconsistent with safe and 
sound banking practices if it:
    (1) Unduly interferes with the ability of the issuer to conduct 
normal banking operations;

[[Page 188]]

    (2) Results in significantly higher dividends or interest payments 
in the event of deterioration in the financial condition of the issuer;
    (3) Impairs the ability of the issuer to comply with statutory or 
regulatory requirements regarding the disposition of assets or 
incurrence of additional debt; or
    (4) Limits the ability of the FDIC or a similar regulatory authority 
to take any necessary action to resolve a problem bank or failing bank 
situation.

Other conditions and covenants that are not expressly listed in 
paragraphs (e)(1) through (e)(4) of this section also may be 
inconsistent with safe and sound banking practices.
    (f) Treatment of mortgage servicing assets, purchased credit card 
relationships, nonmortgage servicing assets, and credit-enhancing 
interest-only strips. For purposes of determining Tier 1 capital under 
this part, mortgage servicing assets, purchased credit card 
relationships, nonmortgage servicing assets, and credit-enhancing 
interest-only strips will be deducted from assets and from common 
stockholders' equity to the extent that these items do not meet the 
conditions, limitations, and restrictions described in this section. 
Banks may elect to deduct disallowed servicing assets and disallowed 
credit-enhancing interest-only strips on a basis that is net of a 
proportional amount of any associated deferred tax liability recorded on 
the balance sheet. Any deferred tax liability netted in this manner 
cannot also be netted against deferred tax assets when determining the 
amount of deferred tax assets that are dependent upon future taxable 
income and calculating the maximum allowable amount of these assets 
under paragraph (g) of this section.
    (1) Valuation. The fair value of mortgage servicing assets, 
purchased credit card relationships, nonmortgage servicing assets, and 
credit-enhancing interest-only strips shall be estimated at least 
quarterly. The quarterly fair value estimate shall include adjustments 
for any significant changes in the original valuation assumptions, 
including changes in prepayment estimates or attrition rates. The FDIC 
in its discretion may require independent fair value estimates on a 
case-by-case basis where it is deemed appropriate for safety and 
soundness purposes.
    (2) Fair value limitation. For purposes of calculating Tier 1 
capital under this part (but not for financial statement purposes), the 
balance sheet assets for mortgage servicing assets, purchased credit 
card relationships, and nonmortgage servicing assets will each be 
reduced to an amount equal to the lesser of:
    (i) 90 percent of the fair value of these assets, determined in 
accordance with paragraph (f)(1) of this section; or
    (ii) 100 percent of the remaining unamortized book value of these 
assets (net of any related valuation allowances), determined in 
accordance with the instructions for the preparation of the ``Reports of 
Income and Condition'' (Call Reports).
    (3) Tier 1 capital limitations. (i) The maximum allowable amount of 
mortgage servicing assets, purchased credit card relationships, and 
nonmortgage servicing assets in the aggregate will be limited to the 
lesser of:
    (A) 100 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed purchased credit card relationships, any disallowed 
nonmortgage servicing assets, any disallowed credit-enhancing interest-
only strips, any disallowed deferred tax assets, and any nonfinancial 
equity investments; or
    (B) The sum of the amounts of mortgage servicing assets, purchased 
credit card relationships, and nonmortgage servicing assets, determined 
in accordance with paragraph (f)(2) of this section.
    (ii) The maximum allowable amount of credit-enhancing interest-only 
strips, whether purchased or retained, will be limited to the lesser of:
    (A) 25 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed purchased credit card relationships, any disallowed 
nonmortgage servicing assets, any disallowed credit-enhancing interest-
only strips, any disallowed deferred tax assets, and any nonfinancial 
equity investments; or

[[Page 189]]

    (B) The sum of the face amounts of all credit-enhancing interest-
only strips.
    (4) Tier 1 capital sublimit. In addition to the aggregate limitation 
on mortgage servicing assets, purchased credit card relationships, and 
nonmortgage servicing assets set forth in paragraph (f)(3) of this 
section, a sublimit will apply to purchased credit card relationships 
and nonmortgage servicing assets. The maximum allowable amount of the 
aggregate of purchased credit card relationships and nonmortgage 
servicing assets will be limited to the lesser of:
    (i) 25 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed purchased credit card relationships, any disallowed 
nonmortgage servicing assets, any disallowed credit-enhancing interest-
only strips, any disallowed deferred tax assets, and any nonfinancial 
equity investments; or
    (ii) The sum of the amounts of purchased credit card relationships 
and nonmortgage servicing assets determined in accordance with paragraph 
(f)(2) of this section.
    (g) Treatment of deferred tax assets. For purposes of calculating 
Tier 1 capital under this part (but not for financial statement 
purposes), deferred tax assets are subject to the conditions, 
limitations, and restrictions described in this section.
    (1) Deferred tax assets that are dependent upon future taxable 
income. These assets are:
    (i) Deferred tax assets arising from deductible temporary 
differences that exceed the amount of taxes previously paid that could 
be recovered through loss carrybacks if existing temporary differences 
(both deductible and taxable and regardless of where the related 
deferred tax effects are reported on the balance sheet) fully reverse at 
the calendar quarter-end date; and
    (ii) Deferred tax assets arising from operating loss and tax credit 
carryforwards.
    (2) Tier 1 capital limitations. (i) The maximum allowable amount of 
deferred tax assets that are dependent upon future taxable income, net 
of any valuation allowance for deferred tax assets, will be limited to 
the lesser of:
    (A) The amount of deferred tax assets that are dependent upon future 
taxable income that is expected to be realized within one year of the 
calendar quarter-end date, based on projected future taxable income for 
that year; or
    (B) 10 percent of the amount of Tier 1 capital that exists before 
the deduction of any disallowed mortgage servicing assets, any 
disallowed nonmortgage servicing assets, any disallowed purchased credit 
card relationships, any disallowed credit-enhancing interest-only 
strips, any disallowed deferred tax assets, and any nonfinancial equity 
investments.
    (ii) For purposes of this limitation, all existing temporary 
differences should be assumed to fully reverse at the calendar quarter-
end date. The recorded amount of deferred tax assets that are dependent 
upon future taxable income, net of any valuation allowance for deferred 
tax assets, in excess of this limitation will be deducted from assets 
and from equity capital for purposes of determining Tier 1 capital under 
this part. The amount of deferred tax assets that can be realized from 
taxes paid in prior carryback years and from the reversal of existing 
taxable temporary differences generally would not be deducted from 
assets and from equity capital. However, notwithstanding the first three 
sentences in this paragraph, the amount of carryback potential that may 
be considered in calculating the amount of deferred tax assets that a 
member of a consolidated group (for tax purposes) may include in Tier 1 
capital may not exceed the amount which the member could reasonably 
expect to have refunded by its parent.
    (3) Projected future taxable income. Projected future taxable income 
should not include net operating loss carryforwards to be used within 
one year of the most recent calendar quarter-end date or the amount of 
existing temporary differences expected to reverse within that year. 
Projected future taxable income should include the estimated effect of 
tax planning strategies that are expected to be implemented to realize 
tax carryforwards that will otherwise expire during that

[[Page 190]]

year. Future taxable income projections for the current fiscal year 
(adjusted for any significant changes that have occurred or are expected 
to occur) may be used when applying the capital limit at an interim 
calendar quarter-end date rather then preparing a new projection each 
quarter.
    (4) Unrealized holding gains and losses on available-for-sale debt 
securities. The deferred tax effects of any unrealized holding gains and 
losses on available-for-sale debt securities may be excluded from the 
determination of the amount of deferred tax assets that are dependent 
upon future taxable income and the calculation of the maximum allowable 
amount of such assets. If these deferred tax effects are excluded, this 
treatment must be followed consistently over time.
    (5) Intangible assets acquired in nontaxable purchase business 
combinations. A deferred tax liability that is specifically related to 
an intangible asset (other than mortgage servicing assets, nonmortgage 
servicing assets, and purchased credit card relationships) acquired in a 
nontaxable purchase business combination may be netted against this 
intangible asset. Only the net amount of the intangible asset must be 
deducted from Tier 1 capital. When a deferred tax liability is netted in 
this manner, the taxable temporary difference that gives rise to this 
deferred tax liability must be excluded from existing taxable temporary 
differences when determining the amount of deferred tax assets that are 
dependent upon future taxable income and calculating the maximum 
allowable amount of such assets.

[56 FR 10163, Mar. 11, 1991, as amended at 57 FR 7647, Mar. 4, 1992; 58 
FR 6369, Jan. 28, 1993; 58 FR 8219, Feb. 12, 1993; 60 FR 8187, Feb. 13, 
1995; 60 FR 39232, Aug. 1, 1995; 63 FR 42677, Aug. 10, 1998; 66 FR 
59652, Nov. 29, 2001; 65 FR 3804, Jan. 25, 2002]

    Effective Date Note: At 73 FR 79606, Dec. 30, 2008, Sec. 325.5 was 
amended by revising paragraph (g)(5), effective January 29, 2009. For 
the convenience of the user, the revised text is set forth as follows:



Sec. 325.5  Miscellaneous.

                                * * * * *

    (g) * * *
    (5) Goodwill and other intangible assets. This paragraph (g)(5) 
provides the capital treatment for intangible assets acquired in a 
nontaxable business combination, and goodwill acquired in a taxable 
business combination.
    (i) Intangible assets acquired in nontaxable purchase business 
combinations. A deferred tax liability that is specifically related to 
an intangible asset (other than mortgage servicing assets, nonmortgage 
servicing assets, and purchased credit card relationships) acquired in a 
nontaxable purchase business combination may be netted against this 
intangible asset. Only the net amount of this intangible asset must be 
deducted from Tier 1 capital.
    (ii) Goodwill acquired in a taxable purchase business combination. A 
deferred tax liability that is specifically related to goodwill acquired 
in a taxable purchase business combination may be netted against this 
goodwill. Only the net amount of this goodwill must be deducted from 
Tier 1 capital.
    (iii) Treatment of a netted deferred tax liability. When a deferred 
tax liability is netted in accordance with paragraph (g)(5)(i) or (ii) 
of this section, the taxable temporary difference that gives rise to 
this deferred tax liability must be excluded from existing taxable 
temporary differences when determining the amount of deferred tax assets 
that are dependent upon future taxable income and calculating the 
maximum allowable amount of such assets.
    (iv) Valuation. The FDIC in its discretion may require independent 
fair value estimates for goodwill and other intangible assets on a case-
by-case basis where it is deemed appropriate for safety and soundness 
purposes.



Sec. 325.6  Issuance of directives.

    (a) General. A directive is a final order issued to a bank that 
fails to maintain capital at or above the minimum leverage capital 
requirement as set forth in Sec. Sec. 325.3 and 325.4. A directive 
issued pursuant to this section, including a plan submitted under a 
directive, is enforceable in the same manner and to the same extent as a 
final cease-and-desist order issued under 12 U.S.C. 1818(b).
    (b) Issuance of directives. If a bank is operating with less than 
the minimum leverage capital requirement established by this regulation, 
the Board of Directors, or its designee(s), may issue and serve upon any 
insured state nonmember bank a directive requiring the bank to restore 
its capital to the minimum leverage capital requirement within a 
specified time period. The directive may require the bank to submit

[[Page 191]]

to the appropriate FDIC regional director, or other specified official, 
for review and approval, a plan describing the means and timing by which 
the bank shall achieve the minimum leverage capital requirement. After 
the FDIC has approved the plan, the bank may be required under the terms 
of the directive to adhere to and monitor compliance with the plan. The 
directive may be issued during the course of an examination of the bank, 
or at any other time that the FDIC deems appropriate, if the bank is 
found to be operating with less than the minimum leverage capital 
requirement.
    (c) Notice and opportunity to respond to issuance of a directive. 
(1) If the FDIC makes an initial determination that a directive should 
be issued to a bank pursuant to paragraph (b) of this section, the FDIC, 
through the appropriate designated official(s), shall serve written 
notification upon the bank of its intent to issue a directive. The 
notice shall include the current Tier 1 leverage capital ratio, the 
basis upon which said ratio was calculated, the proposed capital 
injection, the proposed date for achieving the minimum leverage capital 
requirement and any other relevant information concerning the decision 
to issue a directive. When deemed appropriate, specific requirements of 
a proposed plan for meeting the minimum leverage capital requirement may 
be included in the notice.
    (2) Within 14 days of receipt of notification, the bank may file 
with the appropriate designated FDIC official(s) a written response, 
explaining why the directive should not be issued, seeking modification 
of its terms, or other appropriate relief. The bank's response shall 
include any information, mitigating circumstances, documentation or 
other relevant evidence which supports its position, and may include a 
plan for attaining the minimum leverage capital requirement.
    (3) After considering the bank's response, the appropriate 
designated FDIC official(s) shall serve upon the bank a written 
determination addressing the bank's response and setting forth the 
FDIC's findings and conclusions in support of any decision to issue or 
not to issue a directive. The directive may be issued as originally 
proposed or in modified form. The directive may order the bank to:
    (i) Achieve the minimum leverage capital requirement established by 
this regulation by a certain date;
    (ii) Submit for approval and adhere to a plan for achieving the 
minimum leverage capital requirement;
    (iii) Take other action as is necessary to achieve the minimum 
leverage capital requirement; or
    (iv) A combination of the above actions.

If a directive is to be issued, it may be served upon the bank along 
with the final determination.
    (4) Any bank, upon a change in circumstances, may request the FDIC 
to reconsider the terms of a directive and may propose changes in the 
plan under which it is operating to meet the minimum leverage capital 
requirement. The directive and plan continue in effect while such 
request is pending before the FDIC.
    (5) All papers filed with the FDIC must be postmarked or received by 
the appropriate designated FDIC official(s) within the prescribed time 
limit for filing.
    (6) Failure by the bank to file a written response to notification 
of intent to issue a directive within the specified time period shall 
constitute consent to the issuance of such directive.
    (d) Enforcement of a directive. (1) Whenever a bank fails to follow 
the directive or to submit or adhere to its capital adequacy plan, the 
FDIC may seek enforcement of the directive in the appropriate United 
States district court, pursuant to 12 U.S.C. 3907(b)(2)(B)(ii), in the 
same manner and to the same extent as if the directive were a final 
cease-and-desist order. In addition to enforcement of the directive, the 
FDIC may seek assessment of civil money penalties for violation of the 
directive against any bank, any officer, director, employee, agent, or 
other person participating in the conduct of the affairs of the bank, 
pursuant to 12 U.S.C. 3909(d).
    (2) The directive may be issued separately, in conjunction with, or 
in addition to, any other enforcement mechanisms available to the FDIC, 
including

[[Page 192]]

cease-and-desist orders, orders of correction, the approval or denial of 
applications, or any other actions authorized by law. In addition to 
addressing a bank's minimum leverage capital requirement, the capital 
directive may also address minimum risk-based capital requirements that 
are to be maintained and calculated in accordance with appendix A to 
this part.

[56 FR 10164, Mar. 11, 1991]



                   Subpart B_Prompt Corrective Action

    Source: 57 FR 44900, Sept. 29, 1992, unless otherwise noted.



Sec. 325.101  Authority, purpose, scope, other supervisory authority, and 

disclosure of capital categories.

    (a) Authority. This subpart is issued by the FDIC pursuant to 
section 38 (section 38) of the Federal Deposit Insurance Act (FDI Act), 
as added by section 131 of the Federal Deposit Insurance Corporation 
Improvement Act of 1991 (Pub. L. 102-242, 105 Stat. 2236 (1991)) (12 
U.S.C. 1831o).
    (b) Purpose. Section 38 of the FDI Act establishes a framework of 
supervisory actions for insured depository institutions that are not 
adequately capitalized. The principal purpose of this subpart is to 
define, for FDIC-insured state-chartered nonmember banks, the capital 
measures and capital levels, and for insured branches of foreign banks, 
comparable asset-based measures and levels, that are used for 
determining the supervisory actions authorized under section 38 of the 
FDI Act. This subpart also establishes procedures for submission and 
review of capital restoration plans and for issuance and review of 
directives and orders pursuant to section 38.
    (c) Scope. This subpart implements the provisions of section 38 of 
the FDI Act as they apply to FDIC-insured state-chartered nonmember 
banks and insured branches of foreign banks for which the FDIC is the 
appropriate Federal banking agency. Certain of these provisions also 
apply to officers, directors and employees of those insured 
institutions. In addition, certain provisions of this subpart apply to 
all insured depository institutions that are deemed critically 
undercapitalized.
    (d) Other supervisory authority. Neither section 38 nor this subpart 
in any way limits the authority of the FDIC under any other provision of 
law to take supervisory actions to address unsafe or unsound practices, 
deficient capital levels, violations of law, unsafe or unsound 
conditions, or other practices. Action under section 38 of the FDI Act 
and this subpart may be taken independently of, in conjunction with, or 
in addition to any other enforcement action available to the FDIC, 
including issuance of cease and desist orders, capital directives, 
approval or denial of applications or notices, assessment of civil money 
penalties, or any other actions authorized by law.
    (e) Disclosure of capital categories. The assignment of a bank or 
insured branch under this subpart within a particular capital category 
is for purposes of implementing and applying the provisions of section 
38. Unless permitted by the FDIC or otherwise required by law, no bank 
may state in any advertisement or promotional material its capital 
category under this subpart or that the FDIC or any other federal 
banking agency has assigned the bank to a particular capital category.



Sec. 325.102  Notice of capital category.

    (a) Effective date of determination of capital category. A bank 
shall be deemed to be within a given capital category for purposes of 
section 38 of the FDI Act and this subpart as of the date the bank is 
notified of, or is deemed to have notice of, its capital category, 
pursuant to paragraph (b) of this section.
    (b) Notice of capital category. A bank shall be deemed to have been 
notified of its capital levels and its capital category as of the most 
recent date:
    (1) A Consolidated Report of Condition and Income (Call Report) is 
required to be filed with the FDIC;
    (2) A final report of examination is delivered to the bank; or
    (3) Written notice is provided by the FDIC to the bank of its 
capital category for purposes of section 38 of the FDI Act and this 
subpart or that the bank's capital category has changed as provided in 
Sec. 325.103(d).

[[Page 193]]

    (c) Adjustments to reported capital levels and capital category--(1) 
Notice of adjustment by bank. A bank shall provide the appropriate FDIC 
regional director with written notice that an adjustment to the bank's 
capital category may have occurred no later than 15 calendar days 
following the date that any material event has occurred that would cause 
the bank to be placed in a lower capital category from the category 
assigned to the bank for purposes of section 38 and this subpart on the 
basis of the bank's most recent Call Report or report of examination.
    (2) Determination by the FDIC to change capital category. After 
receiving notice pursuant to paragraph (c)(1) of this section, the FDIC 
shall determine whether to change the capital category of the bank and 
shall notify the bank of the FDIC's determination.



Sec. 325.103  Capital measures and capital category definitions.

    (a) Capital measures. For purposes of section 38 and this subpart, 
the relevant capital measures shall be:
    (1) The total risk-based capital ratio;
    (2) The Tier 1 risk-based capital ratio; and
    (3) The leverage ratio.
    (b) Capital categories. For purposes of section 38 and this subpart, 
a bank shall be deemed to be:
    (1) Well capitalized if the bank:
    (i) Has a total risk-based capital ratio of 10.0 percent or greater; 
and
    (ii) Has a Tier 1 risk-based capital ratio of 6.0 percent or 
greater; and
    (iii) Has a leverage ratio of 5.0 percent or greater; and
    (iv) Is not subject to any written agreement, order, capital 
directive, or prompt corrective action directive issued by the FDIC 
pursuant to section 8 of the FDI Act (12 U.S.C. 1818), the International 
Lending Supervision Act of 1983 (12 U.S.C. 3907), or section 38 of the 
FDI Act (12 U.S.C. 1831o), or any regulation thereunder, to meet and 
maintain a specific capital level for any capital measure.
    (2) Adequately capitalized if the bank:
    (i) Has a total risk-based capital ratio of 8.0 percent or greater; 
and
    (ii) Has a Tier 1 risk-based capital ratio of 4.0 percent or 
greater; and
    (iii) Has:
    (A) A leverage ratio of 4.0 percent or greater; or
    (B) A leverage ratio of 3.0 percent or greater if the bank is rated 
composite 1 under the CAMELS rating system in the most recent 
examination of the bank and is not experiencing or anticipating 
significant growth; and
    (iv) Does not meet the definition of a well capitalized bank.
    (3) Undercapitalized if the bank:
    (i) Has a total risk-based capital ratio that is less than 8.0 
percent; or
    (ii) Has a Tier 1 risk-based capital ratio that is less than 4.0 
percent; or
    (iii)(A) Except as provided in paragraph (b)(3)(iii)(B) of this 
section, has a leverage ratio that is less than 4.0 percent; or
    (B) Has a leverage ratio that is less than 3.0 percent if the bank 
is rated composite 1 under the CAMELS rating system in the most recent 
examination of the bank and is not experiencing or anticipating 
significant growth.
    (4) Significantly undercapitalized if the bank has:
    (i) A total risk-based capital ratio that is less than 6.0 percent; 
or
    (ii) A Tier 1 risk-based capital ratio that is less than 3.0 
percent; or
    (iii) A leverage ratio that is less than 3.0 percent.
    (5) Critically undercapitalized if the insured depository 
institution has a ratio of tangible equity to total assets that is equal 
to or less than 2.0 percent.
    (c) Capital categories for insured branches of foreign banks. For 
purposes of the provisions of section 38 and this subpart, an insured 
branch of a foreign bank shall be deemed to be:
    (1) Well capitalized if the insured branch:
    (i) Maintains the pledge of assets required under Sec. 347.209 of 
this chapter; and
    (ii) Maintains the eligible assets prescribed under Sec. 347.210 of 
this chapter at 108 percent or more of the preceding quarter's average 
book value of the insured branch's third-party liabilities; and
    (iii) Has not received written notification from:
    (A) The OCC to increase its capital equivalency deposit pursuant to 
12 CFR

[[Page 194]]

28.15(b), or to comply with asset maintenance requirements pursuant to 
12 CFR 28.20; or
    (B) The FDIC to pledge additional assets pursuant to Sec. 347.209 
of this chapter or to maintain a higher ratio of eligible assets 
pursuant to Sec. 347.210 of this chapter.
    (2) Adequately capitalized if the insured branch:
    (i) Maintains the pledge of assets required under Sec. 347.209 of 
this chapter; and
    (ii) Maintains the eligible assets prescribed under Sec. 347.210 of 
this chapter at 106 percent or more of the preceding quarter's average 
book value of the insured branch's third-party liabilities; and
    (iii) Does not meet the definition of a well capitalized insured 
branch.
    (3) Undercapitalized if the insured branch:
    (i) Fails to maintain the pledge of assets required under Sec. 
347.209 of this chapter; or
    (ii) Fails to maintain the eligible assets prescribed under Sec. 
347.210 of this chapter at 106 percent or more of the preceding 
quarter's average book value of the insured branch's third-party 
liabilities.
    (4) Significantly undercapitalized if it fails to maintain the 
eligible assets prescribed under Sec. 347.210 of this chapter at 104 
percent or more of the preceding quarter's average book value of the 
insured branch's third-party liabilities.
    (5) Critically undercapitalized if it fails to maintain the eligible 
assets prescribed under Sec. 347.210 of this chapter at 102 percent or 
more of the preceding quarter's average book value of the insured 
branch's third-party liabilities.
    (d) Reclassifications based on supervisory criteria other than 
capital. The FDIC may reclassify a well capitalized bank as adequately 
capitalized and may require an adequately capitalized bank or an 
undercapitalized bank to comply with certain mandatory or discretionary 
supervisory actions as if the bank were in the next lower capital 
category (except that the FDIC may not reclassify a significantly 
undercapitalized bank as critically undercapitalized) (each of these 
actions are hereinafter referred to generally as ``reclassifications'') 
in the following circumstances:
    (1) Unsafe or unsound condition. The FDIC has determined, after 
notice and opportunity for hearing pursuant to Sec. 308.202(a) of this 
chapter, that the bank is in unsafe or unsound condition; or
    (2) Unsafe or unsound practice. The FDIC has determined, after 
notice and opportunity for hearing pursuant to Sec. 308.202(a) of this 
chapter, that, in the most recent examination of the bank, the bank 
received and has not corrected a less-than-satisfactory rating for any 
of the categories of asset quality, management, earnings, or liquidity.

[57 FR 44900, Sept. 29, 1992, as amended at 63 FR 17074, Apr. 8, 1998; 
66 FR 59653, Nov. 29, 2001; 70 FR 17559, Apr. 6, 2005]



Sec. 325.104  Capital restoration plans.

    (a) Schedule for filing plan--(1) In general. A bank shall file a 
written capital restoration plan with the appropriate FDIC regional 
director within 45 days of the date that the bank receives notice or is 
deemed to have notice that the bank is undercapitalized, significantly 
undercapitalized, or critically undercapitalized, unless the FDIC 
notifies the bank in writing that the plan is to be filed within a 
different period. An adequately capitalized bank that has been required 
pursuant to Sec. 325.103(d) of this subpart to comply with supervisory 
actions as if the bank were undercapitalized is not required to submit a 
capital restoration plan solely by virtue of the reclassification.
    (2) Additional capital restoration plans. Notwithstanding paragraph 
(a)(1) of this section, a bank that has already submitted and is 
operating under a capital restoration plan approved under section 38 and 
this subpart is not required to submit an additional capital restoration 
plan based on a revised calculation of its capital measures or a 
reclassification of the institution under Sec. 325.103 unless the FDIC 
notifies the bank that it must submit a new or revised capital plan. A 
bank that is notified that it must submit a new or revised capital 
restoration plan shall file the plan in writing with the appropriate 
FDIC regional director within 45

[[Page 195]]

days of receiving such notice, unless the FDIC notifies the bank in 
writing that the plan must be filed within a different period.
    (b) Contents of plan. All financial data submitted in connection 
with a capital restoration plan shall be prepared in accordance with the 
instructions provided on the Call Report, unless the FDIC instructs 
otherwise. The capital restoration plan shall include all of the 
information required to be filed under section 38(e)(2) of the FDI Act. 
A bank that is required to submit a capital restoration plan as a result 
of a reclassification of the bank pursuant to Sec. 325.103(d) of this 
subpart shall include a description of the steps the bank will take to 
correct the unsafe or unsound condition or practice. No plan shall be 
accepted unless it includes any performance guarantee described in 
section 38(e)(2)(C) of the FDI Act by each company that controls the 
bank.
    (c) Review of capital restoration plans. Within 60 days after 
receiving a capital restoration plan under this subpart, the FDIC shall 
provide written notice to the bank of whether the plan has been 
approved. The FDIC may extend the time within which notice regarding 
approval of a plan shall be provided.
    (d) Disapproval of capital plan. If a capital restoration plan is 
not approved by the FDIC, the bank shall submit a revised capital 
restoration plan within the time specified by the FDIC. Upon receiving 
notice that its capital restoration plan has not been approved, any 
undercapitalized bank (as defined in Sec. 325.103(b) of this subpart) 
shall be subject to all of the provisions of section 38 and this subpart 
applicable to significantly undercapitalized institutions. These 
provisions shall be applicable until such time as a new or revised 
capital restoration plan submitted by the bank has been approved by the 
FDIC.
    (e) Failure to submit capital restoration plan. A bank that is 
undercapitalized (as defined in Sec. 325.103(b) of this subpart) and 
that fails to submit a written capital restoration plan within the 
period provided in this section shall, upon the expiration of that 
period, be subject to all of the provisions of section 38 and this 
subpart applicable to significantly undercapitalized institutions.
    (f) Failure to implement capital restoration plan. Any 
undercapitalized bank that fails in any material respect to implement a 
capital restoration plan shall be subject to all of the provisions of 
section 38 and this subpart applicable to significantly undercapitalized 
institutions.
    (g) Amendment of capital restoration plan. A bank that has filed an 
approved capital restoration plan may, after prior written notice to and 
approval by the FDIC, amend the plan to reflect a change in 
circumstance. Until such time as a proposed amendment has been approved, 
the bank shall implement the capital restoration plan as approved prior 
to the proposed amendment.
    (h) Performance guarantee by companies that control a bank--(1) 
Limitation on liability--(i) Amount limitation. The aggregate liability 
under the guarantee provided under section 38 and this subpart for all 
companies that control a specific bank that is required to submit a 
capital restoration plan under this subpart shall be limited to the 
lesser of:
    (A) An amount equal to 5.0 percent of the bank's total assets at the 
time the bank was notified or deemed to have notice that the bank was 
undercapitalized; or
    (B) The amount necessary to restore the relevant capital measures of 
the bank to the levels required for the bank to be classified as 
adequately capitalized, as those capital measures and levels are defined 
at the time that the bank initially fails to comply with a capital 
restoration plan under this subpart.
    (ii) Limit on duration. The guarantee and limit of liability under 
section 38 and this subpart shall expire after the FDIC notifies the 
bank that it has remained adequately capitalized for each of four 
consecutive calendar quarters. The expiration or fulfillment by a 
company of a guarantee of a capital restoration plan shall not limit the 
liability of the company under any guarantee required or provided in 
connection with any capital restoration plan filed by the same bank 
after expiration of the first guarantee.

[[Page 196]]

    (iii) Collection on guarantee. Each company that controls a given 
bank shall be jointly and severally liable for the guarantee for such 
bank as required under section 38 and this subpart, and the FDIC may 
require and collect payment of the full amount of that guarantee from 
any or all of the companies issuing the guarantee.
    (2) Failure to provide guarantee. In the event that a bank that is 
controlled by any company submits a capital restoration plan that does 
not contain the guarantee required under section 38(e)(2) of the FDI 
Act, the bank shall, upon submission of the plan, be subject to the 
provisions of section 38 and this subpart that are applicable to banks 
that have not submitted an acceptable capital restoration plan.
    (3) Failure to perform guarantee. Failure by any company that 
controls a bank to perform fully its guarantee of any capital plan shall 
constitute a material failure to implement the plan for purposes of 
section 38(f) of the FDI Act. Upon such failure, the bank shall be 
subject to the provisions of section 38 and this subpart that are 
applicable to banks that have failed in a material respect to implement 
a capital restoration plan.



Sec. 325.105  Mandatory and discretionary supervisory actions under section 38.

    (a) Mandatory supervisory actions--(1) Provisions applicable to all 
banks. All banks are subject to the restrictions contained in section 
38(d) of the FDI Act on payment of capital distributions and management 
fees.
    (2) Provisions applicable to undercapitalized, significantly 
undercapitalized, and critically undercapitalized banks. Immediately 
upon receiving notice or being deemed to have notice, as provided in 
Sec. 325.102 of this subpart, that the bank is undercapitalized, 
significantly undercapitalized, or critically undercapitalized, the bank 
shall become subject to the provisions of section 38 of the FDI Act:
    (i) Restricting payment of capital distributions and management fees 
(section 38(d));
    (ii) Requiring that the FDIC monitor the condition of the bank 
(section 38(e)(1));
    (iii) Requiring submission of a capital restoration plan within the 
schedule established in this subpart (section 38(e)(2));
    (iv) Restricting the growth of the bank's assets (section 38(e)(3)); 
and
    (v) Requiring prior approval of certain expansion proposals (section 
38(e)(4)).
    (3) Additional provisions applicable to significantly 
undercapitalized, and critically undercapitalized banks. In addition to 
the provisions of section 38 of the FDI Act described in paragraph 
(a)(2) of this section, immediately upon receiving notice or being 
deemed to have notice, as provided in Sec. 325.102 of this subpart, 
that the bank is significantly undercapitalized, or critically 
undercapitalized, or that the bank is subject to the provisions 
applicable to institutions that are significantly undercapitalized 
because the bank failed to submit or implement in any material respect 
an acceptable capital restoration plan, the bank shall become subject to 
the provisions of section 38 of the FDI Act that restrict compensation 
paid to senior executive officers of the institution (section 38(f)(4)).
    (4) Additional provisions applicable to critically undercapitalized 
institutions. (i) In addition to the provisions of section 38 of the FDI 
Act described in paragraphs (a)(2) and (a)(3) of this section, 
immediately upon receiving notice or being deemed to have notice, as 
provided in Sec. 325.102 of this subpart, that the insured depository 
institution is critically undercapitalized, the institution is 
prohibited from doing any of the following without the FDIC's prior 
written approval:
    (A) Entering into any material transaction other than in the usual 
course of business, including any investment, expansion, acquisition, 
sale of assets, or other similar action with respect to which the 
depository institution is required to provide notice to the appropriate 
Federal banking agency;
    (B) Extending credit for any highly leveraged transaction;
    (C) Amending the institution's charter or bylaws, except to the 
extent necessary to carry out any other requirement of any law, 
regulation, or order;
    (D) Making any material change in accounting methods;

[[Page 197]]

    (E) Engaging in any covered transaction (as defined in section 
23A(b) of the Federal Reserve Act (12 U.S.C. 371c(b));
    (F) Paying excessive compensation or bonuses;
    (G) Paying interest on new or renewed liabilities at a rate that 
would increase the institution's weighted average cost of funds to a 
level significantly exceeding the prevailing rates of interest on 
insured deposits in the institution's normal market areas; and
    (H) Making any principal or interest payment on subordinated debt 
beginning 60 days after becoming critically undercapitalized except that 
this restriction shall not apply, until July 15, 1996, with respect to 
any subordinated debt outstanding on July 15, 1991, and not extended or 
otherwise renegotiated after July 15, 1991.
    (ii) In addition, the FDIC may further restrict the activities of 
any critically undercapitalized institution to carry out the purposes of 
section 38 of the FDI Act.
    (5) Exception for certain savings associations. The restrictions in 
paragraph (a)(4) of this section shall not apply, before July 1, 1994, 
to any insured savings association if:
    (i) The savings association had submitted a plan meeting the 
requirements of section 5(t)(6)(A)(ii) of the Home Owners' Loan Act (12 
U.S.C. 1464(t)(6)(A)(ii)) prior to December 19, 1991;
    (ii) The Director of OTS had accepted the plan prior to December 19, 
1991; and
    (iii) The savings association remains in compliance with the plan or 
is operating under a written agreement with the appropriate federal 
banking agency.
    (b) Discretionary supervisory actions. In taking any action under 
section 38 that is within the FDIC's discretion to take in connection 
with:
    (1) An insured depository institution that is deemed to be 
undercapitalized, significantly undercapitalized, or critically 
undercapitalized, or has been reclassified as undercapitalized, or 
significantly undercapitalized; or
    (2) An officer or director of such institution, the FDIC shall 
follow the procedures for issuing directives under Sec. Sec. 308.201 
and 308.203 of this chapter, unless otherwise provided in section 38 or 
this subpart.



 Sec. Appendix A to Part 325--Statement of Policy on Risk-Based Capital

    Capital adequacy is one of the critical factors that the FDIC is 
required to analyze when taking action on various types of applications 
and when conducting supervisory activities related to the safety and 
soundness of individual banks and the banking system. In view of this, 
the FDIC's Board of Directors has adopted part 325 of its regulations, 
which sets forth (1) minimum standards of capital adequacy for insured 
state nonmember banks and (2) standards for determining when an insured 
bank is in an unsafe or unsound condition by reason of the amount of its 
capital.
    This capital maintenance regulation was designed to establish, in 
conjunction with other Federal bank regulatory agencies, uniform capital 
standards for all federally-regulated banking organizations, regardless 
of size. The uniform capital standards were based on ratios of capital 
to total assets. While those leverage ratios have served as a useful 
tool for assessing capital adequacy, the FDIC believes there is a need 
for a capital measure that is more explicitly and systematically 
sensitive to the risk profiles of individual banks. As a result, the 
FDIC's Board of Directors has adopted this Statement of Policy on Risk-
Based Capital to supplement the part 325 regulation. This statement of 
policy does not replace or eliminate the existing part 325 capital-to-
total assets leverage ratios.
    The framework set forth in this statement of policy consists of (1) 
a definition of capital for risk-based capital purposes, and (2) a 
system for calculating risk-weighted assets by assigning assets and off 
balance sheet items to broad risk categories. A bank's risk-based 
capital ratio is calculated by dividing its qualifying total capital 
base (the numerator of the ratio) by its risk-weighted assets (the 
denominator).\1\ Table I outlines the definition of capital and provides 
a general explanation of how the risk-based capital ratio is calculated, 
Table II summarizes the risk weights and risk categories, and Table III 
sets forth the credit conversation factors for off-balance sheet items. 
Additional explanations of the capital definitions, the risk-weighted 
asset calculations, and the minimum risk-based capital ratio guidelines 
are

[[Page 198]]

provided in Sections I, II and III of this statement of policy.
---------------------------------------------------------------------------

    \1\ Period-end amounts, rather than average balances, normally will 
be used when calculating risk-based capital ratios. However, on a case-
by-case basis, ratios based on average balances may also be required if 
supervisory concerns render it appropriate.
---------------------------------------------------------------------------

    In addition, when certain banks that engage in trading activities 
calculate their risk-based capital ratio under this appendix A, they 
must also refer to appendix C of this part, which incorporates capital 
charges for certain market risks into the risk-based capital ratio. When 
calculating their risk-based capital ratio under this appendix A, such 
banks are required to refer to appendix C of this part for supplemental 
rules to determine qualifying and excess capital, calculate risk-
weighted assets, calculate market risk equivalent assets and add them to 
risk-weighted assets, and calculate risk-based capital ratios as 
adjusted for market risk.
    This statement of policy applies to all FDIC-insured state-chartered 
banks (excluding insured branches of foreign banks) that are not members 
of the Federal Reserve System, hereafter referred to as state nonmember 
banks, regardless of size, and to all circumstances in which the FDIC is 
required to evaluate the capital of a banking organization. Therefore, 
the risk-based capital framework set forth in this statement of policy 
will be used in the examination and supervisory process as well as in 
the analysis of applications that the FDIC is required to act upon.
    The risk-based capital ratio focuses principally on broad categories 
of credit risk, however, the ratio does not take account of many other 
factors that can affect a bank's financial condition. These factors 
include overall interest rate risk exposure, liquidity, funding and 
market risks; the quality and level of earnings; investment, loan 
portfolio, and other concentrations of credit risk, certain risks 
arising from nontraditional activities; the quality of loans and 
investments; the effectiveness of loan and investment policies; and 
management's overall ability to monitor and control financial and 
operating risks, including the risk presented by concentrations of 
credit and nontraditional activities. In addition to evaluating capital 
ratios, an overall assessment of capital adequacy must take account of 
each of these other factors, including, in particular, the level and 
severity of problem and adversely classified assets as well as a bank's 
interest rate risk as measured by the bank's exposure to declines in the 
economic value of its capital due to changes in interest rates. For this 
reason, the final supervisory judgment on a bank's capital adequacy may 
differ significantly from the conclusions that might be drawn solely 
from the absolute level of the bank's risk-based capital ratio.
    In light of these other considerations, banks generally are expected 
to operate above the minimum risk-based capital ratio. Banks 
contemplating significant expansion plans, as well as those institutions 
with high or inordinate levels of risk, should hold capital commensurate 
with the level and nature of the risks to which they are exposed.

        I. Definition of Capital for the Risk-Based Capital Ratio

    A bank's qualifying total capital base consists of two types of 
capital elements: core capital elements (Tier 1) and supplementary 
capital elements (Tier 2). To qualify as an element of Tier 1 or Tier 2 
capital, a capital instrument should not contain or be subject to any 
conditions, covenants, terms, restrictions, or provisions that are 
inconsistent with safe and sound banking practices.

          A. The Components of Qualifying Capital (see Table I)

    1. Core capital elements (Tier 1) consists of:
    i. Common stockholders' equity capital (includes common stock and 
related surplus, undivided profits, disclosed capital reserves that 
represent a segregation of undivided profits, and foreign currency 
translation adjustments, less net unrealized holding losses on 
available-for-sale equity securities with readily determinable fair 
values);
    ii. Noncumulative perpetual preferred stock,\2\ including any 
related surplus; and
---------------------------------------------------------------------------

    \2\ Preferred stock issues where the dividend is reset periodically 
based, in whole or in part, upon the bank's current credit standing, 
including but not limited to, auction rate, money market or remarketable 
preferred stock, are assigned to Tier 2 capital, regardless of whether 
the dividends are cumultive or noncumulative.
---------------------------------------------------------------------------

    iii. Minority interests in the equity capital accounts of 
consolidated subsidiaries.
    (a) At least 50 percent of the qualifying total capital base should 
consist of Tier 1 capital. Core (Tier 1) capital is defined as the sum 
of core capital elements minus all intangible assets (other than 
mortgage servicing assets, nonmortgage servicing assets and purchased 
credit card relationships eligible for inclusion in core capital 
pursuant to Sec. 325.5(f)),\3\ minus credit-enhancing interest-only 
strips that are not eligible for inclusion in core capital pursuant to 
Sec. 325.5(f), minus any disallowed deferred tax assets, and minus any 
amount of nonfinancial equity investments required to be deducted 
pursuant to section II.B.(6) of this Appendix.
---------------------------------------------------------------------------

    \3\ An exception is allowed for intanglble assets that are 
explicitly approved by the FDIC as part of the bank's regulatory capital 
on a specific case basis. These intangibles will be included in capital 
for risk-based capital purposes under the terms and conditions that are 
specifically approved by the FDIC.
---------------------------------------------------------------------------

    (b) Although nonvoting common stock, noncumulative perpetual 
preferred stock, and minority interests in the equity capital accounts 
of consolidated subsidiaries are normally included in Tier 1 capital, 
voting

[[Page 199]]

common stockholders' equity generally will be expected to be the 
dominant form of Tier 1 capital. Thus, banks should avoid undue reliance 
on nonvoting equity, preferred stock and minority interests.
    (c) Although minority interests in consolidated subsidiaries are 
generally included in regulatory capital, exceptions to this general 
rule will be made if the minority interests fail to provide meaningful 
capital support to the consolidated bank. Such a situation could arise 
if the minority interests are entitled to a preferred claim on 
essentially low risk assets of the subsidiary. Similarly, although 
credit-enhancing interest-only strips and intangible assets in the form 
of mortgage servicing assets, nonmortgage servicing assets and purchased 
credit card relationships are generally recognized for risk-based 
capital purposes, the deduction of part or all of the credit-enhancing 
interest-only strips, mortgage servicing assets, nonmortgage servicing 
assets and purchased credit card relationships may be required if the 
carrying amounts of these assets are excessive in relation to their 
market value or the level of the bank's capital accounts. Credit-
enhancing interest-only strips, mortgage servicing assets, nonmortgage 
servicing assets, purchased credit card relationships and deferred tax 
assets that do not meet the conditions, limitations and restrictions 
described in Sec. 325.5(f) and (g) of this part will not be recognized 
for risk-based capital purposes.
    (d) Minority interests in small business investment companies, 
investment funds that hold nonfinancial equity investments (as defined 
in section II.B.(6)(ii) of this appendix A), and subsidiaries that are 
engaged in nonfinancial activities are not included in the bank's Tier 1 
or total capital base if the bank's interest in the company or fund is 
held under one of the legal authorities listed in section II.B.(6)(ii) 
of this appendix A. In addition, minority interests in consolidated 
asset-backed commercial paper programs (ABCP) that are sponsored by a 
bank are not to be included in the bank's Tier 1 or total capital base 
if the bank excludes the consolidated assets of such programs from risk-
weighted assets pursuant to section II.B.6. of this appendix.
    2. Supplementary capital elements (Tier 2) consist of:
    i. Allowance for loan and lease losses, up to a maximum of 1.25 
percent of risk-weighted assets;
    ii. Cumulative perpetual preferred stock, long-term preferred stock 
(original maturity of at least 20 years), and any related surplus;
    iii. Perpetual preferred stock (and any related surplus) where the 
dividend is reset periodically based, in whole or part, on the bank's 
current credit standing, regardless of whether the dividends are 
cumulative or noncumulative;
    iv. Hybrid capital instruments, including mandatory convertible debt 
securities;
    v. Term subordinated debt and intermediate-term preferred stock 
(original average maturity of five years or more) and any related 
surplus; and
    vi. Net unrealized holding gains on equity securities (subject to 
the limitations discussed in paragraph I.A.2.(f) of this section).
    The maximum amount of Tier 2 capital that may be recognized for 
risk-based capital purposes is limited to 100 percent of Tier 1 capital 
(after any deductions for disallowed intangibles and disallowed deferred 
tax assets). In addition, the combined amount of term subordinated debt 
and intermediate-term preferred stock that may be treated as part of 
Tier 2 capital for risk-based capital purposes is limited to 50 percent 
of Tier 1 capital. Amounts in excess of these limits may be issued but 
are not included in the calculation of the risk-based capital ratio.
    (a) Allowance for loan and lease losses. Allowances for loan and 
lease losses are reserves that have been established through a charge 
against earnings to absorb future losses on loans or lease financing 
receivables. Allowances for loan and lease losses exclude allocated 
transfer risk reserves, \4\ and reserves created against identified 
losses.
---------------------------------------------------------------------------

    \4\ Allocated transfer risk reserves are reserves that have been 
established in accordance with section 905(a) of the International 
Lending Supervision Act of 1983 against certain assets whose value has 
been found by the U.S. supervisory authorities to have been 
significantly impaired by protracted transfer risk problems.
---------------------------------------------------------------------------

    This risk-based capital framework provides a phasedown during the 
transition period of the extent to which the allowance for loan and 
lease losses may be included in an institution's capital base. By year-
end 1990, the allowance for loan and lease losses, as an element of 
supplementary capital, may constitute no more than 1.5 percent of risk-
weighted assets and, by year-end 1992, no more than 1.25 percent of 
risk-weighted assets.\5\
---------------------------------------------------------------------------

    \5\ The amount of the allowance for loan and lease losses that may 
be included as a supplementary capital element is based on a percentage 
of gross risk-weighted assets. A bank may deduct reserves for loan and 
lease losses that are in excess of the amount permitted to be included 
in capital, as well as allocated transfer risk reserves, from gross 
risk-weighted assets when computing the denominator of the risk-based 
capital ratio.
---------------------------------------------------------------------------

    (b) Preferred stock. Perpetual preferred stock is defined as 
preferred stock that does not have a maturity date, that cannot be 
redeemed at the option of the holder, and that

[[Page 200]]

has no other provisions that will require future redemption of the 
issue. Long-term preferred stock includes limited-life preferred stock 
with an original maturity of 20 years or more, provided that the stock 
cannot be redeemed at the option of the holder prior to maturity, except 
with the prior approval of the FDIC.
    Cumulative perpetual preferred stock and long-term preferred stock 
qualify for inclusion in supplementary capital provided that the 
instruments can absorb losses while the issuer operates as a going 
concern (a fundamental characteristic of equity capital) and provided 
the issuer has the option to defer payment of dividends on these 
instruments. Given these conditions, and the perpetual or long-term 
nature of the intruments, there is no limit on the amount of these 
preferred stock instruments that may be included with Tier 2 capital.
    Noncumulative perpetual preferred stock where the dividend is reset 
periodically based, in whole or in part, on the bank's current credit 
standing, including auction rate, money market, or remarketable 
preferred stock, are also assigned to Tier 2 capital without limit, 
provided the above conditions are met.
    (c) Hybrid capital instruments. Hybrid capital instruments include 
instruments that have certain characteristics of both debt and equity. 
In order to be included as supplementary capital elements, these 
instruments should meet the following criteria:
    (1) The instrument should be unsecured, subordinated to the claims 
of depositors and general creditors, and fully paid-up.
    (2) The instrument should not be redeemable at the option of the 
holder prior to maturity, except with the prior approval of the FDIC. 
This requirement implies that holders of such instruments may not 
accelerate the payment of principal except in the event of bankruptcy, 
insolvency, or reorganization.
    (3) The instrument should be available to participate in losses 
while the issuer is operating as a going concern. (Term subordinated 
debt would not meet this requirement.) To satisfy this requirement, the 
instrument should convert to common or perpetual preferred stock in the 
event that the sum of the undivided profits and capital surplus accounts 
of the issuer results in a negative balance.
    (4) The instrument should provide the option for the issuer to defer 
principal and interest payments if: (a) The issuer does not report a 
profit in the preceding annual period, defined as combined profits 
(i.e., net income) for the most recent four quarters, and (b) the issuer 
eliminates cash dividends on its common and preferred stock.
    Mandatory convertible debt securities, which are subordinated debt 
instruments that require the issuer to convert such instruments into 
common or perpetual preferred stock by a date at or before the maturity 
of the debt instruments, will qualify as hybrid capital instruments 
provided the maturity of these instruments is 12 years or less and the 
instruments meet the criteria set forth below for ``term subordinated 
debt.'' There is no limit on the amount of hybrid capital instruments 
that may be included within Tier 2 capital.
    (d) Term subordinated debt and intermediate-term preferred stock. 
The aggregate amount of term subordinated debt (excluding mandatory 
convertible debt securities) and intermediate-term preferred stock 
(including any related surplus) that may be treated as Tier 2 capital 
for risk-based capital purposes is limited to 50 percent of Tier 1 
capital. Term subordinated debt and intermediate-term preferred stock 
should have an original average maturity of at least five years to 
qualify as supplementary capital and should not be redeemable at the 
option of the holder prior to maturity, except with the prior approval 
of the FDIC. For state nonmember banks, a term subordinated debt 
instrument is an obligation other than a deposit obligation that:
    (1) Bears on its face, in boldface type, the following: This 
obligation is not a deposit and is not insured by the Federal Deposit 
Insurance Corporation;
    (2)(i) Has a maturity of at least five years; or
    (ii) In the case of an obligation or issue that provides for 
scheduled repayments of principal, has an average maturity of at least 
five years; provided that the Director of the Division of Supervision 
and Consumer Protection (DSC) may permit the issuance of an obligation 
or issue with a shorter maturity or average maturity if the Director has 
determined that exigent circumstances require the issuance of such 
obligation or issue; provided further that the provisions of this 
paragraph I.A.2.(d)(2) shall not apply to mandatory convertible debt 
obligations or issues;
    (3) States express that the obligation:
    (i) Is subordinated and junior in right of payment to the issuing 
bank's obligations to its depositors and to the bank's other obligations 
to its general and secured creditors; and
    (ii) Is ineligible as collateral for a loan by the issuing bank;
    (4) Is unsecured;
    (5) States expressly that the issuing bank may not retire any part 
of its obligation without the prior written consent of the FDIC or other 
primary federal regulator; and
    (6) Includes, if the obligation is issued to a depository 
institution, a specific waiver of the right of offset by the lending 
depository institution.

Subordinated debt obligations issued prior to December 2, 1987 that 
satisfied the definition of the term ``subordinated note and debenture'' 
that was in effect prior to that date

[[Page 201]]

also will be deemed to be term subordinated debt for risk-based capital 
purposes. An optional redemption (``call'') provision in a subordinated 
debt instrument that is exercisable by the issuing bank in less than 
five years will not be deemed to constitute a maturity of less than five 
years, provided that the obligation otherwise has a stated contractual 
maturity of at least five years; the call is exercisable solely at the 
discretion or option of the issuing bank, and not at the discretion or 
option of the holder of the obligation; and the call is exercisable only 
with the express prior written consent of the FDIC under 12 U.S.C. 
1828(i)(1) at the time early redemption or retirement is sought, and 
such consent has not been given in advance at the time of issuance of 
the obligation. Optional redemption provisions will be accorded similar 
treatment when determining the perpetual nature and/or maturity of 
preferred stock and other capital instruments.
    (e) Discount of limited-life supplementary capital instruments. As a 
limited-life capital instrument approaches maturity, the instrument 
begins to take on charcteristics of a short-term obligation and becomes 
less like a component of capital. Therefore, for risk-based capital 
purposes, the outstanding amount of term subordinated debt and limited-
life preferred stock eligible for inclusion in capital will be adjusted 
downward, or discounted, as the instruments approach maturity. Each 
limited-life capital instrument will be discounted by reducing the 
outstanding amount of the capital instrument eligible for inclusion as 
supplementary capital by a fifth of the original amount (less 
redemptions) each year during the instrument's last five years before 
maturity. Such instruments, therefore, will have no capital value when 
they have a remaining maturity of less than a year.
    (f) Unrealized gains on equity securities and unrealized gains 
(losses) on other assets. Up to 45 percent of pretax net unrealized 
holding gains (that is, the excess, if any, of the fair value over 
historical cost) on available-for-sale equity securities with readily 
determinable fair values may be included in supplementary capital. 
However, the FDIC may exclude all or a portion of these unrealized gains 
from Tier 2 capital if the FDIC determines that the equity securities 
are not prudently valued. Unrealized gains (losses) on other types of 
assets, such as bank premises and available-for-sale debt securities, 
are not included in supplementary capital, but the FDIC may take these 
unrealized gains (losses) into account as additional factors when 
assessing a bank's overall capital adequacy.

            B. Deductions from Capital and Other Adjustments

    Certain assets are deducted from a bank's capital base for the 
purpose of calculating the numerator of the risk-based capital ratio.\6\ 
These assets include:
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    \6\ Any assets deducted from capital when computing the numerator of 
the risk-based capital ratio will also be excluded from risk-weighted 
assets when computing the denominator of the ratio.
---------------------------------------------------------------------------

    (1) All intangible assets other than mortgage servicing assets, 
nonmortgage servicing assets and purchased credit card relationships.\7\ 
These disallowed intangibles are deducted from the core capital (Tier 1) 
elements.
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    \7\ In addition to mortgage servicing assets, nonmortgage servicing 
assets and purchased credit card relationships, certain other 
intangibles may be allowed if explicitly approved by the FDIC as part of 
the bank's regulatory capital on a specific case basis. In evaluating 
whether other types of intangibles should be recognized for regulatory 
capital purposes on a specific case basis, the FDIC will accord special 
attention to the general characteristics of the intangibles, including: 
(1) The separability of the intangible asset and the ability to sell it 
separate and apart from the bank or the bulk of the bank's assets, (2) 
the certainty that a readily identifiable stream of cash flows 
associated with the intangible asset can hold its value notwithstanding 
the future prospects of the bank, and (3) the existence of a market of 
sufficient depth to provide liquidity for the intangible asset.
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    (2) Investments in unconsolidated banking and finance 
subsidiaries.\8\ This includes any

[[Page 202]]

equity or debt capital investments in banking or finance subsidaries if 
the subsidiaries are not consolidated for regulatory capital 
requirements.\9\ Generally, these investments include equity and debt 
capital securities and any other instruments or commitments that are 
deemed to be capital of the subsidiary. These investments are deducted 
from the bank's total (Tier 1 plus Tier 2) capital base.
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    \8\ For risk-based capital purposes, these subsidiaries are 
generally defined as any company that is primarily engaged in banking or 
finance and in which the bank, either directly or indirectly, owns more 
than 50 percent of the outstanding voting stock but does not consolidate 
the company for regulatory capital purposes. In addition to investments 
in unconsolidated banking and finance subsidiaries, the FDIC may, on a 
case-by-case basis, deduct investments in associated companies or joint 
ventures, which are generally defined as any companies in which the 
bank, either directly or indirectly, owns 20 to 50 percent of the 
outstanding voting stock. Alternatively, the FDIC may, in certain cases, 
apply an appropriate risk-weighted capital charge against a bank's 
proportionate interest in the assets of associated companies and joint 
ventures. The definitions for subsidiaries, associated companies and 
joint ventures are contained in the instructions for the preparation of 
the Consolidated Reports of Condition and Income.
    \9\ Consolidation requirements for regulatory capital purposes 
generally follow the consolidation requirements set forth in the 
instructions for preparation of the consolidated Reports of Condition 
and Income. However, although investments in subsidiaries representing 
majority ownership in another Federally-insured depository institution 
are not consolidated for purposes of the consolidated Reports of 
Condition and Income that are filed by the parent bank, they are 
generally consolidated for purposes of determining FDIC regulatory 
capital requirements. Therefore, investments in these depository 
institution subsidiaries generally will not be deducted for risk-based 
capital purposes; rather, assets and liabilities of such subsidiaries 
will be consolidated with those of the parent bank when calculating the 
risk-based capital ratio. In addition, although securities subsidiaries 
established pursuant to 12 CFR 337.4 are consolidated for Report of 
Condition and Income purposes, they are not consolidated for regulatory 
capital purposes.
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    (3) Investments in securities subsidiaries established pursuant to 
12 CFR 337.4. The FDIC may also consider deducting investments in other 
subsidiaries, either on a case-by-case basis or, as with securities 
subsidiaries, based on the general characteristics or functional nature 
of the subsidiaries.
    (4) Reciprocal holdings of capital instruments of banks that 
represent intentional cross-holdings by the banks. These holdings are 
deducted from the bank's total capital base.
    (5) Deferred tax assets in excess of the limit set forth in Sec. 
325.5(g). These disallowed deferred tax assets are deducted from the 
core capital (Tier 1) elements.
    On a case-by-case basis, and in conjunction with supervisory 
examinations, other deductions from capital may also be required, 
including any adjustments deemed appropriate for assets classified as 
loss.

            II. Procedures For Computing Risk-Weighted Assets

                          A. General Procedures

    1. Under the risk-based capital framework, a bank's balance sheet 
assets and credit equivalent amounts of off-balance sheet items are 
assigned to one of four broad risk categories according to the obligor 
or, if relevent, the guarantor or the nature of the collateral. The 
aggregate dollar amount in each category is then multiplied by the risk 
weight assigned to that category. The resulting weighted values from 
each of the four risk categories are added together and this sum is the 
risk-weighted assets total that, as adjusted.\10\ comprises the 
denominator of the risk-based capital ratio.
---------------------------------------------------------------------------

    \10\ Any asset deducted from a bank's capital accounts when 
computing the numerator of the risk-based capital ratio will also be 
excluded from risk-weighted assets when calculating the denominator for 
the ratio.
---------------------------------------------------------------------------

    2. The risk-weighted amounts for all off-balance sheet items are 
determined by a two-step process. First, the notional principal, or face 
value, amount of each off-balance sheet item generally is multiplied by 
a credit conversion factor to arrive at a balance sheet credit 
equivalent amount. Second, the credit equivalent amount generally is 
assigned to the appropriate risk category, like any balance sheet asset, 
according to the obligor or, if relevant, the guarantor or the nature of 
the collateral.
    3. The Director of the Division of Supervision and Consumer 
Protection (DSC) may, on a case-by-case basis, determine the appropriate 
risk weight for any asset or credit equivalent amount that does not fit 
wholly within one of the risk categories set forth in this Appendix A or 
that imposes risks on a bank that are not commensurate with the risk 
weight otherwise specified in this Appendix A for the asset or credit 
equivalent amount. In addition, the Director of the Division of 
Supervision and Consumer Protection (DSC) may, on a case-by-case basis, 
determine the appropriate credit conversion factor for any off-balance 
sheet item that does not fit wholly within one of the credit conversion 
factors set forth in this Appendix A or that imposes risks on a bank 
that are not commensurate with the credit conversion factor otherwise 
specified in this Appendix A for the off-balance sheet item. In making 
such a determination, the Director of the Division of Supervision and 
Consumer Protection (DSC) will consider the similarity of the asset or 
off-balance sheet item to assets or off-balance sheet items explicitly 
treated in sections II.B and II.C of this appendix A, as well as other 
relevant factors.

                         B. Other Considerations

    1. Indirect Holdings of Assets. Some of the assets on a bank's 
balance sheet may represent an indirect holding of a pool of assets; for 
example, mutual funds. An investment in shares of a mutual fund whose 
portfolio consists solely of various securities or money market 
instruments that, if held separately,

[[Page 203]]

would be assigned to different risk categories, generally is assigned to 
the risk category appropriate to the highest risk-weighted asset that 
the fund is permitted to hold in accordance with the stated investment 
objectives set forth in its prospectus. The bank may, at its option, 
assign the investment on a pro rata basis to different risk categories 
according to the investment limits in the fund's prospectus, but in no 
case will indirect holdings through shares in any mutual fund be 
assigned to a risk weight less than 20 percent. If the bank chooses to 
assign its investment on a pro rata basis, and the sum of the investment 
limits in the fund's prospectus exceeds 100 percent, the bank must 
assign risk weights in descending order. If, in order to maintain a 
necessary degree of short-term liquidity, a fund is permitted to hold an 
insignificant amount of its assets in short-term, highly liquid 
securities of superior credit quality that do not qualify for a 
preferential risk weight, such securities will generally be disregarded 
in determining the risk category to which the bank's holdings in the 
overall fund should be assigned. The prudent use of hedging instruments 
by a mutual fund to reduce the risk of its assets will not increase the 
risk weighting of the mutual fund investment. For example, the use of 
hedging instruments by a mutual fund to reduce the interest rate risk of 
its government bond portfolio will not increase the risk weight of that 
fund above the 20 percent category. Nonetheless, if the fund engages in 
any activities that appear speculative in nature or has any other 
characteristics that are inconsistent with the preferential risk 
weighting assigned to the fund's assets, holdings in the fund will be 
assigned to the 100 percent risk category.
    2. Collateral. In determining risk weights of various assets, the 
only forms of collateral that are formally recognized by the risk-based 
capital framework are cash on deposit in the lending bank; securities 
issued or guaranteed by the central governments of the OECD-based group 
of countries,\11\ U.S. Government agencies, or U.S. Government-sponsored 
agencies; and securities issued or guaranteed by multilateral lending 
institutions or regional development banks. Claims fully secured by such 
collateral are assigned to the 20 percent risk category. The extent to 
which these securities are recognized as collateral for risk-based 
capital purposes is determined by their current market value. If a claim 
is partially secured, the portion of the claim that is not covered by 
the collateral is assigned to the risk category appropriate to the 
obligor or, if relevant, the guarantor.
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    \11\ The OECD-based group of countries comprises all full members of 
the Organization for Economic Cooperation and Development (OECD) 
regardless of entry date, as well as countries that have concluded 
special lending arrangements with the International Monetary Fund (IMF) 
associated with the IMF's General Arrangements to Borrow, but excludes 
any country that has rescheduled its external sovereign debt within the 
previous five years. As of November 1995, the OECD included the 
following countries: Australia, Austria, Belgium, Canada, Denmark, 
Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, 
Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Portugal, 
Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United 
States; and Saudi Arabia had concluded special lending arrangements with 
the IMF associated with the IMF's General Arrangements to Borrow. A 
rescheduling of external sovereign debt generally would include any 
renegotiation of terms arising from a country's inability or 
unwillingness to meet its external debt service obligations, but 
generally would not include renegotiations of debt in the normal course 
of business, such as a renegotiation to allow the borrower to take 
advantage of a decline in interest rates or other change in market 
conditions.
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    3. Guarantees. Guarantees of the OECD and non-OECD central 
governments, U.S. Government agencies, U.S. Government-sponsored 
agencies, state and local governments of the OECD-based group of 
countries, multilateral lending institutions and regional development 
banks, U.S. depository institutions, foreign banks, and qualifying OECD-
based securities firms are also recognized. If a claim is partially 
guaranteed, the portion of the claim that is not fully covered by the 
guarantee is assigned to the risk category appropriate to the obligor 
or, if relevant, the collateral.
    4. Maturity. Maturity is generally not a factor in assigning items 
to risk categories with the exceptions of claims on non-OECD banks, 
commitments, and interest rate and foreign exchange rate related 
contracts. Except for commitments, short-term is defined as one year or 
less remaining maturity and long-term is defined as over one year 
remaining maturity. In the case of commitments, short-term is defined as 
one year or less original maturity and long-term is defined as over one 
year original maturity.\12\
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    \12\ Through year-end 1992, remaining rather than original maturity 
may be used for determining term to maturity for commitments.
---------------------------------------------------------------------------

    5. Recourse, Direct Credit Substitutes, Residual Interests and 
Mortgage- and Asset-Backed Securities. For purposes of this section 
II.B.5 of this appendix A, the following definitions will apply.

[[Page 204]]

    a. Definitions--(1) Credit derivative means a contract that allows 
one party (the ``protection purchaser'') to transfer the credit risk of 
an asset or off-balance sheet credit exposure to another party (the 
``protection provider''). The value of a credit derivative is dependent, 
at least in part, on the credit performance of the ``reference asset.''
    (2) Credit-enhancing interest only strip is defined in Sec. 
325.2(g).
    (3) Credit-enhancing representations and warranties means 
representations and warranties that are made or assumed in connection 
with a transfer of assets (including loan servicing assets) and that 
obligate the bank to protect investors from losses arising from credit 
risk in the assets transferred or the loans serviced. Credit-enhancing 
representations and warranties include promises to protect a party from 
losses resulting from the default or nonperformance of another party or 
from an insufficiency in the value of the collateral. Credit-enhancing 
representations and warranties do not include:
    (i) Early default clauses and similar warranties that permit the 
return of, or premium refund clauses covering, 1-4 family residential 
first mortgage loans that qualify for a 50 percent risk weight for a 
period not to exceed 120 days from the date of transfer. These 
warranties may cover only those loans that were originated within 1 year 
of the date of transfer;
    (ii) Premium refund clauses that cover assets guaranteed, in whole 
or in part, by the U.S. Government, a U.S. Government agency or a 
government-sponsored enterprise, provided the premium refund clauses are 
for a period not to exceed 120 days from the date of transfer; or
    (iii) Warranties that permit the return of assets in instances of 
misrepresentation, fraud or incomplete documentation.
    (4) Direct credit substitute means an arrangement in which a bank 
assumes, in form or in substance, credit risk associated with an on-or 
off-balance sheet credit exposure that was not previously owned by the 
bank (third-party asset) and the risk assumed by the bank exceeds the 
pro rata share of the bank's interest in the third-party asset. If the 
bank has no claim on the third-party asset, then the bank's assumption 
of any credit risk with respect to the third party asset is a direct 
credit substitute. Direct credit substitutes include, but are not 
limited to:
    (i) Financial standby letters of credit, which includes any letter 
of credit or similar arrangement, however named or described, that 
support financial claims on a third party that exceed a bank's pro rata 
share of losses in the financial claim;
    (ii) Guarantees, surety arrangements, credit derivatives, and 
similar instruments backing financial claims;
    (iii) Purchased subordinated interests or securities that absorb 
more than their pro rata share of credit losses from the underlying 
assets;
    (iv) Credit derivative contracts under which the bank assumes more 
than its pro rata share of credit risk on a third party asset or 
exposure;
    (v) Loans or lines of credit that provide credit enhancement for the 
financial obligations of an account party;
    (vi) Purchased loan servicing assets if the servicer:
    (A) Is responsible for credit losses with the loans being serviced,
    (B) Is responsible for making servicer cash advances (unless the 
advances are not direct credit substitutes because they meet the 
conditions specified in section II.B.5(a)(9) of this Appendix A), or
    (C) Makes or assumes credit-enhancing representations and warranties 
with respect to the loans serviced;
    (vii) Clean-up calls on third party assets. Clean-up calls that are 
exercisable at the option of the bank (as servicer or as an affiliate of 
the servicer) when the pool balance is 10 percent or less of the 
original pool balance are not direct credit substitutes; and
    (viii) Liquidity facilities that provide liquidity support to ABCP 
(other than eligible ABCP liquidity facilities).
    (5) Eligible ABCP liquidity facility means a liquidity facility 
supporting ABCP, in form or in substance, that is subject to an asset 
quality test at the time of draw that precludes funding against assets 
that are 90 days or more past due or in default. In addition, if the 
assets that an eligible ABCP liquidity facility is required to fund 
against are externally rated assets or exposures at the inception of the 
facility, the facility can be used to fund only those assets or 
exposures that are externally rated investment grade at the time of 
funding. Notwithstanding the eligibility requirements set forth in the 
two preceding sentences, a liquidity facility will be considered an 
eligible ABCP liquidity facility if the assets that are funded under the 
liquidity facility and which do not meet the eligibility requirements 
are guaranteed, either conditionally or unconditionally, by the U.S. 
government or its agencies, or by the central government of an OECD 
country.
    (6) Externally rated means that an instrument or obligation has 
received a credit rating from a nationally recognized statistical rating 
organization.
    (7) Face amount means the notional principal, or face value, amount 
of an off-balance sheet item; the amortized cost of an asset not held 
for trading purposes; and the fair value of a trading asset.
    (8) Financial asset means cash or other monetary instrument, 
evidence of debt, evidence of an ownership interest in an entity, or a 
contract that conveys a right to receive

[[Page 205]]

or exchange cash or another financial instrument from another party.
    (9) Financial standby letter of credit means a letter of credit or 
similar arrangement that represents an irrevocable obligation to a 
third-party beneficiary:
    (i) To receive money borrowed by, or advanced to, or advanced to, or 
for the account of, a second party (the account party), or
    (ii) To make payment on behalf of the account party, in the event 
that the account party fails to fulfill its obligation to the 
beneficiary.
    (10) Liquidity facility means a legally binding commitment to 
provide liquidity support to ABCP by lending to, or purchasing assets 
from, any structure, program, or conduit in the event that funds are 
required to repay maturing ABCP.
    (11) Mortgage servicer cash advance means funds that a residential 
mortgage servicer advances to ensure an uninterrupted flow of payments, 
including advances made to cover foreclosure costs or other expenses to 
facilitate the timely collection of the loan. A mortgage servicer cash 
advance is not a recourse obligation or a direct credit substitute if:
    (i) The mortgage servicer is entitled to full reimbursement and this 
right is not subordinated to other claims on the cash flows from the 
underlying asset pool; or
    (ii) For any one loan, the servicer's obligation to make 
nonreimbursable advances is contractually limited to an insignificant 
amount of the outstanding principal of that loan.
    (12) Nationally recognized statistical rating organization (NRSRO) 
means an entity recognized by the Division of Market Regulation of the 
Securities and Exchange Commission (or any successor Division) 
(Commission) as a nationally recognized statistical rating organization 
for various purposes, including the Commission's uniform net capital 
requirements for brokers and dealers (17 CFR 240.15c3-1).
    (13) Recourse means an arrangement in which a bank retains, in form 
or in substance, of any credit risk directly or indirectly associated 
with an asset it has sold (in accordance with generally accepted 
accounting principles) that exceeds a pro rata share of the bank's claim 
on the asset. If a bank has no claim on an asset it has sold, then the 
retention of any credit risk is recourse. A recourse obligation 
typically arises when an institution transfers assets in a sale and 
retains an obligation to repurchase the assets or absorb losses due to a 
default of principal or interest or any other deficiency in the 
performance of the underlying obligor or some other party. Recourse may 
exist implicitly where a bank provides credit enhancement beyond any 
contractual obligation to support assets it has sold. The following are 
examples of recourse arrangements:
    (i) Credit-enhancing representations and warranties made on the 
transferred assets;
    (ii) Loan servicing assets retained pursuant to an agreement under 
which the bank:
    (A) Is responsible for losses associated with the loans being 
serviced, or
    (B) Is responsible for making mortgage servicer cash advances 
(unless the advances are not a recourse obligation because they meet the 
conditions specified in section II.B.5(a)(11) of this Appendix A).
    (iii) Retained subordinated interests that absorb more than their 
pro rata share of losses from the underlying assets;
    (iv) Assets sold under an agreement to repurchase, if the assets are 
not already included on the balance sheet;
    (v) Loan strips sold without contractual recourse where the maturity 
of the transferred portion of the loan is shorter than the maturity of 
the commitment under which the loan is drawn;
    (vi) Credit derivative contracts under which the bank retains more 
than its pro rata share of credit risk on transferred assets;
    (vii) Clean-up calls at inception that are greater than 10 percent 
of the balance of the original pool of transferred loans. Clean-up calls 
that are 10 percent or less of the original pool balance that are 
exercisable at the option of the bank are not recourse arrangements; and
    (viii.) Liquidity facilities that provide liquidity support to ABCP 
(other than eligible ABCP liquidity facilities).
    (14) Residual interest means any on-balance sheet asset that 
represents an interest (including a beneficial interest) created by a 
transfer that qualifies as a sale (in accordance with generally accepted 
accounting principles (GAAP)) of financial assets, whether through a 
securitization or otherwise, and that exposes a bank to credit risk 
directly or indirectly associated with the transferred assets that 
exceeds a pro rata share of the bank's claim on the assets, whether 
through subordination provisions or other credit enhancement techniques. 
Residual interests generally include credit-enhancing I/Os, spread 
accounts, cash collateral accounts, retained subordinated interests, 
other forms of over-collateralization, and similar assets that function 
as a credit enhancement. Residual interests further include those 
exposures that, in substance, cause the bank to retain the credit risk 
of an asset or exposure that had qualified as a residual interest before 
it was sold. Residual interests generally do not include interests 
purchased from a third party, except that purchased credit-enhancing I/
Os are residual interests for purposes of the risk-based capital 
treatment in this appendix.

[[Page 206]]

    (15) Risk participation means a participation in which the 
originating party remains liable to the beneficiary for the full amount 
of an obligation (e.g., a direct credit substitute) notwithstanding that 
another party has acquired a participation in that obligation.
    (16) Securitization means the pooling and repackaging by a special 
purpose entity of assets or other credit exposures into securities that 
can be sold to investors. Securitization includes transactions that 
create stratified credit risk positions whose performance is dependent 
upon an underlying pool of credit exposures, including loans and 
commitments.
    (17) Sponsor means a bank that establishes an ABCP program; approves 
the sellers permitted to participate in the program; approves the asset 
pools to be purchased by the program; or administers the ABCP program by 
monitoring the assets, arranging for debt placement, compiling monthly 
reports, or ensuring compliance with the program documents and with the 
program's credit and investment policy.
    (18) Structured finance program means a program where receivable 
interests and asset-backed securities issued by multiple participants 
are purchased by a special purpose entity that repackages those 
exposures into securities that can be sold to investors. Structured 
finance programs allocate credit risks, generally, between the 
participants and credit enhancement provided to the program.
    (19) Traded position means a position that is externally rated and 
is retained, assumed or issued in connection with an asset 
securitization, where there is a reasonable expectation that, in the 
near future, the rating will be relied upon by unaffiliated investors to 
purchase the position; or an unaffiliated third party to enter into a 
transaction involving the position, such as a purchase, loan, or 
repurchase agreement.
    (b) Credit equivalent amounts and risk weights of recourse 
obligations and direct credit substitutes--(1) General rule for 
determining the credit-equivalent amount. Except as otherwise provided, 
the credit-equivalent amount for a recourse obligation or direct credit 
substitute is the full amount of the credit-enhanced assets for which 
the bank directly or indirectly retains or assumes credit risk 
multiplied by a 100% conversion factor. Thus, a bank that extends a 
partial direct credit substitute, e.g., a financial standby letter of 
credit that absorbs the first 10 percent of loss on a transaction, must 
maintain capital against the full amount of the assets being supported.
    (2) Risk-weight factor. To determine the bank's risk-weighted assets 
for an off-balance sheet recourse obligation or a direct credit 
substitute, the credit equivalent amount is assigned to the risk 
category appropriate to the obligor in the underlying transaction, after 
considering any associated guarantees or collateral. For a direct credit 
substitute that is an on-balance sheet asset, e.g., a purchased 
subordinated security, a bank must calculate risk-weighted assets using 
the amount of the direct credit substitute and the full amount of the 
assets it supports, i.e., all the more senior positions in the 
structure. The treatment covered in this paragraph (b) is subject to the 
low-level exposure rule provided in section II.B.5(h)(1) of this 
appendix A.
    (c) Credit equivalent amount and risk weight of participations in, 
and syndications of, direct credit substitutes. Subject to the low-level 
exposure rule provided in section II.B.5(h)(1) of this appendix A, the 
credit equivalent amount for a participation interest in, or syndication 
of, a direct credit substitute (excluding purchased credit-enhancing 
interest-only strips) is calculated and risk weighted as follows:
    (1) Treatment for direct credit substitutes for which a bank has 
conveyed a risk participation. In the case of a direct credit substitute 
in which a bank has conveyed a risk participation, the full amount of 
the assets that are supported by the direct credit substitute is 
converted to a credit equivalent amount using a 100% conversion factor. 
However, the pro rata share of the credit equivalent amount that has 
been conveyed through a risk participation is then assigned to whichever 
risk-weight category is lower: the risk-weight category appropriate to 
the obligor in the underlying transaction, after considering any 
associated guarantees or collateral, or the risk-weight category 
appropriate to the party acquiring the participation. The pro rata share 
of the credit equivalent amount that has not been participated out is 
assigned to the risk-weight category appropriate to the obligor, 
guarantor, or collateral. For example, the pro rata share of the full 
amount of the assets supported, in whole or in part, by a direct credit 
substitute conveyed as a risk participation to a U.S. domestic 
depository institution or an OECD bank is assigned to the 20 percent 
risk category.\13\
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    \13\ A risk participation with a remaining maturity of one year or 
less that is conveyed to a non-OECD bank is also assigned to the 20 
percent risk category.
---------------------------------------------------------------------------

    (2) Treatment for direct credit substitutes in which the bank has 
acquired a risk participation. In the case of a direct credit substitute 
in which the bank has acquired a risk participation, the acquiring 
bank's pro rata share of the direct credit substitute is multiplied by 
the full amount of the assets that are supported by the direct credit 
substitute and converted using a 100% credit conversion factor. The 
resulting credit equivalent amount is then assigned to the risk-weight 
category appropriate to the obligor in the

[[Page 207]]

underlying transaction, after considering any associated guarantees or 
collateral.
    (3) Treatment for direct credit substitutes related to syndications. 
In the case of a direct credit substitute that takes the form of a 
syndication where each party is obligated only for its pro rata share of 
the risk and there is no recourse to the originating entity, each bank's 
credit equivalent amount will be calculated by multiplying only its pro 
rata share of the assets supported by the direct credit substitute by a 
100% conversion factor. The resulting credit equivalent amount is then 
assigned to the risk-weight category appropriate to the obligor in the 
underlying transaction, after considering any associated guarantees or 
collateral.
    (d) Externally rated positions: credit-equivalent amounts and risk 
weights.--(1) Traded positions. With respect to a recourse obligation, 
direct credit substitute, residual interest (other than a credit-
enhancing interest-only strip) or mortgage- or asset-backed security 
that is a ``traded position'' and that has received an external rating 
on a long-term position that is one grade below investment grade or 
better or a short-term position that is investment grade, the bank may 
multiply the face amount of the position by the appropriate risk weight, 
determined in accordance with Table A or B of this appendix A, as 
appropriate.\14\ If a traded position receives more than one external 
rating, the lowest rating will apply.

                                 Table A
------------------------------------------------------------------------
                                                            Risk weight
     Long-term rating category            Examples         (In percent)
------------------------------------------------------------------------
Highest or second highest           AAA, AA.............              20
 investment grade.
Third highest investment grade....  A...................              50
Lowest investment grade...........  BBB.................             100
One category below investment       BB..................             200
 grade.
------------------------------------------------------------------------


                                 Table B
------------------------------------------------------------------------
                                                            Risk weight
    Short-term rating category            Examples         (In percent)
------------------------------------------------------------------------
Highest investment grade..........  A-1, P-1............              20
Second highest investment grade...  A-2, P-2............              50
Lowest investment grade...........  A-3, P-3............             100
------------------------------------------------------------------------

    (2) Non-traded positions. A recourse obligation, direct credit 
substitute, residual interest (but not a credit-enhancing interest-only 
strip) or mortgage- or asset-backed security extended in connection with 
a securitization that is not a ``traded position'' may be assigned a 
risk weight in accordance with section II.B.5(d)(1) of this appendix A 
if:
    (i) It has been externally rated by more than one NRSRO;
    (ii) It has received an external rating on a long-term position that 
is one category below investment grade or better or a short-term 
position that is investment grade by all NRSROs providing a rating;
    (iii) The ratings are publicly available; and
    (iv) The ratings are based on the same criteria used to rate traded 
positions. If the ratings are different, the lowest rating will 
determine the risk category to which the recourse obligation, direct 
credit substitute, residual interest, or mortgage- or asset-backed 
security will be assigned.
    (e) Senior positions not externally rated. For a recourse 
obligation, direct credit substitute, residual interest or mortgage- or 
asset-backed security that is not externally rated but is senior in all 
features to a traded position (including collateralization and 
maturity), a bank may apply a risk weight to the face amount of the 
senior position in accordance with section II.B.5(d)(1) of this appendix 
A, based upon the risk weight of the traded position, subject to any 
current or prospective supervisory guidance and the bank satisfying the 
FDIC that this treatment is appropriate. This section will apply only if 
the traded position provides substantial credit support for the entire 
life of the unrated position.
---------------------------------------------------------------------------

    \14\ Stripped mortgage-backed securities and similar instruments, 
such as interest-only strips that are not credit-enhancing and 
principal-only strips, must be assigned to the 100% risk category.
---------------------------------------------------------------------------

    (f) Residual interests--(1) Concentration limit on credit-enhancing 
interest-only strips. In addition to the capital requirement provided by 
section II.B.5(f)(2) of this appendix A, a bank must deduct from Tier 1 
capital the face amount of all credit-enhancing interest-only strips in 
excess of 25 percent of Tier 1 capital in accordance with Sec. 
325.5(f)(3).
    (2) Credit-enhancing interest-only strip capital requirement. After 
applying the concentration limit to credit-enhancing interest-only 
strips in accordance with Sec. 325.5(f)(3), a bank must maintain risk-
based

[[Page 208]]

capital for a credit-enhancing interest-only strip, equal to the 
remaining face amount of the credit-enhancing interest-only strip (net 
of the remaining proportional amount of any existing associated deferred 
tax liability recorded on the balance sheet), even if the amount of 
risk-based capital required to be maintained exceeds the full risk-based 
capital requirement for the assets transferred. Transactions that, in 
substance, result in the retention of credit risk associated with a 
transferred credit-enhancing interest-only strip will be treated as if 
the credit-enhancing interest-only strip was retained by the bank and 
not transferred.
    (3) Other residual interests capital requirement. Except as 
otherwise provided in section II.B.5(d) or (e) of this appendix A, a 
bank must maintain risk-based capital for a residual interest (excluding 
a credit-enhancing interest-only strip) equal to the face amount of the 
residual interest (net of any existing associated deferred tax liability 
recorded on the balance sheet), even if the amount of risk-based capital 
required to be maintained exceeds the full risk-based capital 
requirement for the assets transferred. Transactions that, in substance, 
result in the retention of credit risk associated with a transferred 
residual interest will be treated as if the residual interest was 
retained by the bank and not transferred.
    (4) Residual interests and other recourse obligations. Where the 
aggregate capital requirement for residual interests (including credit-
enhancing interest-only strips) and recourse obligations arising from 
the same transfer of assets exceed the full risk-based capital 
requirement for assets transferred, a bank must maintain risk-based 
capital equal to the greater of the risk-based capital requirement for 
the residual interest as calculated under sections II.B.5(f)(2) through 
(3) of this appendix A or the full risk-based capital requirement for 
the assets transferred.
    (g) Positions that are not rated by an NRSRO. A bank's position 
(other than a residual interest) in a securitization or structured 
finance program that is not rated by an NRSRO may be risk-weighted based 
on the bank's determination of the credit rating of the position, as 
specified in Table C of this appendix A, multiplied by the face amount 
of the position. In order to qualify for this treatment, the bank's 
system for determining the credit rating of the position must meet one 
of the three alternative standards set out in section II.B.5(g)(1) 
through (3) of this appendix A.

                                 Table C
------------------------------------------------------------------------
                                                            Risk Weight
          Rating category                 Examples         (In percent)
------------------------------------------------------------------------
Investment grade..................  BBB or better.......             100
One category below investment       BB..................             200
 grade.
------------------------------------------------------------------------

    (1) Internal risk rating used for asset-backed programs. A bank 
extends a direct credit substitute (but not a purchased credit-enhancing 
interest-only strip) to an asset-backed commercial paper program 
sponsored by the bank and the bank is able to demonstrate to the 
satisfaction of the FDIC, prior to relying upon its use, that the bank's 
internal credit risk rating system is adequate. Adequate internal credit 
risk rating systems usually contain the following criteria:\15\
---------------------------------------------------------------------------

    \15\ The adequacy of a bank's use of its internal credit risk rating 
system must be demonstrated to the FDIC considering the criteria listed 
in this section and the size and complexity of the credit exposures 
assumed by the bank.
---------------------------------------------------------------------------

    (i) The internal credit risk rating system is an integral part of 
the bank's risk management system that explicitly incorporates the full 
range of risks arising from a bank's participation in securitization 
activities;
    (ii) Internal credit ratings are linked to measurable outcomes, such 
as the probability that the position will experience any loss, the 
position's expected loss given default, and the degree of variance in 
losses given default on that position;
    (iii) The internal credit risk rating system must separately 
consider the risk associated with the underlying loans or borrowers, and 
the risk associated with the structure of a particular securitization 
transaction;
    (iv) The internal credit risk rating system identifies gradations of 
risk among ``pass'' assets and other risk positions;
    (v) The internal credit risk rating system must have clear, explicit 
criteria (including for subjective factors), that are used to classify 
assets into each internal risk grade;
    (vi) The bank must have independent credit risk management or loan 
review personnel assigning or reviewing the credit risk ratings;
    (vii) An internal audit procedure should periodically verify that 
internal risk ratings are assigned in accordance with the bank's 
established criteria;
    (viii) The bank must monitor the performance of the internal credit 
risk ratings assigned to nonrated, nontraded direct credit substitutes 
over time to determine the appropriateness of the initial credit risk 
rating

[[Page 209]]

assignment and adjust individual credit risk ratings, or the overall 
internal credit risk ratings system, as needed; and
    (ix) The internal credit risk rating system must make credit risk 
rating assumptions that are consistent with, or more conservative than, 
the credit risk rating assumptions and methodologies of NRSROs.
    (2) Program Ratings. A bank extends a direct credit substitute or 
retains a recourse obligation (but not a residual interest) in 
connection with a structured finance program and an NRSRO has reviewed 
the terms of the program and stated a rating for positions associated 
with the program. If the program has options for different combinations 
of assets, standards, internal credit enhancements and other relevant 
factors, and the NRSRO specifies ranges of rating categories to them, 
the bank may apply the rating category applicable to the option that 
corresponds to the bank's position. In order to rely on a program 
rating, the bank must demonstrate to the FDIC's satisfaction that the 
credit risk rating assigned to the program meets the same standards 
generally used by NRSROs for rating traded positions. The bank must also 
demonstrate to the FDIC's satisfaction that the criteria underlying the 
NRSRO's assignment of ratings for the program are satisfied for the 
particular position issued by the bank. If a bank participates in a 
securitization sponsored by another party, the FDIC may authorize the 
bank to use this approach based on a program rating obtained by the 
sponsor of the program.
    (3) Computer Program. A bank is using an acceptable credit 
assessment computer program that has been developed by an NRSRO to 
determine the rating of a direct credit substitute or recourse 
obligation (but not a residual interest) extended in connection with a 
structured finance program. In order to rely on the rating determined by 
the computer program, the bank must demonstrate to the FDIC's 
satisfaction that ratings under the program correspond credibly and 
reliably with the ratings of traded positions. The bank must also 
demonstrate to the FDIC's satisfaction the credibility of the program in 
financial markets, the reliability of the program in assessing credit 
risk, the applicability of the program to the bank's position, and the 
proper implementation of the program.
    (h) Limitations on risk-based capital requirements--(1) Low-level 
exposure rule. If the maximum exposure to loss retained or assumed by a 
bank in connection with a recourse obligation, a direct credit 
substitute, or a residual interest is less than the effective risk-based 
capital requirement for the credit-enhanced assets, the risk-based 
capital required under this appendix A is limited to the bank's maximum 
contractual exposure, less any recourse liability account established in 
accordance with generally accepted accounting principles. This 
limitation does not apply when a bank provides credit enhancement beyond 
any contractual obligation to support assets it has sold.
    (2) Mortgage-related securities or participation certificates 
retained in a mortgage loan swap. If a bank holds a mortgage-related 
security or a participation certificate as a result of a mortgage loan 
swap with recourse, capital is required to support the recourse 
obligation plus the percentage of the mortgage-related security or 
participation certificate that is not covered by the recourse 
obligation. The total amount of capital required for the on-balance 
sheet asset and the recourse obligation, however, is limited to the 
capital requirement for the underlying loans, calculated as if the bank 
continued to hold these loans as an on-balance sheet asset.
    (3) Related on-balance sheet assets. If a recourse obligation or 
direct credit substitute also appears as a balance sheet asset, the 
asset is risk-weighted only under this section II.B.5 of this appendix 
A, except in the case of loan servicing assets and similar arrangements 
with embedded recourse obligations or direct credit substitutes. In that 
case, the on-balance sheet servicing assets and the related recourse 
obligations or direct credit substitutes must both be separately risk 
weighted and incorporated into the risk-based capital calculation.
    (i) Alternative Capital Calculation for Small Business Obligations--
(1) Definitions. For purposes of this section II.B. 5(i):
    (i) Qualified bank means a bank that:
    (A) Is well capitalized as defined in Sec. 325.103(b)(1) without 
applying the capital treatment described in this section II.B.5(i), or
    (B) Is adequately capitalized as defined in Sec. 325.103(b)(2) 
without applying the capital treatment described in this section 
II.B.5(i) and has received written permission by order of the FDIC to 
apply the capital treatment described in this section II.B.5(i).
    (iii) Small business means a business that meets the criteria for a 
small business concern established by the Small Business Administration 
in 13 CFR part 121 pursuant to 15 U.S.C. 632.
    (2) Capital and reserve requirements. Notwithstanding the risk-based 
capital treatment outlined in any other paragraph (other than paragraph 
(i) of this section II.B.5), with respect to a transfer with recourse of 
a small business loan or a lease to a small business of personal 
property that is a sale under generally accepted accounting principles, 
and for which the bank establishes and maintains a non-capital reserve 
under

[[Page 210]]

generally accepted accounting principles sufficient to meet the 
reasonable estimated liability of the bank under the recourse 
arrangement; a qualified bank may elect to include only the face amount 
of its recourse in its risk-weighted assets for purposes of calculating 
the bank's risk-based capital ratio.
    (3) Limit on aggregate amount of recourse. The total outstanding 
amount of recourse retained by a qualified bank with respect to 
transfers of small business loans and leases to small businesses of 
personal property and included in the risk-weighted assets of the bank 
as described in section II.B.5(i)(2) of this appendix A may not exceed 
15 percent of the bank's total risk-based capital, unless the FDIC 
specifies a greater amount by order.
    (4) Bank that ceases to be qualified or that exceeds aggregate 
limit. If a bank ceases to be a qualified bank or exceeds the aggregate 
limit in section II.B.5(i)(3) of this appendix A, the bank may continue 
to apply the capital treatment described in section II.B.5(i)(2) of this 
appendix A to transfers of small business loans and leases to small 
businesses of personal property that occurred when the bank was 
qualified and did not exceed the limit.
    (5) Prompt correction action not affected. (i) A bank shall compute 
its capital without regard to this section II.B.5(i) for purposes of 
prompt corrective action (12 U.S.C. 1831o) unless the bank is a well 
capitalized bank (without applying the capital treatment described in 
this section II.B.5(i)) and, after applying the capital treatment 
described in this section II.B.5(i), the bank would be well capitalized.
    (ii) A bank shall compute its capital without regard to this section 
II.B.5(i) for purposes of 12 U.S.C. 1831o(g) regardless of the bank's 
capital level.
    (6) Nonfinancial equity investments. (i) General. A bank must deduct 
from its Tier 1 capital the sum of the appropriate percentage (as 
determined below) of the adjusted carrying value of all nonfinancial 
equity investments held by the bank or by its direct or indirect 
subsidiaries. For purposes of this section II.B.(6), investments held by 
a bank include all investments held directly or indirectly by the bank 
or any of its subsidiaries.
    (ii) Scope of nonfinancial equity investments. A nonfinancial equity 
investment means any equity investment held by the bank in a 
nonfinancial company: through a small business investment company (SBIC) 
under section 302(b) of the Small Business Investment Act of 1958 (15 
U.S.C. 682(b));\16\ under the portfolio investment provisions of 
Regulation K issued by the Board of Governors of the Federal Reserve 
System (12 CFR 211.8(c)(3)); or under section 24 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831a), other than an investment held in 
accordance with section 24(f) of that Act.\17\ A nonfinancial company is 
an entity that engages in any activity that has not been determined to 
be permissible for the bank to conduct directly, or to be financial in 
nature or incidental to financial activities under section 4(k) of the 
Bank Holding Company Act (12 U.S.C. 1843(k)).
---------------------------------------------------------------------------

    \16\ An equity investment made under section 302(b) of the Small 
Business Investment Act of 1958 in a SBIC that is not consolidated with 
the bank is treated as a nonfinancial equity investment.
    \17\ The Board of Directors of the FDIC, acting directly, may, in 
exceptional cases and after a review of the proposed activity, permit a 
lower capital deduction for investments approved by the Board of 
Directors under section 24 of the FDI Act so long as the bank's 
investments under section 24 and SBIC investments represent, in the 
aggregate, less than 15 percent of the Tier 1 capital of the bank. The 
FDIC reserves the authority to impose higher capital charges on any 
investment where appropriate.
---------------------------------------------------------------------------

    (iii) Amount of deduction from core capital. (A) The bank must 
deduct from its Tier 1 capital the sum of the appropriate percentages, 
as set forth in the table following this paragraph, of the adjusted 
carrying value of all nonfinancial equity investments held by the bank. 
The amount of the percentage deduction increases as the aggregate amount 
of nonfinancial equity investments held by the bank increases as a 
percentage of the bank's Tier 1 capital.

              Deduction for Nonfinancial Equity Investments
------------------------------------------------------------------------
 Aggregate adjusted carrying value
     of all nonfinancial equity
    investments held directly or     Deduction from Tier 1 Capital (as a
    indirectly by the bank (as a     percentage of the adjusted carrying
percentage of the Tier 1 capital of        value of the investment)
           the bank) \1\
------------------------------------------------------------------------
Less than 15 percent...............  8 percent.
15 percent to 24.99 percent........  12 percent.

[[Page 211]]

 
25 percent and above...............  25 percent.
------------------------------------------------------------------------
\1\ For purposes of calculating the adjusted carrying value of
  nonfinancial equity investments as a percentage of Tier 1 capital,
  Tier 1 capital is defined as the sum of core capital elements net of
  goodwill and net of all identifiable intangible assets other than
  mortgage servicing assets, nonmortgage servicing assets and purchased
  credit card relationships, but prior to the deduction for any
  disallowed mortgage servicing assets, any disallowed nonmortgage
  servicing assets, any disallowed purchased credit card relationships,
  any disallowed credit-enhancing interest-only strips (both purchased
  and retained), any disallowed deferred tax assets, and any
  nonfinancial equity investments.

    (B) These deductions are applied on a marginal basis to the portions 
of the adjusted carrying value of nonfinancial equity investments that 
fall within the specified ranges of the parent bank's Tier 1 capital. 
For example, if the adjusted carrying value of all nonfinancial equity 
investments held by a bank equals 20 percent of the Tier 1 capital of 
the bank, then the amount of the deduction would be 8 percent of the 
adjusted carrying value of all investments up to 15 percent of the 
bank's Tier 1 capital, and 12 percent of the adjusted carrying value of 
all investments in excess of 15 percent of the bank's Tier 1 capital.
    (C) The total adjusted carrying value of any nonfinancial equity 
investment that is subject to deduction under this paragraph is excluded 
from the bank's risk-weighted assets for purposes of computing the 
denominator of the bank's risk-based capital ratio and from total assets 
for purposes of calculating the denominator of the leverage ratio.\18\
---------------------------------------------------------------------------

    \18\ For example, if 8 percent of the adjusted carrying value of a 
nonfinancial equity investment is deducted from Tier 1 capital, the 
entire adjusted carrying value of the investment will be excluded from 
both risk-weighted assets and total assets in calculating the respective 
denominators for the risk-based capital and leverage ratios.
---------------------------------------------------------------------------

    (D) This Appendix establishes minimum risk-based capital ratios and 
banks are at all times expected to maintain capital commensurate with 
the level and nature of the risks to which they are exposed. The risk to 
a bank from nonfinancial equity investments increases with its 
concentration in such investments and strong capital levels above the 
minimum requirements are particularly important when a bank has a high 
degree of concentration in nonfinancial equity investments (e.g., in 
excess of 50 percent of Tier 1 capital). The FDIC intends to monitor 
banks and apply heightened supervision to equity investment activities 
as appropriate, including where the bank has a high degree of 
concentration in nonfinancial equity investments, to ensure that each 
bank maintains capital levels that are appropriate in light of its 
equity investment activities. The FDIC also reserves authority to impose 
a higher capital charge in any case where the circumstances, such as the 
level of risk of the particular investment or portfolio of investments, 
the risk management systems of the bank, or other information, indicate 
that a higher minimum capital requirement is appropriate.
    (iv) SBIC investments. (A) No deduction is required for nonfinancial 
equity investments that are held by a bank through one or more SBICs 
that are consolidated with the bank or in one or more SBICs that are not 
consolidated with the bank to the extent that all such investments, in 
the aggregate, do not exceed 15 percent of the bank's Tier 1 capital. 
Any nonfinancial equity investment that is held through an SBIC or in an 
SBIC and that is not required to be deducted from Tier 1 capital under 
this section II.B.(6)(iv) will be assigned a 100 percent risk-weight and 
included in the bank's consolidated risk-weighted assets.\19\
---------------------------------------------------------------------------

    \19\ If a bank has an investment in a SBIC that is consolidated for 
accounting purposes but that is not wholly owned by the bank, the 
adjusted carrying value of the bank's nonfinancial equity investments 
through the SBIC is equal to the bank's proportionate share of the 
adjusted carrying value of the SBIC's investments in nonfinancial 
companies. The remainder of the SBIC's adjusted carrying value (i.e., 
the minority interest holders' proportionate share) is excluded from the 
risk-weighted assets of the bank. If a bank has an investment in a SBIC 
that is not consolidated for accounting purposes and has current 
information that identifies the percentage of the SBIC's assets that are 
equity investments in nonfinancial companies, the bank may reduce the 
adjusted carrying value of its investment in the SBIC proportionately to 
reflect the percentage of the adjusted carrying value of the SBIC's 
assets that are not equity investments in nonfinancial companies. If a 
bank reduces the adjusted carrying value of its investment in a non-
consolidated SBIC to reflect financial investments of the SBIC, the 
amount of the adjustment will be risk weighted at 100 percent and 
included in the bank's risk-weighted assets.

---------------------------------------------------------------------------

[[Page 212]]

    (B) To the extent the adjusted carrying value of all nonfinancial 
equity investments that a bank holds through one or more SBICs that are 
consolidated with the bank or in one or more SBICs that are not 
consolidated with the bank exceeds, in the aggregate, 15 percent of the 
bank's Tier 1 capital, the appropriate percentage of such amounts (as 
set forth in the table in section II.B.(6)(iii)(A)) must be deducted 
from the bank's common stockholders' equity in determining the bank's 
Tier 1 capital. In addition, the aggregate adjusted carrying value of 
all nonfinancial equity investments held by a bank through a 
consolidated SBIC and in a non-consolidated SBIC (including any 
investments for which no deduction is required) must be included in 
determining, for purposes of the table in section II.B.(6)(iii)(A), the 
total amount of nonfinancial equity investments held by the bank in 
relation to its Tier 1 capital.
    (v) Transition provisions. No deduction under this section II.B.(6) 
is required to be made with respect to the adjusted carrying value of 
any nonfinancial equity investment (or portion of such an investment) 
that was made by the bank prior to March 13, 2000, or that was made by 
the bank after such date pursuant to a binding written commitment \20\ 
entered into prior to March 13, 2000, provided that in either case the 
bank has continuously held the investment since the relevant investment 
date.\21\ For purposes of this section II.B.(6)(v) a nonfinancial equity 
investment made prior to March 13, 2000, includes any shares or other 
interests received by the bank through a stock split or stock dividend 
on an investment made prior to March 13, 2000, provided the bank 
provides no consideration for the shares or interests received and the 
transaction does not materially increase the bank's proportional 
interest in the company. The exercise on or after March 13, 2000, of 
options or warrants acquired prior to March 13, 2000, is not considered 
to be an investment made prior to March 13, 2000, if the bank provides 
any consideration for the shares or interests received upon exercise of 
the options or warrants. Any nonfinancial equity investment (or portion 
thereof) that is not required to be deducted from Tier 1 capital under 
this section II.B.(6)(v) must be included in determining the total 
amount of nonfinancial equity investments held by the bank in relation 
to its Tier 1 capital for purposes of the table in section 
II.B.(6)(iii)(A). In addition, any nonfinancial equity investment (or 
portion thereof) that is not required to be deducted from Tier 1 capital 
under this section II.B.(6)(v) will be assigned a 100-percent risk 
weight and included in the bank's consolidated risk-weighted assets.
---------------------------------------------------------------------------

    \20\ A ``binding written commitment'' means a legally binding 
written agreement that requires the bank to acquire shares or other 
equity of the company, or make a capital contribution to the company, 
under terms and conditions set forth in the agreement. Options, 
warrants, and other agreements that give a bank the right to acquire 
equity or make an investment, but do not require the bank to take such 
actions, are not considered a binding written commitment for purposes of 
this section II.B.(6)(v).
    \21\ For example, if a bank made an equity investment in 100 shares 
of a nonfinancial company prior to March 13, 2000, the adjusted carrying 
value of that investment would not be subject to a deduction under this 
section II.B.(6). However, if the bank made any additional equity 
investment in the company after March 13, 2000, such as by purchasing 
additional shares of the company (including through the exercise of 
options or warrants acquired before or after March 13, 2000) or by 
making a capital contribution to the company and such investment was not 
made pursuant to a binding written commitment entered into before March 
13, 2000, the adjusted carrying value of the additional investment would 
be subject to a deduction under this section II.B.(6). In addition, if 
the bank sold and repurchased, after March 13, 2000, 40 shares of the 
company, the adjusted carrying value of those 40 shares would be subject 
to a deduction under this section II.B.(6).
---------------------------------------------------------------------------

    (vi) Adjusted carrying value. (A) For purposes of this section 
II.B.(6), the ``adjusted carrying value'' of investments is the 
aggregate value at which the investments are carried on the balance 
sheet of the bank reduced by any unrealized gains on those investments 
that are reflected in such carrying value but excluded from the bank's 
Tier 1 capital and associated deferred tax liabilities. For example, for 
equity investments held as available-for-sale (AFS), the adjusted 
carrying value of the investments would be the aggregate carrying value 
of those investments (as reflected on the consolidated balance sheet of 
the bank) less any unrealized gains on those investments that are 
included in other comprehensive income and not reflected in Tier 1 
capital, and associated deferred tax liabilities.\22\
---------------------------------------------------------------------------

    \22\ Unrealized gains on available-for-sale equity investments may 
be included in Tier 2 capital to the extent permitted under section 
I.A.(2)(f) of this appendix A. In addition, the net unrealized losses on 
available-for-sale equity investments are deducted from Tier 1 capital 
in accordance with section I.A.(1) of this appendix A.
---------------------------------------------------------------------------

    (B) As discussed above with respect to consolidated SBICs, some 
equity investments

[[Page 213]]

may be in companies that are consolidated for accounting purposes. For 
investments in a nonfinancial company that is consolidated for 
accounting purposes under generally accepted accounting principles, the 
bank's adjusted carrying value of the investment is determined under the 
equity method of accounting (net of any intangibles associated with the 
investment that are deducted from the bank's core capital in accordance 
with section I.A.(1) of this appendix A). Even though the assets of the 
nonfinancial company are consolidated for accounting purposes, these 
assets (as well as the credit equivalent amounts of the company's off-
balance sheet items) should be excluded from the bank's risk-weighted 
assets for regulatory capital purposes.
    (vii) Equity investments. For purposes of this section II.B.(6), an 
equity investment means any equity instrument (including common stock, 
preferred stock, partnership interests, interests in limited liability 
companies, trust certificates and warrants and call options that give 
the holder the right to purchase an equity instrument), any equity 
feature of a debt instrument (such as a warrant or call option), and any 
debt instrument that is convertible into equity where the instrument or 
feature is held under one of the legal authorities listed in section 
II.B.(6)(ii) of this appendix A. An investment in any other instrument 
(including subordinated debt) may be treated as an equity investment if, 
in the judgment of the FDIC, the instrument is the functional equivalent 
of equity or exposes the bank to essentially the same risks as an equity 
instrument.
    6. Asset-backed commercial paper programs. a. An asset-backed 
commercial paper (ABCP) program means a program that primarily issues 
externally rated commercial paper backed by assets or other exposures 
held in a bankruptcy-remote, special purpose entity.
    b. A bank that qualifies as a primary beneficiary and must 
consolidate an ABCP program that is defined as a variable interest 
entity under GAAP may exclude the consolidated ABCP program assets from 
risk-weighted assets provided that the bank is the sponsor of the ABCP 
program. If a bank excludes such consolidated ABCP program assets, the 
bank must assess the appropriate risk-based capital charge against any 
exposures of the bank arising in connection with such ABCP programs, 
including direct credit substitutes, recourse obligations, residual 
interests, liquidity facilities, and loans, in accordance with sections 
II.B.5., II.C. and II.D. of this appendix.
    c. If a bank has multiple overlapping exposures (such as a program-
wide credit enhancement and multiple pool-specific liquidity facilities) 
to an ABCP program that is not consolidated for risk-based capital 
purposes, the bank is not required to hold capital under duplicative 
risk-based capital requirements under this appendix against the 
overlapping position. Instead, the bank should apply to the overlapping 
position the applicable risk-based capital treatment that results in the 
highest capital charge.

         C. Risk Weights for Balance Sheet Assets (see Table II)

    The risk-based capital framework contains four risk weight 
categories--0 percent, 20 percent, 50 percent and 100 percent. In 
general, if a particular item can be placed in more than one risk 
category, it is assigned to the category that has the lowest risk 
weight. An explanation of the components of each category follows:
    Category 1--Zero Percent Risk Weight. a. This category includes cash 
(domestic and foreign) owned and held in all offices of the bank or in 
transit; balances due from Federal Reserve Banks and central banks in 
other OECD countries; the portions of local currency claims on or 
unconditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency; and gold bullion 
held in the bank's own vaults or in another bank's vaults on an 
allocated basis, to the extent it is offset by gold bullion 
liabilities.\23\
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    \23\ All other bullion holdings are to be assigned to the 100 
percent risk weight category.
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    b. The zero percent risk category also includes direct claims \24\ 
(including securities, loans, and leases) on, and the portions of claims 
that are unconditionally guaranteed by, OECD central governments \25\ 
and U.S.

[[Page 214]]

Government agencies.\26\ Federal Reserve Bank stock also is included in 
this category.
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    \24\ For purposes of determining the appropriate risk weights for 
this risk-based capital framework, the terms claims and securities refer 
to loans or other debt obligations of the entity on whom the claim is 
held. Investments in the form of stock or equity holdings in commercial 
or financial firms are generally assigned to the 100 percent risk 
category.
    \25\ A central government is defined to include departments and 
ministries, including the central bank, of the central government. The 
U.S. central bank includes the 12 Federal Reserve Banks. The definition 
of central government does not include state, provincial or local 
governments or commercial enterprises owned by the central government. 
In addition, it does not include local government entities or commercial 
enterprises whose obligations are guaranteed by the central government. 
OECD central governments are defined as central governments of the OECD-
based group of countries. Non-OECD central governments are defined as 
central governments of countries that do not belong to the OECD-based 
group of countries.
    \26\ For risk-based capital purposes U.S. Government agency is 
defined as an instrumentality of the U.S. Government whose debt 
obligations are fully and explicitly guaranteed as to the timely payment 
of principal and interest by the full faith and credit of the U.S. 
Government. These agencies include the Government National Mortgage 
Association (GNMA), the Veterans Administration (VA), the Federal 
Housing Administration (FHA), the Farmers Home Administration (FHA), the 
Export-Import Bank (Exim Bank), the Overseas Private Investment 
Corporation (OPIC), the Commodity Credit Corporation (CCC), and the 
Small Business Administration (SBA). U.S. Government agencies generally 
do not directly issue securities to the public; however, a number of 
U.S. Government agencies, such as GNMA, guarantee securities that are 
publicly held.
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    c. This category also includes claims on, and claims guaranteed by, 
qualifying securities firms incorporated in the United States or other 
members of the OECD-based group of countries that are collateralized by 
cash on deposit in the lending bank or by securities issued or 
guaranteed by the United States or OECD central governments (including 
U.S. government agencies), provided that a positive margin of collateral 
is required to be maintained on such a claim on a daily basis, taking 
into account any change in a bank's exposure to the obligor or 
counterparty under the claim in relation to the market value of the 
collateral held in support of the claim.
    Category 2--20 Percent Risk Weight. a. This category includes short-
term claims (including demand deposits) on, and portions of short-term 
claims that are guaranteed \27\ by, U.S. depository institutions \28\ 
and foreign banks;\29\ portions of claims collateralized by cash held in 
a segregated deposit account of the lending bank; cash items in process 
of collection, both foreign and domestic; and long-term claims on, and 
portions of long-term claims guaranteed by, U.S. depository institutions 
and OECD banks.\30\ This category also includes a claim \31\ on, or 
guaranteed by, qualifying securities firms incorporated in the United 
States or other member of the OECD-based group of countries \32\

[[Page 215]]

provided that: the qualifying securities firm has a long-term issuer 
credit rating, or a rating on at least one issue of long-term debt, in 
one of the three highest investment grade rating categories from a 
nationally recognized statistical rating organization; or the claim is 
guaranteed by the firm's parent company and the parent company has such 
a rating. If ratings are available from more than one rating agency, the 
lowest rating will be used to determine whether the rating requirement 
has been met. This category also includes a collateralized claim on a 
qualifying securities firm in such a country, without regard to 
satisfaction of the rating standard, provided that the claim arises 
under a contract that:
    (1) Is a reverse repurchase/repurchase agreement or securities 
lending/borrowing transaction executed using standard industry 
documentation;
    (2) Is collateralized by debt or equity securities that are liquid 
and readily marketable;
    (3) Is marked-to-market daily;
    (4) Is subject to a daily margin maintenance requirement under the 
standardized documentation; and
    (5) Can be liquidated, terminated, or accelerated immediately in 
bankruptcy or similar proceeding, and the security or collateral 
agreement will not be stayed or avoided, under applicable law of the 
relevant jurisdiction.\33\
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    \27\ Claims guaranteed by U.S. depository institutions and foreign 
banks include risk participations in both bankers acceptances and 
standby letters of credit, as well as participations in commitments, 
that are conveyed to other U.S. depository institutions or foreign 
banks.
    \28\ U.S. depository institutions are defined to include branches 
(foreign and domestic) of federally-insured banks and depository 
institutions chartered and headquartered in the 50 states of the United 
States, the District of Columbia, Puerto Rico, and U.S. territories and 
possessions. The definition encompasses banks, mutual or stock savings 
banks, savings or building and loan associations, cooperative banks, 
credit unions, international banking facilities of domestic depository 
institutions, and U.S.-chartered depository institutions owned by 
foreigners. However, this definition excludes branches and agencies of 
foreign banks located in the U.S. and bank holding companies.
    \29\ Foreign banks are distinguished as either OECD banks or non-
OECD banks. OECD banks include banks and their branches (foreign and 
domestic) organized under the laws of countries (other than the U.S.) 
that belong to the OECD-based group of countries. Non-OECD banks include 
banks and their branches (foreign and domestic) organized under the laws 
of countries that do not belong to the OECD-based group of countries. 
For risk-based capital purposes, a bank is defined as an institution 
that engages in the business of banking; is recognized as a bank by the 
bank supervisory or monetary authorities of the country of its 
organization or principal banking operations; receives deposits to a 
substantial extent in the regular course of business; and has the power 
to accept demand deposits.
    \30\ Long-term claims on, or guaranteed by, non-OECD banks and all 
claims on bank holding companies are assigned to the 100 percent risk 
weight category, as are holdings of bank-issued securities that qualify 
as capital of the issuing banks for risk-based capital purposes.
    \31\ Claims on a qualifying securities firm that are instruments the 
firm, or its parent company, uses to satisfy its applicable capital 
requirements are not eligible for this risk weight.
    \32\ With regard to securities firms incorporated in the United 
States, qualifying securities firms are those securities firms that are 
broker-dealers registered with the Securities and Exchange Commission 
(SEC) and are in compliance with the SEC's net capital rule, 17 CFR 
240.15c3-1. With regard to securities firms incorporated in any other 
country in the OECD-based group of countries, qualifying securities 
firms are those securities firms that a bank is able to demonstrate are 
subject to consolidated supervision and regulation (covering their 
direct and indirect subsidiaries, but not necessarily their parent 
organizations) comparable to that imposed on banks in OECD countries. 
Such regulation must include risk-based capital requirements comparable 
to those applied to banks under the Accord on International Convergence 
of Capital Measurement and Capital Standards (1988, as amended in 1998) 
(Basel Accord). Claims on a qualifying securities firm that are 
instruments the firm, or its parent company, uses to satisfy its 
applicable capital requirements are not eligible for this risk weight 
and are generally assigned to at least a 100 percent risk weight. In 
addition, certain claims on qualifying securities firms are eligible for 
a zero percent risk weight if the claims are collateralized by cash on 
deposit in the lending bank or by securities issued or guaranteed by the 
United States or OECD central governments (including U.S. government 
agencies), provided that a positive margin of collateral is required to 
be maintained on such a claim on a daily basis, taking into account any 
change in a bank's exposure to the obligor or counterparty under the 
claim in relation to the market value of the collateral held in support 
of the claim.
    \33\ For example, a claim is exempt from the automatic stay in 
bankruptcy in the United States if it arises under a securities contract 
or a repurchase agreement subject to section 555 or 559 of the 
Bankruptcy Code, respectively (11 U.S.C. 555 or 559), a qualified 
financial contract under section 11(e)(8) of the Federal Deposit 
Insurance Act (12 U.S.C. 1821(e)(8)), or a netting contract between 
financial institutions under sections 401-407 of the Federal Deposit 
Insurance Corporation Improvement Act of 1991 (12 U.S.C. 4401-4407), or 
the Board's Regulation EE (12 CFR part 231).
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    b. This category also includes claims on, or portions of claims 
guaranteed by, U.S. Government-sponsored agencies;\34\ and portions of 
claims (including repurchase agreements) collateralized by securities 
issued or guaranteed by OECD central governments, U.S. Government 
agencies, or U.S. Government-sponsored agencies. Also included in the 20 
percent risk category are portions of claims that are conditionally 
guaranteed by OECD central governments and U.S. Government agencies,\35\ 
as well as portions of local currency claims that are conditionally 
guaranteed by non-OECD central governments to the extent that the bank 
has liabilities booked in that currency.
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    \34\ For risk-based capital purposes, U.S. Government-sponsored 
agencies are defined as agencies originally established or chartered by 
the U.S. Government to serve public purposes specified by the U.S. 
Congress but whose debt obligations are not explicitly guaranteed by the 
full faith and credit of the U.S. Government. These agencies include the 
Federal Home Loan Mortgage Corporation (FHLMC), the Federal National 
Mortgage Association (FNMA), the Farm Credit System, the Federal Home 
Loan Bank System, and the Student Loan Marketing Association (SLMA). For 
risk-based capital purposes, claims on U.S. Government-sponsored 
agencies also include capital stock in a Federal Home Loan Bank that is 
held as a condition of membership in that Bank.
    \35\ For risk-based capital purposes, a conditional guarantee is 
deemed to exist if the validity of the guarantee by the OECD central 
government or the U.S. Government agency is dependent upon some 
affirmative action (e.g., servicing requirements on the part of the 
beneficiary of the guarantee). Portions of claims that are 
unconditionally guaranteed by OECD central governments or U.S. 
Government agencies are assigned to the zero percent risk category.
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    c. General obligation claims on, or portions of claims guaranteed 
by, the full faith and credit of states or other political subdivisions 
of the United States or other countries of the OECD-based group are also 
assigned to this 20 percent risk category.\36\ In addition, this 
category includes claims on the International Bank for Reconstruction 
and Development (World Bank), International Finance Corporation the 
Inter-American Development Bank, the Asian Development Bank, the African 
Development Bank, the European Investment Bank, the

[[Page 216]]

European Bank for Reconstruction and Development, the Nordic Investment 
Bank, and other multilateral lending institutions or regional 
development institutions in which the U.S. Government is a shareholder 
or contributing member, as well as portions of claims guaranteed by such 
organizations or collateralized by their securities.
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    \36\ Claims on, or guaranteed by, states or other political 
subdivisions of countries that do not belong to the OECD-based group of 
countries are to be placed in the 100 percent risk weight category.
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    d. This category also includes recourse obligations, direct credit 
substitutes, residual interests (other than a credit-enhancing interest-
only strip) and asset- or mortgage-backed securities rated in the 
highest or second highest investment grade category, e.g., AAA, AA, in 
the case of long-term ratings, or the highest rating category, e.g., A-
1, P-1, in the case of short-term ratings.
    a. Category 3--50 Percent Risk Weight. This category includes loans 
fully secured by first liens \37\ on one-to-four family residential 
properties, provided that such loans have been approved in accordance 
with prudent underwriting standards, including standards relating to the 
loan amount as a percent of the appraised value of the property,\38\ and 
provided that the loans are not past due 90 days or more or carried in 
nonaccrual status.\39\ The types of loans that qualify as loans secured 
by one-to-four family residential properties are listed in the 
instructions for preparation of the Consolidated Reports of Condition 
and Income. These properties may be either owner-occupied or rented. In 
addition, for risk-based capital purposes, loans secured by one-to-four 
family residential properties include loans to builders with substantial 
project equity for the construction of one-to-four family residences 
that have been presold under firm contracts to purchasers who have 
obtained firm commitments for permanent qualifying mortgage loans and 
have made substantial earnest money deposits. Such loans to builders 
will be considered prudently underwritten only if the bank has obtained 
sufficient documentation that the buyer of the home intends to purchase 
the home (i.e., has a legally binding written sales contract) and has 
the ability to obtain a mortgage loan sufficient to purchase the home 
(i.e., has a firm written commitment for permanent financing of the home 
upon completion), provided the following criteria are met:
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    \37\ If a bank holds the first and junior lien(s) on a residential 
property and no other party holds an intervening lien, the transactions 
are treated as a single loan secured by a first lien for purposes of 
determining the loan-to-value ratio and assigning a risk weight.
    \38\ For risk-based capital purposes, the loan-to-value ratio 
generally is based upon the most current appraised value of the 
property. The appraisal should be performed in a manner consistent with 
the Federal banking agencies' real estate appraisal guidelines and with 
the bank's own appraisal guidelines.
    \39\ Real estate loans that do not meet all of the specified 
criteria or that are made for the purpose of property development are 
placed in the 100 percent risk category.
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    By order of the Board of Directors.
    (1) The purchaser is an individual(s) who intends to occupy the 
residence and is not a partnership, joint venture, trust, corporation, 
or any other entity (including an entity acting as a sole 
proprietorship) that is purchasing one or more of the homes for 
speculative purposes;
    (2) The builder must incur at least the first ten percent of the 
direct costs (i.e., actual costs of the land, labor, and material) 
before any drawdown is made under the construction loan and the 
construction loan may not exceed 80 percent of the sales price of the 
presold home;
    (3) The purchaser has made a substantial ``earnest money deposit'' 
of no less than three percent of the sales price of the home and the 
deposit must be subject to forfeiture if the purchaser terminates the 
sales contract; and
    (4) The earnest money deposit must be held in escrow by the bank 
financing the builder or by an independent party in a fiduciary capacity 
and the escrow agreement must provide that, in the event of default 
arising from the cancellation of the sales contract by the buyer, the 
escrow funds must first be used to defray any costs incurred by the 
bank.
    b. This category also includes loans fully secured by first liens on 
multifamily residential properties,\40\ provided that:
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    \40\ The types of loans that qualify as loans secured by multifamily 
residential properties are listed in the instructions for preparation of 
the Consolidated Reports of Condition and Income. In addition, from the 
standpoint of the selling bank, when a multifamily residential property 
loan is sold subject to a pro rata loss sharing arrangement which 
provides for the purchaser of the loan to share in any loss incurred on 
the loan on a pro rata basis with the selling bank, that portion of the 
loan is not subject to the risk-based capital standards. In connection 
with sales of multifamily residential property loans in which the 
purchaser of the loan shares in any loss incurred on the loan with the 
selling bank on other than a pro rata basis, the selling bank must treat 
these other loss sharing arrangements in accordance with section II.B.5 
of this appendix A.
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    (1) The loan amount does not exceed 80 percent of the value \41\ of 
the property securing

[[Page 217]]

the loan as determined by the most current appraisal or evaluation, 
whichever may be appropriate (75 percent if the interest rate on the 
loan changes over the term of the loan);
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    \41\ At the origination of a loan to purchase an existing property, 
the term ``value'' means the lesser of the actual acquisition cost or 
the estimate of value set forth in an appraisal or evaluation, whichever 
may be appropriate.
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    (2) For the property's most recent fiscal year, the ratio of annual 
net operating income generated by the property (before payment of any 
debt service on the loan) to annual debt service on the loan is not less 
than 120 percent (115 percent if the interest rate on the loan changes 
over the term of the loan) or, in the case of a property owned by a 
cooperative housing corporation or nonprofit organization, the property 
generates sufficient cash flow to provide comparable protection to the 
bank;
    (3) Amortization of principal and interest on the loan occurs over a 
period of not more than 30 years;
    (4) The minimum original maturity for repayment of principal on the 
loan is not less than seven years;
    (5) All principal and interest payments have been made on a timely 
basis in accordance with the terms of the loan for at least one year 
before the loan is placed in this category; \42\
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    \42\ In the case where the existing owner of a multifamily 
residential property refinances a loan on that property, all principal 
and interest payments on the loan being refinanced must have been made 
on a timely basis in accordance with the terms of that loan for at least 
the preceding year. The new loan must meet all of the other eligibility 
criteria in order to qualify for a 50 percent risk weight.
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    (6) The loan is not 90 days or more past due or carried in 
nonaccrual status; and
    (7) The loan has been made in accordance with prudent underwriting 
standards.
    c. This category also includes revenue (non-general obligation) 
bonds or similar obligations, including loans and leases, that are 
obligations of states or political subdivisions of the United States or 
other OECD countries, but for which the government entity is committed 
to repay the debt with revenues from the specific projects financed, 
rather than from general tax funds (e.g., municipal revenue bonds). In 
addition, the credit equivalent amount of derivative contracts that do 
not qualify for a lower risk weight are assigned to the 50 percent risk 
category.
    d. This category also includes recourse obligations, direct credit 
substitutes, residual interests (other than a credit-enhancing interest-
only strip) and asset- or mortgage-backed securities rated in the third 
highest investment grade category, e.g., A, in the case of long-term 
ratings, or the second highest rating category, e.g., A-2, P-2, in the 
case of short-term ratings.
    Category 4--100 Percent Risk Weight. (a) All assets not included in 
the categories above in section II.C of this appendix A, except the 
assets specifically included in the 200 percent category below in 
section II.C of this appendix A and assets that are otherwise risk 
weighted in accordance with section II.B.5 of this appendix A, are 
assigned to this category, which comprises standard risk assets. The 
bulk of the assets typically found in a loan portfolio would be assigned 
to the 100 percent category.
    (b) This category includes:
    (1) Long-term claims on, and the portions of long-term claims that 
are guaranteed by, non-OECD banks, and all claims on non-OECD central 
governments that entail some degree of transfer risk; \43\
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    \43\ Such assets include all non-local currency claims on, and the 
portions of claims that are guaranteed by, non-OECD central governments 
and those portions of local currency claims on, or guaranteed by, non-
OECD central governments that exceed the local currency liabilities held 
by the bank.
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    (2) All claims on foreign and domestic private-sector obligors not 
included in the categories above in section II.C of this appendix A 
(including loans to nondepository financial institutions and bank 
holding companies);
    (3) Claims on commercial firms owned by the public sector;
    (4) Customer liabilities to the bank on acceptances outstanding 
involving standard risk claims; \44\
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    \44\ Customer liabilities on acceptances outstanding involving 
nonstandard risk claims, such as claims on U.S. depository institutions, 
are assigned to the risk category appropriate to the identity of the 
obligor or, if relevant, the nature of the collateral or guarantees 
backing the claims. Portions of acceptances conveyed as risk 
participations to U.S. depository institutions or foreign banks are 
assigned to the 20 percent risk category appropriate to short-term 
claims guaranteed by U.S. depository institutions and foreign banks.
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    (5) Investments in fixed assets, premises, and other real estate 
owned;
    (6) Common and preferred stock of corporations, including stock 
acquired for debts previously contracted;
    (7) Commercial and consumer loans (except those assigned to lower 
risk categories due to recognized guarantees or collateral and loans 
secured by residential property that qualify for a lower risk weight);
    (8) Recourse obligations, direct credit substitutes, residual 
interests (other than a credit-enhancing interest-only strip) and asset-
or mortgage-backed securities rated in the lowest investment grade 
category, e.g.,

[[Page 218]]

BBB, as well as certain positions (but not residual interests) which the 
bank rates pursuant to section section II.B.5(g) of this appendix A.;
    (9) Industrial-development bonds and similar obligations issued 
under the auspices of states or political subdivisions of the OECD-based 
group of countries for the benefit of a private party or enterprise 
where that party or enterprise, not the government entity, is obligated 
to pay the principal and interest;
    (10) All obligations of states or political subdivisions of 
countries that do not belong to the OECD-based group; and
    (11) Stripped mortgage-backed securities and similar instruments, 
such as interest-only strips that are not credit-enhancing and 
principal-only strips.
    (12) Claims representing capital of a qualifying securities firm.
    (c) The following assets also are assigned a risk weight of 100 
percent if they have not already been deducted from capital: investments 
in unconsolidated companies, joint ventures, or associated companies; 
instruments that qualify as capital issued by other banks; deferred tax 
assets; and mortgage servicing assets, nonmortgage servicing assets, and 
purchased credit card relationships.
    Category 5--200 Percent Risk Weight. This category includes:
    (a) Externally rated recourse obligations, direct credit 
substitutes, residual interests (other than a credit-enhancing interest-
only strip), and asset- and mortgage-backed securities that are rated 
one category below the lowest investment grade category, e.g., BB, to 
the extent permitted in section II.B.5(d) of this appendix A; and
    (b) A position (but not a residual interest) in a securitization or 
structured finance program that is not rated by an NRSRO for which the 
bank determines that the credit risk is equivalent to one category below 
investment grade, e.g., BB, to the extent permitted in section 
II.B.5.(g) of this appendix A.

    D. Conversion Factors for Off-Balance Sheet Items (see Table III)

    The face amount of an off-balance sheet item is generally 
incorporated into the risk-weighted assets in two steps. The face amount 
is first multiplied by a credit conversion factor, except as otherwise 
specified in section II.B.5 of this appendix A for direct credit 
substitutes and recourse obligations. The resultant credit equivalent 
amount is assigned to the appropriate risk category according to the 
obligor or, if relevant, the guarantor, the nature of any collateral, or 
external credit ratings.\45\
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    \45\ The sufficiency of collateral and guarantees for off-balance-
sheet items is determined by the market value of the collateral or the 
amount of the guarantee in relation to the face amount of the item, 
except for derivative contracts, for which this determination is 
generally made in relation to the credit equivalent amount. Collateral 
and guarantees are subject to the same provisions noted under section 
II.B of this appendix A.
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    1. Items With a 100 Percent Conversion Factor. (a) Except as 
otherwise provided in section II.B.5. of this appendix A, the full 
amount of an asset or transaction supported, in whole or in part, by a 
direct credit substitute or a recourse obligation. Direct credit 
substitutes and recourse obligations are defined in section II.B.5. of 
this appendix A.
    (b) Sale and repurchase agreements, if not already included on the 
balance sheet, and forward agreements. Forward agreements are legally 
binding contractual obligations to purchase assets with drawdown which 
is certain at a specified future date. Such obligations include forward 
purchases, forward forward deposits placed,\46\ and partly-paid shares 
and securities; they do not include commitments to make residential 
mortgage loans or forward foreign exchange contracts.
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    \46\ Forward forward deposits accepted are treated as interest rate 
contracts.
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    (c) Securities lent by a bank are treated in one of two ways, 
depending upon whether the lender is exposed to risk of loss. If a bank, 
as agent for a customer, lends the customer's securities and does not 
indemnify the customer against loss, then the securities transaction is 
excluded from the risk-based capital calculation. On the other hand, if 
a bank lends its own securities or, acting as agent for a customer, 
lends the customer's securities and indemnifies the customer against 
loss, the transaction is converted at 100 percent and assigned to the 
risk weight category appropriate to the obligor or, if applicable, to 
the collateral delivered to the lending bank or the independent 
custodian acting on the lending bank's behalf.
    2. Items With a 50 Percent Conversion Factor. a. Transaction-related 
contingencies are to be converted at 50 percent. Such contingencies 
include bid bonds, performance bonds, warranties, and performance 
standby letters of credit related to particular transactions, as well as 
acquisitions of risk participations in performance standby letters of 
credits. Performance standby letters of credit (performance bonds) are 
irrevocable obligations of the bank to pay a third-party beneficiary 
when a customer (account party) fails to perform on some contractual 
nonfinancial obligation. Thus, performance standby letters of credit 
represent obligations backing the performance of nonfinancial or 
commercial contracts or undertakings. To the extent permitted by law or 
regulation, performance standby letters of

[[Page 219]]

credit include arrangements backing, among other things, subcontractors' 
and suppliers' performance, labor and materials contracts, and 
construction bids.
    b. The unused portion of commitments with an original maturity 
exceeding one year, including underwriting commitments and commercial 
and consumer credit commitments, also are to be converted at 50 percent. 
Original maturity is defined as the length of time between the date the 
commitment is issued and the earliest date on which: (1) The bank can at 
its option, unconditionally (without cause) cancel the commitment,\47\ 
and (2) the bank is scheduled to (and as a normal practice actually 
does) review the facility to determine whether or not it should be 
extended and, on at least an annual basis, continues to regularly review 
the facility. Facilities that are unconditionally cancelable (without 
cause) at any time by the bank are not deemed to be commitments, 
provided the bank makes a separate credit decision before each drawing 
under the facility.
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    \47\ In the case of home equity or mortgage lines of credit secured 
by liens on one-to-four family residential properties, a bank is deemed 
able to unconditionally cancel the commitment if, at its option, it can 
prohibit additional extensions of credit, reduce the credit line, and 
terminate the commitment to the full extent permitted by relevant 
Federal law.
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    c.i. Commitments are defined as any legally binding arrangements 
that obligate a bank to extend credit in the form of loans or lease 
financing receivables; to purchase loans, securities, or other assets; 
or to participate in loans and leases. Commitments also include 
overdraft facilities, revolving credit, home equity and mortgage lines 
of credit, eligible ABCP liquidity facilities, and similar transactions. 
Normally, commitments involve a written contract or agreement and a 
commitment fee, or some other form of consideration. Commitments are 
included in weighted-risk assets regardless of whether they contain 
material adverse change clauses or other provisions that are intended to 
relieve the issuer of its funding obligation under certain conditions. 
In the case of commitments structured as syndications, where the bank is 
obligated solely for its pro rata share, only the bank's proportional 
share of the syndicated commitment is taken into account in calculating 
the risk-based capital ratio.
    ii. Banks that are subject to the market risk rules in appendix C to 
part 325 are required to convert the notional amount of eligible ABCP 
liquidity facilities, in form or in substance, with an original maturity 
of over one year that are carried in the trading account at 50 percent 
to determine the appropriate credit equivalent amount even though those 
facilities are structured or characterized as derivatives or other 
trading book assets. Liquidity facilities that support ABCP, in form or 
in substance, (including those positions to which the market risk rules 
may not be applied as set forth in section 2(a) of appendix C of this 
part) that are not eligible ABCP liquidity facilities are to be 
considered recourse obligations or direct credit substitutes, and 
assessed the appropriate risk-based capital treatment in accordance with 
section II.B.5. of this appendix.
    d. In the case of commitments structured as syndications where the 
bank is obligated only for its pro rata share, the risk-based capital 
framework includes only the bank's proportional share of such 
commitments. Thus, after a commitment has been converted at 50 percent, 
portions of commitments that have been conveyed to other U.S. depository 
institutions or OECD banks, but for which the originating bank retains 
the full obligation to the borrower if the participating bank fails to 
pay when the commitment is drawn upon, will be assigned to the 20 
percent risk category. The acquisition of such a participation in a 
commitment would be converted at 50 percent and the credit equivalent 
amount would be assigned to the risk category that is appropriate for 
the account party obligor or, if relevant, to the nature of the 
collateral or guarantees.
    e. Revolving underwriting facilities (RUFs), note issuance 
facilities (NIFs), and other similar arrangements also are converted at 
50 percent. These are facilities under which a borrower can issue on a 
revolving basis short-term notes in its own name, but for which the 
underwriting banks have a legally binding commitment either to purchase 
any notes the borrower is unable to sell by the rollover date or to 
advance funds to the borrower.
    3. Items With a 20 Percent Conversion Factor. Short-term, self-
liquidating, trade-related contingencies which arise from the movement 
of goods are converted at 20 percent. Such contingencies include 
commercial letters of credit and other documentary letters of credit 
collateralized by the underlying shipments.
    4. Items With a 10 Percent Conversion Factor. a. Unused portions of 
eligible ABCP liquidity facilities with an original maturity of one year 
or less that provide liquidity support to ABCP also are converted at 10 
percent.
    b. Banks that are subject to the market risk rules in appendix C to 
part 325 are required to convert the notional amount of eligible ABCP 
liquidity facilities, in form or in substance, with an original maturity 
of one year or less that are carried in the trading account at 10 
percent to determine the appropriate credit equivalent amount even 
though those facilities are structured or characterized as derivatives 
or other trading book assets. Liquidity facilities that provide

[[Page 220]]

liquidity support to ABCP, in form or in substance, (including those 
positions to which the market risk rules may not be applied as set forth 
in section 2(a) of appendix C of this part) that are not eligible ABCP 
liquidity facilities are to be considered recourse obligations or direct 
credit substitutes and assessed the appropriate risk-based capital 
requirement in accordance with section II.B.5. of this appendix.
    5. Items With a Zero Percent Conversion Factor. These include unused 
portions of commitments, with the exception of eligible ABCP liquidity 
facilities, with an original maturity of one year or less, or which are 
unconditionally cancelable at any time, provided a separate credit 
decision is made before each drawing under the facility. Unused portions 
of retail credit card lines and related plans are deemed to be short-
term commitments if the bank, in accordance with applicable law, has the 
unconditional option to cancel the credit line at any time.
    E. Derivative Contracts (Interest Rate, Exchange Rate, Commodity 
(including precious metal) and Equity Derivative Contracts)
    1. Credit equivalent amounts are computed for each of the following 
off-balance-sheet derivative contracts:
    (a) Interest Rate Contracts
    (i) Single currency interest rate swaps.
    (ii) Basis swaps.
    (iii) Forward rate agreements.
    (iv) Interest rate options purchased (including caps, collars, and 
floors purchased).
    (v) Any other instrument linked to interest rates that gives rise to 
similar credit risks (including when-issued securities and forward 
deposits accepted).
    (b) Exchange Rate Contracts
    (i) Cross-currency interest rate swaps.
    (ii) Forward foreign exchange contracts.
    (iii) Currency options purchased.
    (iv) Any other instrument linked to exchange rates that gives rise 
to similar credit risks.
    (c) Commodity (including precious metal) or Equity Derivative 
Contracts
    (i) Commodity- or equity-linked swaps.
    (ii) Commodity- or equity-linked options purchased.
    (iii) Forward commodity- or equity-linked contracts.
    (iv) Any other instrument linked to commodities or equities that 
gives rise to similar credit risks.
    2. Exchange rate contracts with an original maturity of 14 calendar 
days or less and derivative contracts traded on exchanges that require 
daily receipt and payment of cash variation margin may be excluded from 
the risk-based ratio calculation. Gold contracts are accorded the same 
treatment as exchange rate contracts except gold contracts with an 
original maturity of 14 calendar days or less are included in the risk-
based calculation. Over-the-counter options purchased are included and 
treated in the same way as other derivative contracts.
    3. Credit Equivalent Amounts for Derivative Contracts. (a) The 
credit equivalent amount of a derivative contract that is not subject to 
a qualifying bilateral netting contract in accordance with section 
II.E.5. of this appendix A is equal to the sum of:
    (i) The current exposure (which is equal to the mark-to-market 
value,\48\ if positive, and is sometimes referred to as the replacement 
cost) of the contract; and
---------------------------------------------------------------------------

    \48\ Mark-to-market values are measured in dollars, regardless of 
the currency or currencies specified in the contract and should reflect 
changes in both underlying rates, prices and indices, and counterparty 
credit quality.
---------------------------------------------------------------------------

    (ii) An estimate of the potential future credit exposure.
    (b) The current exposure is determined by the mark-to-market value 
of the contract. If the mark-to-market value is positive, then the 
current exposure is equal to that mark-to-market value. If the mark-to-
market value is zero or negative, then the current exposure is zero.
    (c) The potential future credit exposure of a contract, including a 
contract with a negative mark-to-market value, is estimated by 
multiplying the notional principal amount of the contract by a credit 
conversion factor. Banks should, subject to examiner review, use the 
effective rather than the apparent or stated notional amount in this 
calculation. The credit conversion factors are:

                                            Conversion Factor Matrix
----------------------------------------------------------------------------------------------------------------
                                                                Exchange                  Precious
               Remaining maturity                  Interest     rate and      Equity      metals,       Other
                                                     rate         gold                  except gold  commodities
----------------------------------------------------------------------------------------------------------------
One year or less...............................         0.0%         1.0%         6.0%         7.0%        10.0%
More than one year to five years...............         0.5%         5.0%         8.0%         7.0%        12.0%
More than five years...........................         1.5%         7.5%        10.0%         8.0%        15.0%
----------------------------------------------------------------------------------------------------------------

    (d) For contracts that are structured to settle outstanding exposure 
on specified dates and where the terms are reset such that the market 
value of the contract is zero

[[Page 221]]

on these specified dates, the remaining maturity is equal to the time 
until the next reset date. For interest rate contracts with remaining 
maturities of more than one year and that meet these criteria, the 
conversion factor is subject to a minimum value of 0.5 percent.
    (e) For contracts with multiple exchanges of principal, the 
conversion factors are to be multiplied by the number of remaining 
payments in the contract. Derivative contracts not explicitly covered by 
any of the columns of the conversion factor matrix are to be treated as 
``other commodities.''
    (f) No potential future exposure is calculated for single currency 
interest rate swaps in which payments are made based upon two floating 
rate indices (so called floating/floating or basis swaps); the credit 
exposure on these contracts is evaluated solely on the basis of their 
mark-to-market values.
    4. Risk Weights and Avoidance of Double Counting. (a) Once the 
credit equivalent amount for a derivative contract, or a group of 
derivative contracts subject to a qualifying bilateral netting 
agreement, has been determined, that amount is assigned to the risk 
category appropriate to the counterparty, or, if relevant, the guarantor 
or the nature of any collateral. However, the maximum weight that will 
be applied to the credit equivalent amount of such contracts is 50 
percent.
    (b) In certain cases, credit exposures arising from the derivative 
contracts covered by these guidelines may already be reflected, in part, 
on the balance sheet. To avoid double counting such exposures in the 
assessment of capital adequacy and, perhaps, assigning inappropriate 
risk weights, counterparty credit exposures arising from the types of 
instruments covered by these guidelines may need to be excluded from 
balance sheet assets in calculating a bank's risk-based capital ratio.
    (c) The FDIC notes that the conversion factors set forth in section 
II.E.3. of appendix A, which are based on observed volatilities of the 
particular types of instruments, are subject to review and modification 
in light of changing volatilities or market conditions.
    (d) Examples of the calculation of credit equivalent amounts for 
these types of contracts are contained in Table IV of this appendix A.
    5. Netting. (a) For purposes of this appendix A, netting refers to 
the offsetting of positive and negative mark-to-market values when 
determining a current exposure to be used in the calculation of a credit 
equivalent amount. Any legally enforceable form of bilateral netting 
(that is, netting with a single counterparty) of derivative contracts is 
recognized for purposes of calculating the credit equivalent amount 
provided that:
    (i) The netting is accomplished under a written netting contract 
that creates a single legal obligation, covering all included individual 
contracts, with the effect that the bank would have a claim or 
obligation to receive or pay, respectively, only the net amount of the 
sum of the positive and negative mark-to-market values on included 
individual contracts in the event that a counterparty, or a counterparty 
to whom the contract has been validly assigned, fails to perform due to 
default, bankruptcy, liquidation, or similar circumstances;
    (ii) The bank obtains a written and reasoned legal opinion(s) 
representing that in the event of a legal challenge, including one 
resulting from default, insolvency, bankruptcy or similar circumstances, 
the relevant court and administrative authorities would find the bank's 
exposure to be such a net amount under:
    (1) The law of the jurisdiction in which the counterparty is 
chartered or the equivalent location in the case of noncorporate 
entities and, if a branch of the counterparty is involved, then also 
under the law of the jurisdiction in which the branch is located;
    (2) The law that governs the individual contracts covered by the 
netting contract; and
    (3) The law that governs the netting contract.
    (iii) The bank establishes and maintains procedures to ensure that 
the legal characteristics of netting contracts are kept under review in 
the light of possible changes in relevant law; and
    (iv) The bank maintains in its file documentation adequate to 
support the netting of derivative contracts, including a copy of the 
bilateral netting contract and necessary legal opinions.
    (b) A contract containing a walkaway clause is not eligible for 
netting for purposes of calculating the credit equivalent amount.\49\
---------------------------------------------------------------------------

    \49\ For purposes of this section, a walkaway clause means a 
provision in a netting contract that permits a non-defaulting 
counterparty to make lower payments than it would make otherwise under 
the contract, or no payment at all, to a defaulter or to the estate of a 
defaulter, even if a defaulter or the estate of a defaulter is a net 
creditor under the contract.
---------------------------------------------------------------------------

    (c) By netting individual contracts for the purpose of calculating 
its credit equivalent amount, a bank represents that it has met the 
requirements of this appendix A and all the appropriate documents are in 
the bank's files and available for inspection by the FDIC. Upon 
determination by the FDIC that a bank's files are inadequate or that a 
netting contract may not be legally enforceable under any one of the 
bodies of law described in paragraphs (ii)(1) through (3) of section

[[Page 222]]

II.E.5.(a) of this appendix A, underlying individual contracts may be 
treated as though they were not subject to the netting contract.
    (d) The credit equivalent amount of derivative contracts that are 
subject to a qualifying bilateral netting contract is calculated by 
adding:
    (i) The net current exposure of the netting contract; and
    (ii) The sum of the estimates of potential future exposure for all 
individual contracts subject to the netting contract, adjusted to take 
into account the effects of the netting contract.\50\
---------------------------------------------------------------------------

    \50\ For purposes of calculating potential future credit exposure 
for foreign exchange contracts and other similar contracts in which 
notional principal is equivalent to cash flows, total notional principal 
is defined as the net receipts to each party falling due on each value 
date in each currency.
---------------------------------------------------------------------------

    (e) The net current exposure is the sum of all positive and negative 
mark-to-market values of the individual contracts subject to the netting 
contract. If the net sum of the mark-to-market values is positive, then 
the net current exposure is equal to that sum. If the net sum of the 
mark-to-market values is zero or negative, then the net current exposure 
is zero.
    (f) The effects of the bilateral netting contract on the gross 
potential future exposure are recognized through application of a 
formula, resulting in an adjusted add-on amount (Anet). The 
formula, which employs the ratio of net current exposure to gross 
current exposure (NGR) is expressed as:

Anet = (0.4 x Agross) + 0.6(NGR x 
Agross)

    The effect of this formula is that Anet is the weighted 
average of Agross, and Agross adjusted by the NGR.
    (g) The NGR may be calculated in either one of two ways--referred to 
as the counterparty-by-counterparty approach and the aggregate approach.
    (i) Under the counterparty-by-counterparty approach, the NGR is the 
ratio of the net current exposure of the netting contract to the gross 
current exposure of the netting contract. The gross current exposure is 
the sum of the current exposures of all individual contracts subject to 
the netting contract calculated in accordance with section II.E. of this 
appendix A.
    (ii) Under the aggregate approach, the NGR is the ratio of the sum 
of all of the net current exposures for qualifying bilateral netting 
contracts to the sum of all of the gross current exposures for those 
netting contracts (each gross current exposure is calculated in the same 
manner as in section II.E.5.(g)(i) of this appendix A). Net negative 
mark-to-market values to individual counterparties cannot be used to 
offset net positive current exposures to other counterparties.
    (iii) A bank must use consistently either the counterparty-by-
counterparty approach or the aggregate approach to calculate the NGR. 
Regardless of the approach used, the NGR should be applied individually 
to each qualifying bilateral netting contract to determine the adjusted 
add-on for that netting contract.

                  III. Minimum Risk-Based Capital Ratio

    Subject to section II.B.5. of this appendix A, banks generally will 
be expected to meet a minimum ratio of qualifying total capital to risk-
weighted assets of 8 percent, of which at least 4 percentage points 
should be in the form of core capital (Tier 1). Any bank that does not 
meet the minimum risk-based capital ratio, or whose capital is otherwise 
considered inadequate, generally will be expected to develop and 
implement a capital plan for achieving an adequate level of capital, 
consistent with the provisions of this risk-based capital framework and 
Sec. 325.104, the specific circumstances affecting the individual bank, 
and the requirements of any related agreements between the bank and the 
FDIC.

                Table I--Definition of Qualifying Capital
------------------------------------------------------------------------
               Components                      Minimum requirements
------------------------------------------------------------------------
(1) CORE CAPITAL (Tier 1)..............  Must equal or exceed 4% of
                                          weighted-risk assets.
    (a) Common stockholders' equity....  No limit.\1\
    (b) Noncumulative perpetual          No limit.\1\
     preferred stock and any related
     surplus.
    (c) Minority interest in equity      No limit.\1\
     accounts of consolidated.
    (d) Less: All intangible assets      (\2\).
     other than certain mortgage
     servicing assets, nonmortgage
     servicing assets and purchased
     credit card relationships.
    (e) Less: Certain credit-enhancing   (\3\).
     interest-only strips and
     nonfinancial equity investments
     required to be deducted from
     capital.
    (f) Less: Certain deferred tax       (\4\).
     assets.
(2) SUPPLEMENTARY CAPITAL (Tier 2).....  Total of tier 2 is limited to
                                          100% of tier 1.\5\
    (a) Allowance for loan and lease     Limited to 1.25% of weighted-
     losses.                              risk assets.\5\

[[Page 223]]

 
    (b) Unrealized gains on certain      Limited to 45% of pretax net
     equity securities.\6\.               unrealized gains.\6\
    (c) Cumulative perpetual and long-   No limit within tier 2; long-
     term preferred stock (original       term preferred is amortized
     maturity of 20 years or more) and    for capital purposes as it
     any related surplus.                 approaches maturity.
    (d) Auction rate and similar         No limit within Tier 2.
     preferred stock (both cumulative
     and non-cumulative).
    (e) Hybrid capital instruments       No limit within Tier 2.
     (including mandatory convertible
     debt securities).
    (f) Term subordinated debt and       Term subordinated debt and
     intermediate-term preferred stock    intermediate-term preferred
     (original weighted average           stock are limited to 50% of
     maturity of five years or more).     Tier 1 \5\ and amortized for
                                          capital purposes as they
                                          approach maturity.
(3) DEDUCTIONS (from sum of tier 1 and
 tier 2)
    (a) Investments in banking and
     finance subsidiaries that are not
     consolidated for regulatory
     capital purposes
    (b) Intentional, reciprocal cross-
     holdings of capital securities
     issued by banks
    (c) Other deductions (such as        On a case-by-case basis or as a
     investment in other subsidiaries     matter of policy after formal
     or joint ventures) as determined     consideration of relevant
     by supervisory authority.            issues.
(4) TOTAL CAPITAL......................  Must equal or exceed 8% of
                                          weighted-risk assets.
------------------------------------------------------------------------
\1\ No express limits are placed on the amounts of nonvoting common,
  noncumulative perpetual preferred stock, and minority interests that
  may be recognized as part of Tier 1 capital. However, voting common
  stockholders' equity capital generally will be expected to be the
  dominant form of Tier 1 capital and banks should avoid undue reliance
  on other Tier 1 capital elements.
\2\ The amounts of mortgage servicing assets, nonmortgage servicing
  assets and purchased credit card relationships that can be recognized
  for purposes of calculating Tier 1 capital are subject to the
  limitations set forth in Sec.  325.5(f). All deductions are for
  capital purposes only; deductions would not affect accounting
  treatment.
\3\ The amounts of credit-enhancing interest-only strips that can be
  recognized for purposes of calculating Tier 1 capital are subject to
  the limitations set forth in Sec.  325.5(f). The amounts of
  nonfinancial equity investments that must be deducted for purposes of
  calculating Tier 1 capital are set forth in section II.B.(6) of
  appendix A to part 325.
\4\ Deferred tax assets are subject to the capital limitations set forth
  in Sec.  325.5(g).
\5\ Amounts in excess of limitations are permitted but do not qualify as
  capital.
\6\ Unrealized gains on equity securities are subject to the capital
  limitations set forth in paragraph I.A(2)(f) of appendix A to part
  325.

               Calculation of the Risk-Based Capital Ratio

    When calculating the risk-based capital ratio under the framework 
set forth in this statement of policy, qualifying total capital (the 
numerator) is divided by risk-weighted assets (the denominator). The 
process of determining the numerator for the ratio is summarized in 
Table I. The calculation of the denominator is based on the risk weights 
and conversion factors that are summarized in Tables II and III.
    When determining the amount of risk-weighted assets, balance sheet 
assets are assigned an appropriate risk weight (see Table II) and off-
balance sheet items are first converted to a credit equivalent amount 
(see Table III) and then assigned to one of the risk weight categories 
set forth in Table II.
    The balance sheet assets and the credit equivalent amount of off-
balance sheet items are then multiplied by the appropriate risk weight 
percentages and the sum of these risk-weighted amounts is the gross 
risk-weighted asset figure used in determining the denominator of the 
risk-based capital ratio. Any items deducted from capital when computing 
the amount of qualifying capital may also be excluded from risk-weighted 
assets when calculating the denominator for the risk-based capital 
ratio.

          Table II--Summary of Risk Weights and Risk Categories

                  Category 1--Zero Percent Risk Weight

    (1) Cash (domestic and foreign).
    (2) Balances due from Federal Reserve Banks and central banks in 
other OECD countries.
    (3) Direct claims on, and portions of claims unconditionally 
guaranteed by, the U.S. Treasury, U.S. Government agencies,\1\ or 
central governments in other OECD countries.
---------------------------------------------------------------------------

    \1\ For the purpose of calculating the risk-based capital ratio, a 
U.S. Government agency is defined as an instrumentality of the U.S. 
Government whose obligations are fully and explicitly guaranteed as to 
the timely repayment of principal and interest by the full faith and 
credit of the U.S. Government.
---------------------------------------------------------------------------

    (4) Portions of local currency claims on, or unconditionally 
guaranteed by, non-OECD central governments (including non-OECD central 
banks), to the extent the bank has liabilities booked in that currency.
    (5) Gold bullion held in the bank's own vaults or in another bank's 
vaults on an allocated basis, to the extent that it is offset by gold 
bullion liabilities
    (6) Federal Reserve Bank stock.

[[Page 224]]

    (7) Claims on, or guaranteed by, qualifying securities firms 
incorporated in the United States or other members of the OECD-based 
group of countries that are collateralized by cash on deposit in the 
lending bank or by securities issued or guaranteed by the United States 
or OECD central governments (including U.S. government agencies), 
provided that a positive margin of collateral is required to be 
maintained on such a claim on a daily basis, taking into account any 
change in a bank's exposure to the obligor or counterparty under the 
claim in relation to the market value of the collateral held in support 
of the claim.

                   Category 2--20 Percent Risk Weight

    (1) Cash items in the process of collection.
    (2) All claims (long- and short-term) on, and portions of claims 
(long- and short-term) guaranteed by, U.S. depository institutions and 
OECD banks.
    (3) Short-term (remaining maturity of one year or less) claims on, 
and portions of short-term claims guaranteed by, non-OECD banks.
    (4) Portions of loans and other claims conditionally guaranteed by 
the U.S. Treasury, U.S. Government agencies,\1\ or central governments 
in other OECD countries and portions of local currency claims 
conditionally guaranteed by non-OECD central governments to the extent 
that the bank has liabilities booked in that currency.
    (5) Securities and other claims on, and portions of claims 
guaranteed by, U.S. Government-sponsored agencies.\2\
---------------------------------------------------------------------------

    \2\ For the purpose of calculating the risk-based capital ratio, a 
U.S. Government-sponsored agency is defined as an agency originally 
established or chartered to serve public purposes specified by the U.S. 
Congress but whose obligations are not explicitly guaranteed by the full 
faith and credit of the U.S. Government.
---------------------------------------------------------------------------

    (6) Portions of loans and other claims (including repurchase 
agreements) collateralized \3\ by securities issued or guaranteed by the 
U.S. Treasury, U.S. Government agencies, U.S. Government-sponsored 
agencies or central governments in other OECD countries.
---------------------------------------------------------------------------

    \3\ Degree of collateralization is determined by current market 
value.
---------------------------------------------------------------------------

    (7) Portions of loans and other claims collateralized \3\ by cash on 
deposit in the lending bank.
    (8) General obligation claims on, and portions of claims guaranteed 
by, the full faith and credit of states or other political subdivisions 
of OECD countries, including U.S. state and local governments.
    (9) Claims on, and portions of claims guaranteed by, official 
multilateral lending institutions or regional development institutions 
in which the U.S. Government is a shareholder or a contributing member.
    (10) Portions of claims collateralized \3\ by securities issued by 
official multilateral lending institutions or regional development 
institutions in which the U.S. Government is a shareholder or 
contributing member.
    (11) Investments in shares of mutual funds whose portfolios are 
permitted to hold only assets that qualify for the zero or 20 percent 
risk categories.
    (12) Recourse obligations, direct credit substitutes, residual 
interests (other than credit-enhancing interest-only strips) and asset- 
or mortgage-backed securities rated in either of the two highest 
investment grade categories, e.g., AAA or AA, in the case of long-term 
ratings, or the highest rating category, e.g., A-1, P-1, in the case of 
short-term ratings.
    (13) Claims on, and claims guaranteed by, qualifying securities 
firms incorporated in the United States or other member of the OECD-
based group of countries provided that:
    a. The qualifying securities firm has a rating in one of the top 
three investment grade rating categories from a nationally recognized 
statistical rating organization; or
    b. The claim is guaranteed by a qualifying securities firm's parent 
company with such a rating.
    (14) Certain collateralized claims on qualifying securities firms in 
the United States or other member of the OECD-based group of countries, 
without regard to satisfaction of the rating standard, provided that the 
claim arises under a contract that:
    a. Is a reverse repurchase/repurchase agreement or securities 
lending/borrowing transaction executed under standard industry 
documentation;
    b. Is collateralized by liquid and readily marketable debt or equity 
securities;
    c. Is marked to market daily;
    d. Is subject to a daily margin maintenance requirement under the 
standard documentation; and
    e. Can be liquidated, terminated, or accelerated immediately in 
bankruptcy or similar proceeding, and the security or collateral 
agreement will not be stayed or avoided, under applicable law of the 
relevant country.

                   Category 3--50 Percent Risk Weight

    (1) Loans fully secured by first liens on one-to-four family 
residential properties (including certain presold residential 
construction loans), provided that the loans were approved in accordance 
with prudent underwriting standards and are not past due 90 days or more 
or carried in nonaccrual status.
    (2) Loans fully secured by first liens on multifamily residential 
properties that have been prudently underwritten and meet specified 
requirements with respect to loan-to-

[[Page 225]]

value ratio, level of annual net operating income to required debt 
service, maximum amortization period, minimum original maturity, and 
demonstrated timely repayment performance.
    (3) Recourse obligations, direct credit substitutes, residual 
interests (other than credit-enhancing interest-only strips) and asset- 
or mortgage-backed securities rated in the third-highest investment 
grade category, e.g., A, in the case of long-term ratings, or the second 
highest rating category, e.g., A-2, P-2, in the case of short-term 
ratings.
    (4) Revenue bonds or similar obligations, including loans and 
leases, that are obligations of U.S. state or political subdivisions of 
the United States or other OECD countries but for which the government 
entity is committed to repay the debt only out of revenues from the 
specific projects financed.
    (5) Credit equivalent amounts of interest rate and foreign exchange 
rate related contracts, except for those assigned to a lower risk 
category.

                   Category 4--100 Percent Risk Weight

    (1) All other claims on private obligors.
    (2) Claims on, or guaranteed by, non-OECD banks with a remaining 
maturity exceeding one year.
    (3) Claims on non-OECD central governments that are not included in 
item 4 of Category 1 or item 3 of Category 2, and all claims on non-OECD 
state and local governments.
    (4) Obligations issued by U.S. state or local governments or other 
OECD local governments (including industrial development authorities and 
similar entities) that are repayable solely by a private party or 
enterprise.
    (5) Premises, plant, and equipment; other fixed assets; and other 
real estate owned.
    (6) Investments in any unconsolidated subsidiaries, joint ventures, 
or associated companies--if not deducted from capital.
    (7) Instruments issued by other banking organizations that qualify 
as capital.
    (8) Claims on commercial firms owned by the U.S. Government or 
foreign governments.
    (9) Recourse obligations, direct credit substitutes, residual 
interests (other than credit-enhancing interest-only strips) and asset- 
or mortgage-backed securities rated in the lowest investment grade 
category, e.g., BBB, as well as certain positions (but not residual 
interests) which the bank rates pursuant to section II.B.5(g) of this 
appendix A.
    (10) All other assets, including any intangible assets that are not 
deducted from capital, and the credit equivalent amounts \4\ of off-
balance sheet items not assigned to a different risk category.
---------------------------------------------------------------------------

    \4\ In general, for each off-balance sheet item, a conversion factor 
(see Table III) must be applied to determine the ``credit equivalent 
amount'' prior to assigning the off-balance sheet item to a risk weight 
category.
---------------------------------------------------------------------------

                  Category 5--200 Percent Risk Weight.

    (1) Externally rated recourse obligations, direct credit 
substitutes, residual interests (other than credit-enhancing interest-
only strips), and asset- and mortgage-backed securities that are rated 
one category below the lowest investment grade category, e.g., BB, to 
the extent permitted in section II.B.5(d) of this appendix A; and
    (2) A position (but not a residual interest) extended in connection 
with a securitization or structured financing program that is not rated 
by an NRSRO for which the bank determines that the credit risk is 
equivalent to one category below investment grade, e.g., BB, to the 
extent permitted in section II.B.5.(g) of this appendix A.

[54 FR 11509, Mar. 21, 1989]

    Editorial Note: For Federal Register citations affecting Appendix A 
of part 325, see the List of CFR Sections Affected, which appears in the 
Finding Aids section of the printed volume and on GPO Access.



  Sec. Appendix B to Part 325--Statement of Policy on Capital Adequacy

    Part 325 of the Federal Deposit Insurance Corporation rules and 
regulations (12 CFR part 325) sets forth minimum leverage capital 
requirements for fundamentally sound, well-managed banks having no 
material or significant financial weaknesses. It also defines capital 
and sets forth sanctions which will be used against banks which are in 
violation of the part 325 regulation. This statement of policy on 
capital adequacy provides some interpretational and definitional 
guidance as to how this part 325 regulation will be administered and 
enforced by the FDIC. This statement of policy also addresses certain 
aspects of the FDIC's minimum risk-based capital guidelines that are set 
forth in appendix A to part 325. This statement of policy does not 
address the prompt corrective action provisions mandated by the Federal 
Deposit Insurance Corporation Improvement Act of 1991. However, section 
38 of the Federal Deposit Insurance Act and subpart B of part 325 
provide guidance on the prompt corrective action provisions, which 
generally apply to institutions with inadequate levels of capital.

[[Page 226]]

             I. Enforcement of Minimum Capital Requirements

    Section 325.3(b)(1) specifies that FDIC-supervised, state-chartered 
nonmember commercial and savings banks (or other insured depository 
institutions making applications to the FDIC that require the FDIC to 
consider the adequacy of the institutions' capital structure) must 
maintain a minimum leverage ratio of Tier 1 (or core) capital to total 
assets of at least 3 percent; however, this minimum only applies to the 
most highly-rated banks (i.e., those with a composite CAMELS rating of 1 
under the Uniform Financial Institutions Rating System established by 
the Federal Financial Institutions Examination Council) that are not 
anticipating or experiencing any significant growth. All other state 
nonmember banks would need to meet a minimum leverage ratio that is at 
least 100 to 200 basis points above this minimum. That is, in accordance 
with Sec. 325.3(b)(2), an absolute minimum leverage ratio of not less 
than 4 percent must be maintained by those banks that are not highly-
rated or that are anticipating or experiencing significant growth.
    In addition to the minimum leverage capital standards, section III 
of appendix A to part 325 indicates that state nonmember banks generally 
are expected to maintain a minimum risk-based capital ratio of 
qualifying total capital to risk-weighted assets of 8 percent, with at 
least one-half of that total capital amount consisting of Tier 1 
capital.
    State nonmember banks (hereinafter referred to as ``banks'') 
operating with leverage capital ratios below the minimums set forth in 
part 325 will be deemed to have inadequate capital and will be in 
violation of the part 325 regulation. Furthermore, banks operating with 
risk-based capital ratios below the minimums set forth in appendix A to 
part 325 generally will be deemed to have inadequate capital. Banks 
failing to meet the minimum leverage and/or risk-based capital ratios 
normally can expect to have any application submitted to the FDIC denied 
(if such application requires the FDIC to evaluate the adequacy of the 
institution's capital structure) and also can expect to be subject to 
the use of capital directives or other formal enforcement action by the 
FDIC to increase capital.
    Capital adequacy in banks which have capital ratios at or above the 
minimums will be assessed and enforced based on the following factors 
(these same criteria will apply to any insured depository institutions 
making applications to the FDIC and to any other circumstances in which 
the FDIC is requested or required to evaluate the adequacy of a 
depository institution's capital structure):

         A. Banks Which Are Fundamentally Sound and Well-Managed

    The minimum leverage capital ratios set forth in Sec. 325.3(b)(2) 
and the minimum risk-based capital ratios set forth in section III of 
appendix A to part 325 generally will be viewed as the minimum 
acceptable capital standards for banks whose overall financial condition 
is fundamentally sound, which are well-managed and which have no 
material or significant financial weaknesses. While the FDIC will make 
this determination in each bank based upon its own condition and 
specific circumstances, this definition will generally apply to those 
banks evidencing a level of risk which is no greater than that normally 
associated with a Composite rating of 1 or 2 under the Uniform Financial 
Institutions Rating System. Banks meeting this definition which are in 
compliance with the minimum leverage and risk-based capital ratio 
standards will not generally be required by the FDIC to raise new 
capital from external sources.
    The FDIC does, however, encourage such banks to maintain capital 
well above the minimums, particularly those institutions that are 
anticipating or experiencing significant growth, and will carefully 
evaluate their earnings and growth trends, dividend policies, capital 
planning procedures and other factors important to the continuous 
maintenance of adequate capital. Adverse trends or deficiencies in these 
areas will be subject to criticism at regular examinations and may be an 
important factor in the FDIC's action on applications submitted by such 
banks. In addition, the FDIC's consideration of capital adequacy in 
banks making applications to the FDIC will also fully examine the 
expected impact of those applications on the bank's ability to maintain 
its capital adequacy. In all cases, banks should maintain capital 
commensurate with the level and nature of risks, including the volume 
and severity of adversely classified assets, to which they are exposed.

                           B. All Other Banks

    Banks not meeting the definition set forth in I.A. of this appendix, 
that is, banks evidencing a level of risk which is at least as great as 
that normally associated with a Composite rating of 3, 4, or 5 under the 
Uniform Financial Institutions Rating System, will be required to 
maintain capital higher than the minimum regulatory requirement and at a 
level deemed appropriate in relation to the degree of risk within the 
institution. These higher capital levels will normally be addressed 
through memorandums of understanding between the FDIC and the bank or, 
in cases of more pronounced risk, through the use of formal enforcement 
actions under section 8 of the Federal Deposit Insurance Act (12 U.S.C. 
1818).

[[Page 227]]

              C. Capital Requirements of Primary Regulator

    Notwithstanding I.A. and B. of this appendix, all banks (or other 
depository institutions making applications to the FDIC that require the 
FDIC to consider the adequacy of the institutions' capital structure) 
will be expected to meet any capital requirements established by their 
primary state or federal regulator which exceed the minimum capital 
requirement set forth in the FDIC's part 325 regulation. In addition, 
the FDIC will, when establishing capital requirements higher than the 
minimum set forth in the regulation, consult with an institution's 
primary state or federal regulator.

                            II. Capital Plans

    Section 325.4(b) specifies that any bank which has less than its 
minimum leverage capital requirement is deemed to be engaging in an 
unsafe or unsound banking practice unless it has submitted, and is in 
compliance with, a plan approved by the FDIC to increase its Tier 1 
leverage capital ratio to such level as the FDIC deems appropriate.
    As required under Sec. 325.104(a)(1) of this part, a bank must file 
a written capital restoration plan with the appropriate FDIC regional 
director within 45 days of the date that the bank receives notice or is 
deemed to have notice that the bank is undercapitalized, significantly 
undercapitalized or critically undercapitalized, unless the FDIC 
notifies the bank in writing that the plan is to be filed within a 
different period. The amount of time allowed to achieve the minimum 
leverage capital requirement will be evaluated by the FDIC on a case-by-
case basis and will depend on a number of factors, including the 
viability of the bank and whether it is fundamentally sound and well-
managed.
    Banks evidencing more than normal levels of risk will normally have 
their minimum capital requirements established in a formal or informal 
enforcement proceeding. The time frames for meeting these requirements 
will be set forth in such actions and will generally require some 
immediate action on the bank's part to meet its minimum capital 
requirement. The reasonableness of capital plans submitted by depository 
institutions in connection with applications as provided for in Sec. 
325.3(d)(2) will be determined in conjunction with the FDIC's 
consideration of the application.

                         III. Written Agreements

    Section 325.4(c) provides that any insured depository institution 
with a Tier 1 capital to total assets (leverage) ratio of less than 2 
percent must enter into and be in compliance with a written agreement 
with the FDIC (or with its primary federal regulator with FDIC as a 
party to the agreement) to increase its Tier 1 leverage capital ratio to 
such level as the FDIC deems appropriate or may be subject to a section 
8(a) termination of insurance action by the FDIC. Except in the very 
rarest of circumstances, the FDIC will require that such agreements 
contemplate immediate efforts by the depository institution to acquire 
the required capital.
    The guidance in this section III is not intended to preclude the 
FDIC from taking section 8(a) or other enforcement action against any 
institution, regardless of its capital level, if the specific 
circumstances deem such action to be appropriate.

                         IV. Capital Components

    Section 325.2 sets forth the definition of Tier 1 capital for the 
leverage standard as well as the definitions for the various instruments 
and accounts which are included therein. Although nonvoting common 
stock, noncumulative perpetual preferred stock, and minority interests 
in consolidated subsidiaries are normally included in Tier 1 capital, 
voting common stockholders' equity generally will be expected to be the 
dominant form of Tier 1 capital. Thus, banks should avoid undue reliance 
on nonvoting equity, preferred stock and minority interests. The 
following provides some additional guidance with respect to some of the 
items that affect the calculation of Tier 1 capital.

                          A. Intangible Assets

    The FDIC permits state nonmember banks to record intangible assets 
on their books and to report the value of such assets in the 
Consolidated Reports of Condition and Income (``Call Report''). As noted 
in the instructions for preparation of the Consolidated Reports of 
Condition and Income (published by the Federal Financial Institutions 
Examination Council), intangible assets may arise from business 
combinations accounted for under the purchase method and acquisitions of 
portions or segments of another institution's business, such as branch 
offices, mortgage servicing portfolios, and credit card portfolios.
    Notwithstanding the authority to report all intangible assets in the 
Consolidated Reports of Condition and Income, Sec. 325.2(v) of the 
regulation specifies that mortgage servicing assets, nonmortgage 
servicing assets and purchased credit card relationships are the only 
intangible assets which will be allowed as Tier 1 capital.\1\ The 
portion of equity capital represented by other types of intangible 
assets will be deducted from equity

[[Page 228]]

capital and assets in the computation of a bank's Tier 1 capital. 
Certain of these intangible assets may, however, be recognized for 
regulatory capital purposes if explicitly approved by the Director of 
the Division of Supervision and Consumer Protection (DSC) as part of the 
bank's regulatory capital on a specific case basis. These intangibles 
will be included in regulatory capital under the terms and conditions 
that are specifically approved by the FDIC.\2\
---------------------------------------------------------------------------

    \1\ Although intangible assets in the form of mortgage servicing 
assets, nonmortgage servicing assets and purchased credit card 
relationships are generally recognized for regulatory capital purposes, 
the
--deduction of part or all of the mortgage servicing assets, nonmortgage 
servicing assets and purchased credit card relationships may be required 
if the carrying amounts of these rights are excessive in relation to 
their market value or the level of the bank's capital accounts. In this 
regard, mortgage servicing assets, nonmortgage servicing assets and 
purchased credit card relationships will be recognized for regulatory 
capital purposes only to the extent the rights meet the conditions, 
limitations and restrictions described in Sec. 325.5(f).
    \2\ This specific approval must be received in accordance with Sec. 
325.5(b). In evaluating whether other types of intangibles should be 
recognized for regulatory capital purposes, the FDIC will accord special 
attention to the general characteristics of the intangibles, including: 
(1) The separability of the intangible asset and the ability to sell it 
separate and apart from the bank or the bulk of the bank's assets, (2) 
the certainty that a readily identifiable stream of cash flows 
associated with the intangible asset can hold its value notwithstanding 
the future prospects of the bank, and (3) the existence of a market of 
sufficient depth to provide liquidity for the intangible asset. However, 
pursuant to section 18(n) of the Federal Deposit Insurance Act (12 
U.S.C. 1828(n)), specific approval cannot be given for an unidentifiable 
intangible asset, such as goodwill, if acquired after April 12, 1989.
---------------------------------------------------------------------------

    In certain instances banks may have investments in unconsolidated 
subsidiaries or joint ventures that have large volumes of intangible 
assets. In such instances the bank's consolidated statements will 
reflect an investment in a tangible asset even though such investment 
will, in fact, be represented by a large volume of intangible assets. In 
any such situation where this is material, the bank's investment in the 
unconsolidated subsidiary will be divided into a tangible and an 
intangible portion based on the percentage of intangible assets to total 
assets in the subsidiary. The intangible portion of the investment will 
be treated as if it were an intangible asset on the bank's books in the 
calculation of Tier 1 capital. However, intangible assets in the form of 
mortgage servicing assets, nonmortgage servicing assets and purchased 
credit card relationships, including servicing intangibles held by 
mortgage banking subsidiaries, are subject to the specific criteria set 
forth in Sec. 325.5(f).

                      B. Perpetual Preferred Stock

    Perpetual preferred stock is defined as preferred stock that does 
not have a maturity date, that cannot be redeemed at the option of the 
holder, and that has no other provisions that will require future 
redemption of the issue. Also, pursuant to section 18(i)(1) of the 
Federal Deposit Insurance Act (12 U.S.C. 1828(i)(1)), a state nonmember 
bank cannot, without the prior consent of the FDIC, reduce the amount or 
retire any part of its perferred stock. (This prior consent is also 
required for the reduction or retirement of any part of a state 
nonmember bank's common stock or capital notes and debentures.)
    Noncumulative perpetual preferred stock is generally included in 
Tier 1 capital. Nonetheless, it is possible for banks to issue preferred 
stock with a dividend rate which escalates to such a high rate that the 
terms become so onerous as to effectively force the bank to call the 
issue (for example, an issue with a low initial rate that is scheduled 
to escalate to much higher rates in subsequent periods). Preferred stock 
issues with such onerous terms have much the same characteristics as 
limited life preferred stock in that the bank would be effectively 
forced to redeem the issue to avoid performance of the onerous terms. 
Such instruments may be disallowed as Tier 1 capital and, for risk-based 
capital purposes, would be included in Tier 2 capital only to the extent 
that the instruments fall within the limitations applicable to 
intermediate-term preferred stock. Banks which are contemplating issues 
bearing terms which may be so characterized are encouraged to submit 
them to the appropriate FDIC regional office for review prior to 
issuance. Nothing herein shall prohibit banks from issuing floating rate 
preferred stock issues where the rate is constant in relation to some 
outside market or index rate. However, noncumulative floating rate 
instruments where the rate paid is based in some part on the current 
credit standing of the bank, and all cumulative preferred stock 
instruments, are excluded from Tier 1 capital. These instruments are 
included in Tier 2 capital for risk-based capital purposes in accordance 
with the limitations set forth in appendix A to part 325.
    The FDIC will also require that issues of perpetual preferred stock 
be consistent with safe and sound banking practices. Issues which would 
unduly enrich insiders or which contain dividend rates or other terms 
which are inconsistent with safe and sound banking practices will likely 
be the subject of appropriate supervisory response from the FDIC. Banks 
contemplating preferred stock issues which may pose safety and soundness 
concerns are encouraged to submit such issues

[[Page 229]]

to the appropriate FDIC regional office for review prior to sale. 
Pursuant to Sec. 325.5(e), capital instruments that contain or that are 
subject to any conditions, covenants, terms, restrictions or provisions 
that are inconsistent with safe and sound banking practices will not 
qualify as capital under part 325.

   C. Other Instruments or Transactions Which Fail To Provide Capital 
                                 Support

    Section 325.5(b) specifies that any capital component or balance 
sheet entry or account which has characteristics or terms that diminish 
its contribution to an insured depository institution's ability to 
absorb losses shall be deducted from capital. An example involves 
certain types of minority interests in consolidated subsidiaries. 
Minority interests in consolidated subsidiaries have been included in 
capital based on the fact that they provide capital support to the risk 
in the consolidated subsidiaries. Certain transactions have been 
structured where a bank forms a subsidiary by transferring essentially 
risk-free or low-risk assets to the subsidiary in exchange for common 
stock of the subsidiary. The subsidiary then sells preferred stock to 
third parties.
    The preferred stock becomes a minority interest in a consolidated 
subsidiary but, in effect, represents an essentially risk-free or low-
risk investment for the preferred stockholders. This type of minority 
interest fails to provide any meaningful capital support to the 
consolidated entity inasmuch as it has a preferred claim on the 
essentially risk-free or low-risk assets of the subsidiary. In addition, 
certain minority interests are not substantially equivalent to permanent 
equity in that the interests must be paid off on specified future dates, 
or at the option of the holders of the minority interests, or contain 
other provisions or features that limit the ability of the minority 
interests to effectively absorb losses. Capital instruments or 
transactions of this nature which fail to absorb losses or provide 
meaningful capital support will be deducted from Tier 1 capital.

                      D. Mandatory Convertible Debt

    Mandatory convertible debt securities are subordinated debt 
instruments that require the issuer to convert such instruments into 
common or perpetual preferred stock by a date at or before the maturity 
of the debt instruments. The maturity of these instruments must be 12 
years or less and the instruments must also meet the other criteria set 
forth in appendix A to part 325. Mandatory convertible debt is excluded 
from Tier 1 capital but, for risk-based capital purposes, is included in 
Tier 2 capital as a ``hybrid capital instrument.''
    So-called ``equity commitment notes,'' which merely require a bank 
to sell common or perpetual preferred stock during the life of the 
subordinated debt obligation, are specifically excluded from the 
definition of mandatory convertible debt securities and are only 
included in Tier 2 capital under the risk-based capital framework to the 
extent that they satisfy the requirements and limitations for ``term 
subordinated debt'' set forth in appendix A to part 325.

                  V. Analysis of Consolidated Companies

    In determining a bank's compliance with its minimum capital 
requirements the FDIC will, with two exceptions, generally utilize the 
bank's consolidated statements as defined in the instructions for the 
preparation of Consolidated Reports of Condition and Income.
    The first exception relates to securities subsidiaries of state 
nonmember banks which are subject to Sec. 337.4 of the FDIC's rules and 
regulations (12 CFR 337.4). Any subsidiary subject to this section must 
be a bona fide subsidiary which is adequately capitalized. In addition, 
Sec. 337.4(b)(3) requires that any insured state nonmember bank's 
investment in such a subsidiary shall not be counted towards the bank's 
capital. In those instances where the securities subsidiary is 
consolidated in the bank's Consolidated Report of Condition it will be 
necessary, for the purpose of calculating the bank's Tier 1 capital, to 
adjust the Consolidated Report of Condition in such a manner as to 
reflect the bank's investment in the securities subsidiary on the equity 
method. In this case, and in those cases where the securities subsidiary 
has not been consolidated, the investment in the subsidiary will then be 
deducted from the bank's capital and assets prior to calculation of the 
bank's Tier 1 capital ratio. (Where deemed appropriate, the FDIC may 
also consider deducting investments in other subsidiaries, either on a 
case-by-case basis or, as with securities subsidiaries, based on the 
general characteristics or functional nature of the subsidiaries.)
    The second exception relates to the treatment of subsidiaries of 
insured banks that are domestic depository institutions such as 
commercial banks, savings banks, or savings associations. These 
subsidiaries are not consolidated on a line-by-line basis with the 
insured bank parent in the bank parent's Consolidated Reports of 
Condition and Income. Rather, the instructions for these reports provide 
that bank investments in such depository institution subsidiaries are to 
be reported on an unconsolidated basis in accordance with the equity 
method. Since the FDIC believes that the minimum capital requirements 
should apply to a bank's depository activities in their entirety, 
regardless of the form that the organization's corporate structure 
takes, it will be necessary, for the purpose of calculating the bank's 
Tier 1 leverage

[[Page 230]]

and total risk-based capital ratios, to adjust a bank parent's 
Consolidated Report of Condition to consolidate its domestic depository 
institution subsidiaries on a line-by-line basis. The financial 
statements of the subsidiary that are used for this consolidation must 
be prepared in the same manner as the Consolidated Report of Condition.
    The FDIC will, in determining the capital adequacy of a bank which 
is a member of a bank holding company or chain banking group, consider 
the degree of leverage and risks undertaken by the parent company or 
other affiliates. Where the level of risk in a holding company system is 
no more than normal and the consolidated company is adequately 
capitalized at all appropriate levels, the FDIC generally will not 
require additional capital in subsidiary banks under its supervision 
over and above that which would be required for the subsidiary bank on 
its own merit. In cases where a holding company or other affiliated 
banks (or other companies) evidence more than a normal degree of risk 
(either by virtue of the quality of their assets, the nature of the 
activities conducted, or other factors) or where the affiliated 
organizations are inadequately capitalized, the FDIC will consider the 
potential impact of the additional risk or excess leverage upon an 
individual bank to determine if such factors will likely result in 
excessive requirements for dividends, management fees, or other support 
to the holding company or affiliated organizations which would be 
detrimental to the bank. Where the excessive risk or leverage in such 
organizations is determined to be potentially detrimental to the bank's 
condition or its ability to maintain adequate capital, the FDIC may 
initiate appropriate supervisory action to limit the bank's ability to 
support its weaker affiliates and/or require higher than minimum capital 
ratios in the bank.

          VI. Applicability of Part 325 to Savings Associations

    Section 325.3(c) indicates that, where the FDIC is required to 
evaluate the adequacy of any depository institution's (including any 
savings association's) capital structure in conjunction with an 
application filed by the institution, the FDIC will not approve the 
application if the depository institution does not meet the minimum 
leverage capital requirement set forth in Sec. 325.3(b).
    Also, Sec. 325.4(b) states that, under certain conditions specified 
in section 8(t) of the Federal Deposit Insurance Act, the FDIC may take 
section 8(b)(1) and/or 8(c) enforcement action against a savings 
association that is deemed to be engaged in an unsafe or unsound 
practice on account of its inadequate capital structure. Section 
325.4(c) further specifies that any insured depository institution with 
a Tier 1 leverage ratio (as defined in part 325) of less than 2 percent 
is deemed to be operating in an unsafe or unsound condition pursuant to 
section 8(a) of the Federal Deposit Insurance Act.
    In addition, the Office of Thrift Supervision (OTS), as the primary 
federal regulator of savings associations, has established minimum core 
capital leverage, tangible capital and risk-based capital requirements 
for savings associations (12 CFR part 567). In this regard, certain 
differences exist between the methods used by the OTS to calculate a 
savings association's capital and the methods set forth by the FDIC in 
part 325. These differences include, among others, the core capital 
treatment for investments in subsidiaries and for certain intangible 
assets.
    In determining whether a savings association's application should be 
approved pursuant to Sec. 325.3(c), or whether an unsafe or unsound 
practice or condition exists pursuant to Sec. Sec. 325.4(b) and 
325.4(c), the FDIC will consider the extent of the savings association's 
capital as determined in accordance with part 325. However, the FDIC 
will also consider the extent to which a savings association is in 
compliance with (a) the minimum capital requirements set forth by the 
OTS, (b) any related capital plans for meeting the minimum capital 
requirements approved by the OTS, and/or (c) any other criteria deemed 
by the FDIC as appropriate based on the association's specific 
circumstances.

[56 FR 10166, Mar. 11, 1991, as amended at 58 FR 6369, Jan. 28, 1993; 58 
FR 8219, Feb. 12, 1993; 58 FR 60103, Nov. 15, 1993; 60 FR 39232, Aug. 1, 
1995; 63 FR 42678, Aug. 10, 1998; 66 FR 59661, Nov. 29, 2001]



  Sec. Appendix C to Part 325--Risk-Based Capital for State Non-Member 
                           Banks: Market Risk

      Section 1. Purpose, Applicability, Scope, and Effective Date

    (a) Purpose. The purpose of this appendix is to ensure that banks 
with significant exposure to market risk maintain adequate capital to 
support that exposure.\1\ This appendix supplements and adjusts the 
risk-based capital ratio calculations under appendix A of this part with 
respect to those banks.
---------------------------------------------------------------------------

    \1\ This appendix is based on a framework developed jointly by 
supervisory authorities from the countries represented on the Basle 
Committee on Banking Supervision and endorsed by the Group of Ten 
Central Bank Governors. The framework is described in a Basle Committee 
paper entitled ``Amendment to the Capital Accord to Incorporate Market 
Risks,'' January 1996. Also see modifications issued in September 1997.
---------------------------------------------------------------------------

    (b) Applicability. (1) This appendix applies to any insured state 
nonmember bank whose

[[Page 231]]

trading activity \2\ (on a worldwide consolidated basis) equals:
---------------------------------------------------------------------------

    \2\ Trading activity means the gross sum of trading assets and 
liabilities as reported in the bank's most recent quarterly Consolidated 
Report of Condition and Income (Call Report).
---------------------------------------------------------------------------

    (i) 10 percent or more of total assets; \3\ or
---------------------------------------------------------------------------

    \3\ Total assets means quarter-end total assets as reported in the 
bank's most recent Call Report.
---------------------------------------------------------------------------

    (ii) $1 billion or more.
    (2) The FDIC may additionally apply this appendix to any insured 
state nonmember bank if the FDIC deems it necessary or appropriate for 
safe and sound banking practices.
    (3) The FDIC may exclude an insured state nonmember bank otherwise 
meeting the criteria of paragraph (b)(1) of this section from coverage 
under this appendix if it determines the bank meets such criteria as a 
consequence of accounting, operational, or similar considerations, and 
the FDIC deems it consistent with safe and sound banking practices.
    (c) Scope. The capital requirements of this appendix support market 
risk associated with a bank's covered positions.
    (d) Effective date. This appendix is effective as of January 1, 
1997. Compliance is not mandatory until January 1, 1998. Subject to 
supervisory approval, a bank may opt to comply with this appendix as 
early as January 1, 1997.\4\
---------------------------------------------------------------------------

    \4\ A bank that voluntarily complies with the final rule prior to 
January 1, 1998, must comply with all of its provisions.
---------------------------------------------------------------------------

                         Section 2. Definitions

    For purposes of this appendix, the following definitions apply:
    (a) Covered positions means all positions in a bank's trading 
account, and all foreign exchange \5\ and commodity positions, whether 
or not in the trading account.\6\ Positions include on-balance-sheet 
assets and liabilities and off-balance-sheet items. Securities subject 
to repurchase and lending agreements are included as if they are still 
owned by the lender. Covered positions exclude all positions in a bank's 
trading account that, in form or in substance, act as liquidity 
facilities that provide liquidity support to asset-backed commercial 
paper. Such excluded positions are subject to the risk-based capital 
requirements set forth in appendix A of this part.
---------------------------------------------------------------------------

    \5\ Subject to FDIC review, a bank may exclude structural positions 
in foreign currencies from its covered positions.
    \6\ The term trading account is defined in the instructions to the 
Call Report.
---------------------------------------------------------------------------

    (b) Market risk means the risk of loss resulting from movements in 
market prices. Market risk consists of general market risk and specific 
risk components.
    (1) General market risk means changes in the market value of covered 
positions resulting from broad market movements, such as changes in the 
general level of interest rates, equity prices, foreign exchange rates, 
or commodity prices.
    (2) Specific risk means changes in the market value of specific 
positions due to factors other than broad market movements and includes 
event and default risk as well as idiosyncratic variations.
    (c) Tier 1 and Tier 2 capital are defined in appendix A of this 
part.
    (d) Tier 3 capital is subordinated debt that is unsecured; is fully 
paid up; has an original maturity of at least two years; is not 
redeemable before maturity without prior approval by the FDIC; includes 
a lock-in clause precluding payment of either interest or principal 
(even at maturity) if the payment would cause the issuing bank's risk-
based capital ratio to fall or remain below the minimum required under 
appendix A of this part; and does not contain and is not covered by any 
covenants, terms, or restrictions that are inconsistent with safe and 
sound banking practices.
    (e) Value-at-risk (VAR) means the estimate of the maximum amount 
that the value of covered positions could decline during a fixed holding 
period within a stated confidence level, measured in accordance with 
section 4 of this appendix.

  Section 3. Adjustments to the Risk-Based Capital Ratio Calculations.

    (a) Risk-based capital ratio denominator. A bank subject to this 
appendix shall calculate its risk-based capital ratio denominator as 
follows:
    (1) Adjusted risk-weighted assets. Calculate adjusted risk-weighted 
assets, which equals risk-weighted assets (as determined in accordance 
with appendix A of this part), excluding the risk-weighted amounts of 
all covered positions (except foreign exchange positions outside the 
trading account and over-the-counter derivative positions) \7\ and 
receivables arising from the posting of cash collateral that is 
associated with securities borrowing transactions to the extent the 
receivables are collateralized by the market value of the borrowed 
securities, provided that the following conditions are met:
---------------------------------------------------------------------------

    \7\ Foreign-exchange positions outside the trading account and all 
over-the-counter derivative positions, whether or not in the trading 
account, must be included in adjusted risk-weighted assets as determined 
in appendix A of this part.
---------------------------------------------------------------------------

    (i) The transaction is based on securities includable in the trading 
book that are liquid and readily marketable,

[[Page 232]]

    (ii) The transaction is marked to market daily,
    (iii) The transaction is subject to daily margin maintenance 
requirements, and
    (iv)(A) The transaction is a securities contract for the purposes of 
section 555 of the Bankruptcy Code (11 U.S.C. 555), a qualified 
financial contract for the purposes of section 11(e)(8) of the Federal 
Deposit Insurance Act (12 U.S.C. 1821(e)(8)), or a netting contract 
between or among financial institutions for the purposes of sections 
401-407 of the Federal Deposit Insurance Corporation Improvement Act of 
1991 (12 U.S.C. 4401-4407), or the Board's Regulation EE (12 CFR Part 
231); or
    (B) If the transaction does not meet the criteria set forth in 
paragraph (iv)(A) of this section, then either:
    (1) The bank has conducted sufficient legal review to reach a well-
founded conclusion that:
    (i) The securities borrowing agreement executed in connection with 
the transaction provides the bank the right to accelerate, terminate, 
and close-out on a net basis all transactions under the agreement and to 
liquidate or set off collateral promptly upon an event of counterparty 
default, including in a bankruptcy, insolvency, or other similar 
proceeding of the counterparty; and
    (ii) Under applicable law of the relevant jurisdiction, its rights 
under the agreement are legal, valid, binding, and enforceable and any 
exercise of rights under the agreement will not be stayed or avoided; or
    (2) The transaction is either overnight or unconditionally 
cancelable at any time by the bank, and the bank has conducted 
sufficient legal review to reach a well-founded conclusion that:
    (i) The securities borrowing agreement executed in connection with 
the transaction provides the bank the right to accelerate, terminate, 
and close-out on a net basis all transactions under the agreement and to 
liquidate or set off collateral promptly upon an event of counterparty 
default; and
    (ii) Under the law governing the agreement, its rights under the 
agreement are legal, valid, binding, and enforceable.
    (2) Measure for market risk. Calculate the measure for market risk, 
which equals the sum of the VAR-based capital charge, the specific risk 
add-on (if any), and the capital charge for de minimis exposures (if 
any).
    (i) VAR-based capital charge. The VAR-based capital charge equals 
the higher of:
    (A) The previous day's VAR measure; or
    (B) The average of the daily VAR measures for each of the preceding 
60 business days multiplied by three, except as provided in section 4(e) 
of this appendix;
    (ii) Specific risk add-on. The specific risk add-on is calculated in 
accordance with section 5 of this appendix; and
    (iii) Capital charge for de minimis exposure. The capital charge for 
de minimis exposure is calculated in accordance with section 4(a) of 
this appendix.
    (3) Market risk equivalent assets. Calculate market risk equivalent 
assets by multiplying the measure for market risk (as calculated in 
paragraph (a)(2) of this section) by 12.5.
    (4) Denominator calculation. Add market risk equivalent assets (as 
calculated in paragraph (a)(3) of this section) to adjusted risk-
weighted assets (as calculated in paragraph (a)(1) of this section). The 
resulting sum is the bank's risk-based capital ratio denominator.
    (b) Risk-based capital ratio numerator. A bank subject to this 
appendix shall calculate its risk-based capital ratio numerator by 
allocating capital as follows:
    (1) Credit risk allocation. Allocate Tier 1 and Tier 2 capital equal 
to 8.0 percent of adjusted risk-weighted assets (as calculated in 
paragraph (a)(1) of this section). \8\
---------------------------------------------------------------------------

    \8\ A bank may not allocate Tier 3 capital to support credit risk 
(as calculated under appendix A of this part).
---------------------------------------------------------------------------

    (2) Market risk allocation. Allocate Tier 1, Tier 2, and Tier 3 
capital equal to the measure for market risk as calculated in paragraph 
(a)(2) of this section. The sum of Tier 2 and Tier 3 capital allocated 
for market risk must not exceed 250 percent of Tier 1 capital allocated 
for market risk. (This requirement means that Tier 1 capital allocated 
in this paragraph (b)(2) must equal at least 28.6 percent of the measure 
for market risk.)
    (3) Restrictions. (i) The sum of Tier 2 capital (both allocated and 
excess) and Tier 3 capital (allocated in paragraph (b)(2) of this 
section) may not exceed 100 percent of Tier 1 capital (both allocated 
and excess).\9\
---------------------------------------------------------------------------

    \9\ Excess Tier 1 capital means Tier 1 capital that has not been 
allocated in paragraphs (b)(1) and (b)(2) of this section. Excess Tier 2 
capital means Tier 2 capital that has not been allocated in paragraph 
(b)(1) and (b)(2) of this section, subject to the restrictions in 
paragraph (b)(3) of this section.
---------------------------------------------------------------------------

    (ii) Term subordinated debt (and intermediate-term preferred stock 
and related surplus) included in Tier 2 capital (both allocated and 
excess) may not exceed 50 percent of Tier 1 capital (both allocated and 
excess).
    (4) Numerator calculation. Add Tier 1 capital (both allocated and 
excess), Tier 2 capital (both allocated and excess), and Tier 3 capital 
(allocated under paragraph (b)(2) of this section). The resulting sum is 
the bank's risk-based capital ratio numerator.

                       Section 4. Internal Models

    (a) General. For risk-based capital purposes, a bank subject to this 
appendix must use its internal model to measure its daily VAR, in 
accordance with the requirements of

[[Page 233]]

this section.\10\ The FDIC may permit a bank to use alternative 
techniques to measure the market risk of de minimis exposures so long as 
the techniques adequately measure associated market risk.
---------------------------------------------------------------------------

    \10\ A bank's internal model may use any generally accepted 
measurement techniques, such as variance-covariance models, historical 
simulations, or Monte Carlo simulations. However, the level of 
sophistication and accuracy of a bank's internal model must be 
commensurate with the nature and size of its covered positions. A bank 
that modifies its existing modeling procedures to comply with the 
requirements of this appendix for risk-based capital purposes should, 
nonetheless, continue to use the internal model it considers most 
appropriate in evaluating risks for other purposes.
---------------------------------------------------------------------------

    (b) Qualitative requirements. A bank subject to this appendix must 
have a risk management system that meets the following minimum 
qualitative requirements:
    (1) The bank must have a risk control unit that reports directly to 
senior management and is independent from business trading units.
    (2) The bank's internal risk measurement model must be integrated 
into the daily management process.
    (3) The bank's policies and procedures must identify, and the bank 
must conduct, appropriate stress tests and backtests.\11\ The bank's 
policies and procedures must identify the procedures to follow in 
response to the results of such tests.
---------------------------------------------------------------------------

    \11\ Stress tests provide information about the impact of adverse 
market events on a bank's covered positions. Backtests provide 
information about the accuracy of an internal model by comparing a 
bank's daily VAR measures to its corresponding daily trading profits and 
losses.
---------------------------------------------------------------------------

    (4) The bank must conduct independent reviews of its risk 
measurement and risk management systems at least annually.
    (c) Market risk factors. The bank's internal model must use risk 
factors sufficient to measure the market risk inherent in all covered 
positions. The risk factors must address interest rate risk,\12\ equity 
price risk, foreign exchange rate risk, and commodity price risk.
---------------------------------------------------------------------------

    \12\ For material exposures in the major currencies and markets, 
modeling techniques must capture spread risk and must incorporate enough 
segments of the yield curve--at least six--to capture differences in 
volatility and less than perfect correlation of rates along the yield 
curve.
---------------------------------------------------------------------------

    (d) Quantitative requirements. For regulatory capital purposes, VAR 
measures must meet the following quantitative requirements:
    (1) The VAR measures must be calculated on a daily basis using a 99 
percent, one-tailed confidence level with a price shock equivalent to a 
ten-business day movement in rates and prices. In order to calculate VAR 
measures based on a ten-day price shock, the bank may either calculate 
ten-day figures directly or convert VAR figures based on holding periods 
other than ten days to the equivalent of a ten-day holding period (for 
instance, by multiplying a one-day VAR measure by the square root of 
ten).
    (2) The VAR measures must be based on an historical observation 
period (or effective observation period for a bank using a weighting 
scheme or other similar method) of at least one year. The bank must 
update data sets at least once every three months or more frequently as 
market conditions warrant.
    (3) The VAR measures must include the risks arising from the non-
linear price characteristics of options positions and the sensitivity of 
the market value of the positions to changes in the volatility of the 
underlying rates or prices. A bank with a large or complex options 
portfolio must measure the volatility of options positions by different 
maturities.
    (4) The VAR measures may incorporate empirical correlations within 
and across risk categories, provided that the bank's process for 
measuring correlations is sound. In the event that the VAR measures do 
not incorporate empirical correlations across risk categories, then the 
bank must add the separate VAR measures for the four major risk 
categories to determine its aggregate VAR measure.
    (e) Backtesting. (1) Beginning one year after a bank starts to 
comply with this appendix, a bank must conduct backtesting by comparing 
each of its most recent 250 business days' actual net trading profit or 
loss \13\ with the corresponding daily VAR measures generated for 
internal risk measurement purposes and calibrated to a one-day holding 
period and a 99 percent, one-tailed confidence level.
---------------------------------------------------------------------------

    \13\ Actual net trading profits and losses typically include such 
things as realized and unrealized gains and losses on portfolio 
positions as well as fee income and commissions associated with trading 
activities.
---------------------------------------------------------------------------

    (2) Once each quarter, the bank must identify the number of 
exceptions, that is, the number of business days for which the magnitude 
of the actual daily net trading loss, if any, exceeds the corresponding 
daily VAR measure.
    (3) A bank must use the multiplication factor indicated in Table 1 
of this appendix in determining its capital charge for market risk under 
section 3(a)(2)(i)(B) of this appendix until it obtains the next 
quarter's

[[Page 234]]

backtesting results, unless the FDIC determines that a different 
adjustment or other action is appropriate.

     Table 1--Multiplication Factor Based on Results of Backtesting
------------------------------------------------------------------------
                                                          Multiplication
                  Number of exceptions                        factor
------------------------------------------------------------------------
4 or fewer..............................................          3.00
5.......................................................          3.40
6.......................................................          3.50
7.......................................................          3.65
8.......................................................          3.75
9.......................................................          3.85
10 or more..............................................          4.00
------------------------------------------------------------------------

                        Section 5. Specific Risk

    (a) Modeled specific risk. A bank may use its internal model to 
measure specific risk. If the bank has demonstrated to the FDIC that its 
internal model measures the specific risk, including event and default 
risk as well as idiosyncratic variation, of covered debt and equity 
positions and includes the specific risk measure in the VAR-based 
capital charge in section 3(a)(2)(i) of this appendix, then the bank has 
no specific risk add-on for purposes of section 3(a)(2)(ii) of this 
appendix. The model should explain the historical price variation in the 
trading portfolio and capture concentration, both magnitude and changes 
in composition. The model should also be robust to an adverse 
environment and have been validated through backtesting which assesses 
whether specific risk is being accurately captured.
    (b) Add-on charge for modeled specific risk. A bank that 
incorporates specific risk in its internal model but fails to 
demonstrate to the FDIC that its internal model adequately measures all 
aspects of specific risk for covered debt and equity positions, 
including event and default risk, as provided by section 5(a) of this 
appendix, must calculate the bank's specific risk add-on for purposes of 
section 3(a)(2)(ii) of this appendix as follows:
    (1) If the model is capable of valid separation of the VAR measure 
into a specific risk portion and a general market risk portion, then the 
specific risk add-on is equal to the previous day's specific risk 
portion.
    (2) If the model does not separate the VAR measure into a specific 
risk portion and a general market risk portion, then the specific risk 
add-on is the sum of the previous day's VAR measures for subportfolios 
of covered debt and equity positions.
    (c) Add-on charge if specific risk is not modeled. If a bank does 
not model specific risk in accordance with paragraph (a) or (b) of this 
section, the bank's specific risk add-on charge for purposes of section 
3(a)(2)(ii) of this appendix equals the sum of the components for 
covered debt and equity positions. If a bank models, in accordance with 
paragraph (a) or (b) of this section, the specific risk of covered debt 
positions but not covered equity positions (or vice versa), then the 
bank's specific risk add-on charge for the positions not modeled is the 
component for covered debt or equity positions as appropriate:
    (1) Covered debt positions. (i) For purposes of this section 5, 
covered debt positions means fixed-rate or floating-rate debt 
instruments located in the trading account and instruments located in 
the trading account with values that react primarily to changes in 
interest rates, including certain non-convertible preferred stock, 
convertible bonds, and instruments subject to repurchase and lending 
agreements. Also included are derivatives (including written and 
purchased options) for which the underlying instrument is a covered debt 
instrument that is subject to a non-zero specific risk capital charge.
    (A) For covered debt positions that are derivatives, a bank must 
risk-weight (as described in paragraph (c)(1)(iii) of this section) the 
market value of the effective notional amount of the underlying debt 
instrument or index portfolio. Swaps must be included as the notional 
position in the underlying debt instrument or index portfolio, with a 
receiving side treated as a long position and a paying side treated as a 
short position; and
    (B) For covered debt positions that are options, whether long or 
short, a bank must risk-weight (as described in paragraph (c)(1)(iii) of 
this section) the market value of the effective notional amount of the 
underlying debt instrument or index multiplied by the option's delta.
    (ii) A bank may net long and short covered debt positions (including 
derivatives) in identical debt issues or indices.
    (iii) A bank must multiply the absolute value of the current market 
value of each net long or short covered debt position by the appropriate 
specific risk weighting factor indicated in Table 2 of this appendix. 
The specific risk capital charge component for covered debt positions is 
the sum of the weighted values.

   Table 2--Specific Risk Weighting Factors for Covered Debt Positions
------------------------------------------------------------------------
                                                               Weighting
              Category                  Remaining maturity    factor (in
                                          (contractual)        percent)
------------------------------------------------------------------------
Government.........................  N/A....................        0.00
Qualifying.........................  6 months or less.......        0.25
                                     Over 6 months to 24            1.00
                                      months.
                                     Over 24 months.........        1.60
Other..............................  N/A....................        8.00
------------------------------------------------------------------------

    (A) The government category includes all debt instruments of central 
governments of

[[Page 235]]

OECD-based countries \14\ including bonds, Treasury bills, and other 
short-term instruments, as well as local currency instruments of non-
OECD central governments to the extent the bank has liabilities booked 
in that currency.
---------------------------------------------------------------------------

    \14\ Organization for Economic Cooperation and Development (OECD)-
based countries is defined in appendix A of this part.
---------------------------------------------------------------------------

    (B) The qualifying category includes debt instruments of U.S. 
government-sponsored agencies, general obligation debt instruments 
issued by states and other political subdivisions of OECD-based 
countries, multilateral development banks, and debt instruments issued 
by U.S. depository institutions or OECD-banks that do not qualify as 
capital of the issuing institution.\15\ This category also includes 
other debt instruments, including corporate debt and revenue instruments 
issued by states and other political subdivisions of OECD countries, 
that are:
---------------------------------------------------------------------------

    \15\ U.S. government-sponsored agencies, multilateral development 
banks, and OECD banks are defined in appendix A of this part.
---------------------------------------------------------------------------

    (1) Rated investment-grade by at least two nationally recognized 
credit rating services;
    (2) Rated investment-grade by one nationally recognized credit 
rating agency and not rated less than investment-grade by any other 
credit rating agency; or
    (3) Unrated, but deemed to be of comparable investment quality by 
the reporting bank and the issuer has instruments listed on a recognized 
stock exchange, subject to review by the FDIC.
    (C) The other category includes debt instruments that are not 
included in the government or qualifying categories.
    (2) Covered equity positions. (i) For purposes of this section 5, 
covered equity positions means equity instruments located in the trading 
account and instruments located in the trading account with values that 
react primarily to changes in equity prices, including voting or non-
voting common stock, certain convertible bonds, and commitments to buy 
or sell equity instruments. Also included are derivatives (including 
written and purchased options) for which the underlying is a covered 
equity position.
    (A) For covered equity positions that are derivatives, a bank must 
risk weight (as described in paragraph (c)(2)(iii) of this section) the 
market value of the effective notional amount of the underlying equity 
instrument or equity portfolio. Swaps must be included as the notional 
position in the underlying equity instrument or index portfolio, with a 
receiving side treated as a long position and a paying side treated as a 
short position; and
    (B) For covered equity positions that are options, whether long or 
short, a bank must risk weight (as described in paragraph (c)(2)(iii) of 
this section) the market value of the effective notional amount of the 
underlying equity instrument or index multiplied by the option's delta.
    (ii) A bank may net long and short covered equity positions 
(including derivatives) in identical equity issues or equity indices in 
the same market.\16\
---------------------------------------------------------------------------

    \16\ A bank may also net positions in depository receipts against an 
opposite position in the underlying equity or identical equity in 
different markets, provided that the bank includes the costs of 
conversion.
---------------------------------------------------------------------------

    (iii)(A) A bank must multiply the absolute value of the current 
market value of each net long or short covered equity position by a risk 
weighting factor of 8.0 percent, or by 4.0 percent if the equity is held 
in a portfolio that is both liquid and well-diversified.\17\ For covered 
equity positions that are index contracts comprising a well-diversified 
portfolio of equity instruments, the net long or short position is 
multiplied by a risk weighting factor of 2.0 percent.
---------------------------------------------------------------------------

    \17\ A portfolio is liquid and well-diversified if: (1) it is 
characterized by a limited sensitivity to price changes of any single 
equity issue or closely related group of equity issues held in the 
portfolio; (2) the volatility of the portfolio's value is not dominated 
by the volatility of any individual equity issue or by equity issues 
from any single industry or economic sector; (3) it contains a large 
number of individual equity positions, with no single position 
representing a substantial portion of the portfolio's total market 
value; and (4) it consists mainly of issues traded on organized 
exchanges or in well-established over-the-counter markets.
---------------------------------------------------------------------------

    (B) For covered equity positions from the following futures-related 
arbitrage strategies, a bank may apply a 2.0 percent risk weighting 
factor to one side (long or short) of each position with the opposite 
side exempt from charge, subject to review by the FDIC:
    (1) Long and short positions in exactly the same index at different 
dates or in different market centers; or
    (2) Long and short positions in index contracts at the same date in 
different but similar indices.
    (C) For futures contracts on broadly-based indices that are matched 
by offsetting positions in a basket of stocks comprising the index, a 
bank may apply a 2.0 percent risk weighting factor to the futures and 
stock basket positions (long and short), provided that such trades are 
deliberately entered into and separately controlled, and that the basket 
of stocks comprises at least 90 percent of the capitalization of the 
index.

[[Page 236]]

    (iv) The specific risk capital charge component for covered equity 
positions is the sum of the weighted values.

[61 FR 47376, Sept. 6, 1996, as amended at 62 FR 68068, Dec. 30, 1997; 
64 FR 19038, Apr. 19, 1999; 65 FR 75859, Dec. 5, 2000; 69 FR 44924, July 
28, 2004; 71 FR 8937, Feb. 22, 2006]



  Sec. Appendix D to Part 325--Capital Adequacy Guidelines for Banks: 
       Internal-Ratings-Based and Advanced Measurement Approaches

Part I General Provisions
    Section 1 Purpose, Applicability, Reservation of Authority, and 
Principle of Conservatism
    Section 2 Definitions
    Section 3 Minimum Risk-Based Capital Requirements
Part II Qualifying Capital
    Section 11 Additional Deductions
    Section 12 Deductions and Limitations Not Required
    Section 13 Eligible Credit Reserves
Part III Qualification
    Section 21 Qualification Process
    Section 22 Qualification Requirements
    Section 23 Ongoing Qualification
    Section 24 Merger and Acquisition Transitional Arrangements
Part IV Risk-Weighted Assets for General Credit Risk
    Section 31 Mechanics for Calculating Total Wholesale and Retail 
Risk-Weighted Assets
    Section 32 Counterparty Credit Risk of Repo-Style Transactions, 
Eligible Margin Loans, and OTC Derivative Contracts
    Section 33 Guarantees and Credit Derivatives: PD Substitution and 
LGD Adjustment Approaches
    Section 34 Guarantees and Credit Derivatives: Double Default 
Treatment
    Section 35 Risk-Based Capital Requirement for Unsettled Transactions
Part V Risk-Weighted Assets for Securitization Exposures
    Section 41 Operational Criteria for Recognizing the Transfer of Risk
    Section 42 Risk-Based Capital Requirement for Securitization 
Exposures
    Section 43 Ratings-Based Approach (RBA)
    Section 44 Internal Assessment Approach (IAA)
    Section 45 Supervisory Formula Approach (SFA)
    Section 46 Recognition of Credit Risk Mitigants for Securitization 
Exposures
    Section 47 Risk-Based Capital Requirement for Early Amortization 
Provisions
Part VI Risk-Weighted Assets for Equity Exposures
    Section 51 Introduction and Exposure Measurement
    Section 52 Simple Risk Weight Approach (SRWA)
    Section 53 Internal Models Approach (IMA)
    Section 54 Equity Exposures to Investment Funds
    Section 55 Equity Derivative Contracts
Part VII Risk-Weighted Assets for Operational Risk
    Section 61 Qualification Requirements for Incorporation of 
Operational Risk Mitigants
    Section 62 Mechanics of Risk-Weighted Asset Calculation
Part VIII Disclosure
    Section 71 Disclosure Requirements

                       Part I. General Provisions

    Section 1. Purpose, Applicability, Reservation of Authority, and 
                        Principle of Conservatism

    (a) Purpose. This appendix establishes:
    (1) Minimum qualifying criteria for banks using bank-specific 
internal risk measurement and management processes for calculating risk-
based capital requirements;
    (2) Methodologies for such banks to calculate their risk-based 
capital requirements; and
    (3) Public disclosure requirements for such banks.
    (b) Applicability. (1) This appendix applies to a bank that:
    (i) Has consolidated assets, as reported on the most recent year-end 
Consolidated Report of Condition and Income (Call Report) equal to $250 
billion or more;
    (ii) Has consolidated total on-balance sheet foreign exposure at the 
most recent year-end equal to $10 billion or more (where total on-
balance sheet foreign exposure equals total cross-border claims less 
claims with head office or guarantor located in another country plus 
redistributed guaranteed amounts to the country of head office or 
guarantor plus local country claims on local residents plus revaluation 
gains on foreign exchange and derivative products, calculated in 
accordance with the Federal Financial Institutions Examination Council 
(FFIEC) 009 Country Exposure Report);
    (iii) Is a subsidiary of a depository institution that uses 12 CFR 
part 3, appendix C, 12 CFR part 208, appendix F, 12 CFR part 325, 
appendix D, or 12 CFR part 567, appendix C, to calculate its risk-based 
capital requirements; or
    (iv) Is a subsidiary of a bank holding company that uses 12 CFR part 
225, appendix G, to calculate its risk-based capital requirements.
    (2) Any bank may elect to use this appendix to calculate its risk-
based capital requirements.
    (3) A bank that is subject to this appendix must use this appendix 
unless the FDIC determines in writing that application of this appendix 
is not appropriate in light of the

[[Page 237]]

bank's asset size, level of complexity, risk profile, or scope of 
operations. In making a determination under this paragraph, the FDIC 
will apply notice and response procedures in the same manner and to the 
same extent as the notice and response procedures in 12 CFR 325.6(c).
    (c) Reservation of authority--(1) Additional capital in the 
aggregate. The FDIC may require a bank to hold an amount of capital 
greater than otherwise required under this appendix if the FDIC 
determines that the bank's risk-based capital requirement under this 
appendix is not commensurate with the bank's credit, market, 
operational, or other risks. In making a determination under this 
paragraph, the FDIC will apply notice and response procedures in the 
same manner and to the same extent as the notice and response procedures 
in 12 CFR 325.6(c).
    (2) Specific risk-weighted asset amounts. (i) If the FDIC determines 
that the risk-weighted asset amount calculated under this appendix by 
the bank for one or more exposures is not commensurate with the risks 
associated with those exposures, the FDIC may require the bank to assign 
a different risk-weighted asset amount to the exposures, to assign 
different risk parameters to the exposures (if the exposures are 
wholesale or retail exposures), or to use different model assumptions 
for the exposures (if relevant), all as specified by the FDIC.
    (ii) If the FDIC determines that the risk-weighted asset amount for 
operational risk produced by the bank under this appendix is not 
commensurate with the operational risks of the bank, the FDIC may 
require the bank to assign a different risk-weighted asset amount for 
operational risk, to change elements of its operational risk analytical 
framework, including distributional and dependence assumptions, or to 
make other changes to the bank's operational risk management processes, 
data and assessment systems, or quantification systems, all as specified 
by the FDIC.
    (3) Other supervisory authority. Nothing in this appendix limits the 
authority of the FDIC under any other provision of law or regulation to 
take supervisory or enforcement action, including action to address 
unsafe or unsound practices or conditions, deficient capital levels, or 
violations of law.
    (d) Principle of conservatism. Notwithstanding the requirements of 
this appendix, a bank may choose not to apply a provision of this 
appendix to one or more exposures, provided that:
    (1) The bank can demonstrate on an ongoing basis to the satisfaction 
of the FDIC that not applying the provision would, in all circumstances, 
unambiguously generate a risk-based capital requirement for each such 
exposure greater than that which would otherwise be required under this 
appendix;
    (2) The bank appropriately manages the risk of each such exposure;
    (3) The bank notifies the FDIC in writing prior to applying this 
principle to each such exposure; and
    (4) The exposures to which the bank applies this principle are not, 
in the aggregate, material to the bank.

                         Section 2. Definitions

    Advanced internal ratings-based (IRB) systems means a bank's 
internal risk rating and segmentation system; risk parameter 
quantification system; data management and maintenance system; and 
control, oversight, and validation system for credit risk of wholesale 
and retail exposures.
    Advanced systems means a bank's advanced IRB systems, operational 
risk management processes, operational risk data and assessment systems, 
operational risk quantification systems, and, to the extent the bank 
uses the following systems, the internal models methodology, double 
default excessive correlation detection process, IMA for equity 
exposures, and IAA for securitization exposures to ABCP programs.
    Affiliate with respect to a company means any company that controls, 
is controlled by, or is under common control with, the company.
    Applicable external rating means:
    (1) With respect to an exposure that has multiple external ratings 
assigned by NRSROs, the lowest solicited external rating assigned to the 
exposure by any NRSRO; and
    (2) With respect to an exposure that has a single external rating 
assigned by an NRSRO, the external rating assigned to the exposure by 
the NRSRO.
    Applicable inferred rating means:
    (1) With respect to an exposure that has multiple inferred ratings, 
the lowest inferred rating based on a solicited external rating; and
    (2) With respect to an exposure that has a single inferred rating, 
the inferred rating.
    Asset-backed commercial paper (ABCP) program means a program that 
primarily issues commercial paper that:
    (1) Has an external rating; and
    (2) Is backed by underlying exposures held in a bankruptcy-remote 
SPE.
    Asset-backed commercial paper (ABCP) program sponsor means a bank 
that:
    (1) Establishes an ABCP program;
    (2) Approves the sellers permitted to participate in an ABCP 
program;
    (3) Approves the exposures to be purchased by an ABCP program; or
    (4) Administers the ABCP program by monitoring the underlying 
exposures, underwriting or otherwise arranging for the placement of debt 
or other obligations issued by the program, compiling monthly reports, 
or

[[Page 238]]

ensuring compliance with the program documents and with the program's 
credit and investment policy.
    Backtesting means the comparison of a bank's internal estimates with 
actual outcomes during a sample period not used in model development. In 
this context, backtesting is one form of out-of-sample testing.
    Bank holding company is defined in section 2 of the Bank Holding 
Company Act (12 U.S.C. 1841).
    Benchmarking means the comparison of a bank's internal estimates 
with relevant internal and external data or with estimates based on 
other estimation techniques.
    Business environment and internal control factors means the 
indicators of a bank's operational risk profile that reflect a current 
and forward-looking assessment of the bank's underlying business risk 
factors and internal control environment.
    Carrying value means, with respect to an asset, the value of the 
asset on the balance sheet of the bank, determined in accordance with 
GAAP.
    Clean-up call means a contractual provision that permits an 
originating bank or servicer to call securitization exposures before 
their stated maturity or call date. See also eligible clean-up call.
    Commodity derivative contract means a commodity-linked swap, 
purchased commodity-linked option, forward commodity-linked contract, or 
any other instrument linked to commodities that gives rise to similar 
counterparty credit risks.
    Company means a corporation, partnership, limited liability company, 
depository institution, business trust, special purpose entity, 
association, or similar organization.
    Control. A person or company controls a company if it:
    (1) Owns, controls, or holds with power to vote 25 percent or more 
of a class of voting securities of the company; or
    (2) Consolidates the company for financial reporting purposes.
    Controlled early amortization provision means an early amortization 
provision that meets all the following conditions:
    (1) The originating bank has appropriate policies and procedures to 
ensure that it has sufficient capital and liquidity available in the 
event of an early amortization;
    (2) Throughout the duration of the securitization (including the 
early amortization period), there is the same pro rata sharing of 
interest, principal, expenses, losses, fees, recoveries, and other cash 
flows from the underlying exposures based on the originating bank's and 
the investors' relative shares of the underlying exposures outstanding 
measured on a consistent monthly basis;
    (3) The amortization period is sufficient for at least 90 percent of 
the total underlying exposures outstanding at the beginning of the early 
amortization period to be repaid or recognized as in default; and
    (4) The schedule for repayment of investor principal is not more 
rapid than would be allowed by straight-line amortization over an 18-
month period.
    Credit derivative means a financial contract executed under standard 
industry credit derivative documentation that allows one party (the 
protection purchaser) to transfer the credit risk of one or more 
exposures (reference exposure) to another party (the protection 
provider). See also eligible credit derivative.
    Credit-enhancing interest-only strip (CEIO) means an on-balance 
sheet asset that, in form or in substance:
    (1) Represents a contractual right to receive some or all of the 
interest and no more than a minimal amount of principal due on the 
underlying exposures of a securitization; and
    (2) Exposes the holder to credit risk directly or indirectly 
associated with the underlying exposures that exceeds a pro rata share 
of the holder's claim on the underlying exposures, whether through 
subordination provisions or other credit-enhancement techniques.
    Credit-enhancing representations and warranties means 
representations and warranties that are made or assumed in connection 
with a transfer of underlying exposures (including loan servicing 
assets) and that obligate a bank to protect another party from losses 
arising from the credit risk of the underlying exposures. Credit-
enhancing representations and warranties include provisions to protect a 
party from losses resulting from the default or nonperformance of the 
obligors of the underlying exposures or from an insufficiency in the 
value of the collateral backing the underlying exposures. Credit-
enhancing representations and warranties do not include:
    (1) Early default clauses and similar warranties that permit the 
return of, or premium refund clauses that cover, first-lien residential 
mortgage exposures for a period not to exceed 120 days from the date of 
transfer, provided that the date of transfer is within one year of 
origination of the residential mortgage exposure;
    (2) Premium refund clauses that cover underlying exposures 
guaranteed, in whole or in part, by the U.S. government, a U.S. 
government agency, or a U.S. government sponsored enterprise, provided 
that the clauses are for a period not to exceed 120 days from the date 
of transfer; or
    (3) Warranties that permit the return of underlying exposures in 
instances of misrepresentation, fraud, or incomplete documentation.
    Credit risk mitigant means collateral, a credit derivative, or a 
guarantee.

[[Page 239]]

    Credit-risk-weighted assets means 1.06 multiplied by the sum of:
    (1) Total wholesale and retail risk-weighted assets;
    (2) Risk-weighted assets for securitization exposures; and
    (3) Risk-weighted assets for equity exposures.
    Current exposure means, with respect to a netting set, the larger of 
zero or the market value of a transaction or portfolio of transactions 
within the netting set that would be lost upon default of the 
counterparty, assuming no recovery on the value of the transactions. 
Current exposure is also called replacement cost.
    Default--(1) Retail. (i) A retail exposure of a bank is in default 
if:
    (A) The exposure is 180 days past due, in the case of a residential 
mortgage exposure or revolving exposure;
    (B) The exposure is 120 days past due, in the case of all other 
retail exposures; or
    (C) The bank has taken a full or partial charge-off, write-down of 
principal, or material negative fair value adjustment of principal on 
the exposure for credit-related reasons.
    (ii) Notwithstanding paragraph (1)(i) of this definition, for a 
retail exposure held by a non-U.S. subsidiary of the bank that is 
subject to an internal ratings-based approach to capital adequacy 
consistent with the Basel Committee on Banking Supervision's 
``International Convergence of Capital Measurement and Capital 
Standards: A Revised Framework'' in a non-U.S. jurisdiction, the bank 
may elect to use the definition of default that is used in that 
jurisdiction, provided that the bank has obtained prior approval from 
the FDIC to use the definition of default in that jurisdiction.
    (iii) A retail exposure in default remains in default until the bank 
has reasonable assurance of repayment and performance for all 
contractual principal and interest payments on the exposure.
    (2) Wholesale. (i) A bank's wholesale obligor is in default if:
    (A) The bank determines that the obligor is unlikely to pay its 
credit obligations to the bank in full, without recourse by the bank to 
actions such as realizing collateral (if held); or
    (B) The obligor is past due more than 90 days on any material credit 
obligation(s) to the bank.\1\
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    \1\ Overdrafts are past due once the obligor has breached an advised 
limit or been advised of a limit smaller than the current outstanding 
balance.
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    (ii) An obligor in default remains in default until the bank has 
reasonable assurance of repayment and performance for all contractual 
principal and interest payments on all exposures of the bank to the 
obligor (other than exposures that have been fully written-down or 
charged-off).
    Dependence means a measure of the association among operational 
losses across and within units of measure.
    Depository institution is defined in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813).
    Derivative contract means a financial contract whose value is 
derived from the values of one or more underlying assets, reference 
rates, or indices of asset values or reference rates. Derivative 
contracts include interest rate derivative contracts, exchange rate 
derivative contracts, equity derivative contracts, commodity derivative 
contracts, credit derivatives, and any other instrument that poses 
similar counterparty credit risks. Derivative contracts also include 
unsettled securities, commodities, and foreign exchange transactions 
with a contractual settlement or delivery lag that is longer than the 
lesser of the market standard for the particular instrument or five 
business days.
    Early amortization provision means a provision in the documentation 
governing a securitization that, when triggered, causes investors in the 
securitization exposures to be repaid before the original stated 
maturity of the securitization exposures, unless the provision:
    (1) Is triggered solely by events not directly related to the 
performance of the underlying exposures or the originating bank (such as 
material changes in tax laws or regulations); or
    (2) Leaves investors fully exposed to future draws by obligors on 
the underlying exposures even after the provision is triggered.
    Economic downturn conditions means, with respect to an exposure held 
by the bank, those conditions in which the aggregate default rates for 
that exposure's wholesale or retail exposure subcategory (or subdivision 
of such subcategory selected by the bank) in the exposure's national 
jurisdiction (or subdivision of such jurisdiction selected by the bank) 
are significantly higher than average.
    Effective maturity (M) of a wholesale exposure means:
    (1) For wholesale exposures other than repo-style transactions, 
eligible margin loans, and OTC derivative contracts described in 
paragraph (2) or (3) of this definition:
    (i) The weighted-average remaining maturity (measured in years, 
whole or fractional) of the expected contractual cash flows from the 
exposure, using the undiscounted amounts of the cash flows as weights; 
or
    (ii) The nominal remaining maturity (measured in years, whole or 
fractional) of the exposure.
    (2) For repo-style transactions, eligible margin loans, and OTC 
derivative contracts

[[Page 240]]

subject to a qualifying master netting agreement for which the bank does 
not apply the internal models approach in paragraph (d) of section 32 of 
this appendix, the weighted-average remaining maturity (measured in 
years, whole or fractional) of the individual transactions subject to 
the qualifying master netting agreement, with the weight of each 
individual transaction set equal to the notional amount of the 
transaction.
    (3) For repo-style transactions, eligible margin loans, and OTC 
derivative contracts for which the bank applies the internal models 
approach in paragraph (d) of section 32 of this appendix, the value 
determined in paragraph (d)(4) of section 32 of this appendix.
    Effective notional amount means, for an eligible guarantee or 
eligible credit derivative, the lesser of the contractual notional 
amount of the credit risk mitigant and the EAD of the hedged exposure, 
multiplied by the percentage coverage of the credit risk mitigant. For 
example, the effective notional amount of an eligible guarantee that 
covers, on a pro rata basis, 40 percent of any losses on a $100 bond 
would be $40.
    Eligible clean-up call means a clean-up call that:
    (1) Is exercisable solely at the discretion of the originating bank 
or servicer;
    (2) Is not structured to avoid allocating losses to securitization 
exposures held by investors or otherwise structured to provide credit 
enhancement to the securitization; and
    (3)(i) For a traditional securitization, is only exercisable when 10 
percent or less of the principal amount of the underlying exposures or 
securitization exposures (determined as of the inception of the 
securitization) is outstanding; or
    (ii) For a synthetic securitization, is only exercisable when 10 
percent or less of the principal amount of the reference portfolio of 
underlying exposures (determined as of the inception of the 
securitization) is outstanding.
    Eligible credit derivative means a credit derivative in the form of 
a credit default swap, n\th\-to-default swap, total return swap, or any 
other form of credit derivative approved by the FDIC, provided that:
    (1) The contract meets the requirements of an eligible guarantee and 
has been confirmed by the protection purchaser and the protection 
provider;
    (2) Any assignment of the contract has been confirmed by all 
relevant parties;
    (3) If the credit derivative is a credit default swap or n\th\-to-
default swap, the contract includes the following credit events:
    (i) Failure to pay any amount due under the terms of the reference 
exposure, subject to any applicable minimal payment threshold that is 
consistent with standard market practice and with a grace period that is 
closely in line with the grace period of the reference exposure; and
    (ii) Bankruptcy, insolvency, or inability of the obligor on the 
reference exposure to pay its debts, or its failure or admission in 
writing of its inability generally to pay its debts as they become due, 
and similar events;
    (4) The terms and conditions dictating the manner in which the 
contract is to be settled are incorporated into the contract;
    (5) If the contract allows for cash settlement, the contract 
incorporates a robust valuation process to estimate loss reliably and 
specifies a reasonable period for obtaining post-credit event valuations 
of the reference exposure;
    (6) If the contract requires the protection purchaser to transfer an 
exposure to the protection provider at settlement, the terms of at least 
one of the exposures that is permitted to be transferred under the 
contract provides that any required consent to transfer may not be 
unreasonably withheld;
    (7) If the credit derivative is a credit default swap or n\th\-to-
default swap, the contract clearly identifies the parties responsible 
for determining whether a credit event has occurred, specifies that this 
determination is not the sole responsibility of the protection provider, 
and gives the protection purchaser the right to notify the protection 
provider of the occurrence of a credit event; and
    (8) If the credit derivative is a total return swap and the bank 
records net payments received on the swap as net income, the bank 
records offsetting deterioration in the value of the hedged exposure 
(either through reductions in fair value or by an addition to reserves).
    Eligible credit reserves means all general allowances that have been 
established through a charge against earnings to absorb credit losses 
associated with on- or off-balance sheet wholesale and retail exposures, 
including the allowance for loan and lease losses (ALLL) associated with 
such exposures but excluding allocated transfer risk reserves 
established pursuant to 12 U.S.C. 3904 and other specific reserves 
created against recognized losses.
    Eligible double default guarantor, with respect to a guarantee or 
credit derivative obtained by a bank, means:
    (1) U.S.-based entities. A depository institution, a bank holding 
company, a savings and loan holding company (as defined in 12 U.S.C. 
1467a) provided all or substantially all of the holding company's 
activities are permissible for a financial holding company under 12 
U.S.C. 1843(k), a securities broker or dealer registered with the SEC 
under the Securities Exchange Act of 1934 (15 U.S.C. 78o et seq.), or an 
insurance company in the business of providing credit protection (such 
as a monoline bond insurer or re-insurer) that is subject to

[[Page 241]]

supervision by a State insurance regulator, if:
    (i) At the time the guarantor issued the guarantee or credit 
derivative or at any time thereafter, the bank assigned a PD to the 
guarantor's rating grade that was equal to or lower than the PD 
associated with a long-term external rating in the third-highest 
investment-grade rating category; and
    (ii) The bank currently assigns a PD to the guarantor's rating grade 
that is equal to or lower than the PD associated with a long-term 
external rating in the lowest investment-grade rating category; or
    (2) Non-U.S.-based entities. A foreign bank (as defined in Sec. 
211.2 of the Federal Reserve Board's Regulation K (12 CFR 211.2)), a 
non-U.S.-based securities firm, or a non-U.S.-based insurance company in 
the business of providing credit protection, if:
    (i) The bank demonstrates that the guarantor is subject to 
consolidated supervision and regulation comparable to that imposed on 
U.S. depository institutions, securities broker-dealers, or insurance 
companies (as the case may be), or has issued and outstanding an 
unsecured long-term debt security without credit enhancement that has a 
long-term applicable external rating of at least investment grade;
    (ii) At the time the guarantor issued the guarantee or credit 
derivative or at any time thereafter, the bank assigned a PD to the 
guarantor's rating grade that was equal to or lower than the PD 
associated with a long-term external rating in the third-highest 
investment-grade rating category; and
    (iii) The bank currently assigns a PD to the guarantor's rating 
grade that is equal to or lower than the PD associated with a long-term 
external rating in the lowest investment-grade rating category.
    Eligible guarantee means a guarantee that:
    (1) Is written and unconditional;
    (2) Covers all or a pro rata portion of all contractual payments of 
the obligor on the reference exposure;
    (3) Gives the beneficiary a direct claim against the protection 
provider;
    (4) Is not unilaterally cancelable by the protection provider for 
reasons other than the breach of the contract by the beneficiary;
    (5) Is legally enforceable against the protection provider in a 
jurisdiction where the protection provider has sufficient assets against 
which a judgment may be attached and enforced;
    (6) Requires the protection provider to make payment to the 
beneficiary on the occurrence of a default (as defined in the guarantee) 
of the obligor on the reference exposure in a timely manner without the 
beneficiary first having to take legal actions to pursue the obligor for 
payment;
    (7) Does not increase the beneficiary's cost of credit protection on 
the guarantee in response to deterioration in the credit quality of the 
reference exposure; and
    (8) Is not provided by an affiliate of the bank, unless the 
affiliate is an insured depository institution, bank, securities broker 
or dealer, or insurance company that:
    (i) Does not control the bank; and
    (ii) Is subject to consolidated supervision and regulation 
comparable to that imposed on U.S. depository institutions, securities 
broker-dealers, or insurance companies (as the case may be).
    Eligible margin loan means an extension of credit where:
    (1) The extension of credit is collateralized exclusively by liquid 
and readily marketable debt or equity securities, gold, or conforming 
residential mortgages;
    (2) The collateral is marked to market daily, and the transaction is 
subject to daily margin maintenance requirements;
    (3) The extension of credit is conducted under an agreement that 
provides the bank the right to accelerate and terminate the extension of 
credit and to liquidate or set off collateral promptly upon an event of 
default (including upon an event of bankruptcy, insolvency, or similar 
proceeding) of the counterparty, provided that, in any such case, any 
exercise of rights under the agreement will not be stayed or avoided 
under applicable law in the relevant jurisdictions; \2\ and
---------------------------------------------------------------------------

    \2\ This requirement is met where all transactions under the 
agreement are (i) executed under U.S. law and (ii) constitute 
``securities contracts'' under section 555 of the Bankruptcy Code (11 
U.S.C. 555), qualified financial contracts under section 11(e)(8) of the 
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)), or netting 
contracts between or among financial institutions under sections 401-407 
of the Federal Deposit Insurance Corporation Improvement Act of 1991 (12 
U.S.C. 4401-4407) or the Federal Reserve Board's Regulation EE (12 CFR 
part 231).
---------------------------------------------------------------------------

    (4) The bank has conducted sufficient legal review to conclude with 
a well-founded basis (and maintains sufficient written documentation of 
that legal review) that the agreement meets the requirements of 
paragraph (3) of this definition and is legal, valid, binding, and 
enforceable under applicable law in the relevant jurisdictions.
    Eligible operational risk offsets means amounts, not to exceed 
expected operational loss, that:
    (1) Are generated by internal business practices to absorb highly 
predictable and reasonably stable operational losses, including reserves 
calculated consistent with GAAP; and
    (2) Are available to cover expected operational losses with a high 
degree of certainty over a one-year horizon.

[[Page 242]]

    Eligible purchased wholesale exposure means a purchased wholesale 
exposure that:
    (1) The bank or securitization SPE purchased from an unaffiliated 
seller and did not directly or indirectly originate;
    (2) Was generated on an arm's-length basis between the seller and 
the obligor (intercompany accounts receivable and receivables subject to 
contra-accounts between firms that buy and sell to each other do not 
satisfy this criterion);
    (3) Provides the bank or securitization SPE with a claim on all 
proceeds from the exposure or a pro rata interest in the proceeds from 
the exposure;
    (4) Has an M of less than one year; and
    (5) When consolidated by obligor, does not represent a concentrated 
exposure relative to the portfolio of purchased wholesale exposures.
    Eligible securitization guarantor means:
    (1) A sovereign entity, the Bank for International Settlements, the 
International Monetary Fund, the European Central Bank, the European 
Commission, a Federal Home Loan Bank, Federal Agricultural Mortgage 
Corporation (Farmer Mac), a multilateral development bank, a depository 
institution, a bank holding company, a savings and loan holding company 
(as defined in 12 U.S.C. 1467a) provided all or substantially all of the 
holding company's activities are permissible for a financial holding 
company under 12 U.S.C. 1843(k), a foreign bank (as defined in Sec. 
211.2 of the Federal Reserve Board's Regulation K (12 CFR 211.2)), or a 
securities firm;
    (2) Any other entity (other than a securitization SPE) that has 
issued and outstanding an unsecured long-term debt security without 
credit enhancement that has a long-term applicable external rating in 
one of the three highest investment-grade rating categories; or
    (3) Any other entity (other than a securitization SPE) that has a PD 
assigned by the bank that is lower than or equal to the PD associated 
with a long-term external rating in the third highest investment-grade 
rating category.
    Eligible servicer cash advance facility means a servicer cash 
advance facility in which:
    (1) The servicer is entitled to full reimbursement of advances, 
except that a servicer may be obligated to make non-reimbursable 
advances for a particular underlying exposure if any such advance is 
contractually limited to an insignificant amount of the outstanding 
principal balance of that exposure;
    (2) The servicer's right to reimbursement is senior in right of 
payment to all other claims on the cash flows from the underlying 
exposures of the securitization; and
    (3) The servicer has no legal obligation to, and does not, make 
advances to the securitization if the servicer concludes the advances 
are unlikely to be repaid.
    Equity derivative contract means an equity-linked swap, purchased 
equity-linked option, forward equity-linked contract, or any other 
instrument linked to equities that gives rise to similar counterparty 
credit risks.
    Equity exposure means:
    (1) A security or instrument (whether voting or non-voting) that 
represents a direct or indirect ownership interest in, and is a residual 
claim on, the assets and income of a company, unless:
    (i) The issuing company is consolidated with the bank under GAAP;
    (ii) The bank is required to deduct the ownership interest from tier 
1 or tier 2 capital under this appendix;
    (iii) The ownership interest incorporates a payment or other similar 
obligation on the part of the issuing company (such as an obligation to 
make periodic payments); or
    (iv) The ownership interest is a securitization exposure;
    (2) A security or instrument that is mandatorily convertible into a 
security or instrument described in paragraph (1) of this definition;
    (3) An option or warrant that is exercisable for a security or 
instrument described in paragraph (1) of this definition; or
    (4) Any other security or instrument (other than a securitization 
exposure) to the extent the return on the security or instrument is 
based on the performance of a security or instrument described in 
paragraph (1) of this definition.
    Excess spread for a period means:
    (1) Gross finance charge collections and other income received by a 
securitization SPE (including market interchange fees) over a period 
minus interest paid to the holders of the securitization exposures, 
servicing fees, charge-offs, and other senior trust or similar expenses 
of the SPE over the period; divided by
    (2) The principal balance of the underlying exposures at the end of 
the period.
    Exchange rate derivative contract means a cross-currency interest 
rate swap, forward foreign-exchange contract, currency option purchased, 
or any other instrument linked to exchange rates that gives rise to 
similar counterparty credit risks.
    Excluded mortgage exposure means any one- to four-family residential 
pre-sold construction loan for a residence for which the purchase 
contract is cancelled that would receive a 100 percent risk weight under 
section 618(a)(2) of the Resolution Trust Corporation Refinancing, 
Restructuring, and Improvement Act and under 12 CFR part 325, appendix 
A, section II.C.
    Expected credit loss (ECL) means:
    (1) For a wholesale exposure to a non-defaulted obligor or segment 
of non-defaulted retail exposures that is carried at fair value with 
gains and losses flowing through earnings or that is classified as held-
for-sale and

[[Page 243]]

is carried at the lower of cost or fair value with losses flowing 
through earnings, zero.
    (2) For all other wholesale exposures to non-defaulted obligors or 
segments of non-defaulted retail exposures, the product of PD times LGD 
times EAD for the exposure or segment.
    (3) For a wholesale exposure to a defaulted obligor or segment of 
defaulted retail exposures, the bank's impairment estimate for allowance 
purposes for the exposure or segment.
    (4) Total ECL is the sum of expected credit losses for all wholesale 
and retail exposures other than exposures for which the bank has applied 
the double default treatment in section 34 of this appendix.
    Expected exposure (EE) means the expected value of the probability 
distribution of non-negative credit risk exposures to a counterparty at 
any specified future date before the maturity date of the longest term 
transaction in the netting set. Any negative market values in the 
probability distribution of market values to a counterparty at a 
specified future date are set to zero to convert the probability 
distribution of market values to the probability distribution of credit 
risk exposures.
    Expected operational loss (EOL) means the expected value of the 
distribution of potential aggregate operational losses, as generated by 
the bank's operational risk quantification system using a one-year 
horizon.
    Expected positive exposure (EPE) means the weighted average over 
time of expected (non-negative) exposures to a counterparty where the 
weights are the proportion of the time interval that an individual 
expected exposure represents. When calculating risk-based capital 
requirements, the average is taken over a one-year horizon.
    Exposure at default (EAD). (1) For the on-balance sheet component of 
a wholesale exposure or segment of retail exposures (other than an OTC 
derivative contract, or a repo-style transaction or eligible margin loan 
for which the bank determines EAD under section 32 of this appendix), 
EAD means:
    (i) If the exposure or segment is a security classified as 
available-for-sale, the bank's carrying value (including net accrued but 
unpaid interest and fees) for the exposure or segment less any allocated 
transfer risk reserve for the exposure or segment, less any unrealized 
gains on the exposure or segment, and plus any unrealized losses on the 
exposure or segment; or
    (ii) If the exposure or segment is not a security classified as 
available-for-sale, the bank's carrying value (including net accrued but 
unpaid interest and fees) for the exposure or segment less any allocated 
transfer risk reserve for the exposure or segment.
    (2) For the off-balance sheet component of a wholesale exposure or 
segment of retail exposures (other than an OTC derivative contract, or a 
repo-style transaction or eligible margin loan for which the bank 
determines EAD under section 32 of this appendix) in the form of a loan 
commitment, line of credit, trade-related letter of credit, or 
transaction-related contingency, EAD means the bank's best estimate of 
net additions to the outstanding amount owed the bank, including 
estimated future additional draws of principal and accrued but unpaid 
interest and fees, that are likely to occur over a one-year horizon 
assuming the wholesale exposure or the retail exposures in the segment 
were to go into default. This estimate of net additions must reflect 
what would be expected during economic downturn conditions. Trade-
related letters of credit are short-term, self-liquidating instruments 
that are used to finance the movement of goods and are collateralized by 
the underlying goods. Transaction-related contingencies relate to a 
particular transaction and include, among other things, performance 
bonds and performance-based letters of credit.
    (3) For the off-balance sheet component of a wholesale exposure or 
segment of retail exposures (other than an OTC derivative contract, or a 
repo-style transaction or eligible margin loan for which the bank 
determines EAD under section 32 of this appendix) in the form of 
anything other than a loan commitment, line of credit, trade-related 
letter of credit, or transaction-related contingency, EAD means the 
notional amount of the exposure or segment.
    (4) EAD for OTC derivative contracts is calculated as described in 
section 32 of this appendix. A bank also may determine EAD for repo-
style transactions and eligible margin loans as described in section 32 
of this appendix.
    (5) For wholesale or retail exposures in which only the drawn 
balance has been securitized, the bank must reflect its share of the 
exposures' undrawn balances in EAD. Undrawn balances of revolving 
exposures for which the drawn balances have been securitized must be 
allocated between the seller's and investors' interests on a pro rata 
basis, based on the proportions of the seller's and investors' shares of 
the securitized drawn balances.
    Exposure category means any of the wholesale, retail, 
securitization, or equity exposure categories.
    External operational loss event data means, with respect to a bank, 
gross operational loss amounts, dates, recoveries, and relevant causal 
information for operational loss events occurring at organizations other 
than the bank.
    External rating means a credit rating that is assigned by an NRSRO 
to an exposure, provided:
    (1) The credit rating fully reflects the entire amount of credit 
risk with regard to all payments owed to the holder of the exposure.

[[Page 244]]

If a holder is owed principal and interest on an exposure, the credit 
rating must fully reflect the credit risk associated with timely 
repayment of principal and interest. If a holder is owed only principal 
on an exposure, the credit rating must fully reflect only the credit 
risk associated with timely repayment of principal; and
    (2) The credit rating is published in an accessible form and is or 
will be included in the transition matrices made publicly available by 
the NRSRO that summarize the historical performance of positions rated 
by the NRSRO.
    Financial collateral means collateral:
    (1) In the form of:
    (i) Cash on deposit with the bank (including cash held for the bank 
by a third-party custodian or trustee);
    (ii) Gold bullion;
    (iii) Long-term debt securities that have an applicable external 
rating of one category below investment grade or higher;
    (iv) Short-term debt instruments that have an applicable external 
rating of at least investment grade;
    (v) Equity securities that are publicly traded;
    (vi) Convertible bonds that are publicly traded;
    (vii) Money market mutual fund shares and other mutual fund shares 
if a price for the shares is publicly quoted daily; or
    (viii) Conforming residential mortgages; and
    (2) In which the bank has a perfected, first priority security 
interest or, outside of the United States, the legal equivalent thereof 
(with the exception of cash on deposit and notwithstanding the prior 
security interest of any custodial agent).
    GAAP means generally accepted accounting principles as used in the 
United States.
    Gain-on-sale means an increase in the equity capital (as reported on 
Schedule RC of the Call Report) of a bank that results from a 
securitization (other than an increase in equity capital that results 
from the bank's receipt of cash in connection with the securitization).
    Guarantee means a financial guarantee, letter of credit, insurance, 
or other similar financial instrument (other than a credit derivative) 
that allows one party (beneficiary) to transfer the credit risk of one 
or more specific exposures (reference exposure) to another party 
(protection provider). See also eligible guarantee.
    High volatility commercial real estate (HVCRE) exposure means a 
credit facility that finances or has financed the acquisition, 
development, or construction (ADC) of real property, unless the facility 
finances:
    (1) One- to four-family residential properties; or
    (2) Commercial real estate projects in which:
    (i) The loan-to-value ratio is less than or equal to the applicable 
maximum supervisory loan-to-value ratio in the FDIC's real estate 
lending standards at 12 CFR part 365, appendix A.
    (ii) The borrower has contributed capital to the project in the form 
of cash or unencumbered readily marketable assets (or has paid 
development expenses out-of-pocket) of at least 15 percent of the real 
estate's appraised ``as completed'' value; and
    (iii) The borrower contributed the amount of capital required by 
paragraph (2)(ii) of this definition before the bank advances funds 
under the credit facility, and the capital contributed by the borrower, 
or internally generated by the project, is contractually required to 
remain in the project throughout the life of the project. The life of a 
project concludes only when the credit facility is converted to 
permanent financing or is sold or paid in full. Permanent financing may 
be provided by the bank that provided the ADC facility as long as the 
permanent financing is subject to the bank's underwriting criteria for 
long-term mortgage loans.
    Inferred rating. A securitization exposure has an inferred rating 
equal to the external rating referenced in paragraph (2)(i) of this 
definition if:
    (1) The securitization exposure does not have an external rating; 
and
    (2) Another securitization exposure issued by the same issuer and 
secured by the same underlying exposures:
    (i) Has an external rating;
    (ii) Is subordinated in all respects to the unrated securitization 
exposure;
    (iii) Does not benefit from any credit enhancement that is not 
available to the unrated securitization exposure; and
    (iv) Has an effective remaining maturity that is equal to or longer 
than that of the unrated securitization exposure.
    Interest rate derivative contract means a single-currency interest 
rate swap, basis swap, forward rate agreement, purchased interest rate 
option, when-issued securities, or any other instrument linked to 
interest rates that gives rise to similar counterparty credit risks.
    Internal operational loss event data means, with respect to a bank, 
gross operational loss amounts, dates, recoveries, and relevant causal 
information for operational loss events occurring at the bank.
    Investing bank means, with respect to a securitization, a bank that 
assumes the credit risk of a securitization exposure (other than an 
originating bank of the securitization). In the typical synthetic 
securitization, the investing bank sells credit protection on a pool of 
underlying exposures to the originating bank.
    Investment fund means a company:

[[Page 245]]

    (1) All or substantially all of the assets of which are financial 
assets; and
    (2) That has no material liabilities.
    Investors' interest EAD means, with respect to a securitization, the 
EAD of the underlying exposures multiplied by the ratio of:
    (1) The total amount of securitization exposures issued by the 
securitization SPE to investors; divided by
    (2) The outstanding principal amount of underlying exposures.
    Loss given default (LGD) means:
    (1) For a wholesale exposure, the greatest of:
    (i) Zero;
    (ii) The bank's empirically based best estimate of the long-run 
default-weighted average economic loss, per dollar of EAD, the bank 
would expect to incur if the obligor (or a typical obligor in the loss 
severity grade assigned by the bank to the exposure) were to default 
within a one-year horizon over a mix of economic conditions, including 
economic downturn conditions; or
    (iii) The bank's empirically based best estimate of the economic 
loss, per dollar of EAD, the bank would expect to incur if the obligor 
(or a typical obligor in the loss severity grade assigned by the bank to 
the exposure) were to default within a one-year horizon during economic 
downturn conditions.
    (2) For a segment of retail exposures, the greatest of:
    (i) Zero;
    (ii) The bank's empirically based best estimate of the long-run 
default-weighted average economic loss, per dollar of EAD, the bank 
would expect to incur if the exposures in the segment were to default 
within a one-year horizon over a mix of economic conditions, including 
economic downturn conditions; or
    (iii) The bank's empirically based best estimate of the economic 
loss, per dollar of EAD, the bank would expect to incur if the exposures 
in the segment were to default within a one-year horizon during economic 
downturn conditions.
    (3) The economic loss on an exposure in the event of default is all 
material credit-related losses on the exposure (including accrued but 
unpaid interest or fees, losses on the sale of collateral, direct 
workout costs, and an appropriate allocation of indirect workout costs). 
Where positive or negative cash flows on a wholesale exposure to a 
defaulted obligor or a defaulted retail exposure (including proceeds 
from the sale of collateral, workout costs, additional extensions of 
credit to facilitate repayment of the exposure, and draw-downs of unused 
credit lines) occur after the date of default, the economic loss must 
reflect the net present value of cash flows as of the default date using 
a discount rate appropriate to the risk of the defaulted exposure.
    Main index means the Standard & Poor's 500 Index, the FTSE All-World 
Index, and any other index for which the bank can demonstrate to the 
satisfaction of the FDIC that the equities represented in the index have 
comparable liquidity, depth of market, and size of bid-ask spreads as 
equities in the Standard & Poor's 500 Index and FTSE All-World Index.
    Multilateral development bank means the International Bank for 
Reconstruction and Development, the International Finance Corporation, 
the Inter-American Development Bank, the Asian Development Bank, the 
African Development Bank, the European Bank for Reconstruction and 
Development, the European Investment Bank, the European Investment Fund, 
the Nordic Investment Bank, the Caribbean Development Bank, the Islamic 
Development Bank, the Council of Europe Development Bank, and any other 
multilateral lending institution or regional development bank in which 
the U.S. government is a shareholder or contributing member or which the 
FDIC determines poses comparable credit risk.
    Nationally recognized statistical rating organization (NRSRO) means 
an entity registered with the SEC as a nationally recognized statistical 
rating organization under section 15E of the Securities Exchange Act of 
1934 (15 U.S.C. 78o-7).
    Netting set means a group of transactions with a single counterparty 
that are subject to a qualifying master netting agreement or qualifying 
cross-product master netting agreement. For purposes of the internal 
models methodology in paragraph (d) of section 32 of this appendix, each 
transaction that is not subject to such a master netting agreement is 
its own netting set.
    N\th\-to-default credit derivative means a credit derivative that 
provides credit protection only for the n\th\-defaulting reference 
exposure in a group of reference exposures.
    Obligor means the legal entity or natural person contractually 
obligated on a wholesale exposure, except that a bank may treat the 
following exposures as having separate obligors:
    (1) Exposures to the same legal entity or natural person denominated 
in different currencies;
    (2)(i) An income-producing real estate exposure for which all or 
substantially all of the repayment of the exposure is reliant on the 
cash flows of the real estate serving as collateral for the exposure; 
the bank, in economic substance, does not have recourse to the borrower 
beyond the real estate collateral; and no cross-default or cross-
acceleration clauses are in place other than clauses obtained solely out 
of an abundance of caution; and
    (ii) Other credit exposures to the same legal entity or natural 
person; and

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    (3)(i) A wholesale exposure authorized under section 364 of the U.S. 
Bankruptcy Code (11 U.S.C. 364) to a legal entity or natural person who 
is a debtor-in-possession for purposes of Chapter 11 of the Bankruptcy 
Code; and
    (ii) Other credit exposures to the same legal entity or natural 
person.
    Operational loss means a loss (excluding insurance or tax effects) 
resulting from an operational loss event. Operational loss includes all 
expenses associated with an operational loss event except for 
opportunity costs, forgone revenue, and costs related to risk management 
and control enhancements implemented to prevent future operational 
losses.
    Operational loss event means an event that results in loss and is 
associated with any of the following seven operational loss event type 
categories:
    (1) Internal fraud, which means the operational loss event type 
category that comprises operational losses resulting from an act 
involving at least one internal party of a type intended to defraud, 
misappropriate property, or circumvent regulations, the law, or company 
policy, excluding diversity- and discrimination-type events.
    (2) External fraud, which means the operational loss event type 
category that comprises operational losses resulting from an act by a 
third party of a type intended to defraud, misappropriate property, or 
circumvent the law. Retail credit card losses arising from non-
contractual, third-party initiated fraud (for example, identity theft) 
are external fraud operational losses. All other third-party initiated 
credit losses are to be treated as credit risk losses.
    (3) Employment practices and workplace safety, which means the 
operational loss event type category that comprises operational losses 
resulting from an act inconsistent with employment, health, or safety 
laws or agreements, payment of personal injury claims, or payment 
arising from diversity- and discrimination-type events.
    (4) Clients, products, and business practices, which means the 
operational loss event type category that comprises operational losses 
resulting from the nature or design of a product or from an 
unintentional or negligent failure to meet a professional obligation to 
specific clients (including fiduciary and suitability requirements).
    (5) Damage to physical assets, which means the operational loss 
event type category that comprises operational losses resulting from the 
loss of or damage to physical assets from natural disaster or other 
events.
    (6) Business disruption and system failures, which means the 
operational loss event type category that comprises operational losses 
resulting from disruption of business or system failures.
    (7) Execution, delivery, and process management, which means the 
operational loss event type category that comprises operational losses 
resulting from failed transaction processing or process management or 
losses arising from relations with trade counterparties and vendors.
    Operational risk means the risk of loss resulting from inadequate or 
failed internal processes, people, and systems or from external events 
(including legal risk but excluding strategic and reputational risk).
    Operational risk exposure means the 99.9\th\ percentile of the 
distribution of potential aggregate operational losses, as generated by 
the bank's operational risk quantification system over a one-year 
horizon (and not incorporating eligible operational risk offsets or 
qualifying operational risk mitigants).
    Originating bank, with respect to a securitization, means a bank 
that:
    (1) Directly or indirectly originated or securitized the underlying 
exposures included in the securitization; or
    (2) Serves as an ABCP program sponsor to the securitization.
    Other retail exposure means an exposure (other than a securitization 
exposure, an equity exposure, a residential mortgage exposure, an 
excluded mortgage exposure, a qualifying revolving exposure, or the 
residual value portion of a lease exposure) that is managed as part of a 
segment of exposures with homogeneous risk characteristics, not on an 
individual-exposure basis, and is either:
    (1) An exposure to an individual for non-business purposes; or
    (2) An exposure to an individual or company for business purposes if 
the bank's consolidated business credit exposure to the individual or 
company is $1 million or less.
    Over-the-counter (OTC) derivative contract means a derivative 
contract that is not traded on an exchange that requires the daily 
receipt and payment of cash-variation margin.
    Probability of default (PD) means:
    (1) For a wholesale exposure to a non-defaulted obligor, the bank's 
empirically based best estimate of the long-run average one-year default 
rate for the rating grade assigned by the bank to the obligor, capturing 
the average default experience for obligors in the rating grade over a 
mix of economic conditions (including economic downturn conditions) 
sufficient to provide a reasonable estimate of the average one-year 
default rate over the economic cycle for the rating grade.
    (2) For a segment of non-defaulted retail exposures, the bank's 
empirically based best estimate of the long-run average one-year default 
rate for the exposures in the segment, capturing the average default 
experience for exposures in the segment over a mix of economic 
conditions (including economic downturn conditions) sufficient to 
provide a reasonable estimate of the average one-year

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default rate over the economic cycle for the segment and adjusted upward 
as appropriate for segments for which seasoning effects are material. 
For purposes of this definition, a segment for which seasoning effects 
are material is a segment where there is a material relationship between 
the time since origination of exposures within the segment and the 
bank's best estimate of the long-run average one-year default rate for 
the exposures in the segment.
    (3) For a wholesale exposure to a defaulted obligor or segment of 
defaulted retail exposures, 100 percent.
    Protection amount (P) means, with respect to an exposure hedged by 
an eligible guarantee or eligible credit derivative, the effective 
notional amount of the guarantee or credit derivative, reduced to 
reflect any currency mismatch, maturity mismatch, or lack of 
restructuring coverage (as provided in section 33 of this appendix).
    Publicly traded means traded on:
    (1) Any exchange registered with the SEC as a national securities 
exchange under section 6 of the Securities Exchange Act of 1934 (15 
U.S.C. 78f); or
    (2) Any non-U.S.-based securities exchange that:
    (i) Is registered with, or approved by, a national securities 
regulatory authority; and
    (ii) Provides a liquid, two-way market for the instrument in 
question, meaning that there are enough independent bona fide offers to 
buy and sell so that a sales price reasonably related to the last sales 
price or current bona fide competitive bid and offer quotations can be 
determined promptly and a trade can be settled at such a price within 
five business days.
    Qualifying central counterparty means a counterparty (for example, a 
clearinghouse) that:
    (1) Facilitates trades between counterparties in one or more 
financial markets by either guaranteeing trades or novating contracts;
    (2) Requires all participants in its arrangements to be fully 
collateralized on a daily basis; and
    (3) The bank demonstrates to the satisfaction of the FDIC is in 
sound financial condition and is subject to effective oversight by a 
national supervisory authority.
    Qualifying cross-product master netting agreement means a qualifying 
master netting agreement that provides for termination and close-out 
netting across multiple types of financial transactions or qualifying 
master netting agreements in the event of a counterparty's default, 
provided that:
    (1) The underlying financial transactions are OTC derivative 
contracts, eligible margin loans, or repo-style transactions; and
    (2) The bank obtains a written legal opinion verifying the validity 
and enforceability of the agreement under applicable law of the relevant 
jurisdictions if the counterparty fails to perform upon an event of 
default, including upon an event of bankruptcy, insolvency, or similar 
proceeding.
    Qualifying master netting agreement means any written, legally 
enforceable bilateral agreement, provided that:
    (1) The agreement creates a single legal obligation for all 
individual transactions covered by the agreement upon an event of 
default, including bankruptcy, insolvency, or similar proceeding, of the 
counterparty;
    (2) The agreement provides the bank the right to accelerate, 
terminate, and close-out on a net basis all transactions under the 
agreement and to liquidate or set off collateral promptly upon an event 
of default, including upon an event of bankruptcy, insolvency, or 
similar proceeding, of the counterparty, provided that, in any such 
case, any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions;
    (3) The bank has conducted sufficient legal review to conclude with 
a well-founded basis (and maintains sufficient written documentation of 
that legal review) that:
    (i) The agreement meets the requirements of paragraph (2) of this 
definition; and
    (ii) In the event of a legal challenge (including one resulting from 
default or from bankruptcy, insolvency, or similar proceeding) the 
relevant court and administrative authorities would find the agreement 
to be legal, valid, binding, and enforceable under the law of the 
relevant jurisdictions;
    (4) The bank establishes and maintains procedures to monitor 
possible changes in relevant law and to ensure that the agreement 
continues to satisfy the requirements of this definition; and
    (5) The agreement does not contain a walkaway clause (that is, a 
provision that permits a non-defaulting counterparty to make a lower 
payment than it would make otherwise under the agreement, or no payment 
at all, to a defaulter or the estate of a defaulter, even if the 
defaulter or the estate of the defaulter is a net creditor under the 
agreement).
    Qualifying revolving exposure (QRE) means an exposure (other than a 
securitization exposure or equity exposure) to an individual that is 
managed as part of a segment of exposures with homogeneous risk 
characteristics, not on an individual-exposure basis, and:
    (1) Is revolving (that is, the amount outstanding fluctuates, 
determined largely by the borrower's decision to borrow and repay, up to 
a pre-established maximum amount);
    (2) Is unsecured and unconditionally cancelable by the bank to the 
fullest extent permitted by Federal law; and
    (3) Has a maximum exposure amount (drawn plus undrawn) of up to 
$100,000.

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    Repo-style transaction means a repurchase or reverse repurchase 
transaction, or a securities borrowing or securities lending 
transaction, including a transaction in which the bank acts as agent for 
a customer and indemnifies the customer against loss, provided that:
    (1) The transaction is based solely on liquid and readily marketable 
securities, cash, gold, or conforming residential mortgages;
    (2) The transaction is marked-to-market daily and subject to daily 
margin maintenance requirements;
    (3)(i) The transaction is a ``securities contract'' or ``repurchase 
agreement'' under section 555 or 559, respectively, of the Bankruptcy 
Code (11 U.S.C. 555 or 559), a qualified financial contract under 
section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(e)(8)), or a netting contract between or among financial 
institutions under sections 401-407 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (12 U.S.C. 4401-4407) or the Federal 
Reserve Board's Regulation EE (12 CFR part 231); or
    (ii) If the transaction does not meet the criteria set forth in 
paragraph (3)(i) of this definition, then either:
    (A) The transaction is executed under an agreement that provides the 
bank the right to accelerate, terminate, and close-out the transaction 
on a net basis and to liquidate or set off collateral promptly upon an 
event of default (including upon an event of bankruptcy, insolvency, or 
similar proceeding) of the counterparty, provided that, in any such 
case, any exercise of rights under the agreement will not be stayed or 
avoided under applicable law in the relevant jurisdictions; or
    (B) The transaction is:
    (1) Either overnight or unconditionally cancelable at any time by 
the bank; and
    (2) Executed under an agreement that provides the bank the right to 
accelerate, terminate, and close-out the transaction on a net basis and 
to liquidate or set off collateral promptly upon an event of 
counterparty default; and
    (4) The bank has conducted sufficient legal review to conclude with 
a well-founded basis (and maintains sufficient written documentation of 
that legal review) that the agreement meets the requirements of 
paragraph (3) of this definition and is legal, valid, binding, and 
enforceable under applicable law in the relevant jurisdictions.
    Residential mortgage exposure means an exposure (other than a 
securitization exposure, equity exposure, or excluded mortgage exposure) 
that is managed as part of a segment of exposures with homogeneous risk 
characteristics, not on an individual-exposure basis, and is:
    (1) An exposure that is primarily secured by a first or subsequent 
lien on one- to four-family residential property; or
    (2) An exposure with an original and outstanding amount of $1 
million or less that is primarily secured by a first or subsequent lien 
on residential property that is not one to four family.
    Retail exposure means a residential mortgage exposure, a qualifying 
revolving exposure, or an other retail exposure.
    Retail exposure subcategory means the residential mortgage exposure, 
qualifying revolving exposure, or other retail exposure subcategory.
    Risk parameter means a variable used in determining risk-based 
capital requirements for wholesale and retail exposures, specifically 
probability of default (PD), loss given default (LGD), exposure at 
default (EAD), or effective maturity (M).
    Scenario analysis means a systematic process of obtaining expert 
opinions from business managers and risk management experts to derive 
reasoned assessments of the likelihood and loss impact of plausible 
high-severity operational losses. Scenario analysis may include the 
well-reasoned evaluation and use of external operational loss event 
data, adjusted as appropriate to ensure relevance to a bank's 
operational risk profile and control structure.
    SEC means the U.S. Securities and Exchange Commission.
    Securitization means a traditional securitization or a synthetic 
securitization.
    Securitization exposure means an on-balance sheet or off-balance 
sheet credit exposure that arises from a traditional or synthetic 
securitization (including credit-enhancing representations and 
warranties).
    Securitization special purpose entity (securitization SPE) means a 
corporation, trust, or other entity organized for the specific purpose 
of holding underlying exposures of a securitization, the activities of 
which are limited to those appropriate to accomplish this purpose, and 
the structure of which is intended to isolate the underlying exposures 
held by the entity from the credit risk of the seller of the underlying 
exposures to the entity.
    Senior securitization exposure means a securitization exposure that 
has a first priority claim on the cash flows from the underlying 
exposures. When determining whether a securitization exposure has a 
first priority claim on the cash flows from the underlying exposures, a 
bank is not required to consider amounts due under interest rate or 
currency derivative contracts, fees due, or other similar payments. Both 
the most senior commercial paper issued by an ABCP program and a 
liquidity facility that supports the ABCP program may be senior 
securitization exposures if the liquidity facility provider's right to 
reimbursement of the drawn amounts is senior to all claims on the cash 
flows from the underlying exposures except amounts due under interest 
rate or

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currency derivative contracts, fees due, or other similar payments.
    Servicer cash advance facility means a facility under which the 
servicer of the underlying exposures of a securitization may advance 
cash to ensure an uninterrupted flow of payments to investors in the 
securitization, including advances made to cover foreclosure costs or 
other expenses to facilitate the timely collection of the underlying 
exposures. See also eligible servicer cash advance facility.
    Sovereign entity means a central government (including the U.S. 
government) or an agency, department, ministry, or central bank of a 
central government.
    Sovereign exposure means:
    (1) A direct exposure to a sovereign entity; or
    (2) An exposure directly and unconditionally backed by the full 
faith and credit of a sovereign entity.
    Subsidiary means, with respect to a company, a company controlled by 
that company.
    Synthetic securitization means a transaction in which:
    (1) All or a portion of the credit risk of one or more underlying 
exposures is transferred to one or more third parties through the use of 
one or more credit derivatives or guarantees (other than a guarantee 
that transfers only the credit risk of an individual retail exposure);
    (2) The credit risk associated with the underlying exposures has 
been separated into at least two tranches reflecting different levels of 
seniority;
    (3) Performance of the securitization exposures depends upon the 
performance of the underlying exposures; and
    (4) All or substantially all of the underlying exposures are 
financial exposures (such as loans, commitments, credit derivatives, 
guarantees, receivables, asset-backed securities, mortgage-backed 
securities, other debt securities, or equity securities).
    Tier 1 capital is defined in 12 CFR part 325, appendix A, as 
modified in part II of this appendix.
    Tier 2 capital is defined in 12 CFR part 325, appendix A, as 
modified in part II of this appendix.
    Total qualifying capital means the sum of tier 1 capital and tier 2 
capital, after all deductions required in this appendix.
    Total risk-weighted assets means:
    (1) The sum of:
    (i) Credit risk-weighted assets; and
    (ii) Risk-weighted assets for operational risk; minus
    (2) Excess eligible credit reserves not included in tier 2 capital.
    Total wholesale and retail risk-weighted assets means the sum of 
risk-weighted assets for wholesale exposures to non-defaulted obligors 
and segments of non-defaulted retail exposures; risk-weighted assets for 
wholesale exposures to defaulted obligors and segments of defaulted 
retail exposures; risk-weighted assets for assets not defined by an 
exposure category; and risk-weighted assets for non-material portfolios 
of exposures (all as determined in section 31 of this appendix) and 
risk-weighted assets for unsettled transactions (as determined in 
section 35 of this appendix) minus the amounts deducted from capital 
pursuant to 12 CFR part 325, appendix A (excluding those deductions 
reversed in section 12 of this appendix).
    Traditional securitization means a transaction in which:
    (1) All or a portion of the credit risk of one or more underlying 
exposures is transferred to one or more third parties other than through 
the use of credit derivatives or guarantees;
    (2) The credit risk associated with the underlying exposures has 
been separated into at least two tranches reflecting different levels of 
seniority;
    (3) Performance of the securitization exposures depends upon the 
performance of the underlying exposures;
    (4) All or substantially all of the underlying exposures are 
financial exposures (such as loans, commitments, credit derivatives, 
guarantees, receivables, asset-backed securities, mortgage-backed 
securities, other debt securities, or equity securities);
    (5) The underlying exposures are not owned by an operating company;
    (6) The underlying exposures are not owned by a small business 
investment company described in section 302 of the Small Business 
Investment Act of 1958 (15 U.S.C. 682); and
    (7) The underlying exposures are not owned by a firm an investment 
in which qualifies as a community development investment under 12 U.S.C. 
24(Eleventh).
    (8) The FDIC may determine that a transaction in which the 
underlying exposures are owned by an investment firm that exercises 
substantially unfettered control over the size and composition of its 
assets, liabilities, and off-balance sheet exposures is not a 
traditional securitization based on the transaction's leverage, risk 
profile, or economic substance.
    (9) The FDIC may deem a transaction that meets the definition of a 
traditional securitization, notwithstanding paragraph (5), (6), or (7) 
of this definition, to be a traditional securitization based on the 
transaction's leverage, risk profile, or economic substance.
    Tranche means all securitization exposures associated with a 
securitization that have the same seniority level.
    Underlying exposures means one or more exposures that have been 
securitized in a securitization transaction.

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    Unexpected operational loss (UOL) means the difference between the 
bank's operational risk exposure and the bank's expected operational 
loss.
    Unit of measure means the level (for example, organizational unit or 
operational loss event type) at which the bank's operational risk 
quantification system generates a separate distribution of potential 
operational losses.
    Value-at-Risk (VaR) means the estimate of the maximum amount that 
the value of one or more exposures could decline due to market price or 
rate movements during a fixed holding period within a stated confidence 
interval.
    Wholesale exposure means a credit exposure to a company, natural 
person, sovereign entity, or governmental entity (other than a 
securitization exposure, retail exposure, excluded mortgage exposure, or 
equity exposure). Examples of a wholesale exposure include:
    (1) A non-tranched guarantee issued by a bank on behalf of a 
company;
    (2) A repo-style transaction entered into by a bank with a company 
and any other transaction in which a bank posts collateral to a company 
and faces counterparty credit risk;
    (3) An exposure that a bank treats as a covered position under 12 
CFR part 325, appendix C for which there is a counterparty credit risk 
capital requirement;
    (4) A sale of corporate loans by a bank to a third party in which 
the bank retains full recourse;
    (5) An OTC derivative contract entered into by a bank with a 
company;
    (6) An exposure to an individual that is not managed by a bank as 
part of a segment of exposures with homogeneous risk characteristics; 
and
    (7) A commercial lease.
    Wholesale exposure subcategory means the HVCRE or non-HVCRE 
wholesale exposure subcategory.

           Section 3. Minimum Risk-Based Capital Requirements

    (a) Except as modified by paragraph (c) of this section or by 
section 23 of this appendix, each bank must meet a minimum ratio of:
    (1) Total qualifying capital to total risk-weighted assets of 8.0 
percent; and
    (2) Tier 1 capital to total risk-weighted assets of 4.0 percent.
    (b) Each bank must hold capital commensurate with the level and 
nature of all risks to which the bank is exposed.
    (c) When a bank subject to 12 CFR part 325, appendix C calculates 
its risk-based capital requirements under this appendix, the bank must 
also refer to 12 CFR part 325, appendix C for supplemental rules to 
calculate risk-based capital requirements adjusted for market risk.

                       Part II. Qualifying Capital

                    Section 11. Additional Deductions

    (a) General. A bank that uses this appendix must make the same 
deductions from its tier 1 capital and tier 2 capital required in 12 CFR 
part 325, appendix A, except that:
    (1) A bank is not required to deduct certain equity investments and 
CEIOs (as provided in section 12 of this appendix); and
    (2) A bank also must make the deductions from capital required by 
paragraphs (b) and (c) of this section.
    (b) Deductions from tier 1 capital. A bank must deduct from tier 1 
capital any gain-on-sale associated with a securitization exposure as 
provided in paragraph (a) of section 41 and paragraphs (a)(1), (c), 
(g)(1), and (h)(1) of section 42 of this appendix.
    (c) Deductions from tier 1 and tier 2 capital. A bank must deduct 
the exposures specified in paragraphs (c)(1) through (c)(7) in this 
section 50 percent from tier 1 capital and 50 percent from tier 2 
capital. If the amount deductible from tier 2 capital exceeds the bank's 
actual tier 2 capital, however, the bank must deduct the excess from 
tier 1 capital.
    (1) Credit-enhancing interest-only strips (CEIOs). In accordance 
with paragraphs (a)(1) and (c) of section 42 of this appendix, any CEIO 
that does not constitute gain-on-sale.
    (2) Non-qualifying securitization exposures. In accordance with 
paragraphs (a)(4) and (c) of section 42 of this appendix, any 
securitization exposure that does not qualify for the Ratings-Based 
Approach, the Internal Assessment Approach, or the Supervisory Formula 
Approach under sections 43, 44, and 45 of this appendix, respectively.
    (3) Securitizations of non-IRB exposures. In accordance with 
paragraphs (c) and (g)(4) of section 42 of this appendix, certain 
exposures to a securitization any underlying exposure of which is not a 
wholesale exposure, retail exposure, securitization exposure, or equity 
exposure.
    (4) Low-rated securitization exposures. In accordance with section 
43 and paragraph (c) of section 42 of this appendix, any securitization 
exposure that qualifies for and must be deducted under the Ratings-Based 
Approach.
    (5) High-risk securitization exposures subject to the Supervisory 
Formula Approach. In accordance with paragraphs (b) and (c) of section 
45 of this appendix and paragraph (c) of section 42 of this appendix, 
certain high-risk securitization exposures (or portions thereof) that 
qualify for the Supervisory Formula Approach.
    (6) Eligible credit reserves shortfall. In accordance with paragraph 
(a)(1) of section 13 of this appendix, any eligible credit reserves 
shortfall.
    (7) Certain failed capital markets transactions. In accordance with 
paragraph (e)(3)

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of section 35 of this appendix, the bank's exposure on certain failed 
capital markets transactions.

           Section 12. Deductions and Limitations Not Required

    (a) Deduction of CEIOs. A bank is not required to make the 
deductions from capital for CEIOs in 12 CFR part 325, appendix A, 
section II.B.5.
    (b) Deduction for certain equity investments. A bank is not required 
to make the deductions from capital for nonfinancial equity investments 
in 12 CFR part 325, appendix A, section II.B.

                  Section 13. Eligible Credit Reserves

    (a) Comparison of eligible credit reserves to expected credit 
losses--(1) Shortfall of eligible credit reserves. If a bank's eligible 
credit reserves are less than the bank's total expected credit losses, 
the bank must deduct the shortfall amount 50 percent from tier 1 capital 
and 50 percent from tier 2 capital. If the amount deductible from tier 2 
capital exceeds the bank's actual tier 2 capital, the bank must deduct 
the excess amount from tier 1 capital.
    (2) Excess eligible credit reserves. If a bank's eligible credit 
reserves exceed the bank's total expected credit losses, the bank may 
include the excess amount in tier 2 capital to the extent that the 
excess amount does not exceed 0.6 percent of the bank's credit-risk-
weighted assets.
    (b) Treatment of allowance for loan and lease losses. Regardless of 
any provision in 12 CFR part 325, appendix A, the ALLL is included in 
tier 2 capital only to the extent provided in paragraph (a)(2) of this 
section and in section 24 of this appendix.

                         Part III. Qualification

                    Section 21. Qualification Process

    (a) Timing. (1) A bank that is described in paragraph (b)(1) of 
section 1 of this appendix must adopt a written implementation plan no 
later than six months after the later of April 1, 2008, or the date the 
bank meets a criterion in that section. The implementation plan must 
incorporate an explicit first floor period start date no later than 36 
months after the later of April 1, 2008, or the date the bank meets at 
least one criterion under paragraph (b)(1) of section 1 of this 
appendix. The FDIC may extend the first floor period start date.
    (2) A bank that elects to be subject to this appendix under 
paragraph (b)(2) of section 1 of this appendix must adopt a written 
implementation plan.
    (b) Implementation plan. (1) The bank's implementation plan must 
address in detail how the bank complies, or plans to comply, with the 
qualification requirements in section 22 of this appendix. The bank also 
must maintain a comprehensive and sound planning and governance process 
to oversee the implementation efforts described in the plan. At a 
minimum, the plan must:
    (i) Comprehensively address the qualification requirements in 
section 22 of this appendix for the bank and each consolidated 
subsidiary (U.S. and foreign-based) of the bank with respect to all 
portfolios and exposures of the bank and each of its consolidated 
subsidiaries;
    (ii) Justify and support any proposed temporary or permanent 
exclusion of business lines, portfolios, or exposures from application 
of the advanced approaches in this appendix (which business lines, 
portfolios, and exposures must be, in the aggregate, immaterial to the 
bank);
    (iii) Include the bank's self-assessment of:
    (A) The bank's current status in meeting the qualification 
requirements in section 22 of this appendix; and
    (B) The consistency of the bank's current practices with the FDIC's 
supervisory guidance on the qualification requirements;
    (iv) Based on the bank's self-assessment, identify and describe the 
areas in which the bank proposes to undertake additional work to comply 
with the qualification requirements in section 22 of this appendix or to 
improve the consistency of the bank's current practices with the FDIC's 
supervisory guidance on the qualification requirements (gap analysis);
    (v) Describe what specific actions the bank will take to address the 
areas identified in the gap analysis required by paragraph (b)(1)(iv) of 
this section;
    (vi) Identify objective, measurable milestones, including delivery 
dates and a date when the bank's implementation of the methodologies 
described in this appendix will be fully operational;
    (vii) Describe resources that have been budgeted and are available 
to implement the plan; and
    (viii) Receive approval of the bank's board of directors.
    (2) The bank must submit the implementation plan, together with a 
copy of the minutes of the board of directors' approval, to the FDIC at 
least 60 days before the bank proposes to begin its parallel run, unless 
the FDIC waives prior notice.
    (c) Parallel run. Before determining its risk-based capital 
requirements under this appendix and following adoption of the 
implementation plan, the bank must conduct a satisfactory parallel run. 
A satisfactory parallel run is a period of no less than four consecutive 
calendar quarters during which the bank complies with the qualification 
requirements in section 22 of this appendix to the satisfaction of the 
FDIC. During the parallel run, the bank must report to the FDIC on a 
calendar quarterly basis its risk-based

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capital ratios using 12 CFR part 325, appendix A and the risk-based 
capital requirements described in this appendix. During this period, the 
bank is subject to 12 CFR part 325, appendix A.
    (d) Approval to calculate risk-based capital requirements under this 
appendix. The FDIC will notify the bank of the date that the bank may 
begin its first floor period if the FDIC determines that:
    (1) The bank fully complies with all the qualification requirements 
in section 22 of this appendix;
    (2) The bank has conducted a satisfactory parallel run under 
paragraph (c) of this section; and
    (3) The bank has an adequate process to ensure ongoing compliance 
with the qualification requirements in section 22 of this appendix.
    (e) Transitional floor periods. Following a satisfactory parallel 
run, a bank is subject to three transitional floor periods.
    (1) Risk-based capital ratios during the transitional floor 
periods--(i) Tier 1 risk-based capital ratio. During a bank's 
transitional floor periods, the bank's tier 1 risk-based capital ratio 
is equal to the lower of:
    (A) The bank's floor-adjusted tier 1 risk-based capital ratio; or
    (B) The bank's advanced approaches tier 1 risk-based capital ratio.
    (ii) Total risk-based capital ratio. During a bank's transitional 
floor periods, the bank's total risk-based capital ratio is equal to the 
lower of:
    (A) The bank's floor-adjusted total risk-based capital ratio; or
    (B) The bank's advanced approaches total risk-based capital ratio.
    (2) Floor-adjusted risk-based capital ratios. (i) A bank's floor-
adjusted tier 1 risk-based capital ratio during a transitional floor 
period is equal to the bank's tier 1 capital as calculated under 12 CFR 
part 325, appendix A, divided by the product of:
    (A) The bank's total risk-weighted assets as calculated under 12 CFR 
part 325, appendix A; and
    (B) The appropriate transitional floor percentage in Table 1.
    (ii) A bank's floor-adjusted total risk-based capital ratio during a 
transitional floor period is equal to the sum of the bank's tier 1 and 
tier 2 capital as calculated under 12 CFR part 325, appendix A, divided 
by the product of:
    (A) The bank's total risk-weighted assets as calculated under 12 CFR 
part 325, appendix A; and
    (B) The appropriate transitional floor percentage in Table 1.
    (iii) A bank that meets the criteria in paragraph (b)(1) or (b)(2) 
of section 1 of this appendix as of April 1, 2008, must use 12 CFR part 
325, appendix A during the parallel run and as the basis for its 
transitional floors.

                      Table 1--Transitional Floors
------------------------------------------------------------------------
                                                 Transitional floor
         Transitional floor period                   percentage
------------------------------------------------------------------------
First floor period........................  95 percent.
Second floor period.......................  90 percent.
Third floor period........................  85 percent.
------------------------------------------------------------------------

    (3) Advanced approaches risk-based capital ratios. (i) A bank's 
advanced approaches tier 1 risk-based capital ratio equals the bank's 
tier 1 risk-based capital ratio as calculated under this appendix (other 
than this section on transitional floor periods).
    (ii) A bank's advanced approaches total risk-based capital ratio 
equals the bank's total risk-based capital ratio as calculated under 
this appendix (other than this section on transitional floor periods).
    (4) Reporting. During the transitional floor periods, a bank must 
report to the FDIC on a calendar quarterly basis both floor-adjusted 
risk-based capital ratios and both advanced approaches risk-based 
capital ratios.
    (5) Exiting a transitional floor period. A bank may not exit a 
transitional floor period until the bank has spent a minimum of four 
consecutive calendar quarters in the period and the FDIC has determined 
that the bank may exit the floor period. The FDIC's determination will 
be based on an assessment of the bank's ongoing compliance with the 
qualification requirements in section 22 of this appendix.
    (6) Interagency study. After the end of the second transition year 
(2010), the Federal banking agencies will publish a study that evaluates 
the advanced approaches to determine if there are any material 
deficiencies. For any primary Federal supervisor to authorize any 
institution to exit the third transitional floor period, the study must 
determine that there are no such material deficiencies that cannot be 
addressed by then-existing tools, or, if such deficiencies are found, 
they are first remedied by changes to this appendix. Notwithstanding the 
preceding sentence, a primary Federal supervisor that disagrees with the 
finding of material deficiency may not authorize any institution under 
its jurisdiction to exit the third transitional floor period unless it 
provides a public report explaining its reasoning.

                 Section 22. Qualification Requirements

    (a) Process and systems requirements. (1) A bank must have a 
rigorous process for assessing its overall capital adequacy in relation 
to its risk profile and a comprehensive strategy for maintaining an 
appropriate level of capital.
    (2) The systems and processes used by a bank for risk-based capital 
purposes under this appendix must be consistent with the bank's internal 
risk management processes

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and management information reporting systems.
    (3) Each bank must have an appropriate infrastructure with risk 
measurement and management processes that meet the qualification 
requirements of this section and are appropriate given the bank's size 
and level of complexity. Regardless of whether the systems and models 
that generate the risk parameters necessary for calculating a bank's 
risk-based capital requirements are located at any affiliate of the 
bank, the bank itself must ensure that the risk parameters and reference 
data used to determine its risk-based capital requirements are 
representative of its own credit risk and operational risk exposures.
    (b) Risk rating and segmentation systems for wholesale and retail 
exposures. (1) A bank must have an internal risk rating and segmentation 
system that accurately and reliably differentiates among degrees of 
credit risk for the bank's wholesale and retail exposures.
    (2) For wholesale exposures:
    (i) A bank must have an internal risk rating system that accurately 
and reliably assigns each obligor to a single rating grade (reflecting 
the obligor's likelihood of default). A bank may elect, however, not to 
assign to a rating grade an obligor to whom the bank extends credit 
based solely on the financial strength of a guarantor, provided that all 
of the bank's exposures to the obligor are fully covered by eligible 
guarantees, the bank applies the PD substitution approach in paragraph 
(c)(1) of section 33 of this appendix to all exposures to that obligor, 
and the bank immediately assigns the obligor to a rating grade if a 
guarantee can no longer be recognized under this appendix. The bank's 
wholesale obligor rating system must have at least seven discrete rating 
grades for non-defaulted obligors and at least one rating grade for 
defaulted obligors.
    (ii) Unless the bank has chosen to directly assign LGD estimates to 
each wholesale exposure, the bank must have an internal risk rating 
system that accurately and reliably assigns each wholesale exposure to a 
loss severity rating grade (reflecting the bank's estimate of the LGD of 
the exposure). A bank employing loss severity rating grades must have a 
sufficiently granular loss severity grading system to avoid grouping 
together exposures with widely ranging LGDs.
    (3) For retail exposures, a bank must have an internal system that 
groups retail exposures into the appropriate retail exposure 
subcategory, groups the retail exposures in each retail exposure 
subcategory into separate segments with homogeneous risk 
characteristics, and assigns accurate and reliable PD and LGD estimates 
for each segment on a consistent basis. The bank's system must identify 
and group in separate segments by subcategories exposures identified in 
paragraphs (c)(2)(ii) and (iii) of section 31 of this appendix.
    (4) The bank's internal risk rating policy for wholesale exposures 
must describe the bank's rating philosophy (that is, must describe how 
wholesale obligor rating assignments are affected by the bank's choice 
of the range of economic, business, and industry conditions that are 
considered in the obligor rating process).
    (5) The bank's internal risk rating system for wholesale exposures 
must provide for the review and update (as appropriate) of each obligor 
rating and (if applicable) each loss severity rating whenever the bank 
receives new material information, but no less frequently than annually. 
The bank's retail exposure segmentation system must provide for the 
review and update (as appropriate) of assignments of retail exposures to 
segments whenever the bank receives new material information, but 
generally no less frequently than quarterly.
    (c) Quantification of risk parameters for wholesale and retail 
exposures. (1) The bank must have a comprehensive risk parameter 
quantification process that produces accurate, timely, and reliable 
estimates of the risk parameters for the bank's wholesale and retail 
exposures.
    (2) Data used to estimate the risk parameters must be relevant to 
the bank's actual wholesale and retail exposures, and of sufficient 
quality to support the determination of risk-based capital requirements 
for the exposures.
    (3) The bank's risk parameter quantification process must produce 
appropriately conservative risk parameter estimates where the bank has 
limited relevant data, and any adjustments that are part of the 
quantification process must not result in a pattern of bias toward lower 
risk parameter estimates.
    (4) The bank's risk parameter estimation process should not rely on 
the possibility of U.S. government financial assistance, except for the 
financial assistance that the U.S. government has a legally binding 
commitment to provide.
    (5) Where the bank's quantifications of LGD directly or indirectly 
incorporate estimates of the effectiveness of its credit risk management 
practices in reducing its exposure to troubled obligors prior to 
default, the bank must support such estimates with empirical analysis 
showing that the estimates are consistent with its historical experience 
in dealing with such exposures during economic downturn conditions.
    (6) PD estimates for wholesale obligors and retail segments must be 
based on at least five years of default data. LGD estimates for 
wholesale exposures must be based on at least seven years of loss 
severity data, and LGD estimates for retail segments must be based on at 
least five years of loss severity data. EAD estimates for wholesale 
exposures

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must be based on at least seven years of exposure amount data, and EAD 
estimates for retail segments must be based on at least five years of 
exposure amount data.
    (7) Default, loss severity, and exposure amount data must include 
periods of economic downturn conditions, or the bank must adjust its 
estimates of risk parameters to compensate for the lack of data from 
periods of economic downturn conditions.
    (8) The bank's PD, LGD, and EAD estimates must be based on the 
definition of default in this appendix.
    (9) The bank must review and update (as appropriate) its risk 
parameters and its risk parameter quantification process at least 
annually.
    (10) The bank must at least annually conduct a comprehensive review 
and analysis of reference data to determine relevance of reference data 
to the bank's exposures, quality of reference data to support PD, LGD, 
and EAD estimates, and consistency of reference data to the definition 
of default contained in this appendix.
    (d) Counterparty credit risk model. A bank must obtain the prior 
written approval of the FDIC under section 32 of this appendix to use 
the internal models methodology for counterparty credit risk.
    (e) Double default treatment. A bank must obtain the prior written 
approval of the FDIC under section 34 of this appendix to use the double 
default treatment.
    (f) Securitization exposures. A bank must obtain the prior written 
approval of the FDIC under section 44 of this appendix to use the 
Internal Assessment Approach for securitization exposures to ABCP 
programs.
    (g) Equity exposures model. A bank must obtain the prior written 
approval of the FDIC under section 53 of this appendix to use the 
Internal Models Approach for equity exposures.
    (h) Operational risk--(1) Operational risk management processes. A 
bank must:
    (i) Have an operational risk management function that:
    (A) Is independent of business line management; and
    (B) Is responsible for designing, implementing, and overseeing the 
bank's operational risk data and assessment systems, operational risk 
quantification systems, and related processes;
    (ii) Have and document a process (which must capture business 
environment and internal control factors affecting the bank's 
operational risk profile) to identify, measure, monitor, and control 
operational risk in bank products, activities, processes, and systems; 
and
    (iii) Report operational risk exposures, operational loss events, 
and other relevant operational risk information to business unit 
management, senior management, and the board of directors (or a 
designated committee of the board).
    (2) Operational risk data and assessment systems. A bank must have 
operational risk data and assessment systems that capture operational 
risks to which the bank is exposed. The bank's operational risk data and 
assessment systems must:
    (i) Be structured in a manner consistent with the bank's current 
business activities, risk profile, technological processes, and risk 
management processes; and
    (ii) Include credible, transparent, systematic, and verifiable 
processes that incorporate the following elements on an ongoing basis:
    (A) Internal operational loss event data. The bank must have a 
systematic process for capturing and using internal operational loss 
event data in its operational risk data and assessment systems.
    (1) The bank's operational risk data and assessment systems must 
include a historical observation period of at least five years for 
internal operational loss event data (or such shorter period approved by 
the FDIC to address transitional situations, such as integrating a new 
business line).
    (2) The bank must be able to map its internal operational loss event 
data into the seven operational loss event type categories.
    (3) The bank may refrain from collecting internal operational loss 
event data for individual operational losses below established dollar 
threshold amounts if the bank can demonstrate to the satisfaction of the 
FDIC that the thresholds are reasonable, do not exclude important 
internal operational loss event data, and permit the bank to capture 
substantially all the dollar value of the bank's operational losses.
    (B) External operational loss event data. The bank must have a 
systematic process for determining its methodologies for incorporating 
external operational loss event data into its operational risk data and 
assessment systems.
    (C) Scenario analysis. The bank must have a systematic process for 
determining its methodologies for incorporating scenario analysis into 
its operational risk data and assessment systems.
    (D) Business environment and internal control factors. The bank must 
incorporate business environment and internal control factors into its 
operational risk data and assessment systems. The bank must also 
periodically compare the results of its prior business environment and 
internal control factor assessments against its actual operational 
losses incurred in the intervening period.
    (3) Operational risk quantification systems. (i) The bank's 
operational risk quantification systems:
    (A) Must generate estimates of the bank's operational risk exposure 
using its operational risk data and assessment systems;

[[Page 255]]

    (B) Must employ a unit of measure that is appropriate for the bank's 
range of business activities and the variety of operational loss events 
to which it is exposed, and that does not combine business activities or 
operational loss events with demonstrably different risk profiles within 
the same loss distribution;
    (C) Must include a credible, transparent, systematic, and verifiable 
approach for weighting each of the four elements, described in paragraph 
(h)(2)(ii) of this section, that a bank is required to incorporate into 
its operational risk data and assessment systems;
    (D) May use internal estimates of dependence among operational 
losses across and within units of measure if the bank can demonstrate to 
the satisfaction of the FDIC that its process for estimating dependence 
is sound, robust to a variety of scenarios, and implemented with 
integrity, and allows for the uncertainty surrounding the estimates. If 
the bank has not made such a demonstration, it must sum operational risk 
exposure estimates across units of measure to calculate its total 
operational risk exposure; and
    (E) Must be reviewed and updated (as appropriate) whenever the bank 
becomes aware of information that may have a material effect on the 
bank's estimate of operational risk exposure, but the review and update 
must occur no less frequently than annually.
    (ii) With the prior written approval of the FDIC, a bank may 
generate an estimate of its operational risk exposure using an 
alternative approach to that specified in paragraph (h)(3)(i) of this 
section. A bank proposing to use such an alternative operational risk 
quantification system must submit a proposal to the FDIC. In determining 
whether to approve a bank's proposal to use an alternative operational 
risk quantification system, the FDIC will consider the following 
principles:
    (A) Use of the alternative operational risk quantification system 
will be allowed only on an exception basis, considering the size, 
complexity, and risk profile of the bank;
    (B) The bank must demonstrate that its estimate of its operational 
risk exposure generated under the alternative operational risk 
quantification system is appropriate and can be supported empirically; 
and
    (C) A bank must not use an allocation of operational risk capital 
requirements that includes entities other than depository institutions 
or the benefits of diversification across entities.
    (i) Data management and maintenance. (1) A bank must have data 
management and maintenance systems that adequately support all aspects 
of its advanced systems and the timely and accurate reporting of risk-
based capital requirements.
    (2) A bank must retain data using an electronic format that allows 
timely retrieval of data for analysis, validation, reporting, and 
disclosure purposes.
    (3) A bank must retain sufficient data elements related to key risk 
drivers to permit adequate monitoring, validation, and refinement of its 
advanced systems.
    (j) Control, oversight, and validation mechanisms. (1) The bank's 
senior management must ensure that all components of the bank's advanced 
systems function effectively and comply with the qualification 
requirements in this section.
    (2) The bank's board of directors (or a designated committee of the 
board) must at least annually review the effectiveness of, and approve, 
the bank's advanced systems.
    (3) A bank must have an effective system of controls and oversight 
that:
    (i) Ensures ongoing compliance with the qualification requirements 
in this section;
    (ii) Maintains the integrity, reliability, and accuracy of the 
bank's advanced systems; and
    (iii) Includes adequate governance and project management processes.
    (4) The bank must validate, on an ongoing basis, its advanced 
systems. The bank's validation process must be independent of the 
advanced systems' development, implementation, and operation, or the 
validation process must be subjected to an independent review of its 
adequacy and effectiveness. Validation must include:
    (i) An evaluation of the conceptual soundness of (including 
developmental evidence supporting) the advanced systems;
    (ii) An ongoing monitoring process that includes verification of 
processes and benchmarking; and
    (iii) An outcomes analysis process that includes back-testing.
    (5) The bank must have an internal audit function independent of 
business-line management that at least annually assesses the 
effectiveness of the controls supporting the bank's advanced systems and 
reports its findings to the bank's board of directors (or a committee 
thereof).
    (6) The bank must periodically stress test its advanced systems. The 
stress testing must include a consideration of how economic cycles, 
especially downturns, affect risk-based capital requirements (including 
migration across rating grades and segments and the credit risk 
mitigation benefits of double default treatment).
    (k) Documentation. The bank must adequately document all material 
aspects of its advanced systems.

                    Section 23. Ongoing Qualification

    (a) Changes to advanced systems. A bank must meet all the 
qualification requirements in section 22 of this appendix on an ongoing 
basis. A bank must notify the FDIC when the

[[Page 256]]

bank makes any change to an advanced system that would result in a 
material change in the bank's risk-weighted asset amount for an exposure 
type, or when the bank makes any significant change to its modeling 
assumptions.
    (b) Failure to comply with qualification requirements. (1) If the 
FDIC determines that a bank that uses this appendix and has conducted a 
satisfactory parallel run fails to comply with the qualification 
requirements in section 22 of this appendix, the FDIC will notify the 
bank in writing of the bank's failure to comply.
    (2) The bank must establish and submit a plan satisfactory to the 
FDIC to return to compliance with the qualification requirements.
    (3) In addition, if the FDIC determines that the bank's risk-based 
capital requirements are not commensurate with the bank's credit, 
market, operational, or other risks, the FDIC may require such a bank to 
calculate its risk-based capital requirements:
    (i) Under 12 CFR part 325, appendix A; or
    (ii) Under this appendix with any modifications provided by the 
FDIC.

      Section 24. Merger and Acquisition Transitional Arrangements

    (a) Mergers and acquisitions of companies without advanced systems. 
If a bank merges with or acquires a company that does not calculate its 
risk-based capital requirements using advanced systems, the bank may use 
12 CFR part 325, appendix A to determine the risk-weighted asset amounts 
for, and deductions from capital associated with, the merged or acquired 
company's exposures for up to 24 months after the calendar quarter 
during which the merger or acquisition consummates. The FDIC may extend 
this transition period for up to an additional 12 months. Within 90 days 
of consummating the merger or acquisition, the bank must submit to the 
FDIC an implementation plan for using its advanced systems for the 
acquired company. During the period when 12 CFR part 325, appendix A 
apply to the merged or acquired company, any ALLL, net of allocated 
transfer risk reserves established pursuant to 12 U.S.C. 3904, 
associated with the merged or acquired company's exposures may be 
included in the acquiring bank's tier 2 capital up to 1.25 percent of 
the acquired company's risk-weighted assets. All general allowances of 
the merged or acquired company must be excluded from the bank's eligible 
credit reserves. In addition, the risk-weighted assets of the merged or 
acquired company are not included in the bank's credit-risk-weighted 
assets but are included in total risk-weighted assets. If a bank relies 
on this paragraph, the bank must disclose publicly the amounts of risk-
weighted assets and qualifying capital calculated under this appendix 
for the acquiring bank and under 12 CFR part 325, appendix A for the 
acquired company.
    (b) Mergers and acquisitions of companies with advanced systems--(1) 
If a bank merges with or acquires a company that calculates its risk-
based capital requirements using advanced systems, the bank may use the 
acquired company's advanced systems to determine the risk-weighted asset 
amounts for, and deductions from capital associated with, the merged or 
acquired company's exposures for up to 24 months after the calendar 
quarter during which the acquisition or merger consummates. The FDIC may 
extend this transition period for up to an additional 12 months. Within 
90 days of consummating the merger or acquisition, the bank must submit 
to the FDIC an implementation plan for using its advanced systems for 
the merged or acquired company.
    (2) If the acquiring bank is not subject to the advanced approaches 
in this appendix at the time of acquisition or merger, during the period 
when 12 CFR part 325, appendix A apply to the acquiring bank, the ALLL 
associated with the exposures of the merged or acquired company may not 
be directly included in tier 2 capital. Rather, any excess eligible 
credit reserves associated with the merged or acquired company's 
exposures may be included in the bank's tier 2 capital up to 0.6 percent 
of the credit-risk-weighted assets associated with those exposures.

          Part IV. Risk-Weighted Assets for General Credit Risk

 Section 31. Mechanics for Calculating Total Wholesale and Retail Risk-
                             Weighted Assets

    (a) Overview. A bank must calculate its total wholesale and retail 
risk-weighted asset amount in four distinct phases:
    (1) Phase 1--categorization of exposures;
    (2) Phase 2--assignment of wholesale obligors and exposures to 
rating grades and segmentation of retail exposures;
    (3) Phase 3--assignment of risk parameters to wholesale exposures 
and segments of retail exposures; and
    (4) Phase 4--calculation of risk-weighted asset amounts.
    (b) Phase 1--Categorization. The bank must determine which of its 
exposures are wholesale exposures, retail exposures, securitization 
exposures, or equity exposures. The bank must categorize each retail 
exposure as a residential mortgage exposure, a QRE, or an other retail 
exposure. The bank must identify which wholesale exposures are HVCRE 
exposures, sovereign exposures, OTC derivative contracts, repo-style 
transactions, eligible margin loans, eligible purchased wholesale 
exposures, unsettled transactions to which section 35 of this appendix 
applies, and eligible guarantees or eligible credit derivatives that are 
used as credit risk mitigants. The bank must identify any on-

[[Page 257]]

balance sheet asset that does not meet the definition of a wholesale, 
retail, equity, or securitization exposure, as well as any non-material 
portfolio of exposures described in paragraph (e)(4) of this section.
    (c) Phase 2--Assignment of wholesale obligors and exposures to 
rating grades and retail exposures to segments--(1) Assignment of 
wholesale obligors and exposures to rating grades. (i) The bank must 
assign each obligor of a wholesale exposure to a single obligor rating 
grade and must assign each wholesale exposure to which it does not 
directly assign an LGD estimate to a loss severity rating grade.
    (ii) The bank must identify which of its wholesale obligors are in 
default.
    (2) Segmentation of retail exposures. (i) The bank must group the 
retail exposures in each retail subcategory into segments that have 
homogeneous risk characteristics.
    (ii) The bank must identify which of its retail exposures are in 
default. The bank must segment defaulted retail exposures separately 
from non-defaulted retail exposures.
    (iii) If the bank determines the EAD for eligible margin loans using 
the approach in paragraph (b) of section 32 of this appendix, the bank 
must identify which of its retail exposures are eligible margin loans 
for which the bank uses this EAD approach and must segment such eligible 
margin loans separately from other retail exposures.
    (3) Eligible purchased wholesale exposures. A bank may group its 
eligible purchased wholesale exposures into segments that have 
homogeneous risk characteristics. A bank must use the wholesale exposure 
formula in Table 2 in this section to determine the risk-based capital 
requirement for each segment of eligible purchased wholesale exposures.
    (d) Phase 3--Assignment of risk parameters to wholesale exposures 
and segments of retail exposures--(1) Quantification process. Subject to 
the limitations in this paragraph (d), the bank must:
    (i) Associate a PD with each wholesale obligor rating grade;
    (ii) Associate an LGD with each wholesale loss severity rating grade 
or assign an LGD to each wholesale exposure;
    (iii) Assign an EAD and M to each wholesale exposure; and
    (iv) Assign a PD, LGD, and EAD to each segment of retail exposures.
    (2) Floor on PD assignment. The PD for each wholesale obligor or 
retail segment may not be less than 0.03 percent, except for exposures 
to or directly and unconditionally guaranteed by a sovereign entity, the 
Bank for International Settlements, the International Monetary Fund, the 
European Commission, the European Central Bank, or a multilateral 
development bank, to which the bank assigns a rating grade associated 
with a PD of less than 0.03 percent.
    (3) Floor on LGD estimation. The LGD for each segment of residential 
mortgage exposures (other than segments of residential mortgage 
exposures for which all or substantially all of the principal of each 
exposure is directly and unconditionally guaranteed by the full faith 
and credit of a sovereign entity) may not be less than 10 percent.
    (4) Eligible purchased wholesale exposures. A bank must assign a PD, 
LGD, EAD, and M to each segment of eligible purchased wholesale 
exposures. If the bank can estimate ECL (but not PD or LGD) for a 
segment of eligible purchased wholesale exposures, the bank must assume 
that the LGD of the segment equals 100 percent and that the PD of the 
segment equals ECL divided by EAD. The estimated ECL must be calculated 
for the exposures without regard to any assumption of recourse or 
guarantees from the seller or other parties.
    (5) Credit risk mitigation--credit derivatives, guarantees, and 
collateral. (i) A bank may take into account the risk reducing effects 
of eligible guarantees and eligible credit derivatives in support of a 
wholesale exposure by applying the PD substitution or LGD adjustment 
treatment to the exposure as provided in section 33 of this appendix or, 
if applicable, applying double default treatment to the exposure as 
provided in section 34 of this appendix. A bank may decide separately 
for each wholesale exposure that qualifies for the double default 
treatment under section 34 of this appendix whether to apply the double 
default treatment or to use the PD substitution or LGD adjustment 
treatment without recognizing double default effects.
    (ii) A bank may take into account the risk reducing effects of 
guarantees and credit derivatives in support of retail exposures in a 
segment when quantifying the PD and LGD of the segment.
    (iii) Except as provided in paragraph (d)(6) of this section, a bank 
may take into account the risk reducing effects of collateral in support 
of a wholesale exposure when quantifying the LGD of the exposure and may 
take into account the risk reducing effects of collateral in support of 
retail exposures when quantifying the PD and LGD of the segment.
    (6) EAD for OTC derivative contracts, repo-style transactions, and 
eligible margin loans. (i) A bank must calculate its EAD for an OTC 
derivative contract as provided in paragraphs (c) and (d) of section 32 
of this appendix. A bank may take into account the risk-reducing effects 
of financial collateral in support of a repo-style transaction or 
eligible margin loan and of any collateral in support of a repo-style 
transaction that is included in the bank's VaR-based measure under 12 
CFR part 325, appendix C through an adjustment to EAD as provided in 
paragraphs (b) and (d) of section 32 of this appendix. A bank that takes 
collateral into account through such an adjustment to EAD

[[Page 258]]

under section 32 of this appendix may not reflect such collateral in 
LGD.
    (ii) A bank may attribute an EAD of zero to:
    (A) Derivative contracts that are publicly traded on an exchange 
that requires the daily receipt and payment of cash-variation margin;
    (B) Derivative contracts and repo-style transactions that are 
outstanding with a qualifying central counterparty (but not for those 
transactions that a qualifying central counterparty has rejected); and
    (C) Credit risk exposures to a qualifying central counterparty in 
the form of clearing deposits and posted collateral that arise from 
transactions described in paragraph (d)(6)(ii)(B) of this section.
    (7) Effective maturity. An exposure's M must be no greater than five 
years and no less than one year, except that an exposure's M must be no 
less than one day if the exposure has an original maturity of less than 
one year and is not part of a bank's ongoing financing of the obligor. 
An exposure is not part of a bank's ongoing financing of the obligor if 
the bank:
    (i) Has a legal and practical ability not to renew or roll over the 
exposure in the event of credit deterioration of the obligor;
    (ii) Makes an independent credit decision at the inception of the 
exposure and at every renewal or roll over; and
    (iii) Has no substantial commercial incentive to continue its credit 
relationship with the obligor in the event of credit deterioration of 
the obligor.
    (e) Phase 4--Calculation of risk-weighted assets--(1) Non-defaulted 
exposures. (i) A bank must calculate the dollar risk-based capital 
requirement for each of its wholesale exposures to a non-defaulted 
obligor (except eligible guarantees and eligible credit derivatives that 
hedge another wholesale exposure and exposures to which the bank applies 
the double default treatment in section 34 of this appendix) and 
segments of non-defaulted retail exposures by inserting the assigned 
risk parameters for the wholesale obligor and exposure or retail segment 
into the appropriate risk-based capital formula specified in Table 2 and 
multiplying the output of the formula (K) by the EAD of the exposure or 
segment. Alternatively, a bank may apply a 300 percent risk weight to 
the EAD of an eligible margin loan if the bank is not able to meet the 
agencies' requirements for estimation of PD and LGD for the margin loan.

[[Page 259]]

[GRAPHIC] [TIFF OMITTED] TR07DE07.005

    (ii) The sum of all the dollar risk-based capital requirements for 
each wholesale exposure to a non-defaulted obligor and segment of non-
defaulted retail exposures calculated in paragraph (e)(1)(i) of this 
section and in paragraph (e) of section 34 of this appendix equals the 
total dollar risk-based capital requirement for those exposures and 
segments.
    (iii) The aggregate risk-weighted asset amount for wholesale 
exposures to non-defaulted obligors and segments of non-defaulted retail 
exposures equals the total dollar risk-based capital requirement 
calculated in paragraph (e)(1)(ii) of this section multiplied by 12.5.
    (2) Wholesale exposures to defaulted obligors and segments of 
defaulted retail exposures. (i) The dollar risk-based capital 
requirement for each wholesale exposure to a defaulted obligor equals 
0.08 multiplied by the EAD of the exposure.
    (ii) The dollar risk-based capital requirement for a segment of 
defaulted retail exposures equals 0.08 multiplied by the EAD of the 
segment.
    (iii) The sum of all the dollar risk-based capital requirements for 
each wholesale exposure to a defaulted obligor calculated in paragraph 
(e)(2)(i) of this section plus the dollar risk-based capital 
requirements for each segment of defaulted retail exposures

[[Page 260]]

calculated in paragraph (e)(2)(ii) of this section equals the total 
dollar risk-based capital requirement for those exposures and segments.
    (iv) The aggregate risk-weighted asset amount for wholesale 
exposures to defaulted obligors and segments of defaulted retail 
exposures equals the total dollar risk-based capital requirement 
calculated in paragraph (e)(2)(iii) of this section multiplied by 12.5.
    (3) Assets not included in a defined exposure category. (i) A bank 
may assign a risk-weighted asset amount of zero to cash owned and held 
in all offices of the bank or in transit and for gold bullion held in 
the bank's own vaults, or held in another bank's vaults on an allocated 
basis, to the extent the gold bullion assets are offset by gold bullion 
liabilities.
    (ii) The risk-weighted asset amount for the residual value of a 
retail lease exposure equals such residual value.
    (iii) The risk-weighted asset amount for any other on-balance-sheet 
asset that does not meet the definition of a wholesale, retail, 
securitization, or equity exposure equals the carrying value of the 
asset.
    (4) Non-material portfolios of exposures. The risk-weighted asset 
amount of a portfolio of exposures for which the bank has demonstrated 
to the FDIC's satisfaction that the portfolio (when combined with all 
other portfolios of exposures that the bank seeks to treat under this 
paragraph) is not material to the bank is the sum of the carrying values 
of on-balance sheet exposures plus the notional amounts of off-balance 
sheet exposures in the portfolio. For purposes of this paragraph (e)(4), 
the notional amount of an OTC derivative contract that is not a credit 
derivative is the EAD of the derivative as calculated in section 32 of 
this appendix.

    Section 32. Counterparty Credit Risk of Repo-Style Transactions, 
           Eligible Margin Loans, and OTC Derivative Contracts

    (a) In General. (1) This section describes two methodologies--a 
collateral haircut approach and an internal models methodology--that a 
bank may use instead of an LGD estimation methodology to recognize the 
benefits of financial collateral in mitigating the counterparty credit 
risk of repo-style transactions, eligible margin loans, collateralized 
OTC derivative contracts, and single product netting sets of such 
transactions and to recognize the benefits of any collateral in 
mitigating the counterparty credit risk of repo-style transactions that 
are included in a bank's VaR-based measure under 12 CFR part 325, 
appendix C. A third methodology, the simple VaR methodology, is 
available for single product netting sets of repo-style transactions and 
eligible margin loans.
    (2) This section also describes the methodology for calculating EAD 
for an OTC derivative contract or a set of OTC derivative contracts 
subject to a qualifying master netting agreement. A bank also may use 
the internal models methodology to estimate EAD for qualifying cross-
product master netting agreements.
    (3) A bank may only use the standard supervisory haircut approach 
with a minimum 10-business-day holding period to recognize in EAD the 
benefits of conforming residential mortgage collateral that secures 
repo-style transactions (other than repo-style transactions included in 
the bank's VaR-based measure under 12 CFR part 325, appendix C), 
eligible margin loans, and OTC derivative contracts.
    (4) A bank may use any combination of the three methodologies for 
collateral recognition; however, it must use the same methodology for 
similar exposures.
    (b) EAD for eligible margin loans and repo-style transactions--(1) 
General. A bank may recognize the credit risk mitigation benefits of 
financial collateral that secures an eligible margin loan, repo-style 
transaction, or single-product netting set of such transactions by 
factoring the collateral into its LGD estimates for the exposure. 
Alternatively, a bank may estimate an unsecured LGD for the exposure, as 
well as for any repo-style transaction that is included in the bank's 
VaR-based measure under 12 CFR part 325, appendix C, and determine the 
EAD of the exposure using:
    (i) The collateral haircut approach described in paragraph (b)(2) of 
this section;
    (ii) For netting sets only, the simple VaR methodology described in 
paragraph (b)(3) of this section; or
    (iii) The internal models methodology described in paragraph (d) of 
this section.
    (2) Collateral haircut approach--(i) EAD equation. A bank may 
determine EAD for an eligible margin loan, repo-style transaction, or 
netting set by setting EAD equal to max {0, [([Sigma]E-[Sigma]C) + 
[Sigma](Es x Hs) + [Sigma](Efx x Hfx)]{time} , where:
    (A) [Sigma]E equals the value of the exposure (the sum of the 
current market values of all instruments, gold, and cash the bank has 
lent, sold subject to repurchase, or posted as collateral to the 
counterparty under the transaction (or netting set));
    (B) [Sigma]C equals the value of the collateral (the sum of the 
current market values of all instruments, gold, and cash the bank has 
borrowed, purchased subject to resale, or taken as collateral from the 
counterparty under the transaction (or netting set));
    (C) Es equals the absolute value of the net position in a given 
instrument or in gold (where the net position in a given instrument or 
in gold equals the sum of the current market values of the instrument or 
gold the bank has lent, sold subject to repurchase, or posted as 
collateral to the counterparty minus the sum of the current

[[Page 261]]

market values of that same instrument or gold the bank has borrowed, 
purchased subject to resale, or taken as collateral from the 
counterparty);
    (D) Hs equals the market price volatility haircut appropriate to the 
instrument or gold referenced in Es;
    (E) Efx equals the absolute value of the net position of instruments 
and cash in a currency that is different from the settlement currency 
(where the net position in a given currency equals the sum of the 
current market values of any instruments or cash in the currency the 
bank has lent, sold subject to repurchase, or posted as collateral to 
the counterparty minus the sum of the current market values of any 
instruments or cash in the currency the bank has borrowed, purchased 
subject to resale, or taken as collateral from the counterparty); and
    (F) Hfx equals the haircut appropriate to the mismatch between the 
currency referenced in Efx and the settlement currency.
    (ii) Standard supervisory haircuts. (A) Under the standard 
supervisory haircuts approach:
    (1) A bank must use the haircuts for market price volatility (Hs) in 
Table 3, as adjusted in certain circumstances as provided in paragraph 
(b)(2)(ii)(A)(3) and (4) of this section;

                       Table 3--Standard Supervisory Market Price Volatility Haircuts \1\
----------------------------------------------------------------------------------------------------------------
                                                                              Issuers exempt
 Applicable external rating grade    Residual maturity for debt securities   from the 3 basis    Other issuers
   category for debt securities                                                point floor
----------------------------------------------------------------------------------------------------------------
Two highest investment-grade        <= 1 year.............................              0.005               0.01
 rating categories for long-term    1 year, <= 5 years.........               0.02               0.04
 ratings/highest investment-grade    5 years...................               0.04               0.08
 rating category for short-term
 ratings.
----------------------------------------------------------------------------------------------------------------
Two lowest investment-grade rating  <= 1 year.............................               0.01               0.02
 categories for both short- and      1 year, <= 5 years........               0.03               0.06
 long-term ratings.                  5 years...................               0.06               0.12
----------------------------------------------------------------------------------------------------------------
One rating category below           All...................................               0.15               0.25
 investment grade.
----------------------------------------------------------------------------------------------------------------
Main index equities (including convertible bonds) and gold.....0.15.......
----------------------------------------------------------------------------------------------------------------
Other publicly traded equities (including convertible bonds), c0.25rming
 residential mortgages, and nonfinancial collateral.
----------------------------------------------------------------------------------------------------------------
Mutual funds.........................Highest haircut applicable to any security in which the
                                                         fund can invest.
----------------------------------------------------------------------------------------------------------------
Cash on deposit with the bank (including a certificate of deposi0 issued
 by the bank).
----------------------------------------------------------------------------------------------------------------
\1\ The market price volatility haircuts in Table 3 are based on a ten-business-day holding period.

    (2) For currency mismatches, a bank must use a haircut for foreign 
exchange rate volatility (Hfx) of 8 percent, as adjusted in certain 
circumstances as provided in paragraph (b)(2)(ii)(A)(3) and (4) of this 
section.
    (3) For repo-style transactions, a bank may multiply the supervisory 
haircuts provided in paragraphs (b)(2)(ii)(A)(1) and (2) of this section 
by the square root of \1/2\ (which equals 0.707107).
    (4) A bank must adjust the supervisory haircuts upward on the basis 
of a holding period longer than ten business days (for eligible margin 
loans) or five business days (for repo-style transactions) where and as 
appropriate to take into account the illiquidity of an instrument.
    (iii) Own internal estimates for haircuts. With the prior written 
approval of the FDIC, a bank may calculate haircuts (Hs and Hfx) using 
its own internal estimates of the volatilities of market prices and 
foreign exchange rates.
    (A) To receive FDIC approval to use its own internal estimates, a 
bank must satisfy the following minimum quantitative standards:
    (1) A bank must use a 99th percentile one-tailed confidence 
interval.
    (2) The minimum holding period for a repo-style transaction is five 
business days and for an eligible margin loan is ten business days. When 
a bank calculates an own-estimates haircut on a TN-day 
holding period, which is different from the minimum holding period for 
the transaction type, the applicable haircut (HM) is 
calculated using the following square root of time formula:
[GRAPHIC] [TIFF OMITTED] TR07DE07.014

(i) TM equals 5 for repo-style transactions and 10 for 
          eligible margin loans;
(ii) TN equals the holding period used by the bank to derive 
          HN; and
(iii) HN equals the haircut based on the holding period 
          TN.

[[Page 262]]

    (3) A bank must adjust holding periods upwards where and as 
appropriate to take into account the illiquidity of an instrument.
    (4) The historical observation period must be at least one year.
    (5) A bank must update its data sets and recompute haircuts no less 
frequently than quarterly and must also reassess data sets and haircuts 
whenever market prices change materially.
    (B) With respect to debt securities that have an applicable external 
rating of investment grade, a bank may calculate haircuts for categories 
of securities. For a category of securities, the bank must calculate the 
haircut on the basis of internal volatility estimates for securities in 
that category that are representative of the securities in that category 
that the bank has lent, sold subject to repurchase, posted as 
collateral, borrowed, purchased subject to resale, or taken as 
collateral. In determining relevant categories, the bank must at a 
minimum take into account:
    (1) The type of issuer of the security;
    (2) The applicable external rating of the security;
    (3) The maturity of the security; and
    (4) The interest rate sensitivity of the security.
    (C) With respect to debt securities that have an applicable external 
rating of below investment grade and equity securities, a bank must 
calculate a separate haircut for each individual security.
    (D) Where an exposure or collateral (whether in the form of cash or 
securities) is denominated in a currency that differs from the 
settlement currency, the bank must calculate a separate currency 
mismatch haircut for its net position in each mismatched currency based 
on estimated volatilities of foreign exchange rates between the 
mismatched currency and the settlement currency.
    (E) A bank's own estimates of market price and foreign exchange rate 
volatilities may not take into account the correlations among securities 
and foreign exchange rates on either the exposure or collateral side of 
a transaction (or netting set) or the correlations among securities and 
foreign exchange rates between the exposure and collateral sides of the 
transaction (or netting set).
    (3) Simple VaR methodology. With the prior written approval of the 
FDIC, a bank may estimate EAD for a netting set using a VaR model that 
meets the requirements in paragraph (b)(3)(iii) of this section. In such 
event, the bank must set EAD equal to max {0, [([Sigma]E--[Sigma]C) + 
PFE]{time} , where:
    (i) [Sigma]E equals the value of the exposure (the sum of the 
current market values of all instruments, gold, and cash the bank has 
lent, sold subject to repurchase, or posted as collateral to the 
counterparty under the netting set);
    (ii) [Sigma]C equals the value of the collateral (the sum of the 
current market values of all instruments, gold, and cash the bank has 
borrowed, purchased subject to resale, or taken as collateral from the 
counterparty under the netting set); and
    (iii) PFE (potential future exposure) equals the bank's empirically 
based best estimate of the 99th percentile, one-tailed confidence 
interval for an increase in the value of ([Sigma]E--[Sigma]C) over a 
five-business-day holding period for repo-style transactions or over a 
ten-business-day holding period for eligible margin loans using a 
minimum one-year historical observation period of price data 
representing the instruments that the bank has lent, sold subject to 
repurchase, posted as collateral, borrowed, purchased subject to resale, 
or taken as collateral. The bank must validate its VaR model, including 
by establishing and maintaining a rigorous and regular back-testing 
regime.
    (c) EAD for OTC derivative contracts. (1) A bank must determine the 
EAD for an OTC derivative contract that is not subject to a qualifying 
master netting agreement using the current exposure methodology in 
paragraph (c)(5) of this section or using the internal models 
methodology described in paragraph (d) of this section.
    (2) A bank must determine the EAD for multiple OTC derivative 
contracts that are subject to a qualifying master netting agreement 
using the current exposure methodology in paragraph (c)(6) of this 
section or using the internal models methodology described in paragraph 
(d) of this section.
    (3) Counterparty credit risk for credit derivatives. Notwithstanding 
the above, (i) A bank that purchases a credit derivative that is 
recognized under section 33 or 34 of this appendix as a credit risk 
mitigant for an exposure that is not a covered position under 12 CFR 
part 325, appendix C need not compute a separate counterparty credit 
risk capital requirement under this section so long as the bank does so 
consistently for all such credit derivatives and either includes all or 
excludes all such credit derivatives that are subject to a master 
netting agreement from any measure used to determine counterparty credit 
risk exposure to all relevant counterparties for risk-based capital 
purposes.
    (ii) A bank that is the protection provider in a credit derivative 
must treat the credit derivative as a wholesale exposure to the 
reference obligor and need not compute a counterparty credit risk 
capital requirement for the credit derivative under this section, so 
long as it does so consistently for all such credit derivatives and 
either includes all or excludes all such credit derivatives that are 
subject to a master netting agreement from any measure used to determine 
counterparty

[[Page 263]]

credit risk exposure to all relevant counterparties for risk-based 
capital purposes (unless the bank is treating the credit derivative as a 
covered position under 12 CFR part 325, appendix C, in which case the 
bank must compute a supplemental counterparty credit risk capital 
requirement under this section).
    (4) Counterparty credit risk for equity derivatives. A bank must 
treat an equity derivative contract as an equity exposure and compute a 
risk-weighted asset amount for the equity derivative contract under part 
VI (unless the bank is treating the contract as a covered position under 
12 CFR part 325, appendix C). In addition, if the bank is treating the 
contract as a covered position under 12 CFR part 325, appendix C and in 
certain other cases described in section 55 of this appendix, the bank 
must also calculate a risk-based capital requirement for the 
counterparty credit risk of an equity derivative contract under this 
part.
    (5) Single OTC derivative contract. Except as modified by paragraph 
(c)(7) of this section, the EAD for a single OTC derivative contract 
that is not subject to a qualifying master netting agreement is equal to 
the sum of the bank's current credit exposure and potential future 
credit exposure (PFE) on the derivative contract.
    (i) Current credit exposure. The current credit exposure for a 
single OTC derivative contract is the greater of the mark-to-market 
value of the derivative contract or zero.
    (ii) PFE. The PFE for a single OTC derivative contract, including an 
OTC derivative contract with a negative mark-to-market value, is 
calculated by multiplying the notional principal amount of the 
derivative contract by the appropriate conversion factor in Table 4. For 
purposes of calculating either the PFE under this paragraph or the gross 
PFE under paragraph (c)(6) of this section for exchange rate contracts 
and other similar contracts in which the notional principal amount is 
equivalent to the cash flows, notional principal amount is the net 
receipts to each party falling due on each value date in each currency. 
For any OTC derivative contract that does not fall within one of the 
specified categories in Table 4, the PFE must be calculated using the 
``other'' conversion factors. A bank must use an OTC derivative 
contract's effective notional principal amount (that is, its apparent or 
stated notional principal amount multiplied by any multiplier in the OTC 
derivative contract) rather than its apparent or stated notional 
principal amount in calculating PFE. PFE of the protection provider of a 
credit derivative is capped at the net present value of the amount of 
unpaid premiums.

[[Page 264]]



                                           Table 4--Conversion Factor Matrix for OTC Derivative Contracts \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Credit       Credit (non-
                                                              Foreign      (investment-     investment-                      Precious
         Remaining maturity \2\            Interest rate   exchange rate       grade           grade          Equity      metals (except       Other
                                                             and gold        reference       reference                         gold)
                                                                            obligor)\3\      obligor)
--------------------------------------------------------------------------------------------------------------------------------------------------------
One year or less........................           0.00            0.01             0.05            0.10            0.06            0.07            0.10
Over one to five years..................           0.005           0.05             0.05            0.10            0.08            0.07            0.12
Over five years.........................           0.015           0.075            0.05            0.10            0.10            0.08           0.15
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ For an OTC derivative contract with multiple exchanges of principal, the conversion factor is multiplied by the number of remaining payments in the
  derivative contract.
\2\ For an OTC derivative contract that is structured such that on specified dates any outstanding exposure is settled and the terms are reset so that
  the market value of the contract is zero, the remaining maturity equals the time until the next reset date. For an interest rate derivative contract
  with a remaining maturity of greater than one year that meets these criteria, the minimum conversion factor is 0.005.
\3\ A bank must use the column labeled ``Credit (investment-grade reference obligor)'' for a credit derivative whose reference obligor has an
  outstanding unsecured long-term debt security without credit enhancement that has a long-term applicable external rating of at least investment grade.
  A bank must use the column labeled ``Credit (non-investment-grade reference obligor)'' for all other credit derivatives.


[[Page 265]]

    (6) Multiple OTC derivative contracts subject to a qualifying master 
netting agreement. Except as modified by paragraph (c)(7) of this 
section, the EAD for multiple OTC derivative contracts subject to a 
qualifying master netting agreement is equal to the sum of the net 
current credit exposure and the adjusted sum of the PFE exposure for all 
OTC derivative contracts subject to the qualifying master netting 
agreement.
    (i) Net current credit exposure. The net current credit exposure is 
the greater of:
    (A) The net sum of all positive and negative mark-to-market values 
of the individual OTC derivative contracts subject to the qualifying 
master netting agreement; or
    (B) zero.
    (ii) Adjusted sum of the PFE. The adjusted sum of the PFE, Anet, is 
calculated as Anet = (0.4xAgross)+(0.6xNGRxAgross), where:
    (A) Agross = the gross PFE (that is, the sum of the PFE amounts (as 
determined under paragraph (c)(5)(ii) of this section) for each 
individual OTC derivative contract subject to the qualifying master 
netting agreement); and
    (B) NGR = the net to gross ratio (that is, the ratio of the net 
current credit exposure to the gross current credit exposure). In 
calculating the NGR, the gross current credit exposure equals the sum of 
the positive current credit exposures (as determined under paragraph 
(c)(5)(i) of this section) of all individual OTC derivative contracts 
subject to the qualifying master netting agreement.
    (7) Collateralized OTC derivative contracts. A bank may recognize 
the credit risk mitigation benefits of financial collateral that secures 
an OTC derivative contract or single-product netting set of OTC 
derivatives by factoring the collateral into its LGD estimates for the 
contract or netting set. Alternatively, a bank may recognize the credit 
risk mitigation benefits of financial collateral that secures such a 
contract or netting set that is marked to market on a daily basis and 
subject to a daily margin maintenance requirement by estimating an 
unsecured LGD for the contract or netting set and adjusting the EAD 
calculated under paragraph (c)(5) or (c)(6) of this section using the 
collateral haircut approach in paragraph (b)(2) of this section. The 
bank must substitute the EAD calculated under paragraph (c)(5) or (c)(6) 
of this section for [Sigma]E in the equation in paragraph (b)(2)(i) of 
this section and must use a ten-business-day minimum holding period 
(TM = 10).
    (d) Internal models methodology. (1) With prior written approval 
from the FDIC, a bank may use the internal models methodology in this 
paragraph (d) to determine EAD for counterparty credit risk for OTC 
derivative contracts (collateralized or uncollateralized) and single-
product netting sets thereof, for eligible margin loans and single-
product netting sets thereof, and for repo-style transactions and 
single-product netting sets thereof. A bank that uses the internal 
models methodology for a particular transaction type (OTC derivative 
contracts, eligible margin loans, or repo-style transactions) must use 
the internal models methodology for all transactions of that transaction 
type. A bank may choose to use the internal models methodology for one 
or two of these three types of exposures and not the other types. A bank 
may also use the internal models methodology for OTC derivative 
contracts, eligible margin loans, and repo-style transactions subject to 
a qualifying cross-product netting agreement if:
    (i) The bank effectively integrates the risk mitigating effects of 
cross-product netting into its risk management and other information 
technology systems; and
    (ii) The bank obtains the prior written approval of the FDIC. A bank 
that uses the internal models methodology for a transaction type must 
receive approval from the FDIC to cease using the methodology for that 
transaction type or to make a material change to its internal model.
    (2) Under the internal models methodology, a bank uses an internal 
model to estimate the expected exposure (EE) for a netting set and then 
calculates EAD based on that EE.
    (i) The bank must use its internal model's probability distribution 
for changes in the market value of a netting set that are attributable 
to changes in market variables to determine EE.
    (ii) Under the internal models methodology, EAD = [alpha] x 
effective EPE, or, subject to FDIC approval as provided in paragraph 
(d)(7), a more conservative measure of EAD.
[GRAPHIC] [TIFF OMITTED] TR07DE07.026

(that is, effective EPE is the time-weighted average of effective EE 
where the weights are the proportion that an individual effective EE 
represents in a one-year time interval) where:
    (1) Effective EEtk = max (Effective EEtk-1, 
EEtk) (that is, for a specific datetk, effective 
EE is the greater of EE at that date or the effective EE at the previous 
date); and
    (2) tk represents the kth future time period in the model 
and there are n time periods represented in the model over the first 
year; and
    (B) [alpha] = 1.4 except as provided in paragraph (d)(6), or when 
the FDIC has determined that the bank must set [alpha] higher based on 
the bank's specific characteristics of counterparty credit risk.
    (iii) A bank may include financial collateral currently posted by 
the counterparty as collateral (but may not include other forms of 
collateral) when calculating EE.

[[Page 266]]

    (iv) If a bank hedges some or all of the counterparty credit risk 
associated with a netting set using an eligible credit derivative, the 
bank may take the reduction in exposure to the counterparty into account 
when estimating EE. If the bank recognizes this reduction in exposure to 
the counterparty in its estimate of EE, it must also use its internal 
model to estimate a separate EAD for the bank's exposure to the 
protection provider of the credit derivative.
    (3) To obtain FDIC approval to calculate the distributions of 
exposures upon which the EAD calculation is based, the bank must 
demonstrate to the satisfaction of the FDIC that it has been using for 
at least one year an internal model that broadly meets the following 
minimum standards, with which the bank must maintain compliance:
    (i) The model must have the systems capability to estimate the 
expected exposure to the counterparty on a daily basis (but is not 
expected to estimate or report expected exposure on a daily basis).
    (ii) The model must estimate expected exposure at enough future 
dates to reflect accurately all the future cash flows of contracts in 
the netting set.
    (iii) The model must account for the possible non-normality of the 
exposure distribution, where appropriate.
    (iv) The bank must measure, monitor, and control current 
counterparty exposure and the exposure to the counterparty over the 
whole life of all contracts in the netting set.
    (v) The bank must be able to measure and manage current exposures 
gross and net of collateral held, where appropriate. The bank must 
estimate expected exposures for OTC derivative contracts both with and 
without the effect of collateral agreements.
    (vi) The bank must have procedures to identify, monitor, and control 
specific wrong-way risk throughout the life of an exposure. Wrong-way 
risk in this context is the risk that future exposure to a counterparty 
will be high when the counterparty's probability of default is also 
high.
    (vii) The model must use current market data to compute current 
exposures. When estimating model parameters based on historical data, at 
least three years of historical data that cover a wide range of economic 
conditions must be used and must be updated quarterly or more frequently 
if market conditions warrant. The bank should consider using model 
parameters based on forward-looking measures, where appropriate.
    (viii) A bank must subject its internal model to an initial 
validation and annual model review process. The model review should 
consider whether the inputs and risk factors, as well as the model 
outputs, are appropriate.
    (4) Maturity. (i) If the remaining maturity of the exposure or the 
longest-dated contract in the netting set is greater than one year, the 
bank must set M for the exposure or netting set equal to the lower of 
five years or M(EPE),\3\ where:
---------------------------------------------------------------------------

    \3\ Alternatively, a bank that uses an internal model to calculate a 
one-sided credit valuation adjustment may use the effective credit 
duration estimated by the model as M(EPE) in place of the formula in 
paragraph (d)(4).
[GRAPHIC] [TIFF OMITTED] TR07DE07.015

    (B) dfk is the risk-free discount factor for future time 
period tk; and
    (C) [Delta]tk = tk-tk-1.
    (ii) If the remaining maturity of the exposure or the longest-dated 
contract in the netting set is one year or less, the bank must set M for 
the exposure or netting set equal to one year, except as provided in 
paragraph (d)(7) of section 31 of this appendix.
    (5) Collateral agreements. A bank may capture the effect on EAD of a 
collateral agreement that requires receipt of collateral when exposure 
to the counterparty increases but may not capture the effect on EAD of a 
collateral agreement that requires receipt of collateral when 
counterparty credit quality deteriorates. For this purpose, a collateral 
agreement means a legal contract that specifies the time when, and 
circumstances under which, the counterparty is required to pledge 
collateral to the bank for a single financial contract or for all 
financial contracts in a netting set and confers upon the bank a 
perfected, first priority security interest (notwithstanding the prior 
security interest of any custodial agent), or the legal equivalent 
thereof, in the collateral posted by the

[[Page 267]]

counterparty under the agreement. This security interest must provide 
the bank with a right to close out the financial positions and liquidate 
the collateral upon an event of default of, or failure to perform by, 
the counterparty under the collateral agreement. A contract would not 
satisfy this requirement if the bank's exercise of rights under the 
agreement may be stayed or avoided under applicable law in the relevant 
jurisdictions. Two methods are available to capture the effect of a 
collateral agreement:
    (i) With prior written approval from the FDIC, a bank may include 
the effect of a collateral agreement within its internal model used to 
calculate EAD. The bank may set EAD equal to the expected exposure at 
the end of the margin period of risk. The margin period of risk means, 
with respect to a netting set subject to a collateral agreement, the 
time period from the most recent exchange of collateral with a 
counterparty until the next required exchange of collateral plus the 
period of time required to sell and realize the proceeds of the least 
liquid collateral that can be delivered under the terms of the 
collateral agreement and, where applicable, the period of time required 
to re-hedge the resulting market risk, upon the default of the 
counterparty. The minimum margin period of risk is five business days 
for repo-style transactions and ten business days for other transactions 
when liquid financial collateral is posted under a daily margin 
maintenance requirement. This period should be extended to cover any 
additional time between margin calls; any potential closeout 
difficulties; any delays in selling collateral, particularly if the 
collateral is illiquid; and any impediments to prompt re-hedging of any 
market risk.
    (ii) A bank that can model EPE without collateral agreements but 
cannot achieve the higher level of modeling sophistication to model EPE 
with collateral agreements can set effective EPE for a collateralized 
netting set equal to the lesser of:
    (A) The threshold, defined as the exposure amount at which the 
counterparty is required to post collateral under the collateral 
agreement, if the threshold is positive, plus an add-on that reflects 
the potential increase in exposure of the netting set over the margin 
period of risk. The add-on is computed as the expected increase in the 
netting set's exposure beginning from current exposure of zero over the 
margin period of risk. The margin period of risk must be at least five 
business days for netting sets consisting only of repo-style 
transactions subject to daily re-margining and daily marking-to-market, 
and ten business days for all other netting sets; or
    (B) Effective EPE without a collateral agreement.
    (6) Own estimate of alpha. With prior written approval of the FDIC, 
a bank may calculate alpha as the ratio of economic capital from a full 
simulation of counterparty exposure across counterparties that 
incorporates a joint simulation of market and credit risk factors 
(numerator) and economic capital based on EPE (denominator), subject to 
a floor of 1.2. For purposes of this calculation, economic capital is 
the unexpected losses for all counterparty credit risks measured at a 
99.9 percent confidence level over a one-year horizon. To receive 
approval, the bank must meet the following minimum standards to the 
satisfaction of the FDIC:
    (i) The bank's own estimate of alpha must capture in the numerator 
the effects of:
    (A) The material sources of stochastic dependency of distributions 
of market values of transactions or portfolios of transactions across 
counterparties;
    (B) Volatilities and correlations of market risk factors used in the 
joint simulation, which must be related to the credit risk factor used 
in the simulation to reflect potential increases in volatility or 
correlation in an economic downturn, where appropriate; and
    (C) The granularity of exposures (that is, the effect of a 
concentration in the proportion of each counterparty's exposure that is 
driven by a particular risk factor).
    (ii) The bank must assess the potential model uncertainty in its 
estimates of alpha.
    (iii) The bank must calculate the numerator and denominator of alpha 
in a consistent fashion with respect to modeling methodology, parameter 
specifications, and portfolio composition.
    (iv) The bank must review and adjust as appropriate its estimates of 
the numerator and denominator of alpha on at least a quarterly basis and 
more frequently when the composition of the portfolio varies over time.
    (7) Other measures of counterparty exposure. With prior written 
approval of the FDIC, a bank may set EAD equal to a measure of 
counterparty credit risk exposure, such as peak EAD, that is more 
conservative than an alpha of 1.4 (or higher under the terms of 
paragraph (d)(2)(ii)(B) of this section) times EPE for every 
counterparty whose EAD will be measured under the alternative measure of 
counterparty exposure. The bank must demonstrate the conservatism of the 
measure of counterparty credit risk exposure used for EAD. For material 
portfolios of new OTC derivative products, the bank may assume that the 
current exposure methodology in paragraphs (c)(5) and (c)(6) of this 
section meets the conservatism requirement of this paragraph for a 
period not to exceed 180 days. For immaterial portfolios of OTC 
derivative contracts, the bank generally may assume that the current 
exposure methodology in paragraphs (c)(5) and (c)(6) of this section 
meets the conservatism requirement of this paragraph.

[[Page 268]]

 Section 33. Guarantees and Credit Derivatives: PD Substitution and LGD 
                          Adjustment Approaches

    (a) Scope. (1) This section applies to wholesale exposures for 
which:
    (i) Credit risk is fully covered by an eligible guarantee or 
eligible credit derivative; or
    (ii) Credit risk is covered on a pro rata basis (that is, on a basis 
in which the bank and the protection provider share losses 
proportionately) by an eligible guarantee or eligible credit derivative.
    (2) Wholesale exposures on which there is a tranching of credit risk 
(reflecting at least two different levels of seniority) are 
securitization exposures subject to the securitization framework in part 
V.
    (3) A bank may elect to recognize the credit risk mitigation 
benefits of an eligible guarantee or eligible credit derivative covering 
an exposure described in paragraph (a)(1) of this section by using the 
PD substitution approach or the LGD adjustment approach in paragraph (c) 
of this section or, if the transaction qualifies, using the double 
default treatment in section 34 of this appendix. A bank's PD and LGD 
for the hedged exposure may not be lower than the PD and LGD floors 
described in paragraphs (d)(2) and (d)(3) of section 31 of this 
appendix.
    (4) If multiple eligible guarantees or eligible credit derivatives 
cover a single exposure described in paragraph (a)(1) of this section, a 
bank may treat the hedged exposure as multiple separate exposures each 
covered by a single eligible guarantee or eligible credit derivative and 
may calculate a separate risk-based capital requirement for each 
separate exposure as described in paragraph (a)(3) of this section.
    (5) If a single eligible guarantee or eligible credit derivative 
covers multiple hedged wholesale exposures described in paragraph (a)(1) 
of this section, a bank must treat each hedged exposure as covered by a 
separate eligible guarantee or eligible credit derivative and must 
calculate a separate risk-based capital requirement for each exposure as 
described in paragraph (a)(3) of this section.
    (6) A bank must use the same risk parameters for calculating ECL as 
it uses for calculating the risk-based capital requirement for the 
exposure.
    (b) Rules of recognition. (1) A bank may only recognize the credit 
risk mitigation benefits of eligible guarantees and eligible credit 
derivatives.
    (2) A bank may only recognize the credit risk mitigation benefits of 
an eligible credit derivative to hedge an exposure that is different 
from the credit derivative's reference exposure used for determining the 
derivative's cash settlement value, deliverable obligation, or 
occurrence of a credit event if:
    (i) The reference exposure ranks pari passu (that is, equally) with 
or is junior to the hedged exposure; and
    (ii) The reference exposure and the hedged exposure are exposures to 
the same legal entity, and legally enforceable cross-default or cross-
acceleration clauses are in place to assure payments under the credit 
derivative are triggered when the obligor fails to pay under the terms 
of the hedged exposure.
    (c) Risk parameters for hedged exposures--(1) PD substitution 
approach--(i) Full coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and the protection amount (P) of the guarantee or credit 
derivative is greater than or equal to the EAD of the hedged exposure, a 
bank may recognize the guarantee or credit derivative in determining the 
bank's risk-based capital requirement for the hedged exposure by 
substituting the PD associated with the rating grade of the protection 
provider for the PD associated with the rating grade of the obligor in 
the risk-based capital formula applicable to the guarantee or credit 
derivative in Table 2 and using the appropriate LGD as described in 
paragraph (c)(1)(iii) of this section. If the bank determines that full 
substitution of the protection provider's PD leads to an inappropriate 
degree of risk mitigation, the bank may substitute a higher PD than that 
of the protection provider.
    (ii) Partial coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and the protection amount (P) of the guarantee or credit 
derivative is less than the EAD of the hedged exposure, the bank must 
treat the hedged exposure as two separate exposures (protected and 
unprotected) in order to recognize the credit risk mitigation benefit of 
the guarantee or credit derivative.
    (A) The bank must calculate its risk-based capital requirement for 
the protected exposure under section 31 of this appendix, where PD is 
the protection provider's PD, LGD is determined under paragraph 
(c)(1)(iii) of this section, and EAD is P. If the bank determines that 
full substitution leads to an inappropriate degree of risk mitigation, 
the bank may use a higher PD than that of the protection provider.
    (B) The bank must calculate its risk-based capital requirement for 
the unprotected exposure under section 31 of this appendix, where PD is 
the obligor's PD, LGD is the hedged exposure's LGD (not adjusted to 
reflect the guarantee or credit derivative), and EAD is the EAD of the 
original hedged exposure minus P.
    (C) The treatment in this paragraph (c)(1)(ii) is applicable when 
the credit risk of a wholesale exposure is covered on a partial pro rata 
basis or when an adjustment is made to the effective notional amount of 
the

[[Page 269]]

guarantee or credit derivative under paragraph (d), (e), or (f) of this 
section.
    (iii) LGD of hedged exposures. The LGD of a hedged exposure under 
the PD substitution approach is equal to:
    (A) The lower of the LGD of the hedged exposure (not adjusted to 
reflect the guarantee or credit derivative) and the LGD of the guarantee 
or credit derivative, if the guarantee or credit derivative provides the 
bank with the option to receive immediate payout upon triggering the 
protection; or
    (B) The LGD of the guarantee or credit derivative, if the guarantee 
or credit derivative does not provide the bank with the option to 
receive immediate payout upon triggering the protection.
    (2) LGD adjustment approach--(i) Full coverage. If an eligible 
guarantee or eligible credit derivative meets the conditions in 
paragraphs (a) and (b) of this section and the protection amount (P) of 
the guarantee or credit derivative is greater than or equal to the EAD 
of the hedged exposure, the bank's risk-based capital requirement for 
the hedged exposure is the greater of:
    (A) The risk-based capital requirement for the exposure as 
calculated under section 31 of this appendix, with the LGD of the 
exposure adjusted to reflect the guarantee or credit derivative; or
    (B) The risk-based capital requirement for a direct exposure to the 
protection provider as calculated under section 31 of this appendix, 
using the PD for the protection provider, the LGD for the guarantee or 
credit derivative, and an EAD equal to the EAD of the hedged exposure.
    (ii) Partial coverage. If an eligible guarantee or eligible credit 
derivative meets the conditions in paragraphs (a) and (b) of this 
section and the protection amount (P) of the guarantee or credit 
derivative is less than the EAD of the hedged exposure, the bank must 
treat the hedged exposure as two separate exposures (protected and 
unprotected) in order to recognize the credit risk mitigation benefit of 
the guarantee or credit derivative.
    (A) The bank's risk-based capital requirement for the protected 
exposure would be the greater of:
    (1) The risk-based capital requirement for the protected exposure as 
calculated under section 31 of this appendix, with the LGD of the 
exposure adjusted to reflect the guarantee or credit derivative and EAD 
set equal to P; or
    (2) The risk-based capital requirement for a direct exposure to the 
guarantor as calculated under section 31 of this appendix, using the PD 
for the protection provider, the LGD for the guarantee or credit 
derivative, and an EAD set equal to P.
    (B) The bank must calculate its risk-based capital requirement for 
the unprotected exposure under section 31 of this appendix, where PD is 
the obligor's PD, LGD is the hedged exposure's LGD (not adjusted to 
reflect the guarantee or credit derivative), and EAD is the EAD of the 
original hedged exposure minus P.
    (3) M of hedged exposures. The M of the hedged exposure is the same 
as the M of the exposure if it were unhedged.
    (d) Maturity mismatch. (1) A bank that recognizes an eligible 
guarantee or eligible credit derivative in determining its risk-based 
capital requirement for a hedged exposure must adjust the effective 
notional amount of the credit risk mitigant to reflect any maturity 
mismatch between the hedged exposure and the credit risk mitigant.
    (2) A maturity mismatch occurs when the residual maturity of a 
credit risk mitigant is less than that of the hedged exposure(s).
    (3) The residual maturity of a hedged exposure is the longest 
possible remaining time before the obligor is scheduled to fulfill its 
obligation on the exposure. If a credit risk mitigant has embedded 
options that may reduce its term, the bank (protection purchaser) must 
use the shortest possible residual maturity for the credit risk 
mitigant. If a call is at the discretion of the protection provider, the 
residual maturity of the credit risk mitigant is at the first call date. 
If the call is at the discretion of the bank (protection purchaser), but 
the terms of the arrangement at origination of the credit risk mitigant 
contain a positive incentive for the bank to call the transaction before 
contractual maturity, the remaining time to the first call date is the 
residual maturity of the credit risk mitigant. For example, where there 
is a step-up in cost in conjunction with a call feature or where the 
effective cost of protection increases over time even if credit quality 
remains the same or improves, the residual maturity of the credit risk 
mitigant will be the remaining time to the first call.
    (4) A credit risk mitigant with a maturity mismatch may be 
recognized only if its original maturity is greater than or equal to one 
year and its residual maturity is greater than three months.
    (5) When a maturity mismatch exists, the bank must apply the 
following adjustment to the effective notional amount of the credit risk 
mitigant: Pm = E x (t - 0.25)/(T - 0.25), where:
    (i) Pm = effective notional amount of the credit risk mitigant, 
adjusted for maturity mismatch;
    (ii) E = effective notional amount of the credit risk mitigant;
    (iii) t = the lesser of T or the residual maturity of the credit 
risk mitigant, expressed in years; and
    (iv) T = the lesser of five or the residual maturity of the hedged 
exposure, expressed in years.
    (e) Credit derivatives without restructuring as a credit event. If a 
bank recognizes an eligible credit derivative that does not include as a

[[Page 270]]

credit event a restructuring of the hedged exposure involving 
forgiveness or postponement of principal, interest, or fees that results 
in a credit loss event (that is, a charge-off, specific provision, or 
other similar debit to the profit and loss account), the bank must apply 
the following adjustment to the effective notional amount of the credit 
derivative: Pr = Pm x 0.60, where:
    (1) Pr = effective notional amount of the credit risk mitigant, 
adjusted for lack of restructuring event (and maturity mismatch, if 
applicable); and
    (2) Pm = effective notional amount of the credit risk mitigant 
adjusted for maturity mismatch (if applicable).
    (f) Currency mismatch. (1) If a bank recognizes an eligible 
guarantee or eligible credit derivative that is denominated in a 
currency different from that in which the hedged exposure is 
denominated, the bank must apply the following formula to the effective 
notional amount of the guarantee or credit derivative: Pc = Pr x (1 - 
HFX), where:
    (i) Pc = effective notional amount of the credit risk mitigant, 
adjusted for currency mismatch (and maturity mismatch and lack of 
restructuring event, if applicable);
    (ii) Pr = effective notional amount of the credit risk mitigant 
(adjusted for maturity mismatch and lack of restructuring event, if 
applicable); and
    (iii) HFX = haircut appropriate for the currency mismatch 
between the credit risk mitigant and the hedged exposure.
    (2) A bank must set HFX equal to 8 percent unless it 
qualifies for the use of and uses its own internal estimates of foreign 
exchange volatility based on a ten-business-day holding period and daily 
marking-to-market and remargining. A bank qualifies for the use of its 
own internal estimates of foreign exchange volatility if it qualifies 
for:
    (i) The own-estimates haircuts in paragraph (b)(2)(iii) of section 
32 of this appendix;
    (ii) The simple VaR methodology in paragraph (b)(3) of section 32 of 
this appendix; or
    (iii) The internal models methodology in paragraph (d) of section 32 
of this appendix.
    (3) A bank must adjust HFX calculated in paragraph (f)(2) 
of this section upward if the bank revalues the guarantee or credit 
derivative less frequently than once every ten business days using the 
square root of time formula provided in paragraph (b)(2)(iii)(A)(2) of 
section 32 of this appendix.

 Section 34. Guarantees and Credit Derivatives: Double Default Treatment

    (a) Eligibility and operational criteria for double default 
treatment. A bank may recognize the credit risk mitigation benefits of a 
guarantee or credit derivative covering an exposure described in 
paragraph (a)(1) of section 33 of this appendix by applying the double 
default treatment in this section if all the following criteria are 
satisfied.
    (1) The hedged exposure is fully covered or covered on a pro rata 
basis by:
    (i) An eligible guarantee issued by an eligible double default 
guarantor; or
    (ii) An eligible credit derivative that meets the requirements of 
paragraph (b)(2) of section 33 of this appendix and is issued by an 
eligible double default guarantor.
    (2) The guarantee or credit derivative is:
    (i) An uncollateralized guarantee or uncollateralized credit 
derivative (for example, a credit default swap) that provides protection 
with respect to a single reference obligor; or
    (ii) An nth-to-default credit derivative (subject to the 
requirements of paragraph (m) of section 42 of this appendix).
    (3) The hedged exposure is a wholesale exposure (other than a 
sovereign exposure).
    (4) The obligor of the hedged exposure is not:
    (i) An eligible double default guarantor or an affiliate of an 
eligible double default guarantor; or
    (ii) An affiliate of the guarantor.
    (5) The bank does not recognize any credit risk mitigation benefits 
of the guarantee or credit derivative for the hedged exposure other than 
through application of the double default treatment as provided in this 
section.
    (6) The bank has implemented a process (which has received the 
prior, written approval of the FDIC) to detect excessive correlation 
between the creditworthiness of the obligor of the hedged exposure and 
the protection provider. If excessive correlation is present, the bank 
may not use the double default treatment for the hedged exposure.
    (b) Full coverage. If the transaction meets the criteria in 
paragraph (a) of this section and the protection amount (P) of the 
guarantee or credit derivative is at least equal to the EAD of the 
hedged exposure, the bank may determine its risk-weighted asset amount 
for the hedged exposure under paragraph (e) of this section.
    (c) Partial coverage. If the transaction meets the criteria in 
paragraph (a) of this section and the protection amount (P) of the 
guarantee or credit derivative is less than the EAD of the hedged 
exposure, the bank must treat the hedged exposure as two separate 
exposures (protected and unprotected) in order to recognize double 
default treatment on the protected portion of the exposure.
    (1) For the protected exposure, the bank must set EAD equal to P and 
calculate its risk-weighted asset amount as provided in paragraph (e) of 
this section.
    (2) For the unprotected exposure, the bank must set EAD equal to the 
EAD of the original exposure minus P and then calculate its risk-
weighted asset amount as provided in section 31 of this appendix.

[[Page 271]]

    (d) Mismatches. For any hedged exposure to which a bank applies 
double default treatment, the bank must make applicable adjustments to 
the protection amount as required in paragraphs (d), (e), and (f) of 
section 33 of this appendix.
    (e) The double default dollar risk-based capital requirement. The 
dollar risk-based capital requirement for a hedged exposure to which a 
bank has applied double default treatment is KDD multiplied 
by the EAD of the exposure. KDD is calculated according to 
the following formula: KDD = Ko x (0.15 + 160 x 
PDg),

Where:

(1)
[GRAPHIC] [TIFF OMITTED] TR07DE07.016

(2) PDg = PD of the protection provider.
(3) PDo = PD of the obligor of the hedged exposure.
(4) LGDg = (i) The lower of the LGD of the hedged exposure 
(not adjusted to reflect the guarantee or credit derivative) and the LGD 
of the guarantee or credit derivative, if the guarantee or credit 
derivative provides the bank with the option to receive immediate payout 
on triggering the protection; or
(ii) The LGD of the guarantee or credit derivative, if the guarantee or 
credit derivative does not provide the bank with the option to receive 
immediate payout on triggering the protection.
(5) [rho]OS (asset value correlation of the obligor) is 
calculated according to the appropriate formula for (R) provided in 
Table 2 in section 31 of this appendix, with PD equal to PDo.
(6) b (maturity adjustment coefficient) is calculated according to the 
formula for b provided in Table 2 in section 31 of this appendix, with 
PD equal to the lesser of PDo and PDg.
(7) M (maturity) is the effective maturity of the guarantee or credit 
derivative, which may not be less than one year or greater than five 
years.

  Section 35. Risk-Based Capital Requirement for Unsettled Transactions

    (a) Definitions. For purposes of this section:
    (1) Delivery-versus-payment (DvP) transaction means a securities or 
commodities transaction in which the buyer is obligated to make payment 
only if the seller has made delivery of the securities or commodities 
and the seller is obligated to deliver the securities or commodities 
only if the buyer has made payment.
    (2) Payment-versus-payment (PvP) transaction means a foreign 
exchange transaction in which each counterparty is obligated to make a 
final transfer of one or more currencies only if the other counterparty 
has made a final transfer of one or more currencies.
    (3) Normal settlement period. A transaction has a normal settlement 
period if the contractual settlement period for the transaction is equal 
to or less than the market standard for the instrument underlying the 
transaction and equal to or less than five business days.
    (4) Positive current exposure. The positive current exposure of a 
bank for a transaction is the difference between the transaction value 
at the agreed settlement price and the current market price of the 
transaction, if the difference results in a credit exposure of the bank 
to the counterparty.
    (b) Scope. This section applies to all transactions involving 
securities, foreign exchange instruments, and commodities that have a 
risk of delayed settlement or delivery. This section does not apply to:
    (1) Transactions accepted by a qualifying central counterparty that 
are subject to daily marking-to-market and daily receipt and payment of 
variation margin;
    (2) Repo-style transactions, including unsettled repo-style 
transactions (which are addressed in sections 31 and 32 of this 
appendix);
    (3) One-way cash payments on OTC derivative contracts (which are 
addressed in sections 31 and 32 of this appendix); or
    (4) Transactions with a contractual settlement period that is longer 
than the normal settlement period (which are treated as OTC derivative 
contracts and addressed in sections 31 and 32 of this appendix).
    (c) System-wide failures. In the case of a system-wide failure of a 
settlement or clearing system, the FDIC may waive risk-based capital 
requirements for unsettled and failed transactions until the situation 
is rectified.
    (d) Delivery-versus-payment (DvP) and payment-versus-payment (PvP) 
transactions. A bank must hold risk-based capital against any DvP or PvP 
transaction with a normal settlement period if the bank's counterparty 
has not made delivery or payment within five business days after the 
settlement date. The bank must determine its risk-weighted asset amount 
for such a transaction by multiplying the positive current exposure of 
the

[[Page 272]]

transaction for the bank by the appropriate risk weight in Table 5.

      Table 5--Risk Weights for Unsettled DvP and PvP Transactions
------------------------------------------------------------------------
                                                       Risk weight to be
Number of business days after contractual settlement      applied to
                        date                           positive current
                                                      exposure (percent)
------------------------------------------------------------------------
From 5 to 15........................................               100
From 16 to 30.......................................               625
From 31 to 45.......................................               937.5
46 or more..........................................             1,250
------------------------------------------------------------------------

    (e) Non-DvP/non-PvP (non-delivery-versus-payment/non-payment-versus-
payment) transactions. (1) A bank must hold risk-based capital against 
any non-DvP/non-PvP transaction with a normal settlement period if the 
bank has delivered cash, securities, commodities, or currencies to its 
counterparty but has not received its corresponding deliverables by the 
end of the same business day. The bank must continue to hold risk-based 
capital against the transaction until the bank has received its 
corresponding deliverables.
    (2) From the business day after the bank has made its delivery until 
five business days after the counterparty delivery is due, the bank must 
calculate its risk-based capital requirement for the transaction by 
treating the current market value of the deliverables owed to the bank 
as a wholesale exposure.
    (i) A bank may assign an obligor rating to a counterparty for which 
it is not otherwise required under this appendix to assign an obligor 
rating on the basis of the applicable external rating of any outstanding 
unsecured long-term debt security without credit enhancement issued by 
the counterparty.
    (ii) A bank may use a 45 percent LGD for the transaction rather than 
estimating LGD for the transaction provided the bank uses the 45 percent 
LGD for all transactions described in paragraphs (e)(1) and (e)(2) of 
this section.
    (iii) A bank may use a 100 percent risk weight for the transaction 
provided the bank uses this risk weight for all transactions described 
in paragraphs (e)(1) and (e)(2) of this section.
    (3) If the bank has not received its deliverables by the fifth 
business day after the counterparty delivery was due, the bank must 
deduct the current market value of the deliverables owed to the bank 50 
percent from tier 1 capital and 50 percent from tier 2 capital.
    (f) Total risk-weighted assets for unsettled transactions. Total 
risk-weighted assets for unsettled transactions is the sum of the risk-
weighted asset amounts of all DvP, PvP, and non-DvP/non-PvP 
transactions.

        Part V. Risk-Weighted Assets for Securitization Exposures

  Section 41. Operational Criteria for Recognizing the Transfer of Risk

    (a) Operational criteria for traditional securitizations. A bank 
that transfers exposures it has originated or purchased to a 
securitization SPE or other third party in connection with a traditional 
securitization may exclude the exposures from the calculation of its 
risk-weighted assets only if each of the conditions in this paragraph 
(a) is satisfied. A bank that meets these conditions must hold risk-
based capital against any securitization exposures it retains in 
connection with the securitization. A bank that fails to meet these 
conditions must hold risk-based capital against the transferred 
exposures as if they had not been securitized and must deduct from tier 
1 capital any after-tax gain-on-sale resulting from the transaction. The 
conditions are:
    (1) The transfer is considered a sale under GAAP;
    (2) The bank has transferred to third parties credit risk associated 
with the underlying exposures; and
    (3) Any clean-up calls relating to the securitization are eligible 
clean-up calls.
    (b) Operational criteria for synthetic securitizations. For 
synthetic securitizations, a bank may recognize for risk-based capital 
purposes the use of a credit risk mitigant to hedge underlying exposures 
only if each of the conditions in this paragraph (b) is satisfied. A 
bank that fails to meet these conditions must hold risk-based capital 
against the underlying exposures as if they had not been synthetically 
securitized. The conditions are:
    (1) The credit risk mitigant is financial collateral, an eligible 
credit derivative from an eligible securitization guarantor or an 
eligible guarantee from an eligible securitization guarantor;
    (2) The bank transfers credit risk associated with the underlying 
exposures to third parties, and the terms and conditions in the credit 
risk mitigants employed do not include provisions that:
    (i) Allow for the termination of the credit protection due to 
deterioration in the credit quality of the underlying exposures;
    (ii) Require the bank to alter or replace the underlying exposures 
to improve the credit quality of the pool of underlying exposures;
    (iii) Increase the bank's cost of credit protection in response to 
deterioration in the credit quality of the underlying exposures;
    (iv) Increase the yield payable to parties other than the bank in 
response to a deterioration in the credit quality of the underlying 
exposures; or
    (v) Provide for increases in a retained first loss position or 
credit enhancement provided

[[Page 273]]

by the bank after the inception of the securitization;
    (3) The bank obtains a well-reasoned opinion from legal counsel that 
confirms the enforceability of the credit risk mitigant in all relevant 
jurisdictions; and
    (4) Any clean-up calls relating to the securitization are eligible 
clean-up calls.

 Section 42. Risk-Based Capital Requirement for Securitization Exposures

    (a) Hierarchy of approaches. Except as provided elsewhere in this 
section:
    (1) A bank must deduct from tier 1 capital any after-tax gain-on-
sale resulting from a securitization and must deduct from total capital 
in accordance with paragraph (c) of this section the portion of any CEIO 
that does not constitute gain-on-sale.
    (2) If a securitization exposure does not require deduction under 
paragraph (a)(1) of this section and qualifies for the Ratings-Based 
Approach in section 43 of this appendix, a bank must apply the Ratings-
Based Approach to the exposure.
    (3) If a securitization exposure does not require deduction under 
paragraph (a)(1) of this section and does not qualify for the Ratings-
Based Approach, the bank may either apply the Internal Assessment 
Approach in section 44 of this appendix to the exposure (if the bank, 
the exposure, and the relevant ABCP program qualify for the Internal 
Assessment Approach) or the Supervisory Formula Approach in section 45 
of this appendix to the exposure (if the bank and the exposure qualify 
for the Supervisory Formula Approach).
    (4) If a securitization exposure does not require deduction under 
paragraph (a)(1) of this section and does not qualify for the Ratings-
Based Approach, the Internal Assessment Approach, or the Supervisory 
Formula Approach, the bank must deduct the exposure from total capital 
in accordance with paragraph (c) of this section.
    (5) If a securitization exposure is an OTC derivative contract 
(other than a credit derivative) that has a first priority claim on the 
cash flows from the underlying exposures (notwithstanding amounts due 
under interest rate or currency derivative contracts, fees due, or other 
similar payments), with approval of the FDIC, a bank may choose to set 
the risk-weighted asset amount of the exposure equal to the amount of 
the exposure as determined in paragraph (e) of this section rather than 
apply the hierarchy of approaches described in paragraphs (a)(1) through 
(4) of this section.
    (b) Total risk-weighted assets for securitization exposures. A 
bank's total risk-weighted assets for securitization exposures is equal 
to the sum of its risk-weighted assets calculated using the Ratings-
Based Approach in section 43 of this appendix, the Internal Assessment 
Approach in section 44 of this appendix, and the Supervisory Formula 
Approach in section 45 of this appendix, and its risk-weighted assets 
amount for early amortization provisions calculated in section 47 of 
this appendix.
    (c) Deductions. (1) If a bank must deduct a securitization exposure 
from total capital, the bank must take the deduction 50 percent from 
tier 1 capital and 50 percent from tier 2 capital. If the amount 
deductible from tier 2 capital exceeds the bank's tier 2 capital, the 
bank must deduct the excess from tier 1 capital.
    (2) A bank may calculate any deduction from tier 1 capital and tier 
2 capital for a securitization exposure net of any deferred tax 
liabilities associated with the securitization exposure.
    (d) Maximum risk-based capital requirement. Regardless of any other 
provisions of this part, unless one or more underlying exposures does 
not meet the definition of a wholesale, retail, securitization, or 
equity exposure, the total risk-based capital requirement for all 
securitization exposures held by a single bank associated with a single 
securitization (including any risk-based capital requirements that 
relate to an early amortization provision of the securitization but 
excluding any risk-based capital requirements that relate to the bank's 
gain-on-sale or CEIOs associated with the securitization) may not exceed 
the sum of:
    (1) The bank's total risk-based capital requirement for the 
underlying exposures as if the bank directly held the underlying 
exposures; and
    (2) The total ECL of the underlying exposures.
    (e) Amount of a securitization exposure. (1) The amount of an on-
balance sheet securitization exposure that is not a repo-style 
transaction, eligible margin loan, or OTC derivative contract (other 
than a credit derivative) is:
    (i) The bank's carrying value minus any unrealized gains and plus 
any unrealized losses on the exposure, if the exposure is a security 
classified as available-for-sale; or
    (ii) The bank's carrying value, if the exposure is not a security 
classified as available-for-sale.
    (2) The amount of an off-balance sheet securitization exposure that 
is not an OTC derivative contract (other than a credit derivative) is 
the notional amount of the exposure. For an off-balance-sheet 
securitization exposure to an ABCP program, such as a liquidity 
facility, the notional amount may be reduced to the maximum potential 
amount that the bank could be required to fund given the ABCP program's 
current underlying assets (calculated without regard to the current 
credit quality of those assets).
    (3) The amount of a securitization exposure that is a repo-style 
transaction, eligible margin loan, or OTC derivative contract

[[Page 274]]

(other than a credit derivative) is the EAD of the exposure as 
calculated in section 32 of this appendix.
    (f) Overlapping exposures. If a bank has multiple securitization 
exposures that provide duplicative coverage of the underlying exposures 
of a securitization (such as when a bank provides a program-wide credit 
enhancement and multiple pool-specific liquidity facilities to an ABCP 
program), the bank is not required to hold duplicative risk-based 
capital against the overlapping position. Instead, the bank may apply to 
the overlapping position the applicable risk-based capital treatment 
that results in the highest risk-based capital requirement.
    (g) Securitizations of non-IRB exposures. If a bank has a 
securitization exposure where any underlying exposure is not a wholesale 
exposure, retail exposure, securitization exposure, or equity exposure, 
the bank must:
    (1) If the bank is an originating bank, deduct from tier 1 capital 
any after-tax gain-on-sale resulting from the securitization and deduct 
from total capital in accordance with paragraph (c) of this section the 
portion of any CEIO that does not constitute gain-on-sale;
    (2) If the securitization exposure does not require deduction under 
paragraph (g)(1), apply the RBA in section 43 of this appendix to the 
securitization exposure if the exposure qualifies for the RBA;
    (3) If the securitization exposure does not require deduction under 
paragraph (g)(1) and does not qualify for the RBA, apply the IAA in 
section 44 of this appendix to the exposure (if the bank, the exposure, 
and the relevant ABCP program qualify for the IAA); and
    (4) If the securitization exposure does not require deduction under 
paragraph (g)(1) and does not qualify for the RBA or the IAA, deduct the 
exposure from total capital in accordance with paragraph (c) of this 
section.
    (h) Implicit support. If a bank provides support to a securitization 
in excess of the bank's contractual obligation to provide credit support 
to the securitization (implicit support):
    (1) The bank must hold regulatory capital against all of the 
underlying exposures associated with the securitization as if the 
exposures had not been securitized and must deduct from tier 1 capital 
any after-tax gain-on-sale resulting from the securitization; and
    (2) The bank must disclose publicly:
    (i) That it has provided implicit support to the securitization; and
    (ii) The regulatory capital impact to the bank of providing such 
implicit support.
    (i) Eligible servicer cash advance facilities. Regardless of any 
other provisions of this part, a bank is not required to hold risk-based 
capital against the undrawn portion of an eligible servicer cash advance 
facility.
    (j) Interest-only mortgage-backed securities. Regardless of any 
other provisions of this part, the risk weight for a non-credit-
enhancing interest-only mortgage-backed security may not be less than 
100 percent.
    (k) Small-business loans and leases on personal property transferred 
with recourse. (1) Regardless of any other provisions of this appendix, 
a bank that has transferred small-business loans and leases on personal 
property (small-business obligations) with recourse must include in 
risk-weighted assets only the contractual amount of retained recourse if 
all the following conditions are met:
    (i) The transaction is a sale under GAAP.
    (ii) The bank establishes and maintains, pursuant to GAAP, a non-
capital reserve sufficient to meet the bank's reasonably estimated 
liability under the recourse arrangement.
    (iii) The loans and leases are to businesses that meet the criteria 
for a small-business concern established by the Small Business 
Administration under section 3(a) of the Small Business Act (15 U.S.C. 
632).
    (iv) The bank is well capitalized, as defined in the FDIC 's prompt 
corrective action regulation at 12 CFR part 325, subpart B. For purposes 
of determining whether a bank is well capitalized for purposes of this 
paragraph, the bank's capital ratios must be calculated without regard 
to the capital treatment for transfers of small-business obligations 
with recourse specified in paragraph (k)(1) of this section. For 
purposes of determining whether a bank is well capitalized for purposes 
of this paragraph, the bank's capital ratios must be calculated without 
regard to the capital treatment for transfers of small-business 
obligations with recourse specified in paragraph (k)(1) of this section.
    (2) The total outstanding amount of recourse retained by a bank on 
transfers of small-business obligations receiving the capital treatment 
specified in paragraph (k)(1) of this section cannot exceed 15 percent 
of the bank's total qualifying capital.
    (3) If a bank ceases to be well capitalized or exceeds the 15 
percent capital limitation, the preferential capital treatment specified 
in paragraph (k)(1) of this section will continue to apply to any 
transfers of small-business obligations with recourse that occurred 
during the time that the bank was well capitalized and did not exceed 
the capital limit.
    (4) The risk-based capital ratios of the bank must be calculated 
without regard to the capital treatment for transfers of small-business 
obligations with recourse specified in paragraph (k)(1) of this section 
as provided in 12 CFR part 325, appendix A.
    (l) Consolidated ABCP programs. (1) A bank that qualifies as a 
primary beneficiary and must consolidate an ABCP program as a variable 
interest entity under GAAP may exclude the consolidated ABCP program 
assets

[[Page 275]]

from risk-weighted assets if the bank is the sponsor of the ABCP 
program. If a bank excludes such consolidated ABCP program assets from 
risk-weighted assets, the bank must hold risk-based capital against any 
securitization exposures of the bank to the ABCP program in accordance 
with this part.
    (2) If a bank either is not permitted, or elects not, to exclude 
consolidated ABCP program assets from its risk-weighted assets, the bank 
must hold risk-based capital against the consolidated ABCP program 
assets in accordance with this appendix but is not required to hold 
risk-based capital against any securitization exposures of the bank to 
the ABCP program.
    (m) Nth-to-default credit derivatives--(1) First-to-default credit 
derivatives--(i) Protection purchaser. A bank that obtains credit 
protection on a group of underlying exposures through a first-to-default 
credit derivative must determine its risk-based capital requirement for 
the underlying exposures as if the bank synthetically securitized the 
underlying exposure with the lowest risk-based capital requirement and 
had obtained no credit risk mitigant on the other underlying exposures.
    (ii) Protection provider. A bank that provides credit protection on 
a group of underlying exposures through a first-to-default credit 
derivative must determine its risk-weighted asset amount for the 
derivative by applying the RBA in section 43 of this appendix (if the 
derivative qualifies for the RBA) or, if the derivative does not qualify 
for the RBA, by setting its risk-weighted asset amount for the 
derivative equal to the product of:
    (A) The protection amount of the derivative;
    (B) 12.5; and
    (C) The sum of the risk-based capital requirements of the individual 
underlying exposures, up to a maximum of 100 percent.
    (2) Second-or-subsequent-to-default credit derivatives--(i) 
Protection purchaser. (A) A bank that obtains credit protection on a 
group of underlying exposures through a n\th\-to-default credit 
derivative (other than a first-to-default credit derivative) may 
recognize the credit risk mitigation benefits of the derivative only if:
    (1) The bank also has obtained credit protection on the same 
underlying exposures in the form of first-through-(n-1)-to-default 
credit derivatives; or
    (2) If n-1 of the underlying exposures have already defaulted.
    (B) If a bank satisfies the requirements of paragraph (m)(2)(i)(A) 
of this section, the bank must determine its risk-based capital 
requirement for the underlying exposures as if the bank had only 
synthetically securitized the underlying exposure with the 
nth lowest risk-based capital requirement and had obtained no 
credit risk mitigant on the other underlying exposures.
    (ii) Protection provider. A bank that provides credit protection on 
a group of underlying exposures through a nth-to-default 
credit derivative (other than a first-to-default credit derivative) must 
determine its risk-weighted asset amount for the derivative by applying 
the RBA in section 43 of this appendix (if the derivative qualifies for 
the RBA) or, if the derivative does not qualify for the RBA, by setting 
its risk-weighted asset amount for the derivative equal to the product 
of:
    (A) The protection amount of the derivative;
    (B) 12.5; and
    (C) The sum of the risk-based capital requirements of the individual 
underlying exposures (excluding the n-1 underlying exposures with the 
lowest risk-based capital requirements), up to a maximum of 100 percent.

                Section 43. Ratings-Based Approach (RBA)

    (a) Eligibility requirements for use of the RBA--(1) Originating 
bank. An originating bank must use the RBA to calculate its risk-based 
capital requirement for a securitization exposure if the exposure has 
two or more external ratings or inferred ratings (and may not use the 
RBA if the exposure has fewer than two external ratings or inferred 
ratings).
    (2) Investing bank. An investing bank must use the RBA to calculate 
its risk-based capital requirement for a securitization exposure if the 
exposure has one or more external or inferred ratings (and may not use 
the RBA if the exposure has no external or inferred rating).
    (b) Ratings-based approach. (1) A bank must determine the risk-
weighted asset amount for a securitization exposure by multiplying the 
amount of the exposure (as defined in paragraph (e) of section 42 of 
this appendix) by the appropriate risk weight provided in Table 6 and 
Table 7.
    (2) A bank must apply the risk weights in Table 6 when the 
securitization exposure's applicable external or applicable inferred 
rating represents a long-term credit rating, and must apply the risk 
weights in Table 7 when the securitization exposure's applicable 
external or applicable inferred rating represents a short-term credit 
rating.
    (i) A bank must apply the risk weights in column 1 of Table 6 or 
Table 7 to the securitization exposure if:
    (A) N (as calculated under paragraph (e)(6) of section 45 of this 
appendix) is six or more (for purposes of this section only, if the 
notional number of underlying exposures is 25 or more or if all of the 
underlying exposures are retail exposures, a bank may assume that N is 
six or more unless the bank knows or has reason to know that N is less 
than six); and

[[Page 276]]

    (B) The securitization exposure is a senior securitization exposure.
    (ii) A bank must apply the risk weights in column 3 of Table 6 or 
Table 7 to the securitization exposure if N is less than six, regardless 
of the seniority of the securitization exposure.
    (iii) Otherwise, a bank must apply the risk weights in column 2 of 
Table 6 or Table 7.

                         Table 6--Long-Term Credit Rating Risk Weights Under RBA and IAA
----------------------------------------------------------------------------------------------------------------
                                                        Column 1        Column 2        Column 3
                                                    -----------------------------------------------    Applicable
                                                      Risk weights    Risk weights    Risk weights    external or
       Applicable external or inferred rating          for senior    for non-senior        for          inferred
           (Illustrative rating example)             securitization  securitization  securitization      rating
                                                        exposures       exposures       exposures    (Illustrative
                                                        backed by       backed by    backed by non-      rating
                                                     granular pools  granular pools  granular pools     example)
--------------------------------------------------------------------------------------------------- ---------------
Highest investment grade (for example, AAA)........              7%             12%             20%
Second highest investment grade (for example, AA)..              8%             15%             25%
Third-highest investment grade--positive                        10%             18%             35%
 designation (for example, A+).....................
Third-highest investment grade (for example, A)....             12%             20%
Third-highest investment grade--negative                        20%             35%
 designation (for example, A-).....................
                                                                    --------------------------------------------
Lowest investment grade--positive designation (for              35%                50%
 example, BBB+)....................................
Lowest investment grade (for example, BBB).........             60%                75%
                                                    ------------------------------------------------------------
Lowest investment grade--negative designation (for
 example, BBB-)....................................                       100%
One category below investment grade--positive
 designation (for example, BB+)....................                       250%
One category below investment grade (for example,
 BB)...............................................                       425%
One category below investment grade--negative
 designation (for example, BB-)....................                       650%
More than one category below investment grade......     Deduction from tier 1 and tier 2 capital.
----------------------------------------------------------------------------------------------------------------


                        Table 7--Short-Term Credit Rating Risk Weights Under RBA and IAA
----------------------------------------------------------------------------------------------------------------
                                                        Column 1        Column 2        Column 3
                                                    -----------------------------------------------    Applicable
                                                      Risk weights    Risk weights    Risk weights    external or
       Applicable external or inferred rating          for senior    for non-senior        for          inferred
           (Illustrative rating example)             securitization  securitization  securitization      rating
                                                        exposures       exposures       exposures    (Illustrative
                                                        backed by       backed by    backed by non-      rating
                                                     granular pools  granular pools  granular pools     example)
--------------------------------------------------------------------------------------------------- ---------------
Highest investment grade (for example, A1).........              7%             12%             20%
Second highest investment grade (for example, A2)..             12%             20%             35%
Third highest investment grade (for example, A3)...             60%             75%             75%
All other ratings..................................     Deduction from tier 1 and tier 2 capital.
----------------------------------------------------------------------------------------------------------------

             Section 44. Internal Assessment Approach (IAA)

    (a) Eligibility requirements. A bank may apply the IAA to calculate 
the risk-weighted asset amount for a securitization exposure that the 
bank has to an ABCP program (such as a liquidity facility or credit 
enhancement) if the bank, the ABCP program, and the exposure qualify for 
use of the IAA.
    (1) Bank qualification criteria. A bank qualifies for use of the IAA 
if the bank has received the prior written approval of the FDIC. To 
receive such approval, the bank must demonstrate to the FDIC's 
satisfaction that the bank's internal assessment process meets the 
following criteria:
    (i) The bank's internal credit assessments of securitization 
exposures must be based on publicly available rating criteria used by an 
NRSRO.
    (ii) The bank's internal credit assessments of securitization 
exposures used for risk-based capital purposes must be consistent with 
those used in the bank's internal risk management process, management 
information reporting systems, and capital adequacy assessment process.
    (iii) The bank's internal credit assessment process must have 
sufficient granularity to identify gradations of risk. Each of the 
bank's internal credit assessment categories must correspond to an 
external rating of an NRSRO.
    (iv) The bank's internal credit assessment process, particularly the 
stress test factors for determining credit enhancement requirements, 
must be at least as conservative as the most conservative of the 
publicly available rating criteria of the NRSROs that have

[[Page 277]]

provided external ratings to the commercial paper issued by the ABCP 
program.
    (A) Where the commercial paper issued by an ABCP program has an 
external rating from two or more NRSROs and the different NRSROs' 
benchmark stress factors require different levels of credit enhancement 
to achieve the same external rating equivalent, the bank must apply the 
NRSRO stress factor that requires the highest level of credit 
enhancement.
    (B) If any NRSRO that provides an external rating to the ABCP 
program's commercial paper changes its methodology (including stress 
factors), the bank must evaluate whether to revise its internal 
assessment process.
    (v) The bank must have an effective system of controls and oversight 
that ensures compliance with these operational requirements and 
maintains the integrity and accuracy of the internal credit assessments. 
The bank must have an internal audit function independent from the ABCP 
program business line and internal credit assessment process that 
assesses at least annually whether the controls over the internal credit 
assessment process function as intended.
    (vi) The bank must review and update each internal credit assessment 
whenever new material information is available, but no less frequently 
than annually.
    (vii) The bank must validate its internal credit assessment process 
on an ongoing basis and at least annually.
    (2) ABCP-program qualification criteria. An ABCP program qualifies 
for use of the IAA if all commercial paper issued by the ABCP program 
has an external rating.
    (3) Exposure qualification criteria. A securitization exposure 
qualifies for use of the IAA if the exposure meets the following 
criteria:
    (i) The bank initially rated the exposure at least the equivalent of 
investment grade.
    (ii) The ABCP program has robust credit and investment guidelines 
(that is, underwriting standards) for the exposures underlying the 
securitization exposure.
    (iii) The ABCP program performs a detailed credit analysis of the 
sellers of the exposures underlying the securitization exposure.
    (iv) The ABCP program's underwriting policy for the exposures 
underlying the securitization exposure establishes minimum asset 
eligibility criteria that include the prohibition of the purchase of 
assets that are significantly past due or of assets that are defaulted 
(that is, assets that have been charged off or written down by the 
seller prior to being placed into the ABCP program or assets that would 
be charged off or written down under the program's governing contracts), 
as well as limitations on concentration to individual obligors or 
geographic areas and the tenor of the assets to be purchased.
    (v) The aggregate estimate of loss on the exposures underlying the 
securitization exposure considers all sources of potential risk, such as 
credit and dilution risk.
    (vi) Where relevant, the ABCP program incorporates structural 
features into each purchase of exposures underlying the securitization 
exposure to mitigate potential credit deterioration of the underlying 
exposures. Such features may include wind-down triggers specific to a 
pool of underlying exposures.
    (b) Mechanics. A bank that elects to use the IAA to calculate the 
risk-based capital requirement for any securitization exposure must use 
the IAA to calculate the risk-based capital requirements for all 
securitization exposures that qualify for the IAA approach. Under the 
IAA, a bank must map its internal assessment of such a securitization 
exposure to an equivalent external rating from an NRSRO. Under the IAA, 
a bank must determine the risk-weighted asset amount for such a 
securitization exposure by multiplying the amount of the exposure (as 
defined in paragraph (e) of section 42 of this appendix) by the 
appropriate risk weight in Table 6 and Table 7 in paragraph (b) of 
section 43 of this appendix.

             Section 45. Supervisory Formula Approach (SFA)

    (a) Eligibility requirements. A bank may use the SFA to determine 
its risk-based capital requirement for a securitization exposure only if 
the bank can calculate on an ongoing basis each of the SFA parameters in 
paragraph (e) of this section.
    (b) Mechanics. Under the SFA, a securitization exposure incurs a 
deduction from total capital (as described in paragraph (c) of section 
42 of this appendix) and/or an SFA risk-based capital requirement, as 
determined in paragraph (c) of this section. The risk-weighted asset 
amount for the securitization exposure equals the SFA risk-based capital 
requirement for the exposure multiplied by 12.5.
    (c) The SFA risk-based capital requirement. (1) If KIRB 
is greater than or equal to L + T, the entire exposure must be deducted 
from total capital.
    (2) If KIRB is less than or equal to L, the exposure's 
SFA risk-based capital requirement is UE multiplied by TP multiplied by 
the greater of:
    (i) 0.0056 * T; or
    (ii) S[L + T] - S[L].
    (3) If KIRB is greater than L and less than L + T, the 
bank must deduct from total capital an amount equal to 
UE*TP*(KIRB - L), and the exposure's SFA risk-based capital 
requirement is UE multiplied by TP multiplied by the greater of:
    (i) 0.0056 * (T - (KIRB - L)); or

[[Page 278]]

    (ii) S[L + T] - S[KIRB].
    (d) The supervisory formula:
    [GRAPHIC] [TIFF OMITTED] TR07DE07.017
    
    (11) In these expressions, [beta][Y; a, b] refers to the cumulative 
beta distribution with parameters a and b evaluated at Y. In the case 
where N = 1 and EWALGD = 100 percent, S[Y] in formula (1) must be 
calculated with K[Y] set equal to the product of KIRB and Y, 
and d set equal to 1 - KIRB.
    (e) SFA parameters--(1) Amount of the underlying exposures (UE). UE 
is the EAD of any underlying exposures that are wholesale and retail 
exposures (including the amount of

[[Page 279]]

any funded spread accounts, cash collateral accounts, and other similar 
funded credit enhancements) plus the amount of any underlying exposures 
that are securitization exposures (as defined in paragraph (e) of 
section 42 of this appendix) plus the adjusted carrying value of any 
underlying exposures that are equity exposures (as defined in paragraph 
(b) of section 51 of this appendix).
    (2) Tranche percentage (TP). TP is the ratio of the amount of the 
bank's securitization exposure to the amount of the tranche that 
contains the securitization exposure.
    (3) Capital requirement on underlying exposures (KIRB). (i) 
KIRB is the ratio of:
    (A) The sum of the risk-based capital requirements for the 
underlying exposures plus the expected credit losses of the underlying 
exposures (as determined under this appendix as if the underlying 
exposures were directly held by the bank); to
    (B) UE.
    (ii) The calculation of KIRB must reflect the effects of 
any credit risk mitigant applied to the underlying exposures (either to 
an individual underlying exposure, to a group of underlying exposures, 
or to the entire pool of underlying exposures).
    (iii) All assets related to the securitization are treated as 
underlying exposures, including assets in a reserve account (such as a 
cash collateral account).
    (4) Credit enhancement level (L). (i) L is the ratio of:
    (A) The amount of all securitization exposures subordinated to the 
tranche that contains the bank's securitization exposure; to
    (B) UE.
    (ii) A bank must determine L before considering the effects of any 
tranche-specific credit enhancements.
    (iii) Any gain-on-sale or CEIO associated with the securitization 
may not be included in L.
    (iv) Any reserve account funded by accumulated cash flows from the 
underlying exposures that is subordinated to the tranche that contains 
the bank's securitization exposure may be included in the numerator and 
denominator of L to the extent cash has accumulated in the account. 
Unfunded reserve accounts (that is, reserve accounts that are to be 
funded from future cash flows from the underlying exposures) may not be 
included in the calculation of L.
    (v) In some cases, the purchase price of receivables will reflect a 
discount that provides credit enhancement (for example, first loss 
protection) for all or certain tranches of the securitization. When this 
arises, L should be calculated inclusive of this discount if the 
discount provides credit enhancement for the securitization exposure.
    (5) Thickness of tranche (T). T is the ratio of:
    (i) The amount of the tranche that contains the bank's 
securitization exposure; to
    (ii) UE.
    (6) Effective number of exposures (N). (i) Unless the bank elects to 
use the formula provided in paragraph (f) of this section,
[GRAPHIC] [TIFF OMITTED] TR07DE07.018

where EADi represents the EAD associated with the ith 
instrument in the pool of underlying exposures.
    (ii) Multiple exposures to one obligor must be treated as a single 
underlying exposure.
    (iii) In the case of a re-securitization (that is, a securitization 
in which some or all of the underlying exposures are themselves 
securitization exposures), the bank must treat each underlying exposure 
as a single underlying exposure and must not look through to the 
originally securitized underlying exposures.
    (7) Exposure-weighted average loss given default (EWALGD). EWALGD is 
calculated as:
[GRAPHIC] [TIFF OMITTED] TR07DE07.019

where LGDi represents the average LGD associated with all 
exposures to the ith obligor. In the case of a re-securitization, an LGD 
of 100 percent must be assumed for the underlying exposures that are 
themselves securitization exposures.
    (f) Simplified method for computing N and EWALGD. (1) If all 
underlying exposures of a securitization are retail exposures, a bank 
may apply the SFA using the following simplifications:
    (i) h = 0; and
    (ii) v = 0.
    (2) Under the conditions in paragraphs (f)(3) and (f)(4) of this 
section, a bank may employ a simplified method for calculating N and 
EWALGD.
    (3) If C1 is no more than 0.03, a bank may set EWALGD = 
0.50 if none of the underlying exposures is a securitization exposure or 
EWALGD = 1 if one or more of the underlying exposures is a 
securitization exposure, and may set N equal to the following amount:

[[Page 280]]

[GRAPHIC] [TIFF OMITTED] TR07DE07.020

where:
    (i) Cm is the ratio of the sum of the amounts of the `m' 
largest underlying exposures to UE; and
    (ii) The level of m is to be selected by the bank.

    (4) Alternatively, if only C1 is available and 
C1 is no more than 0.03, the bank may set EWALGD = 0.50 if 
none of the underlying exposures is a securitization exposure or EWALGD 
= 1 if one or more of the underlying exposures is a securitization 
exposure and may set N = 1/C1.

  Section 46. Recognition of Credit Risk Mitigants for Securitization 
                                Exposures

    (a) General. An originating bank that has obtained a credit risk 
mitigant to hedge its securitization exposure to a synthetic or 
traditional securitization that satisfies the operational criteria in 
section 41 of this appendix may recognize the credit risk mitigant, but 
only as provided in this section. An investing bank that has obtained a 
credit risk mitigant to hedge a securitization exposure may recognize 
the credit risk mitigant, but only as provided in this section. A bank 
that has used the RBA in section 43 of this appendix or the IAA in 
section 44 of this appendix to calculate its risk-based capital 
requirement for a securitization exposure whose external or inferred 
rating (or equivalent internal rating under the IAA) reflects the 
benefits of a credit risk mitigant provided to the associated 
securitization or that supports some or all of the underlying exposures 
may not use the credit risk mitigation rules in this section to further 
reduce its risk-based capital requirement for the exposure to reflect 
that credit risk mitigant.
    (b) Collateral--(1) Rules of recognition. A bank may recognize 
financial collateral in determining the bank's risk-based capital 
requirement for a securitization exposure (other than a repo-style 
transaction, an eligible margin loan, or an OTC derivative contract for 
which the bank has reflected collateral in its determination of exposure 
amount under section 32 of this appendix) as follows. The bank's risk-
based capital requirement for the collateralized securitization exposure 
is equal to the risk-based capital requirement for the securitization 
exposure as calculated under the RBA in section 43 of this appendix or 
under the SFA in section 45 of this appendix multiplied by the ratio of 
adjusted exposure amount (SE*) to original exposure amount (SE), where:
    (i) SE* = max {0, [SE--C x (1-Hs-Hfx)]{time} ;
    (ii) SE = the amount of the securitization exposure calculated under 
paragraph (e) of section 42 of this appendix;
    (iii) C = the current market value of the collateral;
    (iv) Hs = the haircut appropriate to the collateral type; and
    (v) Hfx = the haircut appropriate for any currency mismatch between 
the collateral and the exposure.
    (2) Mixed collateral. Where the collateral is a basket of different 
asset types or a basket of assets denominated in different currencies, 
the haircut on the basket will be
[GRAPHIC] [TIFF OMITTED] TR07DE07.023

where ai is the current market value of the asset in the 
basket divided by the current market value of all assets in the basket 
and Hi is the haircut applicable to that asset.
    (3) Standard supervisory haircuts. Unless a bank qualifies for use 
of and uses own-estimates haircuts in paragraph (b)(4) of this section:
    (i) A bank must use the collateral type haircuts (Hs) in Table 3;
    (ii) A bank must use a currency mismatch haircut (Hfx) of 8 percent 
if the exposure and the collateral are denominated in different 
currencies;
    (iii) A bank must multiply the supervisory haircuts obtained in 
paragraphs (b)(3)(i) and (ii) by the square root of 6.5 (which equals 
2.549510); and
    (iv) A bank must adjust the supervisory haircuts upward on the basis 
of a holding period longer than 65 business days where and as 
appropriate to take into account the illiquidity of the collateral.
    (4) Own estimates for haircuts. With the prior written approval of 
the FDIC, a bank may calculate haircuts using its own internal estimates 
of market price volatility and foreign exchange volatility, subject to 
paragraph (b)(2)(iii) of section 32 of this appendix. The minimum 
holding period (TM) for securitization exposures is 65 business days.
    (c) Guarantees and credit derivatives--(1) Limitations on 
recognition. A bank may only recognize an eligible guarantee or eligible 
credit derivative provided by an eligible securitization guarantor in 
determining the

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bank's risk-based capital requirement for a securitization exposure.
    (2) ECL for securitization exposures. When a bank recognizes an 
eligible guarantee or eligible credit derivative provided by an eligible 
securitization guarantor in determining the bank's risk-based capital 
requirement for a securitization exposure, the bank must also:
    (i) Calculate ECL for the protected portion of the exposure using 
the same risk parameters that it uses for calculating the risk-weighted 
asset amount of the exposure as described in paragraph (c)(3) of this 
section; and
    (ii) Add the exposure's ECL to the bank's total ECL.
    (3) Rules of recognition. A bank may recognize an eligible guarantee 
or eligible credit derivative provided by an eligible securitization 
guarantor in determining the bank's risk-based capital requirement for 
the securitization exposure as follows:
    (i) Full coverage. If the protection amount of the eligible 
guarantee or eligible credit derivative equals or exceeds the amount of 
the securitization exposure, the bank may set the risk-weighted asset 
amount for the securitization exposure equal to the risk-weighted asset 
amount for a direct exposure to the eligible securitization guarantor 
(as determined in the wholesale risk weight function described in 
section 31 of this appendix), using the bank's PD for the guarantor, the 
bank's LGD for the guarantee or credit derivative, and an EAD equal to 
the amount of the securitization exposure (as determined in paragraph 
(e) of section 42 of this appendix).
    (ii) Partial coverage. If the protection amount of the eligible 
guarantee or eligible credit derivative is less than the amount of the 
securitization exposure, the bank may set the risk-weighted asset amount 
for the securitization exposure equal to the sum of:
    (A) Covered portion. The risk-weighted asset amount for a direct 
exposure to the eligible securitization guarantor (as determined in the 
wholesale risk weight function described in section 31 of this 
appendix), using the bank's PD for the guarantor, the bank's LGD for the 
guarantee or credit derivative, and an EAD equal to the protection 
amount of the credit risk mitigant; and
    (B) Uncovered portion. (1) 1.0 minus the ratio of the protection 
amount of the eligible guarantee or eligible credit derivative to the 
amount of the securitization exposure); multiplied by
    (2) The risk-weighted asset amount for the securitization exposure 
without the credit risk mitigant (as determined in sections 42-45 of 
this appendix).
    (4) Mismatches. The bank must make applicable adjustments to the 
protection amount as required in paragraphs (d), (e), and (f) of section 
33 of this appendix for any hedged securitization exposure and any more 
senior securitization exposure that benefits from the hedge. In the 
context of a synthetic securitization, when an eligible guarantee or 
eligible credit derivative covers multiple hedged exposures that have 
different residual maturities, the bank must use the longest residual 
maturity of any of the hedged exposures as the residual maturity of all 
the hedged exposures.

   Section 47. Risk-Based Capital Requirement for Early Amortization 
                               Provisions

    (a) General. (1) An originating bank must hold risk-based capital 
against the sum of the originating bank's interest and the investors' 
interest in a securitization that:
    (i) Includes one or more underlying exposures in which the borrower 
is permitted to vary the drawn amount within an agreed limit under a 
line of credit; and
    (ii) Contains an early amortization provision.
    (2) For securitizations described in paragraph (a)(1) of this 
section, an originating bank must calculate the risk-based capital 
requirement for the originating bank's interest under sections 42-45 of 
this appendix, and the risk-based capital requirement for the investors' 
interest under paragraph (b) of this section.
    (b) Risk-weighted asset amount for investors' interest. The 
originating bank's risk-weighted asset amount for the investors' 
interest in the securitization is equal to the product of the following 
5 quantities:
    (1) The investors' interest EAD;
    (2) The appropriate conversion factor in paragraph (c) of this 
section;
    (3) KIRB (as defined in paragraph (e)(3) of section 45 of 
this appendix);
    (4) 12.5; and
    (5) The proportion of the underlying exposures in which the borrower 
is permitted to vary the drawn amount within an agreed limit under a 
line of credit.
    (c) Conversion factor. (1)(i) Except as provided in paragraph (c)(2) 
of this section, to calculate the appropriate conversion factor, a bank 
must use Table 8 for a securitization that contains a controlled early 
amortization provision and must use Table 9 for a securitization that 
contains a non-controlled early amortization provision. In circumstances 
where a securitization contains a mix of retail and nonretail exposures 
or a mix of committed and uncommitted exposures, a bank may take a pro 
rata approach to determining the conversion factor for the 
securitization's early amortization provision. If a pro rata approach is 
not feasible, a bank must treat the mixed securitization as a 
securitization of nonretail exposures if a single underlying exposure is 
a nonretail exposure and must treat the mixed

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securitization as a securitization of committed exposures if a single 
underlying exposure is a committed exposure.
    (ii) To find the appropriate conversion factor in the tables, a bank 
must divide the three-month average annualized excess spread of the 
securitization by the excess spread trapping point in the securitization 
structure. In securitizations that do not require excess spread to be 
trapped, or that specify trapping points based primarily on performance 
measures other than the three-month average annualized excess spread, 
the excess spread trapping point is 4.5 percent.

            Table 8--Controlled Early Amortization Provisions
------------------------------------------------------------------------
                                       Uncommitted          Committed
------------------------------------------------------------------------
Retail Credit Lines............  Three-month average     90% CF
                                  annualized excess
                                  spread Conversion
                                  Factor (CF).
                                 133.33% of trapping
                                  point or more, 0% CF.
                                 less than 133.33% to
                                  100% of trapping
                                  point, 1% CF.
                                 less than 100% to 75%
                                  of trapping point, 2%
                                  CF.
                                 less than 75% to 50%
                                  of trapping point,
                                  10% CF.
                                 less than 50% to 25%
                                  of trapping point,
                                  20% CF.
                                 less than 25% of
                                  trapping point, 40%
                                  CF.
Non-retail Credit Lines........  90% CF................  90% CF
------------------------------------------------------------------------


          Table 9--Non-Controlled Early Amortization Provisions
------------------------------------------------------------------------
                                       Uncommitted          Committed
------------------------------------------------------------------------
Retail Credit Lines............  Three-month average     100% CF
                                  annualized excess
                                  spread Conversion
                                  Factor (CF).
                                 133.33% of trapping
                                  point or more, 0% CF.
                                 less than 133.33% to
                                  100% of trapping
                                  point, 5% CF.
                                 less than 100% to 75%
                                  of trapping point,
                                  15% CF.
                                 less than 75% to 50%
                                  of trapping point,
                                  50% CF.
                                 less than 50% of
                                  trapping point, 100%
                                  CF.
Non-retail Credit Lines........  100% CF...............  100% CF
------------------------------------------------------------------------

    (2) For a securitization for which all or substantially all of the 
underlying exposures are residential mortgage exposures, a bank may 
calculate the appropriate conversion factor using paragraph (c)(1) of 
this section or may use a conversion factor of 10 percent. If the bank 
chooses to use a conversion factor of 10 percent, it must use that 
conversion factor for all securitizations for which all or substantially 
all of the underlying exposures are residential mortgage exposures.

           Part VI. Risk-Weighted Assets for Equity Exposures

            Section 51. Introduction and Exposure Measurement

    (a) General. To calculate its risk-weighted asset amounts for equity 
exposures that are not equity exposures to investment funds, a bank may 
apply either the Simple Risk Weight Approach (SRWA) in section 52 of 
this appendix or, if it qualifies to do so, the Internal Models Approach 
(IMA) in section 53 of this appendix. A bank must use the look-through 
approaches in section 54 of this appendix to calculate its risk-weighted 
asset amounts for equity exposures to investment funds.
    (b) Adjusted carrying value. For purposes of this part, the adjusted 
carrying value of an equity exposure is:
    (1) For the on-balance sheet component of an equity exposure, the 
bank's carrying value of the exposure reduced by any unrealized gains on 
the exposure that are reflected in such carrying value but excluded from 
the bank's tier 1 and tier 2 capital; and
    (2) For the off-balance sheet component of an equity exposure, the 
effective notional principal amount of the exposure, the size of which 
is equivalent to a hypothetical on-balance sheet position in the 
underlying equity instrument that would evidence the same change in fair 
value (measured in dollars) for a given small change in the price of the 
underlying equity instrument, minus the adjusted carrying value of the 
on-balance sheet component of the exposure as calculated in paragraph 
(b)(1) of this section. For unfunded equity commitments that are 
unconditional, the effective notional principal amount is the notional 
amount of the commitment. For unfunded equity commitments that are 
conditional, the effective notional principal amount is the bank's best 
estimate of the amount that would be funded under economic downturn 
conditions.

             Section 52. Simple Risk Weight Approach (SRWA)

    (a) General. Under the SRWA, a bank's aggregate risk-weighted asset 
amount for its equity exposures is equal to the sum of the

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risk-weighted asset amounts for each of the bank's individual equity 
exposures (other than equity exposures to an investment fund) as 
determined in this section and the risk-weighted asset amounts for each 
of the bank's individual equity exposures to an investment fund as 
determined in section 54 of this appendix.
    (b) SRWA computation for individual equity exposures. A bank must 
determine the risk-weighted asset amount for an individual equity 
exposure (other than an equity exposure to an investment fund) by 
multiplying the adjusted carrying value of the equity exposure or the 
effective portion and ineffective portion of a hedge pair (as defined in 
paragraph (c) of this section) by the lowest applicable risk weight in 
this paragraph (b).
    (1) 0 percent risk weight equity exposures. An equity exposure to an 
entity whose credit exposures are exempt from the 0.03 percent PD floor 
in paragraph (d)(2) of section 31 of this appendix is assigned a 0 
percent risk weight.
    (2) 20 percent risk weight equity exposures. An equity exposure to a 
Federal Home Loan Bank or Farmer Mac is assigned a 20 percent risk 
weight.
    (3) 100 percent risk weight equity exposures. The following equity 
exposures are assigned a 100 percent risk weight:
    (i) Community development equity exposures. An equity exposure that 
qualifies as a community development investment under 12 U.S.C. 24 
(Eleventh), excluding equity exposures to an unconsolidated small 
business investment company and equity exposures held through a 
consolidated small business investment company described in section 302 
of the Small Business Investment Act of 1958 (15 U.S.C. 682).
    (ii) Effective portion of hedge pairs. The effective portion of a 
hedge pair.
    (iii) Non-significant equity exposures. Equity exposures, excluding 
exposures to an investment firm that would meet the definition of a 
traditional securitization were it not for the FDIC's application of 
paragraph (8) of that definition and has greater than immaterial 
leverage, to the extent that the aggregate adjusted carrying value of 
the exposures does not exceed 10 percent of the bank's tier 1 capital 
plus tier 2 capital.
    (A) To compute the aggregate adjusted carrying value of a bank's 
equity exposures for purposes of this paragraph (b)(3)(iii), the bank 
may exclude equity exposures described in paragraphs (b)(1), (b)(2), 
(b)(3)(i), and (b)(3)(ii) of this section, the equity exposure in a 
hedge pair with the smaller adjusted carrying value, and a proportion of 
each equity exposure to an investment fund equal to the proportion of 
the assets of the investment fund that are not equity exposures or that 
meet the criterion of paragraph (b)(3)(i) of this section. If a bank 
does not know the actual holdings of the investment fund, the bank may 
calculate the proportion of the assets of the fund that are not equity 
exposures based on the terms of the prospectus, partnership agreement, 
or similar contract that defines the fund's permissible investments. If 
the sum of the investment limits for all exposure classes within the 
fund exceeds 100 percent, the bank must assume for purposes of this 
paragraph (b)(3)(iii) that the investment fund invests to the maximum 
extent possible in equity exposures.
    (B) When determining which of a bank's equity exposures qualify for 
a 100 percent risk weight under this paragraph, a bank first must 
include equity exposures to unconsolidated small business investment 
companies or held through consolidated small business investment 
companies described in section 302 of the Small Business Investment Act 
of 1958 (15 U.S.C. 682), then must include publicly traded equity 
exposures (including those held indirectly through investment funds), 
and then must include non-publicly traded equity exposures (including 
those held indirectly through investment funds).
    (4) 300 percent risk weight equity exposures. A publicly traded 
equity exposure (other than an equity exposure described in paragraph 
(b)(6) of this section and including the ineffective portion of a hedge 
pair) is assigned a 300 percent risk weight.
    (5) 400 percent risk weight equity exposures. An equity exposure 
(other than an equity exposure described in paragraph (b)(6) of this 
section) that is not publicly traded is assigned a 400 percent risk 
weight.
    (6) 600 percent risk weight equity exposures. An equity exposure to 
an investment firm that:
    (i) Would meet the definition of a traditional securitization were 
it not for the FDIC's application of paragraph (8) of that definition; 
and
    (ii) Has greater than immaterial leverage is assigned a 600 percent 
risk weight.
    (c) Hedge transactions--(1) Hedge pair. A hedge pair is two equity 
exposures that form an effective hedge so long as each equity exposure 
is publicly traded or has a return that is primarily based on a publicly 
traded equity exposure.
    (2) Effective hedge. Two equity exposures form an effective hedge if 
the exposures either have the same remaining maturity or each has a 
remaining maturity of at least three months; the hedge relationship is 
formally documented in a prospective manner (that is, before the bank 
acquires at least one of the equity exposures); the documentation 
specifies the measure of effectiveness (E) the bank will use for the 
hedge relationship throughout the life of the transaction; and the hedge 
relationship has an E greater than or equal to 0.8. A bank must measure 
E at least quarterly and must use one of three alternative measures of 
E:

[[Page 284]]

    (i) Under the dollar-offset method of measuring effectiveness, the 
bank must determine the ratio of value change (RVC). The RVC is the 
ratio of the cumulative sum of the periodic changes in value of one 
equity exposure to the cumulative sum of the periodic changes in the 
value of the other equity exposure. If RVC is positive, the hedge is not 
effective and E equals 0. If RVC is negative and greater than or equal 
to -1 (that is, between zero and -1), then E equals the absolute value 
of RVC. If RVC is negative and less than -1, then E equals 2 plus RVC.
    (ii) Under the variability-reduction method of measuring 
effectiveness:
[GRAPHIC] [TIFF OMITTED] TR07DE07.021

(A) Xt = At - Bt;
(B) At = the value at time t of one exposure in a hedge pair; 
          and
(C) Bt = the value at time t of the other exposure in a hedge 
          pair.
    (iii) Under the regression method of measuring effectiveness, E 
equals the coefficient of determination of a regression in which the 
change in value of one exposure in a hedge pair is the dependent 
variable and the change in value of the other exposure in a hedge pair 
is the independent variable. However, if the estimated regression 
coefficient is positive, then the value of E is zero.
    (3) The effective portion of a hedge pair is E multiplied by the 
greater of the adjusted carrying values of the equity exposures forming 
a hedge pair.
    (4) The ineffective portion of a hedge pair is (1-E) multiplied by 
the greater of the adjusted carrying values of the equity exposures 
forming a hedge pair.

               Section 53. Internal Models Approach (IMA)

    (a) General. A bank may calculate its risk-weighted asset amount for 
equity exposures using the IMA by modeling publicly traded and non-
publicly traded equity exposures (in accordance with paragraph (c) of 
this section) or by modeling only publicly traded equity exposures (in 
accordance with paragraph (d) of this section).
    (b) Qualifying criteria. To qualify to use the IMA to calculate 
risk-based capital requirements for equity exposures, a bank must 
receive prior written approval from the FDIC. To receive such approval, 
the bank must demonstrate to the FDIC's satisfaction that the bank meets 
the following criteria:
    (1) The bank must have one or more models that:
    (i) Assess the potential decline in value of its modeled equity 
exposures;
    (ii) Are commensurate with the size, complexity, and composition of 
the bank's modeled equity exposures; and
    (iii) Adequately capture both general market risk and idiosyncratic 
risk.
    (2) The bank's model must produce an estimate of potential losses 
for its modeled equity exposures that is no less than the estimate of 
potential losses produced by a VaR methodology employing a 99.0 percent, 
one-tailed confidence interval of the distribution of quarterly returns 
for a benchmark portfolio of equity exposures comparable to the bank's 
modeled equity exposures using a long-term sample period.
    (3) The number of risk factors and exposures in the sample and the 
data period used for quantification in the bank's model and benchmarking 
exercise must be sufficient to provide confidence in the accuracy and 
robustness of the bank's estimates.
    (4) The bank's model and benchmarking process must incorporate data 
that are relevant in representing the risk profile of the bank's modeled 
equity exposures, and must include data from at least one equity market 
cycle containing adverse market movements relevant to the risk profile 
of the bank's modeled equity exposures. In addition, the bank's 
benchmarking exercise must be based on daily market prices for the 
benchmark portfolio. If the bank's model uses a scenario methodology, 
the bank must demonstrate that the model produces a conservative 
estimate of potential losses on the bank's modeled equity exposures over 
a relevant long-term market cycle. If the bank employs risk factor 
models, the bank must demonstrate through empirical analysis the 
appropriateness of the risk factors used.
    (5) The bank must be able to demonstrate, using theoretical 
arguments and empirical evidence, that any proxies used in the modeling 
process are comparable to the bank's modeled equity exposures and that 
the bank

[[Page 285]]

has made appropriate adjustments for differences. The bank must derive 
any proxies for its modeled equity exposures and benchmark portfolio 
using historical market data that are relevant to the bank's modeled 
equity exposures and benchmark portfolio (or, where not, must use 
appropriately adjusted data), and such proxies must be robust estimates 
of the risk of the bank's modeled equity exposures.
    (c) Risk-weighted assets calculation for a bank modeling publicly 
traded and non-publicly traded equity exposures. If a bank models 
publicly traded and non-publicly traded equity exposures, the bank's 
aggregate risk-weighted asset amount for its equity exposures is equal 
to the sum of:
    (1) The risk-weighted asset amount of each equity exposure that 
qualifies for a 0 percent, 20 percent, or 100 percent risk weight under 
paragraphs (b)(1) through (b)(3)(i) of section 52 (as determined under 
section 52 of this appendix) and each equity exposure to an investment 
fund (as determined under section 54 of this appendix); and
    (2) The greater of:
    (i) The estimate of potential losses on the bank's equity exposures 
(other than equity exposures referenced in paragraph (c)(1) of this 
section) generated by the bank's internal equity exposure model 
multiplied by 12.5; or
    (ii) The sum of:
    (A) 200 percent multiplied by the aggregate adjusted carrying value 
of the bank's publicly traded equity exposures that do not belong to a 
hedge pair, do not qualify for a 0 percent, 20 percent, or 100 percent 
risk weight under paragraphs (b)(1) through (b)(3)(i) of section 52 of 
this appendix, and are not equity exposures to an investment fund;
    (B) 200 percent multiplied by the aggregate ineffective portion of 
all hedge pairs; and
    (C) 300 percent multiplied by the aggregate adjusted carrying value 
of the bank's equity exposures that are not publicly traded, do not 
qualify for a 0 percent, 20 percent, or 100 percent risk weight under 
paragraphs (b)(1) through (b)(3)(i) of section 52 of this appendix, and 
are not equity exposures to an investment fund.
    (d) Risk-weighted assets calculation for a bank using the IMA only 
for publicly traded equity exposures. If a bank models only publicly 
traded equity exposures, the bank's aggregate risk-weighted asset amount 
for its equity exposures is equal to the sum of:
    (1) The risk-weighted asset amount of each equity exposure that 
qualifies for a 0 percent, 20 percent, or 100 percent risk weight under 
paragraphs (b)(1) through (b)(3)(i) of section 52 (as determined under 
section 52 of this appendix), each equity exposure that qualifies for a 
400 percent risk weight under paragraph (b)(5) of section 52 or a 600 
percent risk weight under paragraph (b)(6) of section 52 (as determined 
under section 52 of this appendix), and each equity exposure to an 
investment fund (as determined under section 54 of this appendix); and
    (2) The greater of:
    (i) The estimate of potential losses on the bank's equity exposures 
(other than equity exposures referenced in paragraph (d)(1) of this 
section) generated by the bank's internal equity exposure model 
multiplied by 12.5; or
    (ii) The sum of:
    (A) 200 percent multiplied by the aggregate adjusted carrying value 
of the bank's publicly traded equity exposures that do not belong to a 
hedge pair, do not qualify for a 0 percent, 20 percent, or 100 percent 
risk weight under paragraphs (b)(1) through (b)(3)(i) of section 52 of 
this appendix, and are not equity exposures to an investment fund; and
    (B) 200 percent multiplied by the aggregate ineffective portion of 
all hedge pairs.

            Section 54. Equity Exposures to Investment Funds

    (a) Available approaches. (1) Unless the exposure meets the 
requirements for a community development equity exposure in paragraph 
(b)(3)(i) of section 52 of this appendix, a bank must determine the 
risk-weighted asset amount of an equity exposure to an investment fund 
under the Full Look-Through Approach in paragraph (b) of this section, 
the Simple Modified Look-Through Approach in paragraph (c) of this 
section, the Alternative Modified Look-Through Approach in paragraph (d) 
of this section, or, if the investment fund qualifies for the Money 
Market Fund Approach, the Money Market Fund Approach in paragraph (e) of 
this section.
    (2) The risk-weighted asset amount of an equity exposure to an 
investment fund that meets the requirements for a community development 
equity exposure in paragraph (b)(3)(i) of section 52 of this appendix is 
its adjusted carrying value.
    (3) If an equity exposure to an investment fund is part of a hedge 
pair and the bank does not use the Full Look-Through Approach, the bank 
may use the ineffective portion of the hedge pair as determined under 
paragraph (c) of section 52 of this appendix as the adjusted carrying 
value for the equity exposure to the investment fund. The risk-weighted 
asset amount of the effective portion of the hedge pair is equal to its 
adjusted carrying value.
    (b) Full Look-Through Approach. A bank that is able to calculate a 
risk-weighted asset amount for its proportional ownership share of each 
exposure held by the investment fund (as calculated under this appendix 
as if the proportional ownership share of each exposure were held 
directly by the bank) may either:

[[Page 286]]

    (1) Set the risk-weighted asset amount of the bank's exposure to the 
fund equal to the product of:
    (i) The aggregate risk-weighted asset amounts of the exposures held 
by the fund as if they were held directly by the bank; and
    (ii) The bank's proportional ownership share of the fund; or
    (2) Include the bank's proportional ownership share of each exposure 
held by the fund in the bank's IMA.
    (c) Simple Modified Look-Through Approach. Under this approach, the 
risk-weighted asset amount for a bank's equity exposure to an investment 
fund equals the adjusted carrying value of the equity exposure 
multiplied by the highest risk weight in Table 10 that applies to any 
exposure the fund is permitted to hold under its prospectus, partnership 
agreement, or similar contract that defines the fund's permissible 
investments (excluding derivative contracts that are used for hedging 
rather than speculative purposes and that do not constitute a material 
portion of the fund's exposures).

   Table 10--Modified Look-Through Approaches for Equity Exposures to
                            Investment Funds
------------------------------------------------------------------------
               Risk weight                         Exposure class
------------------------------------------------------------------------
0 percent................................  Sovereign exposures with a
                                            long-term applicable
                                            external rating in the
                                            highest investment-grade
                                            rating category and
                                            sovereign exposures of the
                                            United States.
20 percent...............................  Non-sovereign exposures with
                                            a long-term applicable
                                            external rating in the
                                            highest or second-highest
                                            investment-grade rating
                                            category; exposures with a
                                            short-term applicable
                                            external rating in the
                                            highest investment-grade
                                            rating category; and
                                            exposures to, or guaranteed
                                            by, depository institutions,
                                            foreign banks (as defined in
                                            12 CFR 211.2), or securities
                                            firms subject to
                                            consolidated supervision and
                                            regulation comparable to
                                            that imposed on U.S.
                                            securities broker-dealers
                                            that are repo-style
                                            transactions or bankers'
                                            acceptances.
50 percent...............................  Exposures with a long-term
                                            applicable external rating
                                            in the third-highest
                                            investment-grade rating
                                            category or a short-term
                                            applicable external rating
                                            in the second-highest
                                            investment-grade rating
                                            category.
100 percent..............................  Exposures with a long-term or
                                            short-term applicable
                                            external rating in the
                                            lowest investment-grade
                                            rating category.
200 percent..............................  Exposures with a long-term
                                            applicable external rating
                                            one rating category below
                                            investment grade.
300 percent..............................  Publicly traded equity
                                            exposures.
400 percent..............................  Non-publicly traded equity
                                            exposures; exposures with a
                                            long-term applicable
                                            external rating two rating
                                            categories or more below
                                            investment grade; and
                                            exposures without an
                                            external rating (excluding
                                            publicly traded equity
                                            exposures).
1,250 percent............................  OTC derivative contracts and
                                            exposures that must be
                                            deducted from regulatory
                                            capital or receive a risk
                                            weight greater than 400
                                            percent under this appendix.
------------------------------------------------------------------------

    (d) Alternative Modified Look-Through Approach. Under this approach, 
a bank may assign the adjusted carrying value of an equity exposure to 
an investment fund on a pro rata basis to different risk weight 
categories in Table 10 based on the investment limits in the fund's 
prospectus, partnership agreement, or similar contract that defines the 
fund's permissible investments. The risk-weighted asset amount for the 
bank's equity exposure to the investment fund equals the sum of each 
portion of the adjusted carrying value assigned to an exposure class 
multiplied by the applicable risk weight. If the sum of the investment 
limits for exposure classes within the fund exceeds 100 percent, the 
bank must assume that the fund invests to the maximum extent permitted 
under its investment limits in the exposure class with the highest risk 
weight under Table 10, and continues to make investments in order of the 
exposure class with the next highest risk weight under Table 10 until 
the maximum total investment level is reached. If more than one exposure 
class applies to an exposure, the bank must use the highest applicable 
risk weight. A bank may exclude derivative contracts held by the fund 
that are used for hedging rather than for speculative purposes and do 
not constitute a material portion of the fund's exposures.
    (e) Money Market Fund Approach. The risk-weighted asset amount for a 
bank's equity exposure to an investment fund that is a money market fund 
subject to 17 CFR 270.2a-7 and that has an applicable external rating in 
the highest investment-grade rating category equals the adjusted 
carrying value of the equity exposure multiplied by 7 percent.

                 Section 55. Equity Derivative Contracts

    Under the IMA, in addition to holding risk-based capital against an 
equity derivative contract under this part, a bank must hold risk-based 
capital against the counterparty credit risk in the equity derivative 
contract by also treating the equity derivative contract as a wholesale 
exposure and computing a supplemental risk-weighted asset amount for the 
contract under part IV. Under the SRWA, a bank may choose not to hold 
risk-based capital against the counterparty credit risk of equity 
derivative contracts, as long as it does so for all such contracts. 
Where

[[Page 287]]

the equity derivative contracts are subject to a qualified master 
netting agreement, a bank using the SRWA must either include all or 
exclude all of the contracts from any measure used to determine 
counterparty credit risk exposure.

           Part VII. Risk-Weighted Assets for Operational Risk

Section 61. Qualification Requirements for Incorporation of Operational 
                             Risk Mitigants

    (a) Qualification to use operational risk mitigants. A bank may 
adjust its estimate of operational risk exposure to reflect qualifying 
operational risk mitigants if:
    (1) The bank's operational risk quantification system is able to 
generate an estimate of the bank's operational risk exposure (which does 
not incorporate qualifying operational risk mitigants) and an estimate 
of the bank's operational risk exposure adjusted to incorporate 
qualifying operational risk mitigants; and
    (2) The bank's methodology for incorporating the effects of 
insurance, if the bank uses insurance as an operational risk mitigant, 
captures through appropriate discounts to the amount of risk mitigation:
    (i) The residual term of the policy, where less than one year;
    (ii) The cancellation terms of the policy, where less than one year;
    (iii) The policy's timeliness of payment;
    (iv) The uncertainty of payment by the provider of the policy; and
    (v) Mismatches in coverage between the policy and the hedged 
operational loss event.
    (b) Qualifying operational risk mitigants. Qualifying operational 
risk mitigants are:
    (1) Insurance that:
    (i) Is provided by an unaffiliated company that has a claims payment 
ability that is rated in one of the three highest rating categories by a 
NRSRO;
    (ii) Has an initial term of at least one year and a residual term of 
more than 90 days;
    (iii) Has a minimum notice period for cancellation by the provider 
of 90 days;
    (iv) Has no exclusions or limitations based upon regulatory action 
or for the receiver or liquidator of a failed depository institution; 
and
    (v) Is explicitly mapped to a potential operational loss event; and
    (2) Operational risk mitigants other than insurance for which the 
FDIC has given prior written approval. In evaluating an operational risk 
mitigant other than insurance, the FDIC will consider whether the 
operational risk mitigant covers potential operational losses in a 
manner equivalent to holding regulatory capital.

        Section 62. Mechanics of Risk-Weighted Asset Calculation

    (a) If a bank does not qualify to use or does not have qualifying 
operational risk mitigants, the bank's dollar risk-based capital 
requirement for operational risk is its operational risk exposure minus 
eligible operational risk offsets (if any).
    (b) If a bank qualifies to use operational risk mitigants and has 
qualifying operational risk mitigants, the bank's dollar risk-based 
capital requirement for operational risk is the greater of:
    (1) The bank's operational risk exposure adjusted for qualifying 
operational risk mitigants minus eligible operational risk offsets (if 
any); or
    (2) 0.8 multiplied by the difference between:
    (i) The bank's operational risk exposure; and
    (ii) Eligible operational risk offsets (if any).
    (c) The bank's risk-weighted asset amount for operational risk 
equals the bank's dollar risk-based capital requirement for operational 
risk determined under paragraph (a) or (b) of this section multiplied by 
12.5.

                          Part VIII. Disclosure

                   Section 71. Disclosure Requirements

    (a) Each bank must publicly disclose each quarter its total and tier 
1 risk-based capital ratios and their components (that is, tier 1 
capital, tier 2 capital, total qualifying capital, and total risk-
weighted assets).\4\
---------------------------------------------------------------------------

    \4\ Other public disclosure requirements continue to apply--for 
example, Federal securities law and regulatory reporting requirements.
---------------------------------------------------------------------------

    (b) A bank must comply with paragraph (b) of section 71 of appendix 
G to the Federal Reserve Board's Regulation Y (12 CFR part 225, appendix 
G) unless it is a consolidated subsidiary of a bank holding company or 
depository institution that is subject to these requirements.

[72 FR 69396, 69437, Dec. 7, 2007; 73 FR 21690, Apr. 22, 2008]



PART 326_MINIMUM SECURITY DEVICES AND PROCEDURES AND BANK SECRECY ACT \1\ 

COMPLIANCE--Table of Contents



---------------------------------------------------------------------------

    \1\ In its original form, subchapter II of chapter 53 of title 31 
U.S.C., was part of Pub. L. 91-508 which requires recordkeeping for and 
reporting of currency transactions by banks and others and is commonly 
known as the Bank Secrecy Act.
---------------------------------------------------------------------------

                  Subpart A_Minimum Security Procedures

Sec.
326.0 Authority, purpose, and scope.

[[Page 288]]

326.1 Definitions.
326.2 Designation of security officer.
326.3 Security program.
326.4 Reports.

    Subpart B_Procedures for Monitoring Bank Secrecy Act Complianace

326.8 Bank Secrecy Act compliance.

    Authority: 12 U.S.C. 1813, 1815, 1817, 1818, 1819 (Tenth), 1881-
1883; 31 U.S.C. 5311-5314 and 5316-5332.2



                  Subpart A_Minimum Security Procedures

    Source: 56 FR 13581, Apr. 3, 1991, unless otherwise noted.



Sec. 326.0  Authority, purpose, and scope.

    (a) This part is issued by the Federal Deposit Insurance Corporation 
(``FDIC'') pursuant to section 3 of the Bank Protection Act of 1968 (12 
U.S.C. 1882). It applies to insured state banks that are not members of 
the Federal Reserve System. It requires each bank to adopt appropriate 
security procedures to discourage robberies, burglaries, and larcenies 
and to assist in identifying and apprehending persons who commit such 
acts.
    (b) It is the responsibility of the bank's board of directors to 
comply with this part and ensure that a written security program for the 
bank's main office and branches is developed and implemented.

(Approved by the Office of Management and Budget under control number 
3064-0095)



Sec. 326.1  Definitions.

    For the purposes of this part--
    (a) The term insured nonmember bank means any bank, including a 
foreign bank having a branch the deposits of which are insured in 
accordance with the provisions of the Federal Deposit Insurance Act, 
which is not a member of the Federal Reserve System. The term does not 
include any institution chartered or licensed by the Comptroller of the 
Currency, any District bank, or any savings association.
    (b) The term banking office includes any branch of an insured 
nonmember bank, and, in the case of an insured state nonmember bank, it 
includes the main office of that bank.
    (c) The term branch for a bank chartered under the laws of any state 
of the United States includes any branch bank, branch office, branch 
agency, additional office, or any branch place of business located in 
any state or territory of the United States, District of Columbia, 
Puerto Rico, Guam, American Samoa, the Trust Territory of the Pacific 
Islands, the Northern Mariana Islands or the Virgin Islands at which 
deposits are received or checks paid or money lent. In the case of a 
foreign bank, as defined in Sec. 347.202 of this chapter, the term 
branch has the same meaning given in Sec. 347.202 of this chapter.

[56 FR 13581, Apr. 3, 1991, as amended at 63 FR 17075, Apr. 8, 1998]



Sec. 326.2  Designation of security officer.

    Upon the issuance of federal deposit insurance, the board of 
directors of each insured nonmember bank \2\ shall designate a security 
officer who shall have the authority, subject to the approval of the 
board of directors, to develop, within a reasonable time, but no later 
than 180 days, and to administer a written security program for each 
banking office.
---------------------------------------------------------------------------

    \2\ The term board of directors includes the managing official of an 
insured branch of a foreign bank for purposes of 12 CFR 326.0-326.4.
---------------------------------------------------------------------------



Sec. 326.3  Security program.

    (a) Contents of security program. The security program shall:
    (1) Establish procedures for opening and closing for business and 
for the safekeeping of all currency, negotiable securities, and similar 
valuables at all times;
    (2) Establish procedures that will assist in identifying persons 
committing crimes against the bank and that will preserve evidence that 
may aid in their identification and prosecution; such procedures may 
include, but are not limited to:

[[Page 289]]

    (i) Retaining a record of any robbery, burglary, or larceny 
committed against the bank;
    (ii) Maintaining a camera that records activity in the banking 
office; and
    (iii) Using identification devices, such as prerecorded serial-
numbered bills, or chemical and electronic devices;
    (3) Provide for initial and periodic training of officers and 
employees in their responsibilities under the security program and in 
proper employee conduct during and after a robbery, burglary or larceny; 
and
    (4) Provide for selecting, testing, operating and maintaining 
appropriate security devices, as specified in paragraph (b) of this 
section.
    (b) Security devices. Each insured nonmember bank shall have, at a 
minimum, the following security devices:
    (1) A means of protecting cash or other liquid assets, such as a 
vault, safe, or other secure space;
    (2) A lighting system for illuminating, during the hours of 
darkness, the area around the vault, if the vault is visible from 
outside the banking office;
    (3) An alarm system or other appropriate device for promptly 
notifying the nearest responsible law enforcement officers of an 
attempted or perpetrated robbery or burglary;
    (4) Tamper-resistant locks on exterior doors and exterior windows 
that may be opened; and
    (5) Such other devices as the security officer determines to be 
appropriate, taking into consideration:
    (i) The incidence of crimes against financial institutions in the 
area;
    (ii) The amount of currency or other valuables exposed to robbery, 
burglary, and larceny;
    (iii) The distance of the banking office from the nearest 
responsible law enforcement officers;
    (iv) The cost of the security devices;
    (v) Other security measures in effect at the banking office; and
    (vi) The physical characteristics of the structure of the banking 
office and its surroundings.



Sec. 326.4  Reports.

    The security officer for each insured nonmember bank shall report at 
least annually to the bank's board of directors on the implementation, 
administration, and effectiveness of the security program.



     Subpart B_Procedures for Monitoring Bank Secrecy Act Compliance



Sec. 326.8  Bank Secrecy Act compliance.

    (a) Purpose. This subpart is issued to assure that all insured 
nonmember banks as defined in Sec. 326.1 \3\ establish and maintain 
procedures reasonably designed to assure and monitor their compliance 
with the requirements of subchapter II of chapter 53 of title 31, United 
States Code, and the implementing regulations promulgated thereunder by 
the Department of Treasury at 31 CFR part 103.
---------------------------------------------------------------------------

    \3\ In regard to foreign banks, the programs and procedures required 
by Sec. 326.8 need be instituted only at an insured branch as defined 
in Sec. 347.202 of this chapter which is a State branch as defined in 
Sec. 347.202 of this chapter.
---------------------------------------------------------------------------

    (b) Compliance procedures--(1) Program requirement. Each bank shall 
develop and provide for the continued administration of a program 
reasonably designed to assure and monitor compliance with recordkeeping 
and reporting requirements set forth in subchapter II of chapter 53 of 
title 31, United States Code and the implementing regulations issued by 
the Department of the Treasury at 31 CFR part 103. The compliance 
program shall be written, approved by the bank's board of directors, and 
noted in the minutes.
    (2) Customer identification program. Each bank is subject to the 
requirements of 31 U.S.C. 5318(l) and the implementing regulation 
jointly promulgated by the FDIC and the Department of the Treasury at 31 
CFR 103.121, which require a customer identification program to be 
implemented as part of the Bank Secrecy Act compliance program required 
under this section.
    (c) Contents of compliance program. The compliance program shall, at 
a minimum:

[[Page 290]]

    (1) Provide for a system of internal controls to assure ongoing 
compliance;
    (2) Provide for independent testing for compliance to be conducted 
by bank personnel or by an outside party;
    (3) Designate an individual or individuals responsible for 
coordinating and monitoring day-to-day compliance; and
    (4) Provide training for appropriate personnel.

(Approved by the Office of Management and Budget under control number 
3064-0087)

[52 FR 2860, Jan. 27, 1987, as amended at 53 FR 17917, May 19, 1988; 63 
FR 17075, Apr. 8, 1998; 68 FR 25112, May 9, 2003]



PART 327_ASSESSMENTS--Table of Contents




                          Subpart A_In General

Sec.
327.1 Purpose and scope.
327.2 Certified statements.
327.3 Payment of assessments.
327.4 Assessment rates.
327.5 Assessment base.
327.6 Terminating transfers; other terminations of insurance.
327.7 Payment of interest on assessment underpayments and overpayments.
327.8 Definitions.
327.9 Assessment risk categories and pricing methods.
327.10 Assessment rate schedules.

Appendix A to Subpart A
Appendix B to Subpart A
Appendix C to Subpart A

         Subpart B_Implementation of One-Time Assessment Credit

327.30 Purpose and scope.
327.31 Definitions.
327.32 Determination of aggregate credit amount.
327.33 Determination of eligible institution's credit amount.
327.34 Transferability of credits.
327.35 Application of credits.
327.36 Requests for review of credit amount.

            Subpart C_Implementation of Dividend Requirements

327.50 Purpose and scope.
327.51 Definitions.
327.52 Annual dividend determination.
327.53 Allocation and payment of dividends.
327.54 Requests for review.

    Authority: 12 U.S.C. 1441, 1813, 1815, 1817-1819, 1821; Sec. 2101-
2109, Pub. L. 109-171, 120 Stat. 9-21, and Sec. 3, Pub. L. 109-173, 119 
Stat. 3605.

    Source: 54 FR 51374, Dec. 15, 1989, unless otherwise noted.



                          Subpart A_In General

    Source: Sections 327.1 through 327.8 appear at 71 FR 69277, Nov. 30, 
2006, unless otherwise noted.



Sec. 327.1  Purpose and scope.

    (a) Scope. This part 327 applies to any insured depository 
institution, including any insured branch of a foreign bank.
    (b) Purpose. (1) Except as specified in paragraph (b)(2) of this 
section, this part 327 sets forth the rules for:
    (i) The time and manner of filing certified statements by insured 
depository institutions;
    (ii) The time and manner of payment of assessments by such 
institutions;
    (iii) The payment of assessments by depository institutions whose 
insured status has terminated;
    (iv) The classification of depository institutions for risk; and
    (v) The processes for review of assessments.
    (2) Deductions from the assessment base of an insured branch of a 
foreign bank are stated in subpart B part 347 of this chapter.



Sec. 327.2  Certified statements.

    (a) Required. (1) The certified statement shall also be known as the 
quarterly certified statement invoice. Each insured depository 
institution shall file and certify its quarterly certified statement 
invoice in the manner and form set forth in this section.
    (2) The quarterly certified statement invoice shall reflect the 
institution's risk assignment, assessment base, assessment computation, 
and assessment amount, for each quarterly assessment period.
    (b) Availability and access. (1) The Corporation shall make 
available to each insured depository institution via the FDIC's e-
business Web site FDICconnect a quarterly certified statement invoice 
each assessment period.
    (2) Insured depository institutions shall access their quarterly 
certified statement invoices via FDICconnect,

[[Page 291]]

unless the FDIC provides notice to insured depository institutions of a 
successor system. In the event of a contingency, the FDIC may employ an 
alternative means of delivering the quarterly certified statement 
invoices. A quarterly certified statement invoice delivered by any 
alternative means will be treated as if it had been downloaded from 
FDICconnect.
    (3) Institutions that do not have Internet access may request a 
renewable one-year exemption from the requirement that quarterly 
certified statement invoices be accessed through FDICconnect. Any 
exemption request must be submitted in writing to the Manager of the 
Assessments Section.
    (4) Each assessment period, the FDIC will provide courtesy e-mail 
notification to insured depository institutions indicating that new 
quarterly certified statement invoices are available and may be accessed 
on FDICconnect. E-mail notification will be sent to all individuals with 
FDICconnect access to quarterly certified statement invoices.
    (5) E-mail notification may be used by the FDIC to communicate with 
insured depository institutions regarding quarterly certified statement 
invoices and other assessment-related matters.
    (c) Review by institution. The president of each insured depository 
institution, or such other officer as the institution's president or 
board of directors or trustees may designate, shall review the 
information shown on each quarterly certified statement invoice.
    (d) Retention by institution. If the appropriate officer of the 
insured depository institution agrees that, to the best of his or her 
knowledge and belief, the information shown on the quarterly certified 
statement invoice is true, correct, and complete and in accordance with 
the Federal Deposit Insurance Act and the regulations issued under it, 
the institution shall pay the amount specified on the quarterly 
certified statement invoice and shall retain it in the institution's 
files for three years as specified in section 7(b)(4) of the Federal 
Deposit Insurance Act.
    (e) Amendment by institution. If the appropriate officer of the 
insured depository institution determines that, to the best of his or 
her knowledge and belief, the information shown on the quarterly 
certified statement invoice is not true, correct, and complete and in 
accordance with the Federal Deposit Insurance Act and the regulations 
issued under it, the institution shall pay the amount specified on the 
quarterly certified statement invoice, and may:
    (1) Amend its report of condition, or other similar report, to 
correct any data believed to be inaccurate on the quarterly certified 
statement invoice; amendments to such reports timely filed under section 
7(g) of the Federal Deposit Insurance Act but not permitted to be made 
by an institution's primary federal regulator may be filed with the FDIC 
for consideration in determining deposit insurance assessments; or
    (2) Amend and sign its quarterly certified statement invoice to 
correct a calculation believed to be inaccurate and return it to the 
FDIC by the applicable payment date specified in Sec. 327.3(b)(2).
    (f) Certification. Data used by the Corporation to complete the 
quarterly certified statement invoice has been previously attested to by 
the institution in its reports of condition, or other similar reports, 
filed with the institution's primary federal regulator. When an insured 
institution pays the amount shown on the quarterly certified statement 
invoice and does not correct that invoice as provided in paragraph (e) 
of this section, the information on that invoice shall be deemed true, 
correct, complete, and certified for purposes of paragraph (a) of this 
section and section 7(c) of the Federal Deposit Insurance Act.
    (g) Requests for revision of assessment computation. (1) The timely 
filing of an amended report of condition or other similar report under 
paragraph (e)(1) of this section, or the timely filing of an amended 
quarterly certified statement invoice under paragraph (e)(2), that will 
result in a change to deposit insurance assessments owed or paid by an 
insured depository institution, shall be treated as a timely filed 
request for revision of computation of quarterly assessment payment 
under Sec. 327.3(f).
    (2) The assessment rate on the quarterly certified statement invoice 
shall

[[Page 292]]

be amended only if it is inconsistent with the assessment risk 
assignment(s) provided to the institution by the Corporation for the 
assessment period in question pursuant to Sec. 327.4(a). Agreement with 
the assessment rate shall not be deemed to constitute agreement with the 
assessment risk assignment. An institution may request review of an 
assessment risk assignment it believes to be incorrect pursuant to Sec. 
327.4(c).



Sec. 327.3  Payment of assessments.

    (a) Required--(1) In general. Except as provided in paragraph (b) of 
this section, each insured depository institution shall pay to the 
Corporation for each assessment period an assessment determined in 
accordance with this part 327.
    (2) Notice of designated deposit account. For the purpose of making 
such payments, each insured depository institution shall designate a 
deposit account for direct debit by the Corporation. No later than 30 
days prior to the next payment date specified in paragraph (b)(2) of 
this section, each institution shall provide notice to the Corporation 
via FDICconnect of the account designated, including all information and 
authorizations needed by the Corporation for direct debit of the 
account. After the initial notice of the designated account, no further 
notice is required unless the institution designates a different account 
for assessment debit by the Corporation, in which case the requirements 
of the preceding sentence apply.
    (3) Transition Rule for Financing Corporation (FICO) Payments. 
Quarterly FICO payments shall be collected by the FDIC without 
interruption during the assessment system transitional period in 2007. 
All insured depository institutions shall make scheduled quarterly FICO 
payments on January 2, 2007 (unless prepaid on December 30, 2006), and 
March 30, 2007, based upon, respectively, their September 30, 2006, and 
December 31, 2006 reported assessment bases, which shall be the final 
assessment bases calculated pursuant to 12 CFR 327.5(a) and (b) (2006). 
Simultaneous collection of deposit insurance assessments and FICO 
assessments will resume in June of 2007, based on the March 31, 2007 
reported assessment base.
    (b) Assessment payment--(1) Quarterly certified statement invoice. 
Starting with the first assessment period of 2007, no later than 15 days 
prior to the payment date specified in paragraph (b)(2) of this section, 
the Corporation will provide to each insured depository institution a 
quarterly certified statement invoice showing the amount of the 
assessment payment due from the institution for the prior quarter (net 
of credits or dividends, if any), and the computation of that amount. 
Subject to paragraph (e) of this section, the invoiced amount on the 
quarterly certified statement invoice shall be the product of the 
following: the assessment base of the institution for the prior quarter 
computed in accordance with Sec. 327.5 multiplied by the institution's 
rate for that prior quarter as assigned to the institution pursuant to 
Sec. Sec. 327.4(a) and 327.9.
    (2) Quarterly payment date and manner. The Corporation will cause 
the amount stated in the applicable quarterly certified statement 
invoice to be directly debited on the appropriate payment date from the 
deposit account designated by the insured depository institution for 
that purpose, as follows:
    (i) In the case of the assessment payment for the quarter that 
begins on January 1, the payment date is the following June 30;
    (ii) In the case of the assessment payment for the quarter that 
begins on April 1, the payment date is the following September 30;
    (iii) In the case of the assessment payment for the quarter that 
begins on July 1, the payment date is the following December 30; and
    (iv) In the case of the assessment payment for the quarter that 
begins on October 1, the payment date is the following March 30.
    (c) Necessary action, sufficient funding by institution. Each 
insured depository institution shall take all actions necessary to allow 
the Corporation to debit assessments from the insured depository 
institution's designated deposit account. Each insured depository 
institution shall, prior to each payment date indicated in paragraph 
(b)(2) of this section, ensure that funds in an

[[Page 293]]

amount at least equal to the amount on the quarterly certified statement 
invoice are available in the designated account for direct debit by the 
Corporation. Failure to take any such action or to provide such funding 
of the account shall be deemed to constitute nonpayment of the 
assessment. Penalties for failure to timely pay assessments are provided 
for at 12 CFR 308.132(c)(3)(v).
    (d) Business days. If a payment date specified in paragraph (b)(2) 
falls on a date that is not a business day, the applicable date shall be 
the previous business day.
    (e) Payment adjustments in succeeding quarters. Quarterly certified 
statement invoices provided by the Corporation may reflect adjustments, 
initiated by the Corporation or an institution, resulting from such 
factors as amendments to prior quarterly reports of condition, 
retroactive revision of the institution's assessment risk assignment, 
and revision of the Corporation's assessment computations for prior 
quarters.
    (f) Request for revision of computation of quarterly assessment 
payment--(1) In general. An institution may submit a written request for 
revision of the computation of the institution's quarterly assessment 
payment as shown on the quarterly certified statement invoice in the 
following circumstances:
    (i) The institution disagrees with the computation of the assessment 
base as stated on the quarterly certified statement invoice;
    (ii) The institution determines that the rate applied by the 
Corporation is inconsistent with the assessment risk assignment(s) 
provided to the institution in writing by the Corporation for the 
assessment period for which the payment is due; or
    (iii) The institution believes that the quarterly certified 
statement invoice does not fully or accurately reflect adjustments 
provided for in paragraph (e) of this section.
    (2) Inapplicability. This paragraph (f) is not applicable to 
requests for review of an institution's assessment risk assignment, 
which are covered by Sec. 327.4(c) of this part.
    (3) Requirements. Any such request for revision must be submitted 
within 90 days from the date the computation being challenged appears on 
the institution's quarterly certified statement invoice. The request for 
revision shall be submitted to the Manager of the Assessments Section 
and shall provide documentation sufficient to support the change sought 
by the institution. If additional information is requested by the 
Corporation, such information shall be provided by the institution 
within 21 days of the date of the request for additional information. 
Any institution submitting a timely request for revision will receive 
written notice from the Corporation regarding the outcome of its 
request. Upon completion of a review, the DOF Director (or designee) 
shall promptly notify the institution in writing of his or her 
determination of whether revision is warranted. If the institution 
requesting revision disagrees with that determination, it may appeal to 
the FDIC's Assessment Appeals Committee. Notice of the procedures 
applicable to appeals will be included with the written determination.
    (g) Quarterly certified statement invoice unavailable. Any 
institution whose quarterly certified statement invoice is unavailable 
on FDICconnect by the fifteenth day of the month in which the payment is 
due shall promptly notify the Corporation. Failure to provide prompt 
notice to the Corporation shall not affect the institution's obligation 
to make full and timely assessment payment. Unless otherwise directed by 
the Corporation, the institution shall preliminarily pay the amount 
shown on its quarterly certified statement invoice for the preceding 
assessment period, subject to subsequent correction.



Sec. 327.4  Assessment rates.

    (a) Assessment risk assignment. For the purpose of determining the 
annual assessment rate for insured depository institutions under Sec. 
327.9, each insured depository institution will be provided an 
assessment risk assignment. Notice of an institution's current 
assessment risk assignment will be provided to the

[[Page 294]]

institution with each quarterly certified statement invoice. Adjusted 
assessment risk assignments for prior periods may also be provided by 
the Corporation. Notice of the procedures applicable to reviews will be 
included with the notice of assessment risk assignment provided pursuant 
to paragraph (a) of this section.
    (b) Payment of assessment at rate assigned. Institutions shall make 
timely payment of assessments based on the assessment risk assignment in 
the notice provided to the institution pursuant to paragraph (a) of this 
section. Timely payment is required notwithstanding any request for 
review filed pursuant to paragraph (c) of this section. Assessment risk 
assignments remain in effect for future assessment periods until 
changed. If the risk assignment in the notice is subsequently changed, 
any excess assessment paid by the institution will be credited by the 
Corporation, with interest, and any additional assessment owed shall be 
paid by the institution, with interest, in the next assessment payment 
after such subsequent assignment or change. Interest payable under this 
paragraph shall be determined in accordance with Sec. 327.7.
    (c) Requests for review. An institution that believes any assessment 
risk assignment provided by the Corporation pursuant to paragraph (a) of 
this section is incorrect and seeks to change it must submit a written 
request for review of that risk assignment. An institution cannot 
request review through this process of the CAMELS ratings assigned by 
its primary federal regulator; each federal regulator has established 
procedures for that purpose. An institution may also request review of a 
determination by the FDIC to assess the institution as a large or a 
small institution (12 CFR 327.9(d)(6)) or a determination by the FDIC 
that the institution is a new institution (12 CFR 327.9(d)(7)). Any 
request for review must be submitted within 90 days from the date the 
assessment risk assignment being challenged pursuant to paragraph (a) of 
this section appears on the institution's quarterly certified statement 
invoice. The request shall be submitted to the Corporation's Director of 
the Division of Insurance and Research in Washington, DC, and shall 
include documentation sufficient to support the change sought by the 
institution. If additional information is requested by the Corporation, 
such information shall be provided by the institution within 21 days of 
the date of the request for additional information. Any institution 
submitting a timely request for review will receive written notice from 
the Corporation regarding the outcome of its request. Upon completion of 
a review, the Director of the Division of Insurance and Research (or 
designee) or the Director of the Division of Supervision and Consumer 
Protection (or designee), as appropriate, shall promptly notify the 
institution in writing of his or her determination of whether a change 
is warranted. If the institution requesting review disagrees with that 
determination, it may appeal to the FDIC's Assessment Appeals Committee. 
Notice of the procedures applicable to appeals will be included with the 
written determination.
    (d) Disclosure restrictions. The portion of an assessment risk 
assignment provided to an institution by the Corporation pursuant to 
paragraph (a) of this section that reflects any supervisory evaluation 
or confidential information is deemed to be exempt information within 
the scope of Sec. 309.5(g)(8) of this chapter and, accordingly, is 
governed by the disclosure restrictions set out at Sec. 309.6 of this 
chapter.
    (e) Limited use of assessment risk assignment. Any assessment risk 
assignment provided to a depository institution under this part 327 is 
for purposes of implementing and operating the FDIC's risk-based 
assessment system. Unless permitted by the Corporation or otherwise 
required by law, no institution may state in any advertisement or 
promotional material, or in any other public place or manner, the 
assessment risk assignment provided to it pursuant to this part.
    (f) Effective date for changes to risk assignment. (1) Changes to an 
insured institution's risk assignment resulting from a supervisory 
ratings change become effective as of the date of written notification 
to the institution by its primary federal regulator or state authority 
of its supervisory rating (even when the CAMELS component ratings

[[Page 295]]

have not been disclosed to the institution), if the FDIC, after taking 
into account other information that could affect the rating, agrees with 
the rating. If the FDIC does not agree, changes to an insured 
institution's risk assignment become effective as of the date that the 
FDIC determines that a change in the supervisory rating is warranted.
    (2) Changes to an insured institution's risk assignment resulting 
from a change in a long-term debt issuer rating become effective as of 
the date the change is announced by the rating agency.
    (g) Designated reserve ratio. The designated reserve ratio for the 
Deposit Insurance Fund is 1.25 percent.

[71 FR 69277, 69326, Nov. 30, 2006]



Sec. 327.5  Assessment base.

    (a) Quarter-end balances and average daily balances. An insured 
depository institution shall determine its assessment base using 
quarter-end balances until changes in the quarterly report of condition 
allow it to report average daily deposit balances on the quarterly 
report of condition, after which--
    (1) An institution that becomes newly insured after the first report 
of condition allowing for average daily balances shall have its 
assessment base determined using average daily balances;
    (2) An insured depository institution (other than one covered in 
paragraph (a)(1) of this section) reporting assets of $1 billion or more 
on the first report of condition allowing for average daily balances, 
shall within one year after so reporting have its assessment base 
determined using average daily balances;
    (3) An insured depository institution (other than one covered in 
paragraph (a)(1) of this section) that was insured prior to the first 
report of condition allowing for average daily balances, reporting less 
than $1 billion in assets on the first report of condition allowing for 
average daily balances--
    (i) May continue to have its assessment base determined using 
quarter end balances; or
    (ii) May opt permanently to have its assessment base determined 
using average daily balances after notice to the Corporation, but
    (iii) Shall have its assessment rate determined using average daily 
balances for any quarter beginning six months after the institution 
reported that its assets equaled or exceeded $1 billion for two 
consecutive quarters and thereafter; and
    (4) In any event, an insured depository institution that files its 
report of condition on a consolidated basis by including a subsidiary 
bank(s) or savings association(s) shall report its assessment base on an 
unconsolidated basis.
    (b) Computation of assessment base. Whether computed on a quarter-
end balance or an average daily balance, the assessment base for any 
insured institution that is required to file a quarterly report of 
condition shall be computed by:
    (1) Adding all deposit liabilities as defined in section 3(l) of the 
Federal Deposit Insurance Act, to include deposits that are held in any 
insured branches of the institution that are located in the territories 
and possessions of the United States, but does not include unposted 
credits and is not reduced by unposted debits; and
    (2) Subtracting the following allowable exclusions, in the case of 
any institution that maintains such records as will readily permit 
verification of the correctness of its assessment base--
    (i) Any demand deposit balance due from or cash item in the process 
of collection due from any depository institution (not including a 
private depository institution, a foreign depository institution, a 
foreign office of another U.S. depository institution, or a U.S. branch 
of a foreign depository institution) up to the total of the amount of 
deposit balances due to and cash items in the process of collection due 
to such depository institution that are included in paragraph (b)(1) of 
this section;
    (ii) Any outstanding drafts (including advices and authorization to 
charge deposit institution's balance in another bank) drawn in the 
regular course of business;
    (iii) Any pass-through reserve balances;
    (iv) Liabilities arising from a depository institution investment 
contract that are not treated as insured deposits

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under section 11(a)(5) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(a)(5)); and
    (v) Deposits accumulated for the payment of personal loans, which 
represent actual loan payments received by the depository institution 
from borrowers and accumulated by the depository institution in 
hypothecated deposit accounts for payment of the loans at maturity. Time 
and savings deposits that are pledged as collateral to secure loans are 
not ``deposits accumulated for the payment of personal loans.''
    (c) Newly insured institutions. A newly insured institution shall 
pay an assessment for the assessment period during which it became an 
insured institution.



Sec. 327.6  Terminating transfers; other terminations of insurance.

    (a) Terminating institution's final two quarterly certified 
statement invoices. If a terminating institution does not file a report 
of condition for the quarter prior to the quarter in which the 
terminating transfer occurs, its assessment base for the quarterly 
certified statement invoice or invoices for which it failed to file a 
report of condition shall be deemed to be its assessment base for the 
last quarter for which the institution filed a report of condition. The 
acquiring institution in a terminating transfer is liable for paying the 
final invoices of the terminating institution. The terminating 
institution's assessment for the quarter prior to the quarter in which 
the terminating transfer occurs shall be calculated at the terminating 
institution's rate.
    (b) Assessment for quarter in which the terminating transfer 
occurs--(1) Acquirer using Average Daily Balances. If an acquiring 
institution's assessment base is computed using average daily balances 
pursuant to Sec. 327.5, the terminating institution's assessment for 
the quarter in which the terminating transfer occurs shall be reduced by 
the percentage of the quarter remaining after the terminating transfer 
and calculated at the acquiring institution's rate.
    (2) Acquirer using Quarter-end Balances. If an acquiring 
institution's assessment base is computed as a quarter-end balance 
pursuant to Sec. 327.5, its assessment for the quarter in which the 
terminating transfer occurs shall be the acquiring institution's 
quarter-end balance calculated at the acquiring institution's assessment 
rate, and the terminating institution shall not be assessed separately 
for that quarter.
    (c) Other terminations. When the insured status of an institution is 
terminated, and the deposit liabilities of such institution are not 
assumed by another insured depository institution--
    (1) Payment of assessments; quarterly certified statement invoices. 
The terminating depository institution shall continue to file and 
certify its quarterly certified statement invoice and pay assessments 
for the assessment period its deposits are insured. Such terminating 
institution shall not be required to certify its quarterly certified 
statement invoice and pay further assessments after it has paid in full 
its deposit liabilities and the assessment to the Corporation required 
to be paid for the assessment period in which its deposit liabilities 
are paid in full, and after it, under applicable law, goes out of 
business or transfers all or substantially all of its assets and 
liabilities to other institutions or otherwise ceases to be obliged to 
pay subsequent assessments.
    (2) Payment of deposits; certification to Corporation. When the 
deposit liabilities of the depository institution have been paid in 
full, the depository institution shall certify to the Corporation that 
the deposit liabilities have been paid in full and give the date of the 
final payment. When the depository institution has unclaimed deposits, 
the certification shall further state the amount of the unclaimed 
deposits and the disposition made of the funds to be held to meet the 
claims. For assessment purposes, the following will be considered as 
payment of the unclaimed deposits:
    (i) The transfer of cash funds in an amount sufficient to pay the 
unclaimed and unpaid deposits to the public official authorized by law 
to receive the same; or
    (ii) If no law provides for the transfer of funds to a public 
official, the transfer of cash funds or compensatory assets to an 
insured depository institution in an amount sufficient to pay the

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unclaimed and unpaid deposits in consideration for the assumption of the 
deposit obligations by the insured depository institution.
    (3) Notice to depositors. (i) The terminating depository institution 
shall give sufficient advance notice of the intended transfer to the 
owners of the unclaimed deposits to enable the depositors to obtain 
their deposits prior to the transfer. The notice shall be mailed to each 
depositor and shall be published in a local newspaper of general 
circulation. The notice shall advise the depositors of the liquidation 
of the depository institution, request them to call for and accept 
payment of their deposits, and state the disposition to be made of their 
deposits if they fail to promptly claim the deposits.
    (ii) If the unclaimed and unpaid deposits are disposed of as 
provided in paragraph (b)(2)(i) of this section, a certified copy of the 
public official's receipt issued for the funds shall be furnished to the 
Corporation.
    (iii) If the unclaimed and unpaid deposits are disposed of as 
provided in paragraph (b)(2)(ii) of this section, an affidavit of the 
publication and of the mailing of the notice to the depositors, together 
with a copy of the notice and a certified copy of the contract of 
assumption, shall be furnished to the Corporation.
    (4) Notice to Corporation. The terminating depository institution 
shall advise the Corporation of the date on which it goes out of 
business or transfers all or substantially all of its assets and 
liabilities to other institutions or otherwise ceases to be obliged to 
pay subsequent assessments and the method whereby the termination has 
been effected.
    (d) Resumption of insured status before insurance of deposits 
ceases. If a depository institution whose insured status has been 
terminated is permitted by the Corporation to continue or resume its 
status as an insured depository institution before the insurance of its 
deposits has ceased, the institution will be deemed, for assessment 
purposes, to continue as an insured depository institution and must 
thereafter file and certify its quarterly certified statement invoices 
and pay assessments as though its insured status had not been 
terminated. The procedure for applying for the continuance or resumption 
of insured status is set forth in Sec. 303.248 of this chapter.



Sec. 327.7  Payment of interest on assessment underpayments and overpayments.

    (a) Payment of interest--(1) Payment by institutions. Each insured 
depository institution shall pay interest to the Corporation on any 
underpayment of the institution's assessment.
    (2) Payment by Corporation. The Corporation will pay interest on any 
overpayment by the institution of its assessment.
    (3) Accrual of interest. (i) Interest on an amount owed to or by the 
Corporation for the underpayment or overpayment of an assessment shall 
accrue interest at the relevant interest rate.
    (ii) Interest on an amount specified in paragraph (a)(3)(i) of this 
section shall begin to accrue on the day following the regular payment 
date, as provided for in Sec. 327.3(b)(2), for the amount so overpaid 
or underpaid, provided, however, that interest shall not begin to accrue 
on any overpayment until the day following the date such overpayment was 
received by the Corporation. Interest shall continue to accrue through 
the date on which the overpayment or underpayment (together with any 
interest thereon) is discharged.
    (iii) The relevant interest rate shall be redetermined for each 
quarterly assessment interval. A quarterly assessment interval begins on 
the day following a regular payment date, as specified in Sec. 
327.3(b)(2), and ends on the immediately following regular payment date.
    (b) Interest rates. (1) The relevant interest rate for a quarterly 
assessment interval that includes the month of January, April, July, and 
October, respectively, is the coupon equivalent yield of the average 
discount rate set on the 3-month Treasury bill at the last auction held 
by the United States Treasury Department during the preceding December, 
March, June, and September, respectively.
    (2) The relevant interest rate for a quarterly assessment interval 
will

[[Page 298]]

apply to any amounts overpaid or underpaid on the payment date 
immediately prior to the beginning of the quarterly assessment interval. 
The relevant interest rate will also apply to any amounts owed for 
previous overpayments or underpayments (including any interest thereon) 
that remain outstanding, after any adjustments to such overpayments or 
underpayments have been made thereon, at the end of the regular payment 
date immediately prior to the beginning of the quarterly assessment 
interval. Interest will be compounded daily.



Sec. 327.8  Definitions.

    For the purpose of this part 327:
    (a) Deposits. The term deposit has the meaning specified in section 
3(l) of the Federal Deposit Insurance Act.
    (b) Quarterly report of condition. The term quarterly report of 
condition means a report required to be filed pursuant to section 
7(a)(3) of the Federal Deposit Insurance Act.
    (c) Assessment period--In general. The term assessment period means 
a period beginning on January 1 of any calendar year and ending on March 
31 of the same year, or a period beginning on April 1 of any calendar 
year and ending on June 30 of the same year; or a period beginning on 
July 1 of any calendar year and ending on September 30 of the same year; 
or a period beginning on October 1 of any calendar year and ending on 
December 31 of the same year.
    (d) Acquiring institution. The term acquiring institution means an 
insured depository institution that assumes some or all of the deposits 
of another insured depository institution in a terminating transfer.
    (e) Terminating institution. The term terminating institution means 
an insured depository institution some or all of the deposits of which 
are assumed by another insured depository institution in a terminating 
transfer.
    (f) Terminating transfer. The term terminating transfer means the 
assumption by one insured depository institution of another insured 
depository institution's liability for deposits, whether by way of 
merger, consolidation, or other statutory assumption, or pursuant to 
contract, when the terminating institution goes out of business or 
transfers all or substantially all its assets and liabilities to other 
institutions or otherwise ceases to be obliged to pay subsequent 
assessments by or at the end of the assessment period during which such 
assumption of liability for deposits occurs. The term terminating 
transfer does not refer to the assumption of liability for deposits from 
the estate of a failed institution, or to a transaction in which the 
FDIC contributes its own resources in order to induce a surviving 
institution to assume liabilities of a terminating institution.
    (g) Small Institution. An insured depository institution with assets 
of less than $10 billion as of December 31, 2006 (other than an insured 
branch of a foreign bank) shall be classified as a small institution. 
If, after December 31, 2006, an institution classified as large under 
paragraph (h) of this section reports assets of less than $10 billion in 
its reports of condition for four consecutive quarters, the FDIC will 
reclassify the institution as small beginning the following quarter.
    (h) Large Institution. An insured depository institution with assets 
of $10 billion or more as of December 31, 2006 (other than an insured 
branch of a foreign bank) shall be classified as a large institution. 
If, after December 31, 2006, an institution classified as small under 
paragraph (g) of this section reports assets of $10 billion or more in 
its reports of condition for four consecutive quarters, the FDIC will 
reclassify the institution as large beginning the following quarter.
    (i) Long-Term Debt Issuer Rating. A long-term debt issuer rating 
shall mean a current rating of an insured depository institution's long-
term debt obligations by Moody's Investor Services, Standard & Poor's, 
or Fitch Ratings. A long-term debt issuer rating does not include a 
rating of a company that controls an insured depository institution, or 
an affiliate or subsidiary of the institution. A current rating shall 
mean one that has been confirmed or assigned within 12 months before the 
end of the quarter for which an assessment rate is being determined. If 
no current rating is available, the institution will be deemed to have 
no long-term debt issuer rating.

[[Page 299]]

    (j) CAMELS composite and CAMELS component ratings. The terms CAMELS 
composite ratings and CAMELS component ratings shall have the same 
meaning as in the Uniform Financial Institutions Rating System as 
published by the Federal Financial Institutions Examination Council.
    (k) ROCA supervisory ratings. ROCA supervisory ratings rate risk 
management, operational controls, compliance, and asset quality.
    (l) New depository institution. A new insured depository institution 
is a bank or thrift that has not been chartered for at least five years 
as of the last day of any quarter for which it is being assessed.
    (m) Established depository institution. An established institution 
is a bank or thrift that has been chartered for at least five years as 
of the last day of any quarter for which it is being assessed.
    (n) Risk assignment. An institution's risk assignment includes 
assignment to Risk Category I, II, III, or IV, and, within Risk Category 
I, assignment to an assessment rate or rates.



Sec. 327.9  Assessment risk categories and pricing methods.

    (a) Risk Categories. Each insured depository institution shall be 
assigned to one of the following four Risk Categories based upon the 
institution's capital evaluation and supervisory evaluation as defined 
in this section.
    (1) Risk Category I. All institutions in Supervisory Group A that 
are Well Capitalized;
    (2) Risk Category II. All institutions in Supervisory Group A that 
are Adequately Capitalized, and all institutions in Supervisory Group B 
that are either Well Capitalized or Adequately Capitalized;
    (3) Risk Category III. All institutions in Supervisory Groups A and 
B that are Undercapitalized, and all institutions in Supervisory Group C 
that are Well Capitalized or Adequately Capitalized; and
    (4) Risk Category IV. All institutions in Supervisory Group C that 
are Undercapitalized.
    (b) Capital evaluations. An institution will receive one of the 
following three capital evaluations on the basis of data reported in the 
institution's Consolidated Reports of Condition and Income, Report of 
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks, 
or Thrift Financial Report dated as of March 31 for the assessment 
period beginning the preceding January 1; dated as of June 30 for the 
assessment period beginning the preceding April 1; dated as of September 
30 for the assessment period beginning the preceding July 1; and dated 
as of December 31 for the assessment period beginning the preceding 
October 1.
    (1) Well Capitalized. (i) Except as provided in paragraph (b)(1)(ii) 
of this section, a Well Capitalized institution is one that satisfies 
each of the following capital ratio standards: Total risk-based ratio, 
10.0 percent or greater; Tier 1 risk-based ratio, 6.0 percent or 
greater; and Tier 1 leverage ratio, 5.0 percent or greater.
    (ii) For purposes of this section, an insured branch of a foreign 
bank will be deemed to be Well Capitalized if the insured branch:
    (A) Maintains the pledge of assets required under Sec. 347.209 of 
this chapter; and
    (B) Maintains the eligible assets prescribed under Sec. 347.210 of 
this chapter at 108 percent or more of the average book value of the 
insured branch's third-party liabilities for the quarter ending on the 
report date specified in paragraph (b) of this section.
    (2) Adequately Capitalized. (i) Except as provided in paragraph 
(b)(2)(ii) of this section, an Adequately Capitalized institution is one 
that does not satisfy the standards of Well Capitalized under this 
paragraph but satisfies each of the following capital ratio standards: 
Total risk-based ratio, 8.0 percent or greater; Tier 1 risk-based ratio, 
4.0 percent or greater; and Tier 1 leverage ratio, 4.0 percent or 
greater.
    (ii) For purposes of this section, an insured branch of a foreign 
bank will be deemed to be Adequately Capitalized if the insured branch:
    (A) Maintains the pledge of assets required under Sec. 347.209 of 
this chapter; and
    (B) Maintains the eligible assets prescribed under Sec. 347.210 of 
this chapter at 106 percent or more of the average book value of the 
insured branch's third-

[[Page 300]]

party liabilities for the quarter ending on the report date specified in 
paragraph (b) of this section; and
    (C) Does not meet the definition of a Well Capitalized insured 
branch of a foreign bank.
    (3) Undercapitalized. An undercapitalized institution is one that 
does not qualify as either Well Capitalized or Adequately Capitalized 
under paragraphs (b)(1) and (b)(2) of this section.
    (c) Supervisory evaluations. Each institution will be assigned to 
one of three Supervisory Groups based on the Corporation's consideration 
of supervisory evaluations provided by the institution's primary federal 
regulator. The supervisory evaluations include the results of 
examination findings by the primary federal regulator, as well as other 
information that the primary federal regulator determines to be 
relevant. In addition, the Corporation will take into consideration such 
other information (such as state examination findings, if appropriate) 
as it determines to be relevant to the institution's financial condition 
and the risk posed to the Deposit Insurance Fund. The three Supervisory 
Groups are:
    (1) Supervisory Group ``A.'' This Supervisory Group consists of 
financially sound institutions with only a few minor weaknesses;
    (2) Supervisory Group ``B.'' This Supervisory Group consists of 
institutions that demonstrate weaknesses which, if not corrected, could 
result in significant deterioration of the institution and increased 
risk of loss to the Deposit Insurance Fund; and
    (3) Supervisory Group ``C.'' This Supervisory Group consists of 
institutions that pose a substantial probability of loss to the Deposit 
Insurance Fund unless effective corrective action is taken.
    (d) Determining Assessment Rates for Risk Category I Institutions. 
Subject to paragraphs (d)(4), (6), (7) and (8) of this section, an 
insured depository institution in Risk Category I, except for a large 
institution that has at least one long-term debt issuer rating, as 
defined in Sec. 327.8(i), shall have its assessment rate determined 
using the supervisory ratings and financial ratios method set forth in 
paragraph (d)(1) of this section. A large insured depository institution 
in Risk Category I that has at least one long-term debt issuer rating 
shall have its assessment rate determined using the supervisory and debt 
ratings method set forth in paragraph (d)(2) of this section (subject to 
paragraphs (d)(4), (6), (7) and (8) of this section). The assessment 
rate for a large institution whose assessment rate in the prior quarter 
was determined using the supervisory and debt ratings method, but which 
no longer has a long-term debt issuer rating, shall be determined using 
the supervisory ratings and financial ratios method.
    (1) Supervisory ratings and financial ratios method. Under the 
supervisory ratings and financial ratios method for Risk Category I 
institutions, each of five financial ratios and a weighted average of 
CAMELS component ratings will be multiplied by a corresponding pricing 
multiplier. The sum of these products will be added to or subtracted 
from a uniform amount. The resulting sum, subject to adjustment pursuant 
to paragraph (d)(4) of this section, if appropriate, and adjusted for 
the actual assessment rates set by the Board under Sec. 327.10, will 
equal an institution's assessment rate; provided, however, that no 
institution's assessment rate will be less than the minimum rate in 
effect for Risk Category I institutions for that quarter nor greater 
than the maximum rate in effect for Risk Category I institutions for 
that quarter. The five financial ratios are: Tier 1 Leverage Ratio; 
Loans past due 30-89 days/gross assets; Nonperforming assets/gross 
assets; Net loan charge-offs/gross assets; and Net income before taxes/
risk-weighted assets. The ratios are defined in Table A.1 of Appendix A 
to this subpart. The ratios will be determined for an assessment period 
based upon information contained in an institution's report of condition 
filed as of the last day of the assessment period as set out in Sec. 
327.9(b). The weighted average of CAMELS component ratings is created by 
multiplying each component by the following percentages and adding the 
products: Capital adequacy--25%, Asset quality--20%, Management--25%, 
Earnings--10%, Liquidity--10%, and Sensitivity to market risk--10%. 
Appendix A to this subpart contains the initial values of

[[Page 301]]

the pricing multipliers and uniform amount, describes their derivation, 
and explains how they will be periodically updated.
    (i) Publication of uniform amount and pricing multipliers. The FDIC 
will publish notice in the Federal Register whenever a change is made to 
the uniform amount or the pricing multipliers for the supervisory 
ratings and financial ratios method.
    (ii) Implementation of CAMELS rating changes--(A) Changes between 
risk categories. If, during a quarter, a CAMELS rating change occurs 
that results in an institution whose Risk Category I assessment rate is 
determined using the supervisory ratings and financial ratios method 
moving from Risk Category I to Risk Category II, III or IV, the 
institution's assessment rate for the portion of the quarter that it was 
in Risk Category I shall be determined using the CAMELS rating in effect 
before the change, subject to adjustment pursuant to paragraph (d)(4) of 
this section, if appropriate, and adjusted for the actual assessment 
rates set by the Board under Sec. 327.10. For the portion of the 
quarter that the institution was not in Risk Category I, the 
institution's assessment rate shall be determined under the assessment 
schedule for the appropriate Risk Category. If, during a quarter, a 
CAMELS rating change occurs that results in an institution (other than a 
large institution that has at least one long-term debt issuer rating) 
moving from Risk Category II, III or IV to Risk Category I, the 
institution's assessment rate for the portion of the quarter that it was 
in Risk Category I shall be determined using the supervisory ratings and 
financial ratios method, subject to adjustment pursuant to paragraph 
(d)(4) of this section, if appropriate, and adjusted for the actual 
assessment rates set by the Board under Sec. 327.10. For the portion of 
the quarter that the institution was not in Risk Category I, the 
institution's assessment rate shall be determined under the assessment 
schedule for the appropriate Risk Category.
    (B) Changes within Risk Category I. If, during a quarter, an 
institution's CAMELS component ratings change in a way that would change 
the institution's assessment rate within Risk Category I, the assessment 
rate for the period before the change shall be determined under the 
supervisory ratings and financial ratios method using the CAMELS 
component ratings in effect before the change. Beginning on the date of 
the CAMELS component ratings change, the assessment rate for the 
remainder of the quarter shall be determined using the CAMELS component 
ratings in effect after the change.
    (2) Supervisory and debt ratings method. A large insured depository 
institution in Risk Category I that has at least one long-term debt 
issuer rating shall have its assessment rate determined using the 
supervisory and debt ratings method (subject to paragraphs (d)(4) 
through (8) of this section). Its CAMELS component ratings will be 
weighted to derive a weighted average CAMELS rating using the same 
weights applied in the supervisory ratings and financial ratios method 
as set forth under paragraph (d)(1) of this section. Long-term debt 
issuer ratings will be converted to numerical values between 1 and 3 as 
provided in Appendix B to this subpart and the converted values will be 
averaged. The weighted average CAMELS rating and the average of 
converted long-term debt issuer ratings each will be multiplied by 1.176 
(which shall be the pricing multiplier), and the products will be 
summed. To this result will be added -1.882 (which shall be a uniform 
amount for all institutions subject to the supervisory and debt ratings 
method). The resulting sum, subject to adjustment pursuant to paragraph 
(d)(4) of this section, if appropriate, and adjusted for the actual 
assessment rates set by the Board pursuant to Sec. 327.10, will equal 
an institution's assessment rate; provided, however, that no 
institution's assessment rate will be less than the minimum rate in 
effect for Risk Category I institutions for that quarter nor greater 
than the maximum rate in effect for Risk Category I institutions for 
that quarter.
    (3) Assessment rate for insured branches of foreign banks--(i) 
Insured branches of foreign banks in Risk Category I. Insured branches 
of foreign banks in Risk Category I shall be assessed using the weighted 
average ROCA component

[[Page 302]]

rating, as determined under paragraph (d)(3)(ii) of this section.
    (ii) Weighted average ROCA component rating. The weighted average 
ROCA component rating shall equal the sum of the products that result 
from multiplying ROCA component ratings by the following percentages: 
Risk Management--35%, Operational Controls--25%, Compliance--25%, and 
Asset Quality--15%. The weighted average ROCA rating will be multiplied 
by 2.353 (which shall be the pricing multiplier). To this result will be 
added -1.882 (which shall be a uniform amount for all insured branches 
of foreign banks). The resulting sum, subject to adjustment pursuant to 
paragraph (d)(4) of this section and adjusted for assessment rates set 
by the FDIC pursuant to Sec. 327.10(b), will equal an institution's 
assessment rate; provided, however, that no institution's assessment 
rate will be less than the minimum rate in effect for Risk Category I 
institutions for that quarter nor greater than the maximum rate in 
effect for Risk Category I institutions for that quarter.
    (4) Adjustments to the initial risk assignment for large banks or 
insured branches of foreign banks--(i) Basis for and size of adjustment. 
Within Risk Category I, large institutions and insured branches of 
foreign banks are subject to risk assignment adjustment. In determining 
whether to make an adjustment for a large institution or an insured 
branch of a foreign bank, the FDIC may consider other relevant 
information in addition to the factors used to derive the risk 
assignment under paragraphs (d)(1), (2), or (3) of this section. 
Relevant information includes financial performance and condition 
information, other market information, and stress considerations, as 
described in Appendix C to this subpart. Any such adjustment shall be 
limited to a change in assessment rate of up to 0.5 basis points higher 
or lower than the rate determined using the supervisory ratings and 
financial ratios method, the supervisory and debt ratings method, or the 
weighted average ROCA component rating method, whichever is applicable.
    (ii) Adjustment subject to maximum and minimum rates. No rate will 
be adjusted below the minimum rate or above the maximum rate for Risk 
Category I institutions in effect for the quarter.
    (iii) Prior notice of adjustments--(A) Prior notice of upward 
adjustment. Prior to making any upward adjustment to an institution's 
rate because of considerations of additional risk information, the FDIC 
will formally notify the institution and its primary federal regulator 
and provide an opportunity to respond. This notification will include 
the reasons for the adjustment and when the adjustment will take effect.
    (B) Prior notice of downward adjustment. Prior to making any 
downward adjustment to an institution's rate because of considerations 
of additional risk information, the FDIC will formally notify the 
institution's primary federal regulator and provide an opportunity to 
respond.
    (iv) Determination whether to adjust upward; effective period of 
adjustment. After considering an institution's and the primary federal 
regulator's responses to the notice, the FDIC will determine whether the 
adjustment to an institution's assessment rate is warranted, taking into 
account any revisions to weighted average CAMELS component ratings, 
long-term debt issuer ratings, and financial ratios, as well as any 
actions taken by the institution to address the FDIC's concerns 
described in the notice. The FDIC will evaluate the need for the 
adjustment each subsequent assessment period, until it determines that 
an adjustment is no longer warranted. The amount of adjustment will in 
no event be larger than that contained in the initial notice without 
further notice to, and consideration of, responses from the primary 
federal regulator and the institution.
    (v) Determination whether to adjust downward; effective period of 
adjustment. After considering the primary federal regulator's responses 
to the notice, the FDIC will determine whether the adjustment to an 
institution's assessment rate is warranted, taking into account any 
revisions to weighted average CAMELS component ratings, long-term debt 
issuer ratings, and financial ratios, as well as any actions taken by 
the institution to address the FDIC's concerns described in the notice. 
Any

[[Page 303]]

downward adjustment in an institution's assessment rate will remain in 
effect for subsequent assessment periods until the FDIC determines that 
an adjustment is no longer warranted. Downward adjustments will be made 
without notification to the institution. However, the FDIC will provide 
advance notice to an institution and its primary federal regulator and 
give them an opportunity to respond before removing a downward 
adjustment.
    (vi) Adjustment without notice. Notwithstanding the notice 
provisions set forth above, the FDIC may change an institution's 
assessment rate without advance notice under this paragraph, if the 
institution's supervisory or agency ratings or the financial ratios set 
forth in Appendix A to this subpart (for an institution without long-
term debt issuer ratings) deteriorate.
    (5) Implementation of Supervisory and Long-Term Debt Issuer Rating 
Changes--(i) Changes between risk categories. If, during a quarter, a 
CAMELS rating change occurs that results in an institution whose Risk 
Category I assessment rate is determined using the supervisory and debt 
ratings method or an insured branch of a foreign bank moving from Risk 
Category I to Risk Category II, III or IV, the institution's assessment 
rate for the portion of the quarter that it was in Risk Category I shall 
be based upon its assessment rate for the prior quarter; no new Risk 
Category I assessment rate will be developed for the quarter in which 
the institution moved to Risk Category II, III or IV. If, during a 
quarter, a CAMELS rating change occurs that results in a large 
institution with a long-term debt issuer rating or an insured branch of 
a foreign bank moving from Risk Category II, III or IV to Risk Category 
I, the institution's assessment rate for the portion of the quarter that 
it was in Risk Category I shall equal the rate determined under 
paragraphs (d)(2) and (4) or (d)(3) and (4) of this section, as 
appropriate.
    (ii) Changes within Risk Category I. If, during a quarter, an 
institution whose Risk Category I assessment rate is determined using 
the supervisory and debt ratings method remains in Risk Category I, but 
a CAMELS component or a long-term debt issuer rating changes that would 
affect the institution's assessment rate, or if, during a quarter, an 
insured branch of a foreign bank remains in Risk Category I, but a ROCA 
component rating changes that would affect the institution's assessment 
rate, separate assessment rates for the portion(s) of the quarter before 
and after the change(s) shall be determined under paragraphs (d)(2) and 
(4) or (d)(3) and (4) of this section, as appropriate.
    (6) Request to be treated as a large institution--(i) Procedure. Any 
institution in Risk Category I with assets of between $5 billion and $10 
billion may request that the FDIC determine its assessment rate as a 
large institution. The FDIC will grant such a request if it determines 
that it has sufficient information to do so. The absence of long-term 
debt issuer ratings alone will not preclude the FDIC from granting a 
request. The assessment rate for an institution without a long-term debt 
issuer rating will be derived using the supervisory ratings and 
financial ratios method, but will be subject to adjustment. Any such 
request must be made to the FDIC's Division of Insurance and Research. 
Any approved change will become effective within one year from the date 
of the request. If an institution whose request has been granted 
subsequently reports assets of less than $5 billion in its report of 
condition for four consecutive quarters, the FDIC will consider such 
institution to be a small institution subject to the supervisory ratings 
and financial ratios method. An institution that disagrees with the 
FDIC's determination that it is a large or small institution may request 
review of that determination pursuant to Sec. 327.4(c).
    (ii) Time limit on subsequent request for alternate method. An 
institution whose request to be assessed as a large institution is 
granted by the FDIC shall not be eligible to request that it be assessed 
as a small institution for a period of three years from the first 
quarter in which its approved request to be assessed as a large bank 
became effective. Any request to be assessed as a small institution must 
be made to the FDIC's Division of Insurance and Research.

[[Page 304]]

    (7) New and established institutions and exceptions--(i) New Risk 
Category I institutions--(A) Rule as of January 1, 2010. Effective for 
assessment periods beginning on or after January 1, 2010, a new 
institution shall be assessed the Risk Category I maximum rate for the 
relevant assessment period, except as provided in paragraphs (d)(7)(ii)-
(viii) of this section.
    (B) Rule prior to January 1, 2010. Prior to January 1, 2010, a new 
institution's risk assignment shall be determined under paragraph (d)(1) 
or (2) of this section, as appropriate. Prior to January 1, 2010, a Risk 
Category I institution that has no CAMELS component ratings shall be 
assessed at one basis point above the minimum rate applicable to Risk 
Category I institutions until it receives CAMELS component ratings. If 
an institution has less than $10 billion in assets or has at least $10 
billion in assets and no long-term debt issuer rating, its assessment 
rate will be determined under the supervisory ratings and financial 
ratios method once it receives CAMELS component ratings. The assessment 
rate will be determined by annualizing, where appropriate, financial 
ratios obtained from the reports of condition that have been filed, 
until the earlier of the following two events occurs: the institution 
files four reports of condition, or, if it has at least $10 billion in 
assets, it receives a long-term debt issuer rating.
    (ii) Merger or consolidation involving new and established 
institution(s). Subject to paragraphs (d)(7)(iii)-(viii) of this 
section, when an established institution merges into or consolidates 
with a new institution, the resulting institution is a new institution 
unless:
    (A) The assets of the established institution, as reported in its 
report of condition for the quarter ending immediately before the 
merger, exceeded the assets of the new institution, as reported in its 
report of condition for the quarter ending immediately before the 
merger; and
    (B) Substantially all of the management of the established 
institution continued as management of the resulting or surviving 
institution.
    (iii) Consolidation involving established institutions. When 
established institutions consolidate into a new institution, the 
resulting institution is an established institution.
    (iv) Grandfather exception. If a new institution merges into an 
established institution, and the merger agreement was entered into on or 
before July 11, 2006, the resulting institution shall be deemed to be an 
established institution for purposes of this section.
    (v) Subsidiary exception. Subject to paragraph (d)(7)(vi) of this 
section, a new institution will be considered established if it is a 
wholly owned subsidiary of:
    (A) A company that is a bank holding company under the Bank Holding 
Company Act of 1956 or a savings and loan holding company under the Home 
Owners' Loan Act, and:
    (1) At least one eligible depository institution (as defined in 12 
CFR 303.2(r)) that is owned by the holding company has been chartered as 
a bank or savings association for at least five years as of the date 
that the otherwise new institution was established; and
    (2) The holding company has a composite rating of at least ``2'' for 
bank holding companies or an above average or ``A'' rating for savings 
association holding companies and at least 75 percent of its insured 
depository institution assets are assets of eligible depository 
institutions, as defined in 12 CFR 303.2(r); or
    (B) An eligible depository institution, as defined in 12 CFR 
303.2(r), that has been chartered as a bank or savings association for 
at least five years as of the date that the otherwise new institution 
was established.
    (vi) Effect of credit union conversion. In determining whether an 
insured depository institution is new or established, as those terms are 
defined in Sec. 327.8, the FDIC will include any period of time that 
the institution was a federally insured credit union.
    (vii) CAMELS ratings for the surviving institution in a merger or 
consolidation. When an established institution merges with or 
consolidates into a new institution, if the FDIC determines the 
resulting institution to be an established institution under paragraph 
(d)(ii) of this section, its CAMELS ratings will be based upon the 
established institution's ratings prior to the merger or

[[Page 305]]

consolidation until new ratings become available.
    (viii) Rate applicable to institutions subject to subsidiary or 
credit union exception. On or after January 1, 2010, if an institution 
is considered established under paragraph (d)(7)(v) or (vi) of this 
section, but does not have CAMELS component ratings, it shall be 
assessed at one basis point above the minimum rate applicable to Risk 
Category I institutions until it receives CAMELS component ratings. If 
an institution has less than $10 billion in assets or has at least $10 
billion in assets and no long-term debt issuer rating, its assessment 
rate will be determined under the supervisory ratings and financial 
ratios method once it receives CAMELS component ratings. The assessment 
rate will be determined by annualizing, where appropriate, financial 
ratios obtained from all reports of condition that have been filed, 
until the earlier of the following two events occurs: the institution 
files four reports of condition, or, if it has at least $10 billion in 
assets, it receives a long-term debt issuer rating.
    (ix) Request for review. An institution that disagrees with the 
FDIC's determination that it is a new institution may request review of 
that determination pursuant to Sec. 327.4(c).
    (8) Assessment rates for bridge banks and conservatorships. 
Institutions that are bridge banks under 12 U.S.C. 1821(n) and 
institutions for which the Corporation has been appointed or serves as 
conservator shall, in all cases, be assessed at the Risk Category I 
minimum rate.

[71 FR 69309, Nov. 30, 2006]



Sec. 327.10  Assessment rate schedules.

    (a) Base Assessment Schedule. The base annual assessment rate for an 
insured depository institution shall be the rate prescribed in the 
following schedule:

                        Table 1 to Paragraph (a)
------------------------------------------------------------------------
                                             Risk Category
                             -------------------------------------------
                                       I*
                             ----------------------   II     III     IV
                               Minimum    Maximum
------------------------------------------------------------------------
Annual Rates (in basis                2          4      7      25     40
 points)....................
------------------------------------------------------------------------
* Rates for institutions that do not pay the minimum or maximum rate
  vary between these rates.

    (1) Risk Category I Base Rate Schedule. The base annual assessment 
rates for all institutions in Risk Category I shall range from 2 to 4 
basis points.
    (2) Risk Category II, III, and IV Base Rate Schedule. The base 
annual assessment rates for Risk Categories II, III, and IV shall be 7, 
25, and 40 basis points respectively.
    (3) All institutions in any one risk category, other than Risk 
Category I, will be charged the same assessment rate.
    (b) Adjusted Rate Schedule. Beginning on January 1, 2007, the 
adjusted annual assessment rate for an insured depository institution 
shall be the rate prescribed in the following schedule:

                        Table 1 to Paragraph (b)
------------------------------------------------------------------------
                                             Risk Category
                             -------------------------------------------
                                       I*
                             ----------------------   II     III     IV
                               Minimum    Maximum
------------------------------------------------------------------------
Annual Rates (in basis                5          7     10      28     43
 points)....................
------------------------------------------------------------------------
*Rates for institutions that do not pay the minimum or maximum rate vary
  between these rates.

    (1) Risk Category I Adjusted Rate Schedule. The adjusted annual 
assessment rates for all institutions in Risk Category I shall range 
from 5 to 7 basis points.

[[Page 306]]

    (2) Risk Category II, III, and IV Adjusted Rate Schedule. The 
adjusted annual assessment rates for Risk Categories II, III, and IV 
shall be 10, 28, and 43 basis points respectively.
    (3) All institutions in any one risk category, other than Risk 
Category I, will be charged the same assessment rate.
    (c) Rate schedule adjustments and procedures--(1) Adjustments. The 
Board may increase or decrease the base assessment schedule up to a 
maximum increase of 3 basis points or a fraction thereof or a maximum 
decrease of 3 basis points or a fraction thereof (after aggregating 
increases and decreases), as the Board deems necessary. Any such 
adjustment shall apply uniformly to each rate in the base assessment 
schedule. In no case may such adjustments result in an assessment rate 
that is mathematically less than zero or in a rate schedule that, at any 
time, is more than 3 basis points above or below the base assessment 
schedule for the Deposit Insurance Fund, nor may any one such adjustment 
constitute an increase or decrease of more than 3 basis points.
    (2) Amount of revenue. In setting assessment rates, the Board shall 
take into consideration the following:
    (i) Estimated operating expenses of the Deposit Insurance Fund;
    (ii) Case resolution expenditures and income of the Deposit 
Insurance Fund;
    (iii) The projected effects of assessments on the capital and 
earnings of the institutions paying assessments to the Deposit Insurance 
Fund;
    (iv) The risk factors and other factors taken into account pursuant 
to 12 U.S.C. 1817(b)(1); and
    (v) Any other factors the Board may deem appropriate.
    (3) Adjustment procedure. Any adjustment adopted by the Board 
pursuant to this paragraph will be adopted by rulemaking, except that 
the Corporation may set assessment rates as necessary to manage the 
reserve ratio, within set parameters not exceeding cumulatively 3 basis 
points, pursuant to paragraph (c)(1) of this section, without further 
rulemaking.
    (4) Announcement. The Board shall announce the assessment schedule 
and the amount and basis for any adjustment thereto not later than 30 
days before the quarterly certified statement invoice date specified in 
Sec. 327.3(b) of this part for the first assessment period for which 
the adjustment shall be effective. Once set, rates will remain in effect 
until changed by the Board.
    (d) Assessment Rate Schedule for First Assessment Period of 2009. 
The annual assessment rate for an insured depository institution for the 
assessment period beginning January 1, 2009 and ending March 31, 2009, 
shall be the rate prescribed in the following schedule:

----------------------------------------------------------------------------------------------------------------
                                                                          Risk category
                                                ----------------------------------------------------------------
                                                            I *
                                                --------------------------      II          III           IV
                                                   Minimum      Maximum
----------------------------------------------------------------------------------------------------------------
Annual Rates (in basis points).................           12           14           17           35           50
----------------------------------------------------------------------------------------------------------------
\*\ Rates for institutions that do not pay the minimum or maximum rate will vary between these rates.

    (1) Risk Category I Rate Schedule. The annual assessment rates for 
all institutions in Risk Category I shall range from 12 to 14 basis 
points.
    (2) Risk Category II, III, and IV Rate Schedule. The annual 
assessment rates for Risk Categories II, III, and IV shall be 17, 35, 
and 50 basis points respectively.
    (3) All institutions in any one risk category, other than Risk 
Category I, will be charged the same assessment rate.

[71 FR 69309, Nov. 30, 2006, as amended at 73 FR 78161, Dec. 22, 2008]



                Sec. Appendix A to Subpart A of Part 327

         Method to Derive Pricing Multipliers and Uniform Amount

                             I. Introduction

    The uniform amount and pricing multipliers are derived from:

[[Page 307]]

     A model (the Statistical Model) that estimates 
the probability that a Risk Category I institution will be downgraded to 
a composite CAMELS rating of 3 or worse within one year;
     Minimum and maximum downgrade probability cutoff 
values, based on data from June 2006, that will determine which small 
institutions will be charged the minimum and maximum assessment rates in 
Risk Category I;
     The minimum base assessment rate for Risk 
Category I, equal to two basis points, and
     The maximum base assessment rate for Risk 
Category I, which is two basis points higher than the minimum rate.

                        II. The Statistical Model

    The Statistical Model is defined in equation 1a below.
    [GRAPHIC] [TIFF OMITTED] TR30NO06.022
    
where Downgrade(0,1)i,t (the dependent variable--the event 
being explained) is the incidence of downgrade from a composite rating 
of 1 or 2 to a rating of 3 or worse during an on-site examination for an 
institution i between 3 and 12 months after time t. Time t is the end of 
a year within the multi-year period over which the model was estimated 
(as explained below). The dependent variable takes a value of 1 if a 
downgrade occurs and 0 if it does not.
    The explanatory variables (regressors) in the model are five 
financial ratios and a weighted average of the ``C,'' ``A,'' ``M,'' 
``E'' and ``L'' component ratings. The five financial ratios included in 
the model are:
     Tier 1 leverage ratio
     Loans past due 30-89 days/Gross assets
     Nonperforming assets/Gross assets
     Net loan charge-offs/Gross assets
     Net income before taxes/Risk-weighted assets.
    The financial ratios and the weighted average of the ``C,'' ``A,'' 
``M,'' ``E'' and ``L'' component ratings (collectively, the regressors) 
are defined in Table A.1. The component rating for sensitivity to market 
risk (the ``S'' rating) is not available for years prior to 1997. As a 
result, and as described in Table A.1, the Statistical Model is 
estimated using a weighted average of five component ratings excluding 
the ``S'' component. In addition, delinquency and non-accrual data on 
government guaranteed loans are not available before 1993 for Call 
Report filers and before the third quarter of 2005 for TFR filers. As a 
result, and as also described in Table A.1, the Statistical Model is 
estimated without deducting delinquent or past-due government guaranteed 
loans from either the loans past due 30-89 days to gross assets ratio or 
the nonperforming assets to gross assets ratio.

                                      Table A.1.--Definitions of Regressors
----------------------------------------------------------------------------------------------------------------
                      Regressor                                               Description
----------------------------------------------------------------------------------------------------------------
Tier 1 Leverage Ratio (%)                             Tier 1 capital for Prompt Corrective Action (PCA) divided
                                                       by adjusted average assets based on the definition for
                                                       prompt corrective action
----------------------------------------------------------------------------------------------------------------
Loans Past Due 30-89 Days/Gross Assets (%)            Total loans and lease financing receivables past due 30
                                                       through 89 days and still accruing interest divided by
                                                       gross assets (gross assets equal total assets plus
                                                       allowance for loan and lease financing receivable losses
                                                       and allocated transfer risk)
----------------------------------------------------------------------------------------------------------------
Nonperforming Assets/Gross Assets (%)                 Sum of total loans and lease financing receivables past
                                                       due 90 or more days and still accruing interest, total
                                                       nonaccrual loans and lease financing receivables, and
                                                       other real estate owned divided by gross assets
----------------------------------------------------------------------------------------------------------------

[[Page 308]]

 
Net Loan Charge-Offs/Gross Assets (%)                 Total charged-off loans and lease financing receivables
                                                       debited to the allowance for loan and lease losses less
                                                       total recoveries credited to the allowance to loan and
                                                       lease losses for the most recent twelve months divided by
                                                       gross assets
----------------------------------------------------------------------------------------------------------------
Net Income before Taxes/Risk-Weighted Assets (%)      Income before income taxes and extraordinary items and
                                                       other adjustments for the most recent twelve months
                                                       divided by risk-weighted assets
----------------------------------------------------------------------------------------------------------------
Weighted Average of C, A, M, E and L Component        The weighted sum of the ``C,'' ``A,'' ``M,'' ``E'' and
 Ratings                                               ``L'' CAMELS components, with weights of 28 percent each
                                                       for the ``C'' and ``M'' components, 22 percent for the
                                                       ``A'' component, and 11 percent each for the ``E'' and
                                                       ``L'' components. (For the regression, the ``S''
                                                       component is omitted.)
----------------------------------------------------------------------------------------------------------------

    The financial ratio regressors used to estimate the downgrade 
probabilities are obtained from quarterly reports of condition (Reports 
of Condition and Income and Thrift Financial Reports). The weighted 
average of the ``C,'' ``A,'' ``M,'' ``E'' and ``L'' component ratings 
regressor is based on component ratings obtained from the most recent 
bank examination conducted within 24 months before the date of the 
report of condition.
    The Statistical Model uses ordinary least squares (OLS) regression 
to estimate downgrade probabilities. The model is estimated with data 
from a multi-year period (as explained below) for all institutions in 
Risk Category I, except for institutions established within five years 
before the date of the report of condition.
    The OLS regression estimates coefficients, [beta]j, for a 
given regressor j and a constant amount, [beta]0, as 
specified in equation 1a. As shown in equation 1b below, these 
coefficients are multiplied by values of risk measures at time T, which 
is the date of the report of condition corresponding to the end of the 
quarter for which the assessment rate is computed. The sum of the 
products is then added to the constant amount to produce an estimated 
probability, di,T, that an institution will be downgraded to 
3 or worse within 3 to 12 months from time T.
    The risk measures are financial ratios as defined in Table A.1, 
except that the loans past due 30 to 89 days ratio and the nonperforming 
asset ratio are adjusted to exclude the maximum amount recoverable from 
the U.S. Government, its agencies or government-sponsored agencies, 
under guarantee or insurance provisions. Also, the weighted sum of six 
CAMELS component ratings is used, with weights of 25 percent each for 
the ``C'' and ``M'' components, 20 percent for the ``A'' component, and 
10 percent each for the ``E,'' ``L,'' and ``S'' components.
[GRAPHIC] [TIFF OMITTED] TR30NO06.023

      III. Minimum and maximum downgrade probability cutoff values

    The pricing multipliers are also determined by minimum and maximum 
downgrade probability cutoff values, which will be computed as follows:
     The minimum downgrade probability cutoff value 
will be the maximum downgrade probability among the forty-five percent 
of all small insured institutions in Risk Category I (excluding new 
institutions) with the lowest estimated downgrade probabilities, 
computed using values of the risk measures

[[Page 309]]

as of June 30, 2006.\1\ The minimum downgrade probability cutoff value 
is approximately 2 percent.
     The maximum downgrade probability cutoff value 
will be the minimum downgrade probability among the five percent of all 
small insured institutions in Risk Category I (excluding new 
institutions) with the highest estimated downgrade probabilities, 
computed using values of the risk measures as of June 30, 2006.\2\ The 
maximum downgrade probability cutoff value is approximately 14 percent.

        IV. Derivation of uniform amount and pricing multipliers

    The uniform amount and pricing multipliers used to compute the 
annual base assessment rate in basis points, PiT, for any 
such institution i at a given time T will be determined from the 
Statistical Model, the minimum and maximum downgrade probability cutoff 
values, and minimum and maximum base assessment rates in Risk Category I 
as follows:
[GRAPHIC] [TIFF OMITTED] TR30NO06.026

where [alpha]0 and [alpha]1 are a constant term 
and a scale factor used to convert diT (the estimated 
downgrade probability for institution i at a given time T from the 
Statistical Model) to an assessment rate, respectively. The numbers 2 
and 4 in the restriction to equation 2 are the minimum base assessment 
rate and maximum base assessment rate, respectively, and they are 
expressed in basis points.
[GRAPHIC] [TIFF OMITTED] TR30NO06.027

    Solving equation 2 for minimum and maximum base assessment rates 
simultaneously, (2 = [alpha]0 + [alpha]1 * 0.02 
and 4 = [alpha]0 + [alpha]1 * 0.14), where 0.02 is 
the minimum downgrade probability cutoff value and 0.14 is the maximum 
downgrade probability cutoff value, results in values for the constant 
amount, [alpha]0, and the scale factor, [alpha]1:
---------------------------------------------------------------------------

    \1\ As used in this context, a ``new institution'' means an 
institution that has been chartered as a bank or thrift for less than 
five years.
    \2\ As used in this context, a ``new institution'' means an 
institution that has been chartered as a bank or thrift for less than 
five years.
[GRAPHIC] [TIFF OMITTED] TR30NO06.028

[GRAPHIC] [TIFF OMITTED] TR30NO06.024

    Substituting equations 1b, 3 and 4 into equation 2 produces an 
annual base assessment rate for institution i at time T, PiT, 
in terms of the uniform amount, the pricing multipliers and the ratios 
and weighted average CAMELS component rating referred to in 12 CFR 
327.9(d)(2)(i):

[[Page 310]]

[GRAPHIC] [TIFF OMITTED] TR30NO06.025

where 1.67+16.67*[beta]0 equals the uniform amount, 
16.67*[beta]j is a pricing multiplier for the associated risk 
measure j, and T is the date of the report of condition corresponding to 
the end of the quarter for which the assessment rate is computed.

     V. Updating the Statistical Model, uniform amount, and pricing 
                               multipliers

    The initial Statistical Model is estimated using year-end financial 
ratios and the weighted average of the ``C,'' ``A,'' ``M,'' ``E'' and 
``L'' component ratings over the 1984 to 2004 period and downgrade data 
from the 1985 to 2005 period. The FDIC may, from time to time, but no 
more frequently than annually, re-estimate the Statistical Model with 
updated data and publish a new formula for determining assessment 
rates--equation 5--based on updated uniform amounts and pricing 
multipliers. However, the minimum and maximum downgrade probability 
cutoff values will not change without additional notice-and-comment 
rulemaking. The period covered by the analysis will be lengthened by one 
year each year; however, from time to time, the FDIC may drop some 
earlier years from its analysis.

[71 FR 69313, Nov. 30, 2006]



                Sec. Appendix B to Subpart A of Part 327

          Numerical Conversion of Long-term Debt Issuer Ratings
------------------------------------------------------------------------
                                                               Converted
           Current long-term  debt issuer rating *               value
------------------------------------------------------------------------
Standard & Poor's
  AAA.......................................................        1.00
  AA+.......................................................        1.05
  AA........................................................        1.15
  AA-.......................................................        1.30
  A+........................................................        1.50
  A.........................................................        1.80
  A-........................................................        2.20
  BBB+......................................................        2.70
  BBB or worse..............................................        3.00
Moody's
  Aaa.......................................................        1.00
  Aa1.......................................................        1.05
  Aa2.......................................................        1.15
  Aa3.......................................................        1.30
  A1........................................................        1.50
  A2........................................................        1.80
  A3........................................................        2.20
  Baa1......................................................        2.70
  Baa2 or worse.............................................        3.00
Fitch's
  AAA.......................................................        1.00
  AA+.......................................................        1.05
  AA........................................................        1.15
  AA-.......................................................        1.30
  A+........................................................        1.50
  A.........................................................        1.80
  A-........................................................        2.20
  BBB+......................................................        2.70
  BBB or worse..............................................        3.00
------------------------------------------------------------------------
* A current rating is defined as one that has been assigned or reviewed
  in the last 12 months. Stale ratings are not considered.


[71 FR 69313, Nov. 30, 2006]

                   Appendix C to Subpart A of Part 327

  Additional Risk Considerations for Large Risk Category I Institutions
------------------------------------------------------------------------
                            Examples of Associated Risk Indicators or
   Information source                      Information
------------------------------------------------------------------------
Financial Performance    Capital Measures (Level and Trend)
 and Condition
 Information
                             Regulatory capital ratios
                             Capital composition
                             Dividend payout ratios
                             Internal capital growth
                             rates relative to asset growth
                         Profitability Measures (Level and Trend)

[[Page 311]]

 
                             Return on assets and
                             return on risk-adjusted assets
                             Net interest margins,
                             funding costs and volumes, earning asset
                             yields and volumes
                             Noninterest revenue
                             sources
                             Operating expenses
                             Loan loss provisions
                             relative to problem loans
                             Historical volatility of
                             various earnings sources
                         Asset Quality Measures (Level and Trend)
                          Loan and securities
                          portfolio composition and volume of higher
                          risk lending activities (e.g., sub-prime
                          lending)
                             Loan performance measures
                             (past due, nonaccrual, classified and
                             criticized, and renegotiated loans) and
                             portfolio characteristics such as internal
                             loan rating and credit score distributions,
                             internal estimates of default, internal
                             estimates of loss given default, and
                             internal estimates of exposures in the
                             event of default
                             Loan loss reserve trends
                             Loan growth and
                             underwriting trends
                             Off-balance sheet credit
                             exposure measures (unfunded loan
                             commitments, securitization activities,
                             counterparty derivatives exposures) and
                             hedging activities
                         Liquidity and Funding Measures (Level and
                          Trend)
                             Composition of deposit
                             and non-deposit funding sources
                             Liquid resources relative
                             to short-term obligations, undisbursed
                             credit lines, and contingent liabilities
                         Interest Rate Risk and Market Risk (Level and
                          Trend)
                             Maturity and repricing
                             information on assets and liabilities,
                             interest rate risk analyses
                             Trading book composition
                             and Value-at-Risk information
------------------------------------------------------------------------
Market Information           Subordinated debt spreads
                             Credit default swap
                             spreads
                             Parent's debt issuer
                             ratings and equity price volatility
                             Market-based measures of
                             default probabilities
                             Rating agency watch lists
                             Market analyst reports
------------------------------------------------------------------------
Stress Considerations    Ability to Withstand Stress Conditions
                             Internal analyses of
                             portfolio composition and risk
                             concentrations, and vulnerabilities to
                             changing economic and financial conditions
                             Stress scenario
                             development and analyses
                             Results of stress tests
                             or scenario analyses that show the degree
                             of vulnerability to adverse economic,
                             industry, market, and liquidity events.
                             Examples include:
                              i. an evaluation of credit portfolio
                               performance under varying stress
                               scenarios
                              ii. an evaluation of non-credit business
                               performance under varying stress
                               scenarios.
                              iii. an analysis of the ability of
                               earnings and capital to absorb losses
                               stemming from unanticipated adverse
                               events
                             Contingency or emergency
                             funding strategies and analyses
                             Capital adequacy
                             assessments
                         Loss Severity Indicators
                          Nature of and breadth of an
                          institution's primary business lines and the
                          degree of variability in valuations for firms
                          with similar business lines or similar
                          portfolios
                             Ability to identify and
                             describe discrete business units within the
                             banking legal entity
                             Funding structure
                             considerations relating to the order of
                             claims in the event of liquidation
                             (including the extent of subordinated
                             claims and priority claims)
                             Extent of insured
                             institutions assets held in foreign units
                             Degree of reliance on
                             affiliates and outsourcing for material
                             mission-critical services, such as
                             management information systems or loan
                             servicing, and products
                             Availability of
                             sufficient information, such as information
                             on insured deposits and qualified financial
                             contracts, to resolve an institution in an
                             orderly and cost-efficient manner
------------------------------------------------------------------------


[71 FR 69313, Nov. 30, 2006]



         Subpart B_Implementation of One-Time Assessment Credit

    Authority: 12 U.S.C. 1817(e)(3).

    Source: 71 FR 61383, Oct. 18, 2006, unless otherwise noted.



Sec. 327.30  Purpose and scope.

    (a) Scope. This subpart B of part 327 implements the one-time 
assessment credit required by section 7(e)(3) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1817(e)(3) and applies to insured depository 
institutions.

[[Page 312]]

    (b) Purpose. This subpart B of part 327 sets forth the rules for:
    (1) Determination of the aggregate amount of the one-time credit;
    (2) Identification of eligible insured depository institutions;
    (3) Determination of the amount of each eligible institution's 
December 31, 1996 assessment base ratio and one-time credit;
    (4) Transferability of credit amounts among insured depository 
institutions;
    (5) Application of such credit amounts against assessments; and
    (6) An institution's request for review of the FDIC's determination 
of a credit amount.



Sec. 327.31  Definitions.

    For purposes of this subpart and subpart C:
    (a) The average assessment rate for any assessment period means the 
aggregate assessment charged all insured depository institutions for 
that period divided by the aggregate assessment base for that period.
    (b) Board means the Board of Directors of the FDIC.
    (c) De facto rule means any transaction in which an insured 
depository institution assumes substantially all of the deposit 
liabilities and acquires substantially all of the assets of any other 
insured depository institution at the time of the transaction.
    (d) An eligible insured depository institution:
    (1) Means an insured depository institution that:
    (i) Was in existence on December 31, 1996, and paid a deposit 
insurance assessment before December 31, 1996; or
    (ii) Is a successor to an insured depository institution referred to 
in paragraph (d)(1)(i) of this section; and
    (2) does not include an institution if its insured status has 
terminated as of or after the effective date of this regulation.
    (e) Merger means any transaction in which an insured depository 
institution merges or consolidates with any other insured depository 
institution. Notwithstanding part 303, subpart D, for purposes of this 
subpart B and subpart C of this part, merger does not include 
transactions in which an insured depository institution either directly 
or indirectly acquires the assets of, or assumes liability to pay any 
deposits made in, any other insured depository institution, but there is 
not a legal merger or consolidation of the two insured depository 
institutions.
    (f) Resulting institution refers to the acquiring, assuming, or 
resulting institution in a merger.
    (g) Successor means a resulting institution or an insured depository 
institution that acquired part of another insured depository 
institution's 1996 assessment base ratio under paragraph 327.33(c) of 
this subpart under the de facto rule.



Sec. 327.32  Determination of aggregate credit amount.

    The aggregate amount of the one-time credit shall equal 
$4,707,580,238.19.



Sec. 327.33  Determination of eligible institution's credit amount.

    (a) Subject to paragraph (c) of this section, allocation of the one-
time credit shall be based on each eligible insured depository 
institution's 1996 assessment base ratio.
    (b) Subject to paragraph (c) of this section, an eligible insured 
depository institution's 1996 assessment base ratio shall consist of:
    (1) Its assessment base as of December 31, 1996 (adjusted as 
appropriate to reflect the assessment base of December 31, 1996, of all 
institutions for which it is the successor), as the numerator; and
    (2) The combined aggregate assessment bases of all eligible insured 
depository institutions, including any successor institutions, as of 
December 31, 1996, as the denominator.
    (c) If an insured depository institution is a successor to an 
eligible insured depository institution under the de facto rule, as 
defined in paragraph 327.31(c) of this subpart, the successor and the 
eligible insured depository institution will divide the eligible insured 
depository institution's 1996 assessment base ratio pro rata, based on 
the deposit liabilities assumed in the transaction. In any subsequent 
transaction involving an insured depository institution that previously 
engaged in a transaction to which the de facto rule

[[Page 313]]

applied, the insured depository institution may not be deemed to have 
transferred more than its remaining 1996 assessment base ratio. If the 
transferring institution is no longer an insured depository institution 
after the transfer, the last successor will acquire the transferring 
institution's remaining 1996 assessment base ratio.



Sec. 327.34  Transferability of credits.

    (a) Any remaining amount of the one-time assessment credit and the 
associated 1996 assessment base ratio shall transfer to a successor of 
an eligible insured depository institution.
    (b) Prior to the final determination of its 1996 assessment base and 
one-time assessment credit amount by the FDIC, an eligible insured 
depository institution may enter into an agreement to transfer any 
portion of such institution's one-time credit amount and 1996 assessment 
base ratio to another insured depository institution. The parties to the 
agreement shall notify the FDIC's Division of Finance and submit a 
written agreement, signed by legal representatives of both institutions. 
The parties must include documentation stating that each representative 
has the legal authority to bind the institution. The adjustment to 
credit amount and the associated 1996 assessment base ratio shall be 
made in the next assessment invoice that is sent at least 10 days after 
the FDIC's receipt of the written agreement.
    (c) An eligible insured depository institution may enter into an 
agreement after the final determination of its 1996 assessment base 
ratio and one-time credit amount by the FDIC to transfer any portion of 
such institution's one-time credit amount to another insured depository 
institution. The parties to the agreement shall notify the FDIC's 
Division of Finance and submit a written agreement, signed by legal 
representatives of both institutions. The parties must include 
documentation stating that each representative has the legal authority 
to bind the institution. The adjustment to the credit amount shall be 
made in the next assessment invoice that is sent at least 10 days after 
the FDIC's receipt of the written agreement.



Sec. 327.35  Application of credits.

    (a) Subject to the limitations in paragraph (b) of this section, the 
amount of an eligible insured depository institution's one-time credit 
shall be applied to the maximum extent allowable by law against that 
institution's quarterly assessment payment under subpart A of this part, 
until the institution's credit is exhausted.
    (b) The following limitations shall apply to the application of the 
credit against assessment payments.
    (1) For assessments that become due for assessment periods beginning 
in calendar years 2008, 2009, and 2010, the credit may not be applied to 
more than 90 percent of the quarterly assessment.
    (2) For an insured depository institution that exhibits financial, 
operational, or compliance weaknesses ranging from moderately severe to 
unsatisfactory, or is not at least adequately capitalized (as defined 
pursuant to section 38 of the Federal Deposit Insurance Act) at the 
beginning of an assessment period, the amount of the credit that may be 
applied against the institution's quarterly assessment for that period 
shall not exceed the amount that the institution would have been 
assessed if it had been assessed at the average assessment rate for all 
insured institutions for that period. The FDIC shall determine the 
average assessment rate for an assessment period based upon its best 
estimate of the average rate for the period. The estimate shall be made 
using the best information available, but shall be made no earlier than 
30 days and no later than 20 days prior to the payment due date for the 
period.
    (3) If the FDIC has established a restoration plan pursuant to 
section 7(b)(3)(E) of the Federal Deposit Insurance Act, the FDIC may 
elect to restrict the application of credit amounts, in any assessment 
period, up to the lesser of:
    (i) The amount of an insured depository institution's assessment for 
that period; or
    (ii) The amount equal to 3 basis points of the institution's 
assessment base.

[[Page 314]]



Sec. 327.36  Requests for review of credit amount.

    (a)(1) As soon as practicable after the publication date of this 
rule, the FDIC shall notify each insured depository institution by 
FDICconnect or mail of its 1996 assessment base ratio and credit amount 
in a Statement of One-Time Credit (``Statement''), if any. An insured 
depository institution may submit a request for review of the FDIC's 
determination of the institution's 1996 assessment base ratio or credit 
amount as shown on the Statement within 30 days after the effective date 
of this rule. Such review may be requested if:
    (i) The institution disagrees with a determination as to eligibility 
for the credit that relates to that institution's credit amount;
    (ii) The institution disagrees with the calculation of the credit as 
stated on the Statement; or
    (iii) The institution believes that the 1996 assessment base ratio 
attributed to the institution on the Statement does not fully or 
accurately reflect its own 1996 assessment base or appropriate 
adjustments for successors.
    (2) If an institution does not submit a timely request for review, 
that institution is barred from subsequently requesting review of its 
credit amount, subject to paragraph (e) of this section.
    (b)(1) An insured depository institution may submit a request for 
review of the FDIC's adjustment to the credit amount in a quarterly 
invoice within 30 days of the date on which the FDIC provides the 
invoice. Such review may be requested if:
    (i) The institution disagrees with the calculation of the credit as 
stated on the invoice; or
    (ii) The institution believes that the 1996 assessment base ratio 
attributed to the institution due to the adjustment to the invoice does 
not fully or accurately reflect appropriate adjustments for successors 
since the last quarterly invoice.
    (2) If an institution does not submit a timely request for review, 
that institution is barred from subsequently requesting review of its 
credit amount, subject to paragraph (e) of this section.
    (c) The request for review shall be submitted to the Division of 
Finance and shall provide documentation sufficient to support the change 
sought by the institution. At the time of filing with the FDIC, the 
requesting institution shall notify, to the extent practicable, any 
other insured depository institution that would be directly and 
materially affected by granting the request for review and provide such 
institution with copies of the request for review, the supporting 
documentation, and the FDIC's procedures for requests under this 
subpart. In addition, the FDIC also shall make reasonable efforts, based 
on its official systems of records, to determine that such institutions 
have been identified and notified.
    (d) During the FDIC's consideration of the request for review, the 
amount of credit in dispute shall not be available for use by any 
institution.
    (e) Within 30 days of being notified of the filing of the request 
for review, those institutions identified as potentially affected by the 
request for review may submit a response to such request, along with any 
supporting documentation, to the Division of Finance, and shall provide 
copies to the requesting institution. If an institution that was 
notified under paragraph (c) does not submit a response to the request 
for review, that institution may not:
    (1) Subsequently dispute the information submitted by other 
institutions on the transaction(s) at issue in the review process; or
    (2) Appeal the decision by the Director of the Division of Finance.
    (f) If additional information is requested of the requesting or 
affected institutions by the FDIC, such information shall be provided by 
the institution within 21 days of the date of the FDIC's request for 
additional information.
    (g) Any institution submitting a timely request for review will 
receive a written response from the FDIC's Director of the Division of 
Finance, (or his or her designee), notifying the requesting and affected 
institutions of the determination of the Director as to whether the 
requested change is warranted. Notice of the procedures applicable to 
appeals under paragraph (h) of this section will be included with the 
Director's written determination.

[[Page 315]]

Whenever feasible, the FDIC will provide the institution with the 
aforesaid written response the later of:
    (1) Within 60 days of receipt by the FDIC of the request for 
revision;
    (2) If additional institutions have been notified by the requesting 
institution or the FDIC, within 60 days of the date of the last response 
to the notification; or
    (3) If additional information has been requested by the FDIC, within 
60 days of receipt of the additional information.
    (h) Subject to paragraph (e) of this section, the insured depository 
institution that requested review under this section, or an insured 
depository institution materially affected by the Director's 
determination, that disagrees with that determination may appeal to the 
FDIC's Assessment Appeals Committee on the same grounds as set forth 
under paragraph (a) of this section. Any such appeal must be submitted 
within 30 calendar days from the date of the Director's written 
determination. Notice of the procedures applicable to appeals under this 
section will be included with the Director's written determination. The 
decision of the Assessment Appeals Committee shall be the final 
determination of the FDIC.
    (i) Any adjustment to an institution's credits resulting from a 
determination by the Director of the FDIC's Assessment Appeals Committee 
shall be reflected in the institution's next assessment invoice. The 
adjustment to credits shall affect future assessments only and shall not 
result in a retroactive adjustment of assessment amounts owed for prior 
periods.



            Subpart C_Implementation of Dividend Requirements

    Authority: 12 U.S.C. 1817(e)(2), (4).

    Source: 73 FR 73162, Dec. 2, 2008, unless otherwise noted.



Sec. 327.50  Purpose and scope.

    (a) Scope. This subpart C of part 327 implements the dividend 
provisions of section 7(e)(2) of the Federal Deposit Insurance Act, 12 
U.S.C. 1817(e)(2), and applies to insured depository institutions.
    (b) Purpose. This subpart C of part 327 provides the rules for:
    (1) The FDIC's annual determination of whether to declare a dividend 
and the aggregate amount of any dividend;
    (2) The FDIC's determination of the amount of each insured 
depository institution's share of any declared dividend;
    (3) The time and manner for the FDIC's payments of dividends; and
    (4) An institution's appeal of the FDIC's determination of its 
dividend amount.



Sec. 327.51  Definitions.

    For purposes of this subpart:
    (a) Assessment base share means an insured depository institution's 
1996 assessment base ratio divided by the total of all existing, 
eligible insured depository institution's shares of the 1996 assessment 
base (rounded to 14 decimal places).
    (b) Board has the same meaning as under subpart B of this part.
    (c) DIF means the Deposit Insurance Fund.
    (d)(1) An eligible premium means an assessment paid by an insured 
depository institution (or its predecessor) that did not exceed, for the 
applicable assessment period, the maximum assessment applicable in that 
assessment period to a Risk Category 1 institution under subpart A of 
this part.
    (2) An eligible premium does not include any assessments or fees 
paid by insured depository institutions for the Temporary Liquidity 
Guarantee Program. An eligible premium also does not include any 
emergency special assessments paid by insured depository institutions 
pursuant to section 13(c)(4)(G) of the Federal Deposit Insurance Act, 12 
U.S.C. 1823(c)(4)(G), whether to repay any loss to the FDIC as a 
consequence of the Temporary Liquidity Guarantee Program or for any 
other reason.
    (e) An insured depository institution's eligible premium share means 
that institution's cumulative eligible premiums over the previous five 
years (ending on December 31st of the year prior to the year in which 
the dividend is declared) divided by the cumulative

[[Page 316]]

total of all eligible premiums paid by all existing insured depository 
institutions or their predecessors over that five-year period (rounded 
to 14 decimal places).
    (f) An insured depository institution's 1996 assessment base ratio 
means an institution's 1996 assessment base ratio, as determined 
pursuant to Sec. 327.33 of this part, adjusted as necessary to reflect 
subsequent transactions in which the institution succeeds to another 
institution's assessment base ratio, or a transfer of the assessment 
base ratio pursuant to Sec. 327.34. The 1996 assessment base ratio 
shall be rounded to seven decimal places.
    (g) Predecessor, when used in the context of insured depository 
institutions, refers to the institution merged with or into a resulting 
institution or acquired by an institution under Sec. 327.33(c) under 
the de facto rule, consistent with the definition of successor in Sec. 
327.31.



Sec. 327.52  Annual dividend determination.

    (a) If the DIF reserve ratio as of December 31st of 2008 or any 
later year equals or exceeds 1.35 percent, then on or before May 10th of 
the following year, the Board shall determine whether to declare a 
dividend based upon the reserve ratio of the DIF as of December 31st of 
the preceding year, and the amount of the dividend, if any.
    (b) Except as provided in paragraph (d) of this section, if the 
reserve ratio of the DIF equals or exceeds 1.35 percent of estimated 
insured deposits and does not exceed 1.50 percent, the Board shall 
declare the amount that is equal to one-half of the amount in excess of 
the amount required to maintain the reserve ratio at 1.35 percent as the 
aggregate dividend to be paid to insured depository institutions.
    (c) Except as provided in paragraph (d) of this section, if the 
reserve ratio of the DIF exceeds 1.50 percent of estimated insured 
deposits, the Board shall declare the amount in excess of the amount 
required to maintain the reserve ratio at 1.50 percent as the aggregate 
dividend to be paid to insured depository institutions and shall declare 
a dividend under paragraph (b) of this section.
    (d)(1) The Board may suspend or limit a dividend otherwise required 
to be paid if the Board determines that:
    (i) A significant risk of losses to the DIF exists over the next 
one-year period; and
    (ii) It is likely that such losses will be sufficiently high as to 
justify the Board concluding that the reserve ratio should be allowed:
    (A) To grow temporarily without requiring dividends when the reserve 
ratio is between 1.35 and 1.50 percent; or
    (B) To exceed 1.50 percent.
    (2) In making a determination under this paragraph, the Board shall 
consider:
    (i) National and regional conditions and their impact on insured 
depository institutions;
    (ii) Potential problems affecting insured depository institutions or 
a specific group or type of depository institution;
    (iii) The degree to which the contingent liability of the FDIC for 
anticipated failures of insured institutions adequately addresses 
concerns over funding levels in the DIF; and
    (iv) Any other factors that the Board may deem appropriate.
    (3) Within 270 days of making a determination under this paragraph, 
the Board shall submit a report to the Committee on Financial Services 
and the Committee on Banking, Housing, and Urban Affairs, providing a 
detailed explanation of its determination, including a discussion of the 
factors considered.
    (e) The Board shall annually review any determination to suspend or 
limit dividend payments and must either:
    (1) Make a new finding justifying the renewal of the suspension or 
limitation under paragraph (d) of this section, and submit a report as 
required under paragraph (d)(3) of this section; or
    (2) Reinstate the payment of dividends as required by paragraph (b) 
or (c) of this section.



Sec. 327.53  Allocation and payment of dividends.

    (a)(1) The allocation of any dividend among insured depository 
institutions shall be based on the institution's 1996

[[Page 317]]

assessment base share and the institution's eligible premium share.
    (2) As set forth in the following table, the part of a dividend 
allocated based upon an institution's 1996 assessment base share shall 
decline steadily from 100 percent to zero over fifteen years, and the 
part of a dividend allocated based upon an institution's eligible 
premium share shall increase steadily over the same fifteen-year period 
from zero to 100 percent. The 15-year period shall begin as if it had 
applied to a dividend based upon the reserve ratio at the end of 2006 
and shall end with respect to any dividend based upon the reserve ratio 
at the end of 2021. Dividends based upon the reserve ratio as of 
December 31, 2021, and thereafter shall be allocated among insured 
depository institutions based solely on eligible premium shares.

                  Total DIF Dividend Distribution Table
------------------------------------------------------------------------
                                         Part of total DIF dividend
                                               determined by:
 Based upon the DIF reserve ratio  -------------------------------------
            at year-end              1996 Assessment    Eligible premium
                                       base shares           shares
------------------------------------------------------------------------
2006 \1\..........................         1 (100.0%)             0 (0%)
2007 \1\..........................      14/15 (93.3%)        1/15 (6.7%)
2008..............................      13/15 (86.7%)       2/15 (13/3%)
2009..............................        4/5 (80.0%)        1/5 (20.0%)
2010..............................      11/15 (73.3%)       4/15 (26.7%)
2011..............................        2/3 (66.7%)        1/3 (33.3%)
2012..............................        3/5 (60.0%)        2/5 (40.0%)
2013..............................       8/15 (53.3%)       7/15 (46.7%)
2014..............................       7/15 (46.7%)       8/15 (53.3%)
2015..............................        2/5 (40.0%)        3/5 (60.0%)
2016..............................        1/3 (33.3%)        2/3 (66.7%)
2017..............................       4/15 (26.7%)      11/15 (73.3%)
2018..............................        1/5 (20.0%)        4/5 (80.0%)
2019..............................       2/15 (13.3%)      13/15 (86.7%)
2020..............................        1/15 (6.7%)      14/15 (93.3%)
2021..............................             0 (0%)         1 (100.0%)
Thereafter........................             0 (0%)          1 (100%)
------------------------------------------------------------------------
\1\ The 15-year period shall be computed as if it had applied to
  dividends based upon the reserve ratios at the end of 2006 and 2007.

    (b) The FDIC shall notify each insured depository institution of the 
amount of such institution's dividend payment based on its share as 
determined pursuant to paragraph (a) of this section. Notice shall be 
given as soon as practicable after the Board's declaration of a dividend 
through a special notice of dividend.
    (c) The FDIC shall pay individual dividend amounts, unless they are 
the subject of a request for review under Sec. 327.54, to insured 
depository institutions on June 30 of the year the dividend is declared. 
The FDIC shall notify institutions whether dividends will offset the 
next collection of assessments at the time of the invoice. An 
institution's dividend amount will be settled with that institution's 
assessment. Any excess dividend amount will be a net credit to the 
institution and will be deposited into the deposit account designated by 
the institution for assessment payment purposes pursuant to subpart A of 
this part. If the dividend amount is less than the amount of assessment 
due, then the institution's account will be directly debited by the FDIC 
to reflect the net amount owed to the FDIC as an assessment.
    (d) If an insured depository institution's dividend amount is 
subject to review under Sec. 327.54, and that request is not finally 
resolved prior to the dividend payment date, the FDIC shall withhold the 
payment of the disputed portion of the dividend amount involved in the 
request for review. Adjustments to an individual institution's dividend 
amount based on the final determination of a request for review will be 
handled in the same manner as assessment underpayments and overpayments.
    (e) An institution may sell, assign, or otherwise transfer its right 
to a current or future dividend. However, the FDIC will pay dividend 
amounts to insured institutions without regard to any such sale, 
assignment or transfer, regardless of whether the FDIC has received 
notice of the sale, assignment or transfer.



Sec. 327.54  Requests for review.

    (a) An insured depository institution may submit a request for 
review of the FDIC's determination of the institution's 1996 assessment 
base share and/or its eligible premium share as shown on the 
institution's quarterly assessment invoice. Such requests shall be 
subject to the provisions of Sec. 327.3(f)(3) of this part, except for 
the invoice provided by the FDIC in March of any calendar year in which 
the FDIC declares a dividend. If the FDIC declares a dividend, any 
request for review of an institution's 1996 assessment base share and/or 
its eligible premium share as shown on the institution's March quarterly 
assessment invoice must be filed

[[Page 318]]

within 30 days of the date that the FDIC notifies the institution of its 
dividend amount. If an institution does not submit a timely request for 
review for the first invoice in which the dividend-related information 
that forms the basis for the request appears, the institution shall be 
barred from subsequently requesting review of that information.
    (b) An insured depository institution may submit a request for 
review of the FDIC's determination of the institution's dividend amount 
as shown on the special notice of dividend. Such review may be requested 
if:
    (1) The institution disagrees with the calculation of the dividend 
as stated on the special notice of dividend; or
    (2) The institution believes that the 1996 assessment base ratio 
attributed to the institution is inaccurate or has not been adjusted to 
include the 1996 assessment base ratio of an institution acquired by 
merger or transfer pursuant to Sec. Sec. 327.33 and 327.34 of this part 
and Sec. 327.51(g), and the institution has not had a prior opportunity 
to request review or appeal under subpart B of this part or paragraph 
(a) of this section; or
    (3) The institution believes that the special notice does not fully 
or accurately reflect its eligible premiums or those of any of its 
predecessors and the institution has not had a prior opportunity to 
request review or appeal under subpart B of this part or paragraph (a) 
of this section.
    (c) Any such request for review under paragraph (b) of this section 
must be submitted within 30 days of the date of the special notice of 
dividend for which a change is requested. The request for review shall 
be submitted to the Division of Finance and shall provide documentation 
sufficient to support the change sought by the institution. If an 
institution does not submit a timely request for review, that 
institution may not subsequently request review of its dividend amount, 
subject to paragraph (d) of this section. At the time of filing with the 
FDIC, the requesting institution shall notify, to the extent 
practicable, any other insured depository institution that would be 
directly and materially affected by granting the request for review and 
provide such institution with copies of the request for review, the 
supporting documentation, and the FDIC's procedures for requests under 
this subpart. The FDIC shall make reasonable efforts, based on its 
official systems of records, to determine that such institutions have 
been identified and notified.
    (d) During the FDIC's consideration of a request for review, the 
amount of dividend in dispute will not be paid.
    (e) Within 30 days of receiving notice of the request for review 
under paragraph (b) of this section, those institutions identified as 
potentially affected by the request for review may submit a response to 
such request, along with any supporting documentation, to the Division 
of Finance, and shall provide copies to the requesting institution. If 
an institution that was notified under paragraph (c) of this section 
does not submit a response to the request for review, that institution 
may not subsequently:
    (1) Dispute the information submitted by any other institution on 
the transaction(s) at issue in that review process; or
    (2) Appeal the decision by the Director of the Division of Finance.
    (f) If additional information is requested of the requesting or 
affected institutions by the FDIC, such information shall be provided by 
the institution within 21 days of the date of the FDIC's request for 
additional information.
    (g) Any institution submitting a timely request for review under 
paragraph (b) of this section will receive a written response from the 
FDIC's Director of the Division of Finance (``Director''), or his or her 
designee, notifying the affected institutions of the determination of 
the Director as to whether the requested change is warranted, whenever 
feasible:
    (1) Within 60 days of receipt by the FDIC of the request for review;
    (2) If additional institutions have been notified by the requesting 
institution or the FDIC, within 60 days of the date of the last response 
to the notification; or
    (3) If additional information has been requested by the FDIC, within 
60 days of receipt of the additional information, whichever is later. 
Notice of the

[[Page 319]]

procedures applicable to appeals under paragraph (g) of this section 
will be included with the Director's written determination.
    (h) An insured depository institution may appeal the determination 
of the Director to the FDIC's Assessment Appeals Committee on the same 
grounds as set forth under paragraph (b) of this section. Any such 
appeal must be submitted within 30 calendar days from the date of the 
Director's written determination. The decision of the Assessment Appeals 
Committee shall be the final determination of the FDIC.



PART 328_ADVERTISEMENT OF MEMBERSHIP--Table of Contents




Sec.
328.0 Scope.
328.1 Official sign.
328.2 Display and procurement of official sign.
328.3 Official advertising statement requirements.
328.4 Prohibition against receiving deposits at same teller station or 
          window as noninsured institution.

    Authority: 12 U.S.C. 1818(a), 1819 (Tenth), 1828(a).

    Source: 72 FR 66102, Nov. 13, 2006, unless otherwise noted.



Sec. 328.0  Scope.

    Part 328 describes the official sign of the FDIC and prescribes its 
use by insured depository institutions. It also prescribes the official 
advertising statement insured depository institutions must include in 
their advertisements. For purposes of part 328, the term ``insured 
depository institution'' includes insured branches of a foreign 
depository institution. Part 328 does not apply to non-insured offices 
or branches of insured depository institutions located in foreign 
countries.



Sec. 328.1  Official sign.

    (a) The official sign referred to in this part shall be 7 
by 3 in size, with black lettering and gold background, and 
of the following design:
[GRAPHIC] [TIFF OMITTED] TR13NO06.000

    (b) The ``symbol'' of the Corporation, as used in this part, shall 
be that portion of the official sign consisting of ``FDIC'' and the two 
lines of smaller type above and below ``FDIC.''



Sec. 328.2  Display and procurement of official sign.

    (a) Display of official sign. Each insured depository institution 
shall continuously display the official sign at each station or window 
where insured deposits are usually and normally received in the 
depository institution's

[[Page 320]]

principal place of business and in all its branches.
    (1) Other locations--
    (i) Within the institution. In addition to locations where display 
of the official sign is required under this Sec. 328.2(a), an insured 
depository institution may display the official sign in other locations 
at the institution.
    (ii) Other facilities. An insured depository institution may display 
the official sign on or at Remote Service Facilities. If an insured 
depository institution displays the official sign at a Remote Service 
Facility, and if there are any noninsured institutions that share in the 
Remote Service Facility, any insured depository institution that 
displays the official sign must clearly show that the sign refers only 
to a designated insured depository institution(s). As used in this part, 
the term ``Remote Service Facility'' includes any automated teller 
machine, cash dispensing machine, point-of-sale terminal, or other 
remote electronic facility where deposits are received.
    (2) Varied signs. Instead of displaying the official sign, an 
insured depository institution may display signs that vary from the 
official sign in size, color, or material at any location where display 
of the official sign is required or permitted under this Sec. 328.2(a). 
However, any such varied sign that is displayed in locations where 
display of the official sign is required under this Sec. 328.2(a) must 
not be smaller in size than the official sign and must have the same 
color for the text and symbols.
    (3) Newly insured institutions. A depository institution shall 
display the official sign no later than its twenty-first day of 
operation as an insured depository institution, unless the institution 
promptly requested the official sign from the Corporation, but did not 
receive it before that date.
    (b) Procuring official sign. An insured depository institution may 
procure the official sign from the Corporation for official use at no 
charge. Information on obtaining the official sign is posted on the 
FDIC's internet Web site, http://www.fdic.gov. Alternatively, insured 
depository institutions may, at their expense, procure from commercial 
suppliers signs that vary from the official sign in size, color, or 
material. Any insured depository institution which has promptly 
submitted a written request for an official sign to the Corporation 
shall not be deemed to have violated this Sec. 328.2 by failing to 
display the official sign, unless the insured depository institution 
fails to display the official sign after receipt thereof.
    (c) Required changes in sign. The Corporation may require any 
insured depository institution, upon at least thirty (30) days' written 
notice, to change the wording of the official sign in a manner deemed 
necessary for the protection of depositors or others.



Sec. 328.3  Official advertising statement requirements.

    (a) Advertisement defined. The term ``advertisement,'' as used in 
this part, shall mean a commercial message, in any medium, that is 
designed to attract public attention or patronage to a product or 
business.
    (b) Official advertising statement. The official advertising 
statement shall be in substance as follows: ``Member of the Federal 
Deposit Insurance Corporation.''
    (1) Optional short title and symbol. The short title ``Member of 
FDIC'' or ``Member FDIC,'' or a reproduction of the symbol of the 
Corporation (as described in Sec. 328.1(b)), may be used by insured 
depository institutions at their option as the official advertising 
statement.
    (2) Size and print. The official advertising statement shall be of 
such size and print to be clearly legible. If the symbol of the 
Corporation is used as the official advertising statement, and the 
symbol must be reduced to such proportions that the two lines of smaller 
type above and below ``FDIC'' are indistinct and illegible, those lines 
of smaller type may be blocked out or dropped.
    (c) Use of official advertising statement in advertisements--(1) 
General requirement. Except as provided in Sec. 328.3(d), each insured 
depository institution shall include the official advertising statement 
prescribed in Sec. 328.3(b) in all advertisements that either promote 
deposit products and services or promote non-specific banking products 
and services offered by the institution. For

[[Page 321]]

purposes of this Sec. 328.3, an advertisement promotes non-specific 
banking products and services if it includes the name of the insured 
depository institution but does not list or describe particular products 
or services offered by the institution. An example of such an 
advertisement would be, ``Anytown Bank, offering a full range of banking 
services.''
    (2) Foreign depository institutions. When a foreign depository 
institution has both insured and noninsured U.S. branches, the 
depository institution must also identify which branches are insured and 
which branches are not insured in all of its advertisements requiring 
use of the official advertising statement.
    (3) Newly insured institutions. A depository institution shall 
include the official advertising statement in its advertisements no 
later than its twenty-first day of operation as an insured depository 
institution.
    (d) Types of advertisements which do not require the official 
advertising statement. The following types of advertisements do not 
require use of the official advertising statement:
    (1) Statements of condition and reports of condition of an insured 
depository institution which are required to be published by State or 
Federal law;
    (2) Insured depository institution supplies such as stationery 
(except when used for circular letters), envelopes, deposit slips, 
checks, drafts, signature cards, deposit passbooks, certificates of 
deposit, etc.;
    (3) Signs or plates in the insured depository institution offices or 
attached to the building or buildings in which such offices are located;
    (4) Listings in directories;
    (5) Advertisements not setting forth the name of the insured 
depository institution;
    (6) Entries in a depository institution directory, provided the name 
of the insured depository institution is listed on any page in the 
directory with a symbol or other descriptive matter indicating it is a 
member of the Federal Deposit Insurance Corporation;
    (7) Joint or group advertisements of depository institution services 
where the names of insured depository institutions and noninsured 
institutions are listed and form a part of such advertisements;
    (8) Advertisements by radio or television, other than display 
advertisements, which do not exceed thirty (30) seconds in time;
    (9) Advertisements which are of the type or character that make it 
impractical to include the official advertising statement, including, 
but not limited to, promotional items such as calendars, matchbooks, 
pens, pencils, and key chains; and
    (10) Advertisements which contain a statement to the effect that the 
depository institution is a member of the Federal Deposit Insurance 
Corporation, or that the depository institution is insured by the 
Federal Deposit Insurance Corporation, or that its deposits or 
depositors are insured by the Federal Deposit Insurance Corporation to 
at least $100,000 for each depositor.
    (e) Restrictions on using the official advertising statement when 
advertising non-deposit products--(1) Definitions--
    (i) Non-deposit product. As used in this part, the term ``non-
deposit product'' shall include, but is not limited to, insurance 
products, annuities, mutual funds, and securities. For purposes of this 
definition, a credit product is not a non-deposit product.
    (ii) Hybrid product. As used in this part, the term ``hybrid 
product'' shall mean a product or service that has both deposit product 
features and non-deposit product features. A sweep account is an example 
of a hybrid product.
    (2) Non-deposit product advertisements. Except as provided in Sec. 
328.3(e)(4), an insured depository institution shall not include the 
official advertising statement, or any other statement or symbol which 
implies or suggests the existence of Federal deposit insurance, in any 
advertisement relating solely to non-deposit products.
    (3) Hybrid product advertisements. Except as provided in Sec. 
328.3(e)(4), an insured depository institution shall not include the 
official advertising statement, or any other statement or symbol which 
implies or suggests the existence of federal deposit insurance, in any 
advertisement relating solely to hybrid products.

[[Page 322]]

    (4) Mixed advertisements. In advertisements containing information 
about both insured deposit products and non-deposit products or hybrid 
products, an insured depository institution shall clearly segregate the 
official advertising statement or any similar statement from that 
portion of the advertisement that relates to the non-deposit products.
    (f) Official advertising statement in non-English language. The non-
English equivalent of the official advertising statement may be used in 
any advertisement, provided that the translation has had the prior 
written approval of the Corporation.



Sec. 328.4  Prohibition against receiving deposits at same teller station or 

window as noninsured institution.

    (a) Prohibition. An insured depository institution may not receive 
deposits at any teller station or window where any noninsured 
institution receives deposits or similar liabilities.
    (b) Exception. This Sec. 328.4 does not apply to deposits received 
at a Remote Service Facility.



PART 329_INTEREST ON DEPOSITS--Table of Contents




Sec.
329.0 Scope.
329.1 Definitions.
329.2 Payment of interest.
329.3 Exception to prohibition on payment of interest.
329.101 Transfers not included within the six transfers allowed for 
          nondemand deposits pursuant to Sec. 329.1(b)(3).
329.102 Deposits described in Sec. 329.1(b)(3).
329.103 Premiums.
329.104 Ten-day grace period.

    Authority: 12 U.S.C. 1819, 1828(g) and 1832(a).

    Source: 51 FR 10808, Mar. 31, 1986, unless otherwise noted.



Sec. 329.0  Scope.

    This part applies to any deposit which is payable by a bank within 
the States of the United States or the District of Columbia, or which is 
directly or indirectly accessible by check, draft, or order payable 
within the States of the United States or the District of Columbia, 
which check, draft or order is drawn on an account maintained at a bank 
office located within the States of the United States or the District of 
Columbia. An international banking facility time deposit, as defined by 
the Board of Governors of the Federal Reserve System in Sec. 
204.8(a)(2) of this title, is not a deposit within the meaning of this 
part.



Sec. 329.1  Definitions.

    (a) The term bank includes:
    (1) Any State bank, as defined in section 3(a) of the Federal 
Deposit Insurance Act, 12 U.S.C. 1813(a), the deposits in which are 
insured by the Corporation, and which is not a member of the Federal 
Reserve System;
    (2) Any State branch of a foreign bank, the deposit obligations in 
which branch are insured by the Corporation; and
    (3) Any noninsured bank in a State if the total amount of time and 
savings deposits held in all such banks in the State, plus the total 
amount of deposits, shares, and withdrawable accounts held in all 
building and loan, savings and loan, and homestead associations 
(including cooperative banks) in the State which are not members of a 
Federal home loan bank, is more than 20 per centum of the total amount 
of such deposits, shares, and withdrawable accounts held in all banks 
and building and loan, savings and loan, and homestead associations 
(including cooperative banks) in the State.
    (b) The term demand deposit includes:
    (1) Any deposit that has a maturity or required-notice period of 
less than seven days;
    (2) Any deposit regarding which the bank does not reserve the right 
to require at least seven days' written notice prior to withdrawal or 
transfer of any funds from the account; or
    (3) Any other deposit from which, under the terms of the deposit 
contract, the depositor is authorized to make, during any month or 
statement cycle of at least four weeks, more than six transfers by means 
of a preauthorized or automatic transfer or telephonic (including data 
transmission) agreement, order or instruction, which transfers are made 
to another account of the depositor at the same bank, to the bank 
itself, or to a third party:
    Provided, That any deposit specified in this paragraph (b)(3) will 
be deemed

[[Page 323]]

to be a demand deposit if more than three of the six authorized 
transfers are authorized to be made by check, draft, debit card or 
similar order made by the depositor;
    And provided further, That no deposit specified in this paragraph 
(3) will be deemed to be a demand deposit if the entire beneficial 
interest of the deposit is held by a depositor identified in paragraph 
(2) of section 2(a) of Pub. L. 93-100 (12 U.S.C. 1832(a)(2)).\1\
---------------------------------------------------------------------------

    \1\ Paragraph (1) of 12 U.S.C. 1832(a) authorizes banks to let 
certain depositors make withdrawals from interest-bearing deposits by 
negotiable or transferable instruments for the purpose of making 
transfers to third parties--i.e., to hold deposits commonly called NOW 
accounts.
    Paragraph (2) of 12 U.S.C. 1832(a) provides: ``Paragraph (1) shall 
apply only with respect to deposits or accounts which consist solely of 
funds in which the entire beneficial interest is held by one or more 
individuals or by an organization which is operated primarily for 
religous, philanthropic, charitable, educational, political, or other 
similar purposes and which is not operated for profit, and with respect 
to deposits of public funds by an officer, employee, or agent of the 
United States, any State, county, municipality, or political subdivision 
thereof, the District of Columbia, the Commonwealth of Puerto Rico, 
American Samoa, Guam, any territory or possession of the United States, 
or any political subdivision thereof.
---------------------------------------------------------------------------

    (c) The term interest means any payment to or for the account of any 
depositor as compensation for the use of funds constituting a deposit. A 
bank's absorption of expenses incident to providing a normal banking 
function or its forbearance from charging a fee in connection with such 
a service is not considered a payment of interest.

[51 FR 10808, Mar. 31, 1986, as amended at 53 FR 47523, Nov. 23, 1988]



Sec. 329.2  Payment of interest.

    No bank shall, directly or indirectly, by any device whatsoever, pay 
interest on any demand deposit.



Sec. 329.3  Exception to prohibition on payment of interest.

    Section 329.2 shall not apply to the payment of interest or other 
remuneration on any deposit which, if held by a member bank, would be 
allowable under 12 U.S.C. 371a and 461, or by regulation of the Board of 
Governors of the Federal Reserve System.

[63 FR 8342, Feb. 19, 1998]



Sec. 329.101  Transfers not included within the six transfers allowed for 

nondemand deposits pursuant to Sec. 329.1(b)(3).

    This interpretive rule describes certain transfers that are not 
included as any of the six transfers allowed pursuant to Sec. 
329.1(b)(3).
    (a) Transfers from a deposit described in Sec. 329.1(b)(3) that are 
made to the bank are not deemed to be included within the six transfers 
permitted for a nondemand deposit by that paragraph (3) when the 
transfers are made for the purpose of repaying loans and associated 
expenses at the bank (as originator or servicer). This exemption does 
not apply to transfers to the bank that are made for the purpose of 
repaying loans that are made by the bank to the depositor's demand 
account for the purpose of covering overdrafts.
    (b) Transfers from a deposit described in Sec. 329.1(b)(3) that are 
made to another account of the same depositor at the bank are not deemed 
to be included within the six transfers permitted for a nondemand 
deposit by that paragraph (3) when the transfers are made by mail, 
messenger, automated teller machine or in person.
    (c) Withdrawals from a deposit described in Sec. 329.1(b)(3) are 
not deemed to be included within the six transfers permitted for a 
nondemand deposit by that paragraph (3) when the withdrawals are made by 
mail, messenger, telephone (via check mailed to the depositor), 
automated teller machine, or in person.



Sec. 329.102  Deposits described in Sec. 329.1(b)(3).

    This interpretive rule explains the second proviso of Sec. 
329.1(b)(3).
    (a) No deposit described in Sec. 329.1(b)(3) that is held by an 
organization that is not organized for profit and that is described in 
paragraphs 501(c) (3) through (13) and (19) and section 528 of the 
Internal Revenue Code of 1954 (26 U.S.C. 501(c) (3) through (13) and 
(19), and 528)

[[Page 324]]

is deemed to be a demand deposit. Actual Internal Revenue Service 
documentation of the organization's tax-exempt status is not required; 
it is merely an aid in making the determination.
    (b) No deposit described in Sec. 329.1(b)(3) that is held by a 
depositor identified in section 2(a)(2) of Pub. L. 93-100 (12 U.S.C. 
1832(a)(2))--whether the deposit is used for business purposes or 
otherwise--is deemed to be a demand deposit.
    (c) No deposit described in Sec. 329.1(b)(3) that represents funds 
held in a fiduciary capacity (whether the fiduciary is a natural person 
or otherwise) is deemed to be a demand deposit if all the beneficiaries 
of the account are natural persons.



Sec. 329.103  Premiums.

    This interpretive rule describes certain payments that are not 
deemed to be interest as defined in Sec. 329.1(c).
    (a) Premiums, whether in the form of merchandise, credit, or cash, 
given by a bank to the holder of a deposit will not be regarded as 
interest as defined in Sec. 329.1(c) if:
    (1) The premium is given to the depositor only at the time of the 
opening of a new account or an addition to an existing account;
    (2) No more than two premiums per deposit are given in any twelve-
month interval; and (3) the value of the premium (in the case of 
merchandise, the total cost to the bank, including shipping, 
warehousing, packaging, and handling costs) does not exceed $10 for a 
deposit of less than $5,000 or $20 for a deposit of $5,000 or more.
    (b) The costs of premiums may not be averaged.
    (c) A bank may not solicit funds for deposit on the basis that the 
bank will divide the funds into several accounts for the purpose of 
enabling the bank to pay the depositor more than two premiums within a 
twelve-month interval on the solicited funds.
    (d) The bank must retain sufficient information for examiners to 
determine that the requirements of this section have been satisfied.
    (e) Notwithstanding paragraph (a) of this section, any premium that 
is not, directly or indirectly, related to or dependent on the balance 
in a demand deposit account and the duration of the account balance 
shall not be considered the payment of interest on a demand deposit 
account and shall not be subject to the limitations in paragraph (a) of 
this section.

[51 FR 10808, Mar. 31, 1986, as amended at 62 FR 40732, July 30, 1997]



Sec. 329.104  Ten-day grace period.

    This interpretive rule provides for 10-day grace periods during 
which interest may be paid on a deposit without violating Sec. 329.2.
    (a) During the ten calendar days following the maturity of a time 
deposit, the bank may continue to pay interest on the matured deposit at 
the contract rate of the deposit, or at any lesser rate, if the deposit 
contract provides for such post-maturity interest. The payment of such 
post-maturity interest will not be regarded as the payment of interest 
on a demand deposit.
    (b) If a time deposit is renewed within ten calendar days after 
maturity, the renewed deposit may be dated back to the maturity date of 
the matured deposit and may draw interest from that date. The payment of 
such additional interest will not be regarded as the payment of interest 
on a demand deposit.
    (c) If a time or savings deposit is renewed within ten days after 
expiration of the period of notice given with respect to its repayment, 
the renewed deposit may draw interest from the date such notice period 
expired. The payment of such additional interest will not be regarded as 
the payment of interest on a demand deposit.



PART 330_DEPOSIT INSURANCE COVERAGE--Table of Contents




Sec.
330.1 Definitions.
330.2 Purpose.
330.3 General principles.
330.4 Continuation of separate deposit insurance after merger of insured 
          depository institutions.
330.5 Recognition of deposit ownership and fiduciary relationships.
330.6 Single ownership accounts.
330.7 Accounts held by an agent, nominee, guardian, custodian or 
          conservator.
330.8 Annuity contract accounts.
330.9 Joint ownership accounts.

[[Page 325]]

330.10 Revocable trust accounts.
330.11 Accounts of a corporation, partnership or unincorporated 
          association.
330.12 Accounts held by a depository institution as the trustee of an 
          irrevocable trust.
330.13 Irrevocable trust accounts.
330.14 Retirement and other employee benefit plan accounts.
330.15 Accounts held by government depositors.

    Authority: 12 U.S.C. 1813(l), 1813(m), 1817(i), 1818(q), 
1819(Tenth), 1820(f), 1821(a), 1822(c).

    Source: 63 FR 25756, May 11, 1998, unless otherwise noted.



Sec. 330.1  Definitions.

    For the purposes of this part:
    (a) Act means the Federal Deposit Insurance Act (12 U.S.C. 1811 et 
seq.).
    (b) Corporation means the Federal Deposit Insurance Corporation.
    (c) Default has the same meaning as provided under section 3(x) of 
the Act (12 U.S.C. 1813(x)).
    (d) Deposit has the same meaning as provided under section 3(l) of 
the Act (12 U.S.C. 1813(l)).
    (e) Deposit account records means account ledgers, signature cards, 
certificates of deposit, passbooks, corporate resolutions authorizing 
accounts in the possession of the insured depository institution and 
other books and records of the insured depository institution, including 
records maintained by computer, which relate to the insured depository 
institution's deposit taking function, but does not mean account 
statements, deposit slips, items deposited or cancelled checks.
    (f) FDIC means the Federal Deposit Insurance Corporation.
    (g) Independent activity. A corporation, partnership or 
unincorporated association shall be deemed to be engaged in an 
``independent activity'' if the entity is operated primarily for some 
purpose other than to increase deposit insurance.
    (h) Insured branch means a branch of a foreign bank any deposits in 
which are insured in accordance with the provisions of the Act.
    (i) Insured deposit has the same meaning as that provided under 
section 3(m)(1) of the Act (12 U.S.C. 1813(m)(1)).
    (j) Insured depository institution is any depository institution 
whose deposits are insured pursuant to the Act, including a foreign bank 
having an insured branch.
    (k) Natural person means a human being.
    (l) Non-contingent trust interest means a trust interest capable of 
determination without evaluation of contingencies except for those 
covered by the present worth tables and rules of calculation for their 
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
(26 CFR 20.2031-7) or any similar present worth or life expectancy 
tables which may be adopted by the Internal Revenue Service.
    (m) Sole proprietorship means a form of business in which one person 
owns all the assets of the business, in contrast to a partnership or 
corporation.
    (n) Standard maximum deposit insurance amount, referred to as the 
``SMDIA'' hereafter, means $250,000 from October 3, 2008, until December 
31, 2009. Effective January 1, 2010, the SMDIA means $100,000 adjusted 
pursuant to subparagraph (F) of section 11(a)(1) of the FDI Act (12 
U.S.C. 1821(a)(1)(F)). All examples in this part use $100,000 as the 
SMDIA.
    (o) Trust estate means the determinable and beneficial interest of a 
beneficiary or principal in trust funds but does not include the 
beneficial interest of an heir or devisee in a decedent's estate.
    (p) Trust funds means funds held by an insured depository 
institution as trustee pursuant to any irrevocable trust established 
pursuant to any statute or written trust agreement.
    (q) Trust interest means the interest of a beneficiary in an 
irrevocable express trust (other than an employee benefit plan) created 
either by written trust instrument or by statute, but does not include 
any interest retained by the settlor.

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006; 73 
FR 61660, Oct. 17, 2008]



Sec. 330.2  Purpose.

    The purpose of this part is to clarify the rules and define the 
terms necessary to afford deposit insurance coverage under the Act and 
provide rules for the recognition of deposit ownership in various 
circumstances.

[[Page 326]]



Sec. 330.3  General principles.

    (a) Ownership rights and capacities. The insurance coverage provided 
by the Act and this part is based upon the ownership rights and 
capacities in which deposit accounts are maintained at insured 
depository institutions. All deposits in an insured depository 
institution which are maintained in the same right and capacity (by or 
for the benefit of a particular depositor or depositors) shall be added 
together and insured in accordance with this part. Deposits maintained 
in different rights and capacities, as recognized under this part, shall 
be insured separately from each other. (Example: Single ownership 
accounts and joint ownership accounts are insured separately from each 
other.)
    (b) Deposits maintained in separate insured depository institutions 
or in separate branches of the same insured depository institution. Any 
deposit accounts maintained by a depositor at one insured depository 
institution are insured separately from, and without regard to, any 
deposit accounts that the same depositor maintains at any other 
separately chartered and insured depository institution, even if two or 
more separately chartered and insured depository institutions are 
affiliated through common ownership. (Example: Deposits held by the same 
individual at two different banks owned by the same bank holding company 
would be insured separately, per bank.)
    The deposit accounts of a depositor maintained in the same right and 
capacity at different branches or offices of the same insured depository 
institution are not separately insured; rather they shall be added 
together and insured in accordance with this part.
    (c) Deposits maintained by foreigners and deposits denominated in 
foreign currency. The availability of deposit insurance is not limited 
to citizens and residents of the United States. Any person or entity 
that maintains deposits in an insured depository institution is entitled 
to the deposit insurance provided by the Act and this part. In addition, 
deposits denominated in a foreign currency shall be insured in 
accordance with this part. Deposit insurance for such deposits shall be 
determined and paid in the amount of United States dollars that is 
equivalent in value to the amount of the deposit denominated in the 
foreign currency as of close of business on the date of default of the 
insured depository institution. The exchange rates to be used for such 
conversions are the 12 PM rates (the ``noon buying rates for cable 
transfers'') quoted for major currencies by the Federal Reserve Bank of 
New York on the date of default of the insured depository institution, 
unless the deposit agreement specifies that some other widely recognized 
exchange rates are to be used for all purposes under that agreement, in 
which case, the rates so specified shall be used for such conversions.
    (d) Deposits in insured branches of foreign banks. Deposits in an 
insured branch of a foreign bank which are payable by contract in the 
United States shall be insured in accordance with this part, except that 
any deposits to the credit of the foreign bank, or any office, branch, 
agency or any wholly owned subsidiary of the foreign bank, shall not be 
insured. All deposits held by a depositor in the same right and capacity 
in more than one insured branch of the same foreign bank shall be added 
together for the purpose of determining the amount of deposit insurance.
    (e) Deposits payable solely outside of the United States and certain 
other locations. Any obligation of an insured depository institution 
which is payable solely at an office of such institution located outside 
the States of the United States, the District of Columbia, Puerto Rico, 
Guam, the Commonwealth of the Northern Mariana Islands, American Samoa, 
the Trust Territory of the Pacific Islands, and the Virgin Islands, is 
not a deposit for the purposes of this part.
    (f) International banking facility deposits. An ``international 
banking facility time deposit,'' as defined by the Board of Governors of 
the Federal Reserve System in Regulation D (12 CFR 204.8(a)(2)), or in 
any successor regulation, is not a deposit for the purposes of this 
part.
    (g) Bank investment contracts. As required by section 11(a)(8) of 
the Act (12 U.S.C. 1821(a)(8)), any liability arising

[[Page 327]]

under any investment contract between any insured depository institution 
and any employee benefit plan which expressly permits ``benefit 
responsive withdrawals or transfers'' (as defined in section 11(a)(8) of 
the Act) are not insured deposits for purposes of this part. The term 
``substantial penalty or adjustment'' used in section 11(a)(8) of the 
Act means, in the case of a deposit having an original term which 
exceeds one year, all interest earned on the amount withdrawn from the 
date of deposit or for six months, whichever is less; or, in the case of 
a deposit having an original term of one year or less, all interest 
earned on the amount withdrawn from the date of deposit or three months, 
whichever is less.
    (h) Application of state or local law to deposit insurance 
determinations. In general, deposit insurance is for the benefit of the 
owner or owners of funds on deposit. However, while ownership under 
state law of deposited funds is a necessary condition for deposit 
insurance, ownership under state law is not sufficient for, or decisive 
in, determining deposit insurance coverage. Deposit insurance coverage 
is also a function of the deposit account records of the insured 
depository institution and of the provisions of this part, which, in the 
interest of uniform national rules for deposit insurance coverage, are 
controlling for purposes of determining deposit insurance coverage.
    (i) Determination of the amount of a deposit--(1) General rule. The 
amount of a deposit is the balance of principal and interest 
unconditionally credited to the deposit account as of the date of 
default of the insured depository institution, plus the ascertainable 
amount of interest to that date, accrued at the contract rate (or the 
anticipated or announced interest or dividend rate), which the insured 
depository institution in default would have paid if the deposit had 
matured on that date and the insured depository institution had not 
failed. In the absence of any such announced or anticipated interest or 
dividend rate, the rate for this purpose shall be whatever rate was paid 
in the immediately preceding payment period.
    (2) Discounted certificates of deposit. The amount of a certificate 
of deposit sold by an insured depository institution at a discount from 
its face value is its original purchase price plus the amount of accrued 
earnings calculated by compounding interest annually at the rate 
necessary to increase the original purchase price to the maturity value 
over the life of the certificate.
    (3) Waiver of minimum requirements. In the case of a deposit with a 
fixed payment date, fixed or minimum term, or a qualifying or notice 
period that has not expired as of such date, interest thereon to the 
date of closing shall be computed according to the terms of the deposit 
contract as if interest had been credited and as if the deposit could 
have been withdrawn on such date without any penalty or reduction in the 
rate of earnings.
    (j) Continuation of insurance coverage following the death of a 
deposit owner. The death of a deposit owner shall not affect the 
insurance coverage of the deposit for a period of six months following 
the owner's death unless the deposit account is restructured. The 
operation of this grace period, however, shall not result in a reduction 
of coverage. If an account is not restructured within six months after 
the owner's death, the insurance shall be provided on the basis of 
actual ownership in accordance with the provisions of Sec. 330.5(a)(1).

[63 FR 25756, May 11, 1998, as amended at 64 FR 15656, Apr. 1, 1999]



Sec. 330.4  Continuation of separate deposit insurance after merger of insured 

depository institutions.

    Whenever the liabilities of one or more insured depository 
institutions for deposits are assumed by another insured depository 
institution, whether by merger, consolidation, other statutory 
assumption or contract:
    (a) The insured status of the institutions whose liabilities have 
been assumed terminates on the date of receipt by the FDIC of 
satisfactory evidence of the assumption; and
    (b) The separate insurance of deposits assumed continues for six 
months from the date the assumption takes effect or, in the case of a 
time deposit, the earliest maturity date after the six-

[[Page 328]]

month period. In the case of time deposits which mature within six 
months of the date the deposits are assumed and which are renewed at the 
same dollar amount (either with or without accrued interest having been 
added to the principal amount) and for the same term as the original 
deposit, the separate insurance applies to the renewed deposits until 
the first maturity date after the six-month period. Time deposits that 
mature within six months of the deposit assumption and that are renewed 
on any other basis, or that are not renewed and thereby become demand 
deposits, are separately insured only until the end of the six-month 
period.



Sec. 330.5  Recognition of deposit ownership and fiduciary relationships.

    (a) Recognition of deposit ownership--(1) Evidence of deposit 
ownership. Except as indicated in this paragraph (a)(1) or as provided 
in Sec. 330.3(j), in determining the amount of insurance available to 
each depositor, the FDIC shall presume that deposited funds are actually 
owned in the manner indicated on the deposit account records of the 
insured depository institution. If the FDIC, in its sole discretion, 
determines that the deposit account records of the insured depository 
institution are clear and unambiguous, those records shall be considered 
binding on the depositor, and the FDIC shall consider no other records 
on the manner in which the funds are owned. If the deposit account 
records are ambiguous or unclear on the manner in which the funds are 
owned, then the FDIC may, in its sole discretion, consider evidence 
other than the deposit account records of the insured depository 
institution for the purpose of establishing the manner in which the 
funds are owned. Despite the general requirements of this paragraph 
(a)(1), if the FDIC has reason to believe that the insured depository 
institution's deposit account records misrepresent the actual ownership 
of deposited funds and such misrepresentation would increase deposit 
insurance coverage, the FDIC may consider all available evidence and pay 
claims for insured deposits on the basis of the actual rather than the 
misrepresented ownership.
    (2) Recognition of deposit ownership in custodial accounts. In the 
case of custodial deposits, the interest of each beneficial owner may be 
determined on a fractional or percentage basis. This may be accomplished 
in any manner which indicates that where the funds of an owner are 
commingled with other funds held in a custodial capacity and a portion 
thereof is placed on deposit in one or more insured depository 
institutions without allocation, the owner's insured interest in the 
deposit in any one insured depository institution would represent, at 
any given time, the same fractional share as his or her share of the 
total commingled funds.
    (b) Fiduciary relationships--(1) Recognition. The FDIC will 
recognize a claim for insurance coverage based on a fiduciary 
relationship only if the relationship is expressly disclosed, by way of 
specific references, in the ``deposit account records'' (as defined in 
Sec. 330.1(e)) of the insured depository institution. Such 
relationships include, but are not limited to, relationships involving a 
trustee, agent, nominee, guardian, executor or custodian pursuant to 
which funds are deposited. The express indication that the account is 
held in a fiduciary capacity will not be necessary, however, in 
instances where the FDIC determines, in its sole discretion, that the 
titling of the deposit account and the underlying deposit account 
records sufficiently indicate the existence of a fiduciary relationship. 
This exception may apply, for example, where the deposit account title 
or records indicate that the account is held by an escrow agent, title 
company or a company whose business is to hold deposits and securities 
for others.
    (2) Details of fiduciary relationships. If the deposit account 
records of an insured depository institution disclose the existence of a 
relationship which might provide a basis for additional insurance 
(including the exception provided for in paragraph (b)(1) of this 
section), the details of the relationship and the interests of other 
parties in the account must be ascertainable either from the deposit 
account records of the insured depository institution or from records 
maintained, in good faith and in the regular course of business, by

[[Page 329]]

the depositor or by some person or entity that has undertaken to 
maintain such records for the depositor.
    (3) Multi-tiered fiduciary relationships. In deposit accounts where 
there are multiple levels of fiduciary relationships, there are two 
methods of satisfying paragraphs (b)(1) and (b)(2) of this section to 
obtain insurance coverage for the interests of the true beneficial 
owners of a deposit account.
    (i) One method is to:
    (A) Expressly indicate, on the deposit account records of the 
insured depository institution, the existence of each and every level of 
fiduciary relationships; and
    (B) Disclose, at each level, the name(s) and interest(s) of the 
person(s) on whose behalf the party at that level is acting.
    (ii) An alternative method is to:
    (A) Expressly indicate, on the deposit account records of the 
insured depository institution, that there are multiple levels of 
fiduciary relationships;
    (B) Disclose the existence of additional levels of fiduciary 
relationships in records, maintained in good faith and in the regular 
course of business, by parties at subsequent levels; and
    (C) Disclose, at each of the levels, the name(s) and interest(s) of 
the person(s) on whose behalf the party at that level is acting. No 
person or entity in the chain of parties will be permitted to claim that 
they are acting in a fiduciary capacity for others unless the possible 
existence of such a relationship is revealed at some previous level in 
the chain.
    (4) Exceptions--(i) Deposits evidenced by negotiable instruments. If 
any deposit obligation of an insured depository institution is evidenced 
by a negotiable certificate of deposit, negotiable draft, negotiable 
cashier's or officer's check, negotiable certified check, negotiable 
traveler's check, letter of credit or other negotiable instrument, the 
FDIC will recognize the owner of such deposit obligation for all 
purposes of claim for insured deposits to the same extent as if his or 
her name and interest were disclosed on the records of the insured 
depository institution; provided, that the instrument was in fact 
negotiated to such owner prior to the date of default of the insured 
depository institution. The owner must provide affirmative proof of such 
negotiation, in a form satisfactory to the FDIC, to substantiate his or 
her claim. Receipt of a negotiable instrument directly from the insured 
depository institution in default shall, in no event, be considered a 
negotiation of said instrument for purposes of this provision.
    (ii) Deposit obligations for payment of items forwarded for 
collection by depository institution acting as agent. Where an insured 
depository institution in default has become obligated for the payment 
of items forwarded for collection by a depository institution acting 
solely as agent, the FDIC will recognize the holders of such items for 
all purposes of claim for insured deposits to the same extent as if 
their name(s) and interest(s) were disclosed as depositors on the 
deposit account records of the insured depository institution, when such 
claim for insured deposits, if otherwise payable, has been established 
by the execution and delivery of prescribed forms. The FDIC will 
recognize such depository institution forwarding such items for the 
holders thereof as agent for such holders for the purpose of making an 
assignment to the FDIC of their rights against the insured depository 
institution in default and for the purpose of receiving payment on their 
behalf.

[63 FR 25756, May 11, 1998, as amended at 64 FR 15656, Apr. 1, 1999]



Sec. 330.6  Single ownership accounts.

    (a) Individual accounts. Funds owned by a natural person and 
deposited in one or more deposit accounts in his or her own name shall 
be added together and insured up to the SMDIA in the aggregate. 
Exception: Despite the general requirement in this paragraph (a), if 
more than one natural person has the right to withdraw funds from an 
individual account (excluding persons who have the right to withdraw by 
virtue of a Power of Attorney), the account shall be treated as a joint 
ownership account (although not necessarily a qualifying joint account) 
and shall be insured in accordance with the provisions of Sec. 330.9, 
unless the deposit account records clearly indicate, to the satisfaction 
of the FDIC, that the funds are owned by one individual and that other

[[Page 330]]

signatories on the account are merely authorized to withdraw funds on 
behalf of the owner.
    (b) Sole proprietorship accounts. Funds owned by a business which is 
a ``sole proprietorship'' (as defined in Sec. 330.1(m)) and deposited 
in one or more deposit accounts in the name of the business shall be 
treated as the individual account(s) of the person who is the sole 
proprietor, added to any other individual accounts of that person, and 
insured up to the SMDIA in the aggregate.
    (c) Single-name accounts containing community property funds. 
Community property funds deposited into one or more deposit accounts in 
the name of one member of a husband-wife community shall be treated as 
the individual account(s) of the named member, added to any other 
individual accounts of that person, and insured up to the SMDIA in the 
aggregate.
    (d) Accounts of a decedent and accounts held by executors or 
administrators of a decedent's estate. Funds held in the name of a 
decedent or in the name of the executor, administrator, or other 
personal representative of his or her estate and deposited into one or 
more deposit accounts shall be added together and insured up to the 
SMDIA in the aggregate; provided, however, that nothing in this 
paragraph (d) shall affect the operation of Sec. 330.3(j). The deposit 
insurance provided by this paragraph (d) shall be separate from any 
insurance coverage provided for the individual deposit accounts of the 
executor, administrator, other personal representative or the 
beneficiaries of the estate.

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006]



Sec. 330.7  Accounts held by an agent, nominee, guardian, custodian or 

conservator.

    (a) Agency or nominee accounts. Funds owned by a principal or 
principals and deposited into one or more deposit accounts in the name 
of an agent, custodian or nominee, shall be insured to the same extent 
as if deposited in the name of the principal(s). When such funds are 
deposited by an insured depository institution acting as a trustee of an 
irrevocable trust, the insurance coverage shall be governed by the 
provisions of Sec. 330.13.
    (b) Guardian, custodian or conservator accounts. Funds held by a 
guardian, custodian, or conservator for the benefit of his or her ward, 
or for the benefit of a minor under the Uniform Gifts to Minors Act, and 
deposited into one or more accounts in the name of the guardian, 
custodian or conservator shall, for purposes of this part, be deemed to 
be agency or nominee accounts and shall be insured in accordance with 
paragraph (a) of this section.
    (c) Accounts held by fiduciaries on behalf of two or more persons. 
Funds held by an agent, nominee, guardian, custodian, conservator or 
loan servicer, on behalf of two or more persons jointly, shall be 
treated as a joint ownership account and shall be insured in accordance 
with the provisions of Sec. 330.9.
    (d) Mortgage servicing accounts. Accounts maintained by a mortgage 
servicer, in a custodial or other fiduciary capacity, which are 
comprised of payments by mortgagors of principal and interest, shall be 
insured for the cumulative balance paid into the account by the 
mortgagors, up to a limit of the SMDIA per mortgagor. Accounts 
maintained by a mortgage servicer, in a custodial or other fiduciary 
capacity, which are comprised of payments by mortgagors of taxes and 
insurance premiums shall be added together and insured in accordance 
with paragraph (a) of this section for the ownership interest of each 
mortgagor in such accounts. This provision is effective as of October 
10, 2008, for all existing and future mortgage servicing account.
    (e) Custodian accounts for American Indians. Paragraph (a) of this 
section shall not apply to any interest an individual American Indian 
may have in funds deposited by the Bureau of Indian Affairs of the 
United States Department of the Interior (the ``BIA'') on behalf of that 
person pursuant to 25 U.S.C. 162(a), or by any other disbursing agent of 
the United States on behalf of that person pursuant to similar 
authority, in an insured depository institution. The interest of each 
American Indian in all such accounts maintained at the same insured 
depository institution shall be added together and insured, up to the 
SMDIA, separately

[[Page 331]]

from any other accounts maintained by that person in the same insured 
depository institution.

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006; 73 
FR 61660, Oct. 17, 2008]



Sec. 330.8  Annuity contract accounts.

    (a) Funds held by an insurance company or other corporation in a 
deposit account for the sole purpose of funding life insurance or 
annuity contracts and any benefits incidental to such contracts, shall 
be insured separately in the amount of up to the SMDIA per annuitant, 
provided that, pursuant to a state statute:
    (1) The corporation establishes a separate account for such funds;
    (2) The account cannot be charged with the liabilities arising out 
of any other business of the corporation; and
    (3) The account cannot be invaded by other creditors of the 
corporation in the event that the corporation becomes insolvent and its 
assets are liquidated.
    (b) Such insurance coverage shall be separate from the insurance 
provided for any other accounts maintained by the corporation or the 
annuitants at the same insured depository institution.

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006]



Sec. 330.9  Joint ownership accounts.

    (a) Separate insurance coverage. Qualifying joint accounts, whether 
owned as joint tenants with the right of survivorship, as tenants in 
common or as tenants by the entirety, shall be insured separately from 
any individually owned (single ownership) deposit accounts maintained by 
the co-owners. (Example: If A has a single ownership account and also is 
a joint owner of a qualifying joint account, A's interest in the joint 
account would be insured separately from his or her interest in the 
individual account.) Qualifying joint accounts in the names of both 
husband and wife which are comprised of community property funds shall 
be added together and insured up to twice the SMDIA, separately from any 
funds deposited into accounts bearing their individual names.
    (b) Determination of insurance coverage. The interests of each co-
owner in all qualifying joint accounts shall be added together and the 
total shall be insured up to the SMDIA. (Example: ``A&B'' have a 
qualifying joint account with a balance of $60,000; ``A&C'' have a 
qualifying joint account with a balance of $80,000; and ``A&B&C'' have a 
qualifying joint account with a balance of $150,000. A's combined 
ownership interest in all qualifying joint accounts would be $120,000 
($30,000 plus $40,000 plus $50,000); therefore, A's interest would be 
insured in the amount of $100,000 and uninsured in the amount of 
$20,000. B's combined ownership interest in all qualifying joint 
accounts would be $80,000 ($30,000 plus $50,000); therefore, B's 
interest would be fully insured. C's combined ownership interest in all 
qualifying joint accounts would be $90,000 ($40,000 plus $50,000); 
therefore, C's interest would be fully insured.)
    (c) Qualifying joint accounts. (1) A joint deposit account shall be 
deemed to be a qualifying joint account, for purposes of this section, 
only if:
    (i) All co-owners of the funds in the account are ``natural 
persons'' (as defined in Sec. 330.1(k)); and
    (ii) Each co-owner has personally signed a deposit account signature 
card; and
    (iii) Each co-owner possesses withdrawal rights on the same basis.
    (2) The signature-card requirement of paragraph (c)(1)(ii) of this 
section shall not apply to certificates of deposit, to any deposit 
obligation evidenced by a negotiable instrument, or to any account 
maintained by an agent, nominee, guardian, custodian or conservator on 
behalf of two or more persons.
    (3) All deposit accounts that satisfy the criteria in paragraph 
(c)(1) of this section, and those accounts that come within the 
exception provided for in paragraph (c)(2) of this section, shall be 
deemed to be jointly owned provided that, in accordance with the 
provisions of Sec. 330.5(a), the FDIC determines that the deposit 
account records of the insured depository institution are clear and 
unambiguous as to the ownership of the accounts. If the deposit account 
records are ambiguous or unclear as to

[[Page 332]]

the manner in which the deposit accounts are owned, then the FDIC may, 
in its sole discretion, consider evidence other than the deposit account 
records of the insured depository institution for the purpose of 
establishing the manner in which the funds are owned. The signatures of 
two or more persons on the deposit account signature card or the names 
of two or more persons on a certificate of deposit or other deposit 
instrument shall be conclusive evidence that the account is a joint 
account (although not necessarily a qualifying joint account) unless the 
deposit records as a whole are ambiguous and some other evidence 
indicates, to the satisfaction of the FDIC, that there is a contrary 
ownership capacity.
    (d) Nonqualifying joint accounts. A deposit account held in two or 
more names which is not a qualifying joint account, for purposes of this 
section, shall be treated as being owned by each named owner, as an 
individual, corporation, partnership, or unincorporated association, as 
the case may be, and the actual ownership interest of each individual or 
entity in such account shall be added to any other single ownership 
accounts of such individual or other accounts of such entity, and shall 
be insured in accordance with the provisions of this part governing the 
insurance of such accounts.
    (e) Determination of interests. The interests of the co-owners of 
qualifying joint accounts, held as tenants in common, shall be deemed 
equal, unless otherwise stated in the depository institution's deposit 
account records. This section applies regardless of whether the 
conjunction ``and'' or ``or'' is used in the title of a joint deposit 
account, even when both terms are used, such as in the case of a joint 
deposit account with three or more co-owners.

[63 FR 25756, May 11, 1998, as amended at 64 FR 15656, Apr. 1, 1999; 64 
FR 62102, Nov. 16, 1999; 71 FR 14631, Mar. 23, 2006]



Sec. 330.10  Revocable trust accounts.

    (a) General rule. Except as provided in paragraph (e) of this 
section, the funds owned by an individual and deposited into one or more 
accounts with respect to which the owner evidences an intention that 
upon his or her death the funds shall belong to one or more 
beneficiaries shall be separately insured (from other types of accounts 
the owner has at the same insured depository institution) in an amount 
equal to the total number of different beneficiaries named in the 
account(s) multiplied by the SMDIA. This section applies to all accounts 
held in connection with informal and formal testamentary revocable 
trusts. Such informal trusts are commonly referred to as payable-on-
death accounts, in-trust-for accounts or Totten Trust accounts, and such 
formal trusts are commonly referred to as living trusts or family 
trusts. (Example 1: An individual has a living trust account with four 
beneficiaries named in the trust. The account owner has no other 
revocable trust accounts at the same FDIC-insured institution. The 
maximum insurance coverage would be $400,000, determined by multiplying 
4 (the number of beneficiaries) times $100,000 (the current SMDIA). 
Example 2: An individual has a payable-on-death account naming his niece 
and cousin as beneficiaries and, at the same FDIC-insured institution, 
has another payable-on-death account naming the same niece and a friend 
as beneficiaries. The maximum coverage available to the account owner 
would be $300,000. This is because the account owner has named three 
different beneficiaries in the revocable trust accounts. The naming of 
the same beneficiary in more than one revocable trust account, whether 
it be a payable-on-death account or living trust account, does not 
increase the total coverage amount.)
    (b) Required intention. The required intention in paragraph (a) of 
this section that upon the owner's death the funds shall belong to one 
or more beneficiaries must be manifested in the title of the account 
using commonly accepted terms such as, but not limited to, in trust for, 
as trustee for, payable-on-death to, or any acronym therefore. In 
addition, for informal revocable trust accounts, the beneficiaries must 
be specifically named in the deposit account records of the insured 
depository institution. The settlor of a revocable trust shall be 
presumed to own the funds deposited into the account.

[[Page 333]]

    (c) Definition of beneficiary. For purposes of this section, a 
beneficiary includes natural persons as well as charitable organizations 
and other non-profit entities recognized as such under the Internal 
Revenue Code of 1986.
    (d) Interests of beneficiaries outside the definition of beneficiary 
in this section. If a beneficiary named in a trust covered by this 
section does not meet the definition of beneficiary in paragraph (c) of 
this section, the funds corresponding to that beneficiary shall be 
treated as the individually owned (single ownership) funds of the 
owner(s). As such, they shall be aggregated with any other single 
ownership accounts of such owner(s) and insured up to the SMDIA per 
owner. (Example: If an individual establishes an account payable-on-
death to a pet, the account would be insured as a single-ownership 
account.)
    (e) Revocable trust accounts with aggregate balances exceeding five 
times the SMDIA and naming more than five different beneficiaries. 
Notwithstanding the general coverage provisions in paragraph (a) of this 
section, for funds owned by an individual in one or more revocable trust 
accounts naming more than five different beneficiaries and whose 
aggregate balance is more than five times the SMDIA, the maximum 
revocable trust account coverage for the account owner shall be the 
greater of either: five times the SMDIA or the aggregate amount of the 
ownership interests of each different beneficiary named in the trusts, 
to a limit of the SMDIA per different beneficiary. (Example: A has a 
living trust account with a balance of $600,000. Under the terms of the 
trust, upon A's death, A's three children are each entitled to $50,000, 
A's friend is entitled to $5,000 and a designated charity is entitled to 
$70,000. The trust also provides that the remainder of the trust assets 
shall belong to A's spouse. In this case, because the balance of the 
account is over $500,000 (which is five times the current SMDIA of 
$100,000) and there are more than five different beneficiaries named in 
the trust, the maximum coverage available to A would be the greater of: 
$500,000 or the aggregate of each different beneficiary's interest to a 
limit of $100,000 per beneficiary. The beneficial interests in the trust 
considered for purposes of determining coverage are: $50,000 for each of 
the children (totaling $150,000), $5,000 for the friend, $70,000 for the 
charity, and $100,000 for the spouse ($375,000, subject to the $100,000 
limit per beneficiary). The aggregate beneficial interests, thus, are 
$325,000. Hence, the maximum coverage afforded to the account owner 
would be $500,000, the greater of $500,000 or $325,000.)
    (f) Joint revocable trust accounts. (1) Where an account described 
in paragraph (a) of this section is established by more than one owner, 
the respective interest of each account owner (which shall be deemed 
equal) shall be insured separately, per different beneficiary, up to the 
SMDIA, subject to the limitation imposed in paragraph (e) of this 
section. (Example 1: A & B, two individuals, establish a payable-on-
death account naming their three nieces as beneficiaries. Neither A nor 
B has any other revocable trust accounts at the same FDIC-insured 
institution. The maximum coverage afforded to A&B would be $600,000, 
determined by multiplying the number of owners (2) times the SMDIA 
(currently $100,000) times the number of different beneficiaries (3). In 
this example, A would be entitled to revocable trust coverage of 
$300,000 and B would be entitled to revocable trust coverage of 
$300,000. Example 2: A and B, two individuals, establish a payable-on-
death account naming their two children, two cousins and a charity as 
beneficiaries. The balance in the account is $700,000. Neither A nor B 
has any other revocable trust accounts at the same FDIC-insured 
institution. The maximum coverage would be determined (under paragraph 
(a) of this section) by multiplying the number of account owners (2) 
times the number of different beneficiaries (5) times $100,000, or $1 
million. Because the account balance is less than the maximum coverage 
amount, the account would be fully insured. Example 3: A and B, two 
individuals, establish a living trust account with a balance of $1.5 
million. Under the terms of the trust, upon the death of both A & B, 
each of A & B's three children is entitled to $200,000, B's cousin is 
entitled to $150,000, A's friend is entitled to $30,000 and the 
remaining amount ($720,000)

[[Page 334]]

goes to a charity. Under paragraph (e) of this section, the maximum 
coverage, as to each joint account owner, would be the greater of 
$500,000 or the aggregate amount (as to each joint owner) of the 
interest of each different beneficiary named in the trust, to a limit of 
$100,000 per account owner per beneficiary. The beneficial interests in 
the trust considered for purposes of determining coverage for account 
owner A are: $300,000 for the children (three times $100,000), $75,000 
for the cousin, $15,000 for the friend and $100,000 for the charity 
($360,000 subject to the $100,000 per-beneficiary limitation). As to A, 
the aggregate amount of the beneficial interests eligible for deposit 
insurance coverage, thus, is $490,000. Hence, the maximum coverage 
afforded to joint account owner A would be $500,000, the greater of 
$500,000 or $490,000 (the aggregate of all the beneficial interests 
attributable to A, limited to $100,000 per beneficiary). The same 
analysis and coverage determination also would apply to B.
    (2) Notwithstanding paragraph (f)(1) of this section, where the 
owners of a joint revocable trust account are themselves the sole 
beneficiaries of the corresponding trust, the account shall be insured 
as a joint account under section 330.9 and shall not be insured under 
the provisions of this section. (Example: If A and B establish a 
payable-on-death account naming themselves as the sole beneficiaries of 
the account, the account will be insured as a joint account because the 
account does not satisfy the intent requirement (under paragraph (a) of 
this section) that the funds in the account belong to the named 
beneficiaries upon the owners' death. The beneficiaries are in fact the 
actual owners of the funds during the account owners' lifetimes.)
    (g) For deposit accounts held in connection with a living trust that 
provides for a life-estate interest for designated beneficiaries, the 
FDIC shall value each such life estate interest as the SMDIA for 
purposes of determining the insurance coverage available to the account 
owner.
    (h) Revocable trusts that become irrevocable trusts. Notwithstanding 
the provisions in section 330.13 on the insurance coverage of 
irrevocable trust accounts, a revocable trust account shall continue to 
be insured under the provisions of this section even if the 
corresponding revocable trust, upon the death of one or more of the 
owners thereof, converts, in part or entirely, to an irrevocable trust. 
(Example: Assume A and B have a trust account in connection with a 
living trust, of which they are joint grantors. If upon the death of 
either A or B the trust transforms into an irrevocable trust as to the 
deceased grantor's ownership in the trust, the account will continue to 
be insured under the provisions of this section.)
    (i) This section shall be effective as of September 26, 2008 for all 
existing and future revocable trust accounts and for existing and future 
irrevocable trust accounts resulting from formal revocable trust 
accounts.

[73 FR 56711, Sept. 30, 2008]



Sec. 330.11  Accounts of a corporation, partnership or unincorporated 

association.

    (a) Corporate accounts. (1) The deposit accounts of a corporation 
engaged in any ``independent activity'' (as defined in Sec. 330.1(g)) 
shall be added together and insured up to the SMDIA in the aggregate. If 
a corporation has divisions or units which are not separately 
incorporated, the deposit accounts of those divisions or units shall be 
added to any other deposit accounts of the corporation. If a corporation 
maintains deposit accounts in a representative or fiduciary capacity, 
such accounts shall not be treated as the deposit accounts of the 
corporation but shall be treated as fiduciary accounts and insured in 
accordance with the provisions of Sec. 330.7.
    (2) Notwithstanding any other provision of this part, any trust or 
other business arrangement which has filed or is required to file a 
registration statement with the Securities and Exchange Commission 
pursuant to section 8 of the Investment Company Act of 1940 (15 U.S.C. 
80a-8) or that would be required so to register but for the fact it is 
not created under the laws of the United States or a state or but for 
sections 2(b), 3(c)(1), or 6(a)(1) of that act shall be deemed to be a 
corporation for purposes of determining deposit insurance coverage. An 
exception to this

[[Page 335]]

paragraph (a)(2) shall exist for any trust or other business arrangement 
established by a state or that is a state agency or state public 
instrumentality as part of a qualified tuition savings program under 
section 529 of the Internal Revenue Code (26 U.S.C. 529). A deposit 
account of such a trust or business arrangement shall not be deemed to 
be the deposit of a corporation provided that: The funds in the account 
may be traced to one or more particular investors or participants; and 
the existence of the trust relationships is disclosed in accordance with 
the requirements of Sec. 330.5. If these conditions are satisfied, each 
participant's funds shall be insured as a deposit account of the 
participant.
    (b) Partnership accounts. The deposit accounts of a partnership 
engaged in any ``independent activity'' (as defined in Sec. 330.1(g)) 
shall be added together and insured up to the SMDIA in the aggregate. 
Such insurance coverage shall be separate from any insurance provided 
for individually owned (single ownership) accounts maintained by the 
individual partners. A partnership shall be deemed to exist, for 
purposes of this paragraph, any time there is an association of two or 
more persons or entities formed to carry on, as co-owners, an 
unincorporated business for profit.
    (c) Unincorporated association accounts. The deposit accounts of an 
unincorporated association engaged in any independent activity shall be 
added together and insured up to the SMDIA in the aggregate, separately 
from the accounts of the person(s) or entity(ies) comprising the 
unincorporated association. An unincorporated association shall be 
deemed to exist, for purposes of this paragraph, whenever there is an 
association of two or more persons formed for some religious, 
educational, charitable, social or other noncommercial purpose.
    (d) Non-qualifying entities. The deposit accounts of an entity which 
is not engaged in an ``independent activity'' (as defined in Sec. 
330.1(g)) shall be deemed to be owned by the person or persons owning 
the corporation or comprising the partnership or unincorporated 
association, and, for deposit insurance purposes, the interest of each 
person in such a deposit account shall be added to any other deposit 
accounts individually owned by that person and insured up to the SMDIA 
in the aggregate.

[63 FR 25756, May 11, 1998, as amended at 70 FR 33692, June 9, 2005; 70 
FR 62059, Oct. 28, 2005; 71 FR 14631, Mar. 23, 2006]



Sec. 330.12  Accounts held by a depository institution as the trustee of an 

irrevocable trust.

    (a) Separate insurance coverage. ``Trust funds'' (as defined in 
Sec. 330.1(p)) held by an insured depository institution in its 
capacity as trustee of an irrevocable trust, whether held in its trust 
department, held or deposited in any other department of the fiduciary 
institution, or deposited by the fiduciary institution in another 
insured depository institution, shall be insured up to the SMDIA for 
each owner or beneficiary represented. This insurance shall be separate 
from, and in addition to, the insurance provided for any other deposits 
of the owners or the beneficiaries.
    (b) Determination of interests. The insurance for funds held by an 
insured depository institution in its capacity as trustee of an 
irrevocable trust shall be determined in accordance with the following 
provisions:
    (1) Allocated funds of a trust estate. If trust funds of a 
particular ``trust estate'' (as defined in Sec. 330.1(o)) are allocated 
by the fiduciary and deposited, the insurance with respect to such trust 
estate shall be determined by ascertaining the amount of its funds 
allocated, deposited and remaining to the credit of the claimant as 
fiduciary at the insured depository institution in default.
    (2) Interest of a trust estate in unallocated trust funds. If funds 
of a particular trust estate are commingled with funds of other trust 
estates and deposited by the fiduciary institution in one or more 
insured depository institutions to the credit of the depository 
institution as fiduciary, without allocation of specific amounts from a 
particular trust estate to an account in such institution(s), the 
percentage interest of that trust estate in the unallocated deposits in 
any institution in default is the same as that trust estate's percentage 
interest in the entire commingled investment pool.

[[Page 336]]

    (c) Limitation on applicability. This section shall not apply to 
deposits of trust funds belonging to a trust which is classified as a 
corporation under Sec. 330.11(a)(2).

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006]



Sec. 330.13  Irrevocable trust accounts.

    (a) General rule. Funds representing the ``non-contingent trust 
interest(s)'' (as defined in Sec. 330.1(l)) of a beneficiary deposited 
into one or more deposit accounts established pursuant to one or more 
irrevocable trust agreements created by the same settlor(s) (grantor(s)) 
shall be added together and insured up to the SMDIA in the aggregate. 
Such insurance coverage shall be separate from the coverage provided for 
other accounts maintained by the settlor(s), trustee(s) or 
beneficiary(ies) of the irrevocable trust(s) at the same insured 
depository institution. Each ``trust interest'' (as defined in Sec. 
330.1(q)) in any irrevocable trust established by two or more settlors 
shall be deemed to be derived from each settlor pro rata to his or her 
contribution to the trust.
    (b) Treatment of contingent trust interests. In the case of any 
trust in which certain trust interests do not qualify as non-contingent 
trust interests, the funds representing those interests shall be added 
together and insured up to the SMDIA in the aggregate. Such insurance 
coverage shall be in addition to the coverage provided for the funds 
representing non-contingent trust interests which are insured pursuant 
to paragraph (a) of this section.
    (c) Commingled accounts of bankruptcy trustees. Whenever a 
bankruptcy trustee appointed under Title 11 of the United States Code 
commingles the funds of various bankruptcy estates in the same account 
at an insured depository institution, the funds of each Title 11 
bankruptcy estate will be added together and insured up to the SMDIA, 
separately from the funds of any other such estate.

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006]



Sec. 330.14  Retirement and other employee benefit plan accounts.

    (a) ``Pass-through'' insurance. Any deposits of an employee benefit 
plan in an insured depository institution shall be insured on a ``pass-
through'' basis, in the amount of up to the SMDIA for the non-contingent 
interest of each plan participant, provided the rules in Sec. 330.5 are 
satisfied. Deposits eligible for coverage under paragraph (b)(2) of this 
section that also are deposits of a employee benefit plan or deposits of 
an deferred compensation plan described in section 457 of the Internal 
Revenue Code of 1986 (26 U.S.C. 457) in an insured depository 
institution shall be insured on a ``pass-through'' basis in the amount 
of $250,000 for the non-contingent interest of each plan participant, 
provided the rules in Sec. 330.5 are satisfied.
    (b) Aggregation--(1) Multiple plans. Funds representing the non-
contingent interests of a beneficiary in an employee benefit plan, or 
eligible deferred compensation plan described in section 457 of the 
Internal Revenue Code of 1986 (26 U.S.C. 457), which are deposited in 
one or more deposit accounts shall be aggregated with any other 
deposited funds representing such interests of the same beneficiary in 
other employee benefit plans, or eligible deferred compensation plans 
described in section 457 of the Internal Revenue Code of 1986, 
established by the same employer or employee organization.
    (2) Certain retirement accounts. Deposits in an insured depository 
institution made in connection with the following types of retirement 
plans shall be aggregated and insured in the amount of up to $250,000 
per participant:
    (i) Any individual retirement account described in section 408(a) of 
the Internal Revenue Code of 1986 (26 U.S.C. 408(a)):
    (ii) Any eligible deferred compensation plan described in section 
457 of the Internal Revenue Code of 1986 (26 U.S.C. 457); and
    (iii) Any individual account plan defined in section 3(34) of the 
Employee Retirement Income Security Act (ERISA) (29 U.S.C. 1002) and any 
plan described in section 401(d) of the Internal Revenue Code of 1986 
(26 U.S.C.

[[Page 337]]

401(d)), to the extent that participants and beneficiaries under such 
plans have the right to direct the investment of assets held in 
individual accounts maintained on their behalf by the plans.
    (c) Determination of interests--(1) Defined contribution plans. The 
value of an employee's non-contingent interest in a defined contribution 
plan shall be deemed to be the employee's account balance as of the date 
of default of the insured depository institution, regardless of whether 
said amount was derived, in whole or in part, from contributions of the 
employee and/or the employer to the account.
    (2) Defined benefit plans. The value of an employee's non-contingent 
interest in a defined benefit plan shall be deemed to be the present 
value of the employee's interest in the plan, evaluated in accordance 
with the method of calculation ordinarily used under such plan, as of 
the date of default of the insured depository institution.
    (3) Amounts taken into account. For the purposes of applying the 
rule under paragraph (b)(2) of this section, only the present vested and 
ascertainable interests of each participant in an employee benefit plan 
or ``457 Plan,'' excluding any remainder interest created by, or as a 
result of, the plan, shall be taken into account in determining the 
amount of deposit insurance accorded to the deposits of the plan.
    (d) Treatment of contingent interests. In the event that employees' 
interests in an employee benefit plan are not capable of evaluation in 
accordance with the provisions of this section, or an account 
established for any such plan includes amounts for future participants 
in the plan, payment by the FDIC with respect to all such interests 
shall not exceed the SMDIA in the aggregate.
    (e) Overfunded pension plan deposits. Any portion of an employee 
benefit plan's deposits which is not attributable to the interests of 
the beneficiaries under the plan shall be deemed attributable to the 
overfunded portion of the plan's assets and shall be aggregated and 
insured up to the SMDIA, separately from any other deposits.
    (f) Definitions of ``depositor'', ``employee benefit plan'', 
``employee organization'' and ``non-contingent interest''. Except as 
otherwise indicated in this section, for purposes of this section:
    (1) The term depositor means the person(s) administering or managing 
an employee benefit plan.
    (2) The term employee benefit plan has the same meaning given to 
such term in section 3(3) of the Employee Retirement Income Security Act 
of 1974 (ERISA) (29 U.S.C. 1002) and includes any plan described in 
section 401(d) of the Internal Revenue Code of 1986.
    (3) The term employee organization means any labor union, 
organization, employee representation committee, association, group, or 
plan, in which employees participate and which exists for the purpose, 
in whole or in part, of dealing with employers concerning an employee 
benefit plan, or other matters incidental to employment relationships; 
or any employees' beneficiary association organized for the purpose, in 
whole or in part, of establishing such a plan.
    (4) The term non-contingent interest means an interest capable of 
determination without evaluation of contingencies except for those 
covered by the present worth tables and rules of calculation for their 
use set forth in Sec. 20.2031-7 of the Federal Estate Tax Regulations 
(26 CFR 20.2031-7) or any similar present worth or life expectancy 
tables as may be published by the Internal Revenue Service.

[63 FR 25756, May 11, 1998, as amended at 64 FR 15657, Apr. 1, 1999; 71 
FR 14631, Mar. 23, 2006; 71 FR 53550, Sept. 12, 2006]



Sec. 330.15  Accounts held by government depositors.

    (a) Extent of insurance coverage--(1) Accounts of the United States. 
Each official custodian of funds of the United States lawfully 
depositing such funds in an insured depository institution shall be 
separately insured in the amount of:
    (i) Up to the SMDIA in the aggregate for all time and savings 
deposits; and
    (ii) Up to the SMDIA in the aggregate for all demand deposits.
    (2) Accounts of a state, county, municipality or political 
subdivision. (i) Each official custodian of funds of any state of the 
United States, or any county, municipality, or political subdivision

[[Page 338]]

thereof, lawfully depositing such funds in an insured depository 
institution in the state comprising the public unit or wherein the 
public unit is located (including any insured depository institution 
having a branch in said state) shall be separately insured in the amount 
of:
    (A) Up to the SMDIA in the aggregate for all time and savings 
deposits; and
    (B) Up to the SMDIA in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such funds 
in an insured depository institution outside of the state comprising the 
public unit or wherein the public unit is located, shall be insured in 
the amount of up to the SMDIA in the aggregate for all deposits, 
regardless of whether they are time, savings or demand deposits.
    (3) Accounts of the District of Columbia. (i) Each official 
custodian of funds of the District of Columbia lawfully depositing such 
funds in an insured depository institution in the District of Columbia 
(including an insured depository institution having a branch in the 
District of Columbia) shall be separately insured in the amount of:
    (A) Up to the SMDIA in the aggregate for all time and savings 
deposits; and
    (B) Up to the SMDIA in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such funds 
in an insured depository institution outside of the District of Columbia 
shall be insured in the amount of up to the SMDIA in the aggregate for 
all deposits, regardless of whether they are time, savings or demand 
deposits.
    (4) Accounts of the Commonwealth of Puerto Rico and other government 
possessions and territories. (i) Each official custodian of funds of the 
Commonwealth of Puerto Rico, the Virgin Islands, American Samoa, the 
Trust Territory of the Pacific Islands, Guam, or The Commonwealth of the 
Northern Mariana Islands, or of any county, municipality, or political 
subdivision thereof lawfully depositing such funds in an insured 
depository institution in Puerto Rico, the Virgin Islands, American 
Samoa, the Trust Territory of the Pacific Islands, Guam, or The 
Commonwealth of the Northern Mariana Islands, respectively, shall be 
separately insured in the amount of:
    (A) Up to the SMDIA in the aggregate for all time and savings 
deposits; and
    (B) Up to the SMDIA in the aggregate for all demand deposits.
    (ii) In addition, each such official custodian depositing such funds 
in an insured depository institution outside of the commonwealth, 
possession or territory comprising the public unit or wherein the public 
unit is located, shall be insured in the amount of up to the SMDIA in 
the aggregate for all deposits, regardless of whether they are time, 
savings or demand deposits.
    (5) Accounts of an Indian tribe. Each official custodian of funds of 
an Indian tribe (as defined in 25 U.S.C. 1452(c)), including an agency 
thereof having official custody of tribal funds, lawfully depositing the 
same in an insured depository institution shall be separately insured in 
the amount of:
    (i) Up to the SMDIA in the aggregate for all time and savings 
deposits; and
    (ii) Up to the SMDIA in the aggregate for all demand deposits.
    (b) Rules relating to the ``official custodian''--(1) Qualifications 
for an ``official custodian''. In order to qualify as an ``official 
custodian'' for the purposes of paragraph (a) of this section, such 
custodian must have plenary authority, including control, over funds 
owned by the public unit which the custodian is appointed or elected to 
serve. Control of public funds includes possession, as well as the 
authority to establish accounts for such funds in insured depository 
institutions and to make deposits, withdrawals, and disbursements of 
such funds.
    (2) Official custodian of the funds of more than one public unit. 
For the purposes of paragraph (a) of this section, if the same person is 
an official custodian of the funds of more than one public unit, he or 
she shall be separately insured with respect to the funds held by him or 
her for each such public unit, but shall not be separately insured by 
virtue of holding different offices in such public unit or, except as 
provided in paragraph (c) of this section, holding such funds for 
different purposes.

[[Page 339]]

    (3) Split of authority or control over public unit funds. If the 
exercise of authority or control over the funds of a public unit 
requires action by, or the consent of, two or more officers, employees, 
or agents of such public unit, then they will be treated as one 
``official custodian'' for the purposes of this section.
    (c) Public bond issues. Where an officer, agent or employee of a 
public unit has custody of certain funds which by law or under a bond 
indenture are required to be set aside to discharge a debt owed to the 
holders of notes or bonds issued by the public unit, any deposit of such 
funds in an insured depository institution shall be deemed to be a 
deposit by a trustee of trust funds of which the noteholders or 
bondholders are pro rata beneficiaries, and the beneficial interest of 
each noteholder or bondholder in the deposit shall be separately insured 
up to the SMDIA.
    (d) Definition of ``political subdivision''. The term ``political 
subdivision'' includes drainage, irrigation, navigation, improvement, 
levee, sanitary, school or power districts, and bridge or port 
authorities and other special districts created by state statute or 
compacts between the states. It also includes any subdivision of a 
public unit mentioned in paragraphs (a)(2), (a)(3) and (a)(4) of this 
section or any principal department of such public unit:
    (1) The creation of which subdivision or department has been 
expressly authorized by the law of such public unit;
    (2) To which some functions of government have been delegated by 
such law; and
    (3) Which is empowered to exercise exclusive control over funds for 
its exclusive use.

[63 FR 25756, May 11, 1998, as amended at 71 FR 14631, Mar. 23, 2006]

                           PART 331 [RESERVED]



PART 332_PRIVACY OF CONSUMER FINANCIAL INFORMATION--Table of Contents




Sec.
332.1 Purpose and scope.
332.2 Rule of construction.
332.3 Definitions.

                  Subpart A_Privacy and Opt Out Notices

332.4 Initial privacy notice to consumers required.
332.5 Annual privacy notice to customers required.
332.6 Information to be included in privacy notices.
332.7 Form of opt out notice to consumers; opt out methods.
332.8 Revised privacy notices.
332.9 Delivering privacy and opt out notices.

                     Subpart B_Limits on Disclosures

332.10 Limits on disclosure of nonpublic personal information to 
          nonaffiliated third parties.
332.11 Limits on redisclosure and reuse of information.
332.12 Limits on sharing account number information for marketing 
          purposes.

                          Subpart C_Exceptions

332.13 Exception to opt out requirements for service providers and joint 
          marketing.
332.14 Exceptions to notice and opt out requirements for processing and 
          servicing transactions.
332.15 Other exceptions to notice and opt out requirements.

            Subpart D_Relation to Other Laws; Effective Date

332.16 Protection of Fair Credit Reporting Act.
332.17 Relation to State laws.
332.18 Effective date; transition rule.

Appendix A to Part 332--Sample Clauses

    Authority: 12 U.S.C. 1819 (Seventh and Tenth); 15 U.S.C. 6801 et 
seq.

    Source: 65 FR 35216, June 1, 2000, unless otherwise noted.



Sec. 332.1  Purpose and scope.

    (a) Purpose. This part governs the treatment of nonpublic personal 
information about consumers by the financial institutions listed in 
paragraph (b) of this section. This part:
    (1) Requires a financial institution to provide notice to customers 
about its privacy policies and practices;
    (2) Describes the conditions under which a financial institution may 
disclose nonpublic personal information about consumers to nonaffiliated 
third parties; and
    (3) Provides a method for consumers to prevent a financial 
institution from disclosing that information to most

[[Page 340]]

nonaffiliated third parties by ``opting out'' of that disclosure, 
subject to the exceptions in Sec. Sec. 332.13, 332.14, and 332.15.
    (b) Scope. (1) This part applies only to nonpublic personal 
information about individuals who obtain financial products or services 
primarily for personal, family, or household purposes from the 
institutions listed below. This part does not apply to information about 
companies or about individuals who obtain financial products or services 
for business, commercial, or agricultural purposes. This part applies to 
the United States offices of entities for which the Federal Deposit 
Insurance Corporation (FDIC) has primary federal supervisory authority. 
They are referred to in this part as ``you.'' These are: banks insured 
by the FDIC (other than members of the Federal Reserve System), insured 
state branches of foreign banks, and certain subsidiaries of such 
entities.
    (2) Nothing in this part modifies, limits, or supersedes the 
standards governing individually identifiable health information 
promulgated by the Secretary of Health and Human Services under the 
authority of sections 262 and 264 of the Health Insurance Portability 
and Accountability Act of 1996 (42 U.S.C. 1320d-1320d-8).



Sec. 332.2  Rule of construction.

    The examples in this part and the sample clauses in Appendix A of 
this part are not exclusive. Compliance with an example or use of a 
sample clause, to the extent applicable, constitutes compliance with 
this part.



Sec. 332.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (b)(1) Clear and conspicuous means that a notice is reasonably 
understandable and designed to call attention to the nature and 
significance of the information in the notice.
    (2) Examples--(i) Reasonably understandable. You make your notice 
reasonably understandable if you:
    (A) Present the information in the notice in clear, concise 
sentences, paragraphs, and sections;
    (B) Use short explanatory sentences or bullet lists whenever 
possible;
    (C) Use definite, concrete, everyday words and active voice whenever 
possible;
    (D) Avoid multiple negatives;
    (E) Avoid legal and highly technical business terminology whenever 
possible; and
    (F) Avoid explanations that are imprecise and readily subject to 
different interpretations.
    (ii) Designed to call attention. You design your notice to call 
attention to the nature and significance of the information in it if 
you:
    (A) Use a plain-language heading to call attention to the notice;
    (B) Use a typeface and type size that are easy to read;
    (C) Provide wide margins and ample line spacing;
    (D) Use boldface or italics for key words; and
    (E) In a form that combines your notice with other information, use 
distinctive type size, style, and graphic devices, such as shading or 
sidebars, when you combine your notice with other information.
    (iii) Notices on web sites. If you provide a notice on a web page, 
you design your notice to call attention to the nature and significance 
of the information in it if you use text or visual cues to encourage 
scrolling down the page if necessary to view the entire notice and 
ensure that other elements on the web site (such as text, graphics, 
hyperlinks, or sound) do not distract attention from the notice, and you 
either:
    (A) Place the notice on a screen that consumers frequently access, 
such as a page on which transactions are conducted; or
    (B) Place a link on a screen that consumers frequently access, such 
as a page on which transactions are conducted, that connects directly to 
the notice and is labeled appropriately to convey the importance, 
nature, and relevance of the notice.
    (c) Collect means to obtain information that you organize or can 
retrieve by the name of an individual or by identifying number, symbol, 
or other

[[Page 341]]

identifying particular assigned to the individual, irrespective of the 
source of the underlying information.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e)(1) Consumer means an individual who obtains or has obtained a 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, or that individual's legal 
representative.
    (2) Examples--(i) An individual who applies to you for credit for 
personal, family, or household purposes is a consumer of a financial 
service, regardless of whether the credit is extended.
    (ii) An individual who provides nonpublic personal information to 
you in order to obtain a determination about whether he or she may 
qualify for a loan to be used primarily for personal, family, or 
household purposes is a consumer of a financial service, regardless of 
whether the loan is extended.
    (iii) An individual who provides nonpublic personal information to 
you in connection with obtaining or seeking to obtain financial, 
investment, or economic advisory services is a consumer regardless of 
whether you establish a continuing advisory relationship.
    (iv) If you hold ownership or servicing rights to an individual's 
loan that is used primarily for personal, family, or household purposes, 
the individual is your consumer, even if you hold those rights in 
conjunction with one or more other institutions. (The individual is also 
a consumer with respect to the other financial institutions involved.) 
An individual who has a loan in which you have ownership or servicing 
rights is your consumer, even if you, or another institution with those 
rights, hire an agent to collect on the loan.
    (v) An individual who is a consumer of another financial institution 
is not your consumer solely because you act as agent for, or provide 
processing or other services to, that financial institution.
    (vi) An individual is not your consumer solely because he or she has 
designated you as trustee for a trust.
    (vii) An individual is not your consumer solely because he or she is 
a beneficiary of a trust for which you are a trustee.
    (viii) An individual is not your consumer solely because he or she 
is a participant or a beneficiary of an employee benefit plan that you 
sponsor or for which you act as a trustee or fiduciary.
    (f) Consumer reporting agency has the same meaning as in section 
603(f) of the Fair Credit Reporting Act (15 U.S.C. 1681a(f)).
    (g) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company, as the FDIC 
determines.
    (h) Customer means a consumer who has a customer relationship with 
you.
    (i)(1) Customer relationship means a continuing relationship between 
a consumer and you under which you provide one or more financial 
products or services to the consumer that are to be used primarily for 
personal, family, or household purposes.
    (2) Examples--(i) Continuing relationship. A consumer has a 
continuing relationship with you if the consumer:
    (A) Has a deposit or investment account with you;
    (B) Obtains a loan from you;
    (C) Has a loan for which you own the servicing rights;
    (D) Purchases an insurance product from you;
    (E) Holds an investment product through you, such as when you act as 
a custodian for securities or for assets in an Individual Retirement 
Arrangement;
    (F) Enters into an agreement or understanding with you whereby you 
undertake to arrange or broker a home mortgage loan for the consumer;
    (G) Enters into a lease of personal property with you; or

[[Page 342]]

    (H) Obtains financial, investment, or economic advisory services 
from you for a fee.
    (ii) No continuing relationship. A consumer does not, however, have 
a continuing relationship with you if:
    (A) The consumer obtains a financial product or service only in 
isolated transactions, such as using your ATM to withdraw cash from an 
account at another financial institution or purchasing a cashier's check 
or money order;
    (B) You sell the consumer's loan and do not retain the rights to 
service that loan; or
    (C) You sell the consumer airline tickets, travel insurance, or 
traveler's checks in isolated transactions.
    (j) Federal functional regulator means:
    (1) The Board of Governors of the Federal Reserve System;
    (2) The Office of the Comptroller of the Currency;
    (3) The Board of Directors of the Federal Deposit Insurance 
Corporation;
    (4) The Director of the Office of Thrift Supervision;
    (5) The National Credit Union Administration Board; and
    (6) The Securities and Exchange Commission.
    (k)(1) Financial institution means any institution the business of 
which is engaging in activities that are financial in nature or 
incidental to such financial activities as described in section 4(k) of 
the Bank Holding Company Act of 1956 (12 U.S.C. 1843(k)).
    (2) Financial institution does not include:
    (i) Any person or entity with respect to any financial activity that 
is subject to the jurisdiction of the Commodity Futures Trading 
Commission under the Commodity Exchange Act (7 U.S.C. 1 et seq.);
    (ii) The Federal Agricultural Mortgage Corporation or any entity 
chartered and operating under the Farm Credit Act of 1971 (12 U.S.C. 
2001 et seq.); or
    (iii) Institutions chartered by Congress specifically to engage in 
securitizations, secondary market sales (including sales of servicing 
rights), or similar transactions related to a transaction of a consumer, 
as long as such institutions do not sell or transfer nonpublic personal 
information to a nonaffiliated third party.
    (l)(1) Financial product or service means any product or service 
that a financial holding company could offer by engaging in an activity 
that is financial in nature or incidental to such a financial activity 
under section 4(k) of the Bank Holding Company Act of 1956 (12 U.S.C. 
1843(k)).
    (2) Financial service includes your evaluation or brokerage of 
information that you collect in connection with a request or an 
application from a consumer for a financial product or service.
    (m)(1) Nonaffiliated third party means any person except:
    (i) Your affiliate; or
    (ii) A person employed jointly by you and any company that is not 
your affiliate (but nonaffiliated third party includes the other company 
that jointly employs the person).
    (2) Nonaffiliated third party includes any company that is an 
affiliate solely by virtue of your or your affiliate's direct or 
indirect ownership or control of the company in conducting merchant 
banking or investment banking activities of the type described in 
section 4(k)(4)(H) or insurance company investment activities of the 
type described in section 4(k)(4)(I) of the Bank Holding Company Act of 
1956 (12 U.S.C. 1843(k)(4)(H) and (I)).
    (n)(1) Nonpublic personal information means:
    (i) Personally identifiable financial information; and
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived using 
any personally identifiable financial information that is not publicly 
available.
    (2) Nonpublic personal information does not include:
    (i) Publicly available information, except as included on a list 
described in paragraph (n)(1)(ii) of this section; or
    (ii) Any list, description, or other grouping of consumers (and 
publicly available information pertaining to them) that is derived 
without using any personally identifiable financial information that is 
not publicly available.

[[Page 343]]

    (3) Examples of lists--(i) Nonpublic personal information includes 
any list of individuals' names and street addresses that is derived in 
whole or in part using personally identifiable financial information 
that is not publicly available, such as account numbers.
    (ii) Nonpublic personal information does not include any list of 
individuals' names and addresses that contains only publicly available 
information, is not derived in whole or in part using personally 
identifiable financial information that is not publicly available, and 
is not disclosed in a manner that indicates that any of the individuals 
on the list is a consumer of a financial institution.
    (o)(1) Personally identifiable financial information means any 
information:
    (i) A consumer provides to you to obtain a financial product or 
service from you;
    (ii) About a consumer resulting from any transaction involving a 
financial product or service between you and a consumer; or
    (iii) You otherwise obtain about a consumer in connection with 
providing a financial product or service to that consumer.
    (2) Examples--(i) Information included. Personally identifiable 
financial information includes:
    (A) Information a consumer provides to you on an application to 
obtain a loan, credit card, or other financial product or service;
    (B) Account balance information, payment history, overdraft history, 
and credit or debit card purchase information;
    (C) The fact that an individual is or has been one of your customers 
or has obtained a financial product or service from you;
    (D) Any information about your consumer if it is disclosed in a 
manner that indicates that the individual is or has been your consumer;
    (E) Any information that a consumer provides to you or that you or 
your agent otherwise obtain in connection with collecting on a loan or 
servicing a loan;
    (F) Any information you collect through an Internet ``cookie'' (an 
information collecting device from a web server); and
    (G) Information from a consumer report.
    (ii) Information not included. Personally identifiable financial 
information does not include:
    (A) A list of names and addresses of customers of an entity that is 
not a financial institution; and
    (B) Information that does not identify a consumer, such as aggregate 
information or blind data that does not contain personal identifiers 
such as account numbers, names, or addresses.
    (p)(1) Publicly available information means any information that you 
have a reasonable basis to believe is lawfully made available to the 
general public from:
    (i) Federal, State, or local government records;
    (ii) Widely distributed media; or
    (iii) Disclosures to the general public that are required to be made 
by Federal, State, or local law.
    (2) Reasonable basis. You have a reasonable basis to believe that 
information is lawfully made available to the general public if you have 
taken steps to determine:
    (i) That the information is of the type that is available to the 
general public; and
    (ii) Whether an individual can direct that the information not be 
made available to the general public and, if so, that your consumer has 
not done so.
    (3) Examples--(i) Government records. Publicly available information 
in government records includes information in government real estate 
records and security interest filings.
    (ii) Widely distributed media. Publicly available information from 
widely distributed media includes information from a telephone book, a 
television or radio program, a newspaper, or a web site that is 
available to the general public on an unrestricted basis. A web site is 
not restricted merely because an Internet service provider or a site 
operator requires a fee or a password, so long as access is available to 
the general public.
    (iii) Reasonable basis. (A) You have a reasonable basis to believe 
that mortgage information is lawfully made

[[Page 344]]

available to the general public if you have determined that the 
information is of the type included on the public record in the 
jurisdiction where the mortgage would be recorded.
    (B) You have a reasonable basis to believe that an individual's 
telephone number is lawfully made available to the general public if you 
have located the telephone number in the telephone book or the consumer 
has informed you that the telephone number is not unlisted.
    (q) You means:
    (1) A bank insured by the FDIC (other than a member of the Federal 
Reserve System);
    (2) An insured state branch of a foreign bank; and
    (3) A subsidiary of either such entity except:
    (i) A broker or dealer that is registered under the Securities and 
Exchange Act of 1934 (15 U.S.C. 78a et seq.);
    (ii) A registered investment adviser, properly registered by or on 
behalf of either the Securities Exchange Commission or any State, with 
respect to its investment advisory activities and its activities 
incidental to those investment advisory activities;
    (iii) An investment company that is registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.); or
    (iv) An insurance company, with respect to its insurance activities 
and its activities incidental to those insurance activities, that is 
subject to supervision by a State insurance regulator.



                  Subpart A_Privacy and Opt Out Notices



Sec. 332.4  Initial privacy notice to consumers required.

    (a) Initial notice requirement. You must provide a clear and 
conspicuous notice that accurately reflects your privacy policies and 
practices to:
    (1) Customer. An individual who becomes your customer, not later 
than when you establish a customer relationship, except as provided in 
paragraph (e) of this section; and
    (2) Consumer. A consumer, before you disclose any nonpublic personal 
information about the consumer to any nonaffiliated third party, if you 
make such a disclosure other than as authorized by Sec. Sec. 332.14 and 
332.15.
    (b) When initial notice to a consumer is not required. You are not 
required to provide an initial notice to a consumer under paragraph (a) 
of this section if:
    (1) You do not disclose any nonpublic personal information about the 
consumer to any nonaffiliated third party, other than as authorized by 
Sec. Sec. 332.14 and 332.15; and
    (2) You do not have a customer relationship with the consumer.
    (c) When you establish a customer relationship--(1) General rule. 
You establish a customer relationship when you and the consumer enter 
into a continuing relationship.
    (2) Special rule for loans. You establish a customer relationship 
with a consumer when you originate a loan to the consumer for personal, 
family, or household purposes. If you subsequently transfer the 
servicing rights to that loan to another financial institution, the 
customer relationship transfers with the servicing rights.
    (3)(i) Examples of establishing customer relationship. You establish 
a customer relationship when the consumer:
    (A) Opens a credit card account with you;
    (B) Executes the contract to open a deposit account with you, 
obtains credit from you, or purchases insurance from you;
    (C) Agrees to obtain financial, economic, or investment advisory 
services from you for a fee; or
    (D) Becomes your client for the purpose of your providing credit 
counseling or tax preparation services.
    (ii) Examples of loan rule. You establish a customer relationship 
with a consumer who obtains a loan for personal, family, or household 
purposes when you:
    (A) Originate the loan to the consumer; or
    (B) Purchase the servicing rights to the consumer's loan.
    (d) Existing customers. When an existing customer obtains a new 
financial product or service from you that is to be used primarily for 
personal, family, or household purposes, you satisfy the initial notice 
requirements of paragraph (a) of this section as follows:

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    (1) You may provide a revised privacy notice, under Sec. 332.8, 
that covers the customer's new financial product or service; or
    (2) If the initial, revised, or annual notice that you most recently 
provided to that customer was accurate with respect to the new financial 
product or service, you do not need to provide a new privacy notice 
under paragraph (a) of this section.
    (e) Exceptions to allow subsequent delivery of notice. (1) You may 
provide the initial notice required by paragraph (a)(1) of this section 
within a reasonable time after you establish a customer relationship if:
    (i) Establishing the customer relationship is not at the customer's 
election; or
    (ii) Providing notice not later than when you establish a customer 
relationship would substantially delay the customer's transaction and 
the customer agrees to receive the notice at a later time.
    (2) Examples of exceptions--(i) Not at customer's election. 
Establishing a customer relationship is not at the customer's election 
if you acquire a customer's deposit liability or the servicing rights to 
a customer's loan from another financial institution and the customer 
does not have a choice about your acquisition.
    (ii) Substantial delay of customer's transaction. Providing notice 
not later than when you establish a customer relationship would 
substantially delay the customer's transaction when:
    (A) You and the individual agree over the telephone to enter into a 
customer relationship involving prompt delivery of the financial product 
or service; or
    (B) You establish a customer relationship with an individual under a 
program authorized by Title IV of the Higher Education Act of 1965 (20 
U.S.C. 1070 et seq.) or similar student loan programs where loan 
proceeds are disbursed promptly without prior communication between you 
and the customer.
    (iii) No substantial delay of customer's transaction. Providing 
notice not later than when you establish a customer relationship would 
not substantially delay the customer's transaction when the relationship 
is initiated in person at your office or through other means by which 
the customer may view the notice, such as on a web site.
    (f) Delivery. When you are required to deliver an initial privacy 
notice by this section, you must deliver it according to Sec. 332.9. If 
you use a short-form initial notice for non-customers according to Sec. 
332.6(d), you may deliver your privacy notice according to Sec. 
332.6(d)(3).



Sec. 332.5  Annual privacy notice to customers required.

    (a)(1) General rule. You must provide a clear and conspicuous notice 
to customers that accurately reflects your privacy policies and 
practices not less than annually during the continuation of the customer 
relationship. Annually means at least once in any period of 12 
consecutive months during which that relationship exists. You may define 
the 12-consecutive-month period, but you must apply it to the customer 
on a consistent basis.
    (2) Example. You provide a notice annually if you define the 12-
consecutive-month period as a calendar year and provide the annual 
notice to the customer once in each calendar year following the calendar 
year in which you provided the initial notice. For example, if a 
customer opens an account on any day of year 1, you must provide an 
annual notice to that customer by December 31 of year 2.
    (b)(1) Termination of customer relationship. You are not required to 
provide an annual notice to a former customer.
    (2) Examples. Your customer becomes a former customer when:
    (i) In the case of a deposit account, the account is inactive under 
your policies;
    (ii) In the case of a closed-end loan, the customer pays the loan in 
full, you charge off the loan, or you sell the loan without retaining 
servicing rights;
    (iii) In the case of a credit card relationship or other open-end 
credit relationship, you no longer provide any statements or notices to 
the customer concerning that relationship or you sell the credit card 
receivables without retaining servicing rights; or
    (iv) You have not communicated with the customer about the 
relationship for a period of 12 consecutive months,

[[Page 346]]

other than to provide annual privacy notices or promotional material.
    (c) Special rule for loans. If you do not have a customer 
relationship with a consumer under the special rule for loans in Sec. 
332.4(c)(2), then you need not provide an annual notice to that consumer 
under this section.
    (d) Delivery. When you are required to deliver an annual privacy 
notice by this section, you must deliver it according to Sec. 332.9.



Sec. 332.6  Information to be included in privacy notices.

    (a) General rule. The initial, annual and revised privacy notices 
that you provide under Sec. Sec. 332.4, 332.5, and 332.8 must include 
each of the following items of information, in addition to any other 
information you wish to provide, that applies to you and to the 
consumers to whom you send your privacy notice:
    (1) The categories of nonpublic personal information that you 
collect;
    (2) The categories of nonpublic personal information that you 
disclose;
    (3) The categories of affiliates and nonaffiliated third parties to 
whom you disclose nonpublic personal information, other than those 
parties to whom you disclose information under Sec. Sec. 332.14 and 
332.15;
    (4) The categories of nonpublic personal information about your 
former customers that you disclose and the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information about your former customers, other than those parties to 
whom you disclose information under Sec. Sec. 332.14 and 332.15;
    (5) If you disclose nonpublic personal information to a 
nonaffiliated third party under Sec. 332.13 (and no other exception in 
Sec. 332.14 or 332.15 applies to that disclosure), a separate statement 
of the categories of information you disclose and the categories of 
third parties with whom you have contracted;
    (6) An explanation of the consumer's right under Sec. 332.10(a) to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right at that time;
    (7) Any disclosures that you make under section 603(d)(2)(A)(iii) of 
the Fair Credit Reporting Act (15 U.S.C. 1681a(d)(2)(A)(iii)) (that is, 
notices regarding the ability to opt out of disclosures of information 
among affiliates);
    (8) Your policies and practices with respect to protecting the 
confidentiality and security of nonpublic personal information; and
    (9) Any disclosure that you make under paragraph (b) of this 
section.
    (b) Description of nonaffiliated third parties subject to 
exceptions. If you disclose nonpublic personal information to third 
parties as authorized under Sec. Sec. 332.14 and 332.15, you are not 
required to list those exceptions in the initial or annual privacy 
notices required by Sec. Sec. 332.4 and 332.5. When describing the 
categories with respect to those parties, you are required to state only 
that you make disclosures to other nonaffiliated third parties as 
permitted by law.
    (c) Examples--(1) Categories of nonpublic personal information that 
you collect. You satisfy the requirement to categorize the nonpublic 
personal information that you collect if you list the following 
categories, as applicable:
    (i) Information from the consumer;
    (ii) Information about the consumer's transactions with you or your 
affiliates;
    (iii) Information about the consumer's transactions with 
nonaffiliated third parties; and
    (iv) Information from a consumer reporting agency.
    (2) Categories of nonpublic personal information you disclose--(i) 
You satisfy the requirement to categorize the nonpublic personal 
information that you disclose if you list the categories described in 
paragraph (c)(1) of this section, as applicable, and a few examples to 
illustrate the types of information in each category.
    (ii) If you reserve the right to disclose all of the nonpublic 
personal information about consumers that you collect, you may simply 
state that fact without describing the categories or examples of the 
nonpublic personal information you disclose.
    (3) Categories of affiliates and nonaffiliated third parties to whom 
you disclose. You satisfy the requirement to

[[Page 347]]

categorize the affiliates and nonaffiliated third parties to whom you 
disclose nonpublic personal information if you list the following 
categories, as applicable, and a few examples to illustrate the types of 
third parties in each category.
    (i) Financial service providers;
    (ii) Non-financial companies; and
    (iii) Others.
    (4) Disclosures under exception for service providers and joint 
marketers. If you disclose nonpublic personal information under the 
exception in Sec. 332.13 to a nonaffiliated third party to market 
products or services that you offer alone or jointly with another 
financial institution, you satisfy the disclosure requirement of 
paragraph (a)(5) of this section if you:
    (i) List the categories of nonpublic personal information you 
disclose, using the same categories and examples you used to meet the 
requirements of paragraph (a)(2) of this section, as applicable; and
    (ii) State whether the third party is:
    (A) A service provider that performs marketing services on your 
behalf or on behalf of you and another financial institution; or
    (B) A financial institution with whom you have a joint marketing 
agreement.
    (5) Simplified notices. If you do not disclose, and do not wish to 
reserve the right to disclose, nonpublic personal information about 
customers or former customers to affiliates or nonaffiliated third 
parties except as authorized under Sec. Sec. 332.14 and 332.15, you may 
simply state that fact, in addition to the information you must provide 
under paragraphs (a)(1), (a)(8), (a)(9), and (b) of this section.
    (6) Confidentiality and security. You describe your policies and 
practices with respect to protecting the confidentiality and security of 
nonpublic personal information if you do both of the following:
    (i) Describe in general terms who is authorized to have access to 
the information; and
    (ii) State whether you have security practices and procedures in 
place to ensure the confidentiality of the information in accordance 
with your policy. You are not required to describe technical information 
about the safeguards you use.
    (d) Short-form initial notice with opt out notice for non-
customers--(1) You may satisfy the initial notice requirements in 
Sec. Sec. 332.4(a)(2), 332.7(b), and 332.7(c) for a consumer who is not 
a customer by providing a short-form initial notice at the same time as 
you deliver an opt out notice as required in Sec. 332.7.
    (2) A short-form initial notice must:
    (i) Be clear and conspicuous;
    (ii) State that your privacy notice is available upon request; and
    (iii) Explain a reasonable means by which the consumer may obtain 
that notice.
    (3) You must deliver your short-form initial notice according to 
Sec. 332.9. You are not required to deliver your privacy notice with 
your short-form initial notice. You instead may simply provide the 
consumer a reasonable means to obtain your privacy notice. If a consumer 
who receives your short-form notice requests your privacy notice, you 
must deliver your privacy notice according to Sec. 332.9.
    (4) Examples of obtaining privacy notice. You provide a reasonable 
means by which a consumer may obtain a copy of your privacy notice if 
you:
    (i) Provide a toll-free telephone number that the consumer may call 
to request the notice; or
    (ii) For a consumer who conducts business in person at your office, 
maintain copies of the notice on hand that you provide to the consumer 
immediately upon request.
    (e) Future disclosures. Your notice may include:
    (1) Categories of nonpublic personal information that you reserve 
the right to disclose in the future, but do not currently disclose; and
    (2) Categories of affiliates or nonaffiliated third parties to whom 
you reserve the right in the future to disclose, but to whom you do not 
currently disclose, nonpublic personal information.
    (f) Sample clauses. Sample clauses illustrating some of the notice 
content required by this section are included in appendix A of this 
part.

[[Page 348]]



Sec. 332.7  Form of opt out notice to consumers; opt out methods.

    (a) (1) Form of opt out notice. If you are required to provide an 
opt out notice under Sec. 332.10(a), you must provide a clear and 
conspicuous notice to each of your consumers that accurately explains 
the right to opt out under that section. The notice must state:
    (i) That you disclose or reserve the right to disclose nonpublic 
personal information about your consumer to a nonaffiliated third party;
    (ii) That the consumer has the right to opt out of that disclosure; 
and
    (iii) A reasonable means by which the consumer may exercise the opt 
out right.
    (2) Examples--(i) Adequate opt out notice. You provide adequate 
notice that the consumer can opt out of the disclosure of nonpublic 
personal information to a nonaffiliated third party if you:
    (A) Identify all of the categories of nonpublic personal information 
that you disclose or reserve the right to disclose, and all of the 
categories of nonaffiliated third parties to which you disclose the 
information, as described in Sec. 332.6(a)(2) and (3), and state that 
the consumer can opt out of the disclosure of that information; and
    (B) Identify the financial products or services that the consumer 
obtains from you, either singly or jointly, to which the opt out 
direction would apply.
    (ii) Reasonable opt out means. You provide a reasonable means to 
exercise an opt out right if you:
    (A) Designate check-off boxes in a prominent position on the 
relevant forms with the opt out notice;
    (B) Include a reply form together with the opt out notice;
    (C) Provide an electronic means to opt out, such as a form that can 
be sent via electronic mail or a process at your web site, if the 
consumer agrees to the electronic delivery of information; or
    (D) Provide a toll-free telephone number that consumers may call to 
opt out.
    (iii) Unreasonable opt out means. You do not provide a reasonable 
means of opting out if:
    (A) The only means of opting out is for the consumer to write his or 
her own letter to exercise that opt out right; or
    (B) The only means of opting out as described in any notice 
subsequent to the initial notice is to use a check-off box that you 
provide with the initial notice but did not include with the subsequent 
notice.
    (iv) Specific opt out means. You may require each consumer to opt 
out through a specific means, as long as that means is reasonable for 
that consumer.
    (b) Same form as initial notice permitted. You may provide the opt 
out notice together with or on the same written or electronic form as 
the initial notice you provide in accordance with Sec. 332.4.
    (c) Initial notice required when opt out notice delivered subsequent 
to initial notice. If you provide the opt out notice later than required 
for the initial notice in accordance with Sec. 332.4, you must also 
include a copy of the initial notice with the opt out notice in writing 
or, if the consumer agrees, electronically.
    (d) Joint relationships--(1) If two or more consumers jointly obtain 
a financial product or service from you, you may provide a single opt 
out notice. Your opt out notice must explain how you will treat an opt 
out direction by a joint consumer (as explained in paragraph (d)(5) of 
this section).
    (2) Any of the joint consumers may exercise the right to opt out. 
You may either:
    (i) Treat an opt out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (ii) Permit each joint consumer to opt out separately.
    (3) If you permit each joint consumer to opt out separately, you 
must permit one of the joint consumers to opt out on behalf of all of 
the joint consumers.
    (4) You may not require all joint consumers to opt out before you 
implement any opt out direction.
    (5) Example. If John and Mary have a joint checking account with you 
and arrange for you to send statements to John's address, you may do any 
of the following, but you must explain in your opt out notice which opt 
out policy you will follow:

[[Page 349]]

    (i) Send a single opt out notice to John's address, but you must 
accept an opt out direction from either John or Mary.
    (ii) Treat an opt out direction by either John or Mary as applying 
to the entire account. If you do so, and John opts out, you may not 
require Mary to opt out as well before implementing John's opt out 
direction.
    (iii) Permit John and Mary to make different opt out directions. If 
you do so:
    (A) You must permit John and Mary to opt out for each other;
    (B) If both opt out, you must permit both to notify you in a single 
response (such as on a form or through a telephone call); and
    (C) If John opts out and Mary does not, you may only disclose 
nonpublic personal information about Mary, but not about John and not 
about John and Mary jointly.
    (e) Time to comply with opt out. You must comply with a consumer's 
opt out direction as soon as reasonably practicable after you receive 
it.
    (f) Continuing right to opt out. A consumer may exercise the right 
to opt out at any time.
    (g) Duration of consumer's opt out direction--(1) A consumer's 
direction to opt out under this section is effective until the consumer 
revokes it in writing or, if the consumer agrees, electronically.
    (2) When a customer relationship terminates, the customer's opt out 
direction continues to apply to the nonpublic personal information that 
you collected during or related to that relationship. If the individual 
subsequently establishes a new customer relationship with you, the opt 
out direction that applied to the former relationship does not apply to 
the new relationship.
    (h) Delivery. When you are required to deliver an opt out notice by 
this section, you must deliver it according to Sec. 332.9.



Sec. 332.8  Revised privacy notices.

    (a) General rule. Except as otherwise authorized in this part, you 
must not, directly or through any affiliate, disclose any nonpublic 
personal information about a consumer to a nonaffiliated third party 
other than as described in the initial notice that you provided to that 
consumer under Sec. 332.4, unless:
    (1) You have provided to the consumer a clear and conspicuous 
revised notice that accurately describes your policies and practices;
    (2) You have provided to the consumer a new opt out notice;
    (3) You have given the consumer a reasonable opportunity, before you 
disclose the information to the nonaffiliated third party, to opt out of 
the disclosure; and
    (4) The consumer does not opt out.
    (b) Examples--(1) Except as otherwise permitted by Sec. Sec. 
332.13, 332.14, and 332.15, you must provide a revised notice before 
you:
    (i) Disclose a new category of nonpublic personal information to any 
nonaffiliated third party;
    (ii) Disclose nonpublic personal information to a new category of 
nonaffiliated third party; or
    (iii) Disclose nonpublic personal information about a former 
customer to a nonaffiliated third party, if that former customer has not 
had the opportunity to exercise an opt out right regarding that 
disclosure.
    (2) A revised notice is not required if you disclose nonpublic 
personal information to a new nonaffiliated third party that you 
adequately described in your prior notice.
    (c) Delivery. When you are required to deliver a revised privacy 
notice by this section, you must deliver it according to Sec. 332.9.



Sec. 332.9  Delivering privacy and opt out notices.

    (a) How to provide notices. You must provide any privacy notices and 
opt out notices, including short-form initial notices, that this part 
requires so that each consumer can reasonably be expected to receive 
actual notice in writing or, if the consumer agrees, electronically.
    (b) (1) Examples of reasonable expectation of actual notice. You may 
reasonably expect that a consumer will receive actual notice if you:
    (i) Hand-deliver a printed copy of the notice to the consumer;

[[Page 350]]

    (ii) Mail a printed copy of the notice to the last known address of 
the consumer;
    (iii) For the consumer who conducts transactions electronically, 
post the notice on the electronic site and require the consumer to 
acknowledge receipt of the notice as a necessary step to obtaining a 
particular financial product or service; or
    (iv) For an isolated transaction with the consumer, such as an ATM 
transaction, post the notice on the ATM screen and require the consumer 
to acknowledge receipt of the notice as a necessary step to obtaining 
the particular financial product or service.
    (2) Examples of unreasonable expectation of actual notice. You may 
not, however, reasonably expect that a consumer will receive actual 
notice of your privacy policies and practices if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements of your privacy policies and practices; or
    (ii) Send the notice via electronic mail to a consumer who does not 
obtain a financial product or service from you electronically.
    (c) Annual notices only. You may reasonably expect that a customer 
will receive actual notice of your annual privacy notice if:
    (1) The customer uses your web site to access financial products and 
services electronically and agrees to receive notices at the web site, 
and you post your current privacy notice continuously in a clear and 
conspicuous manner on the web site; or
    (2) The customer has requested that you refrain from sending any 
information regarding the customer relationship, and your current 
privacy notice remains available to the customer upon request.
    (d) Oral description of notice insufficient. You may not provide any 
notice required by this part solely by orally explaining the notice, 
either in person or over the telephone.
    (e) Retention or accessibility of notices for customers--(1) For 
customers only, you must provide the initial notice required by Sec. 
332.4(a)(1), the annual notice required by Sec. 332.5(a), and the 
revised notice required by Sec. 332.8 so that the customer can retain 
them or obtain them later in writing or, if the customer agrees, 
electronically.
    (2) Examples of retention or accessibility. You provide a privacy 
notice to the customer so that the customer can retain it or obtain it 
later if you:
    (i) Hand-deliver a printed copy of the notice to the customer;
    (ii) Mail a printed copy of the notice to the last known address of 
the customer; or
    (iii) Make your current privacy notice available on a web site (or a 
link to another web site) for the customer who obtains a financial 
product or service electronically and agrees to receive the notice at 
the web site.
    (f) Joint notice with other financial institutions. You may provide 
a joint notice from you and one or more of your affiliates or other 
financial institutions, as identified in the notice, as long as the 
notice is accurate with respect to you and the other institutions.
    (g) Joint relationships. If two or more consumers jointly obtain a 
financial product or service from you, you may satisfy the initial, 
annual, and revised notice requirements of Sec. Sec. 332.4(a), 
332.5(a), and 332.8(a), respectively, by providing one notice to those 
consumers jointly.



                     Subpart B_Limits on Disclosures



Sec. 332.10  Limits on disclosure of non-public personal information to 

nonaffiliated third parties.

    (a) (1) Conditions for disclosure. Except as otherwise authorized in 
this part, you may not, directly or through any affiliate, disclose any 
nonpublic personal information about a consumer to a nonaffiliated third 
party unless:
    (i) You have provided to the consumer an initial notice as required 
under Sec. 332.4;
    (ii) You have provided to the consumer an opt out notice as required 
in Sec. 332.7;
    (iii) You have given the consumer a reasonable opportunity, before 
you disclose the information to the nonaffiliated third party, to opt 
out of the disclosure; and
    (iv) The consumer does not opt out.
    (2) Opt out definition. Opt out means a direction by the consumer 
that you not

[[Page 351]]

disclose nonpublic personal information about that consumer to a 
nonaffiliated third party, other than as permitted by Sec. Sec. 332.13, 
332.14, and 332.15.
    (3) Examples of reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (i) By mail. You mail the notices required in paragraph (a)(1) of 
this section to the consumer and allow the consumer to opt out by 
mailing a form, calling a toll-free telephone number, or any other 
reasonable means within 30 days from the date you mailed the notices.
    (ii) By electronic means. A customer opens an on-line account with 
you and agrees to receive the notices required in paragraph (a)(1) of 
this section electronically, and you allow the customer to opt out by 
any reasonable means within 30 days after the date that the customer 
acknowledges receipt of the notices in conjunction with opening the 
account.
    (iii) Isolated transaction with consumer. For an isolated 
transaction, such as the purchase of a cashier's check by a consumer, 
you provide the consumer with a reasonable opportunity to opt out if you 
provide the notices required in paragraph (a)(1) of this section at the 
time of the transaction and request that the consumer decide, as a 
necessary part of the transaction, whether to opt out before completing 
the transaction.
    (b) Application of opt out to all consumers and all nonpublic 
personal information--(1) You must comply with this section, regardless 
of whether you and the consumer have established a customer 
relationship.
    (2) Unless you comply with this section, you may not, directly or 
through any affiliate, disclose any nonpublic personal information about 
a consumer that you have collected, regardless of whether you collected 
it before or after receiving the direction to opt out from the consumer.
    (c) Partial opt out. You may allow a consumer to select certain 
nonpublic personal information or certain nonaffiliated third parties 
with respect to which the consumer wishes to opt out.



Sec. 332.11  Limits on redisclosure and reuse of information.

    (a)(1) Information you receive under an exception. If you receive 
nonpublic personal information from a nonaffiliated financial 
institution under an exception in Sec. 332.14 or 332.15 of this part, 
your disclosure and use of that information is limited as follows:
    (i) You may disclose the information to the affiliates of the 
financial institution from which you received the information;
    (ii) You may disclose the information to your affiliates, but your 
affiliates may, in turn, disclose and use the information only to the 
extent that you may disclose and use the information; and
    (iii) You may disclose and use the information pursuant to an 
exception in Sec. 332.14 or 332.15 in the ordinary course of business 
to carry out the activity covered by the exception under which you 
received the information.
    (2) Example. If you receive a customer list from a nonaffiliated 
financial institution in order to provide account processing services 
under the exception in Sec. 332.14(a), you may disclose that 
information under any exception in Sec. 332.14 or 332.15 in the 
ordinary course of business in order to provide those services. For 
example, you could disclose the information in response to a properly 
authorized subpoena or to your attorneys, accountants, and auditors. You 
could not disclose that information to a third party for marketing 
purposes or use that information for your own marketing purposes.
    (b)(1) Information you receive outside of an exception. If you 
receive nonpublic personal information from a nonaffiliated financial 
institution other than under an exception in Sec. 332.14 or 332.15 of 
this part, you may disclose the information only:
    (i) To the affiliates of the financial institution from which you 
received the information;
    (ii) To your affiliates, but your affiliates may, in turn, disclose 
the information only to the extent that you can disclose the 
information; and
    (iii) To any other person, if the disclosure would be lawful if made 
directly to that person by the financial

[[Page 352]]

institution from which you received the information.
    (2) Example. If you obtain a customer list from a nonaffiliated 
financial institution outside of the exceptions in Sec. 332.14 and 
332.15:
    (i) You may use that list for your own purposes; and
    (ii) You may disclose that list to another nonaffiliated third party 
only if the financial institution from which you purchased the list 
could have lawfully disclosed the list to that third party. That is, you 
may disclose the list in accordance with the privacy policy of the 
financial institution from which you received the list, as limited by 
the opt out direction of each consumer whose nonpublic personal 
information you intend to disclose, and you may disclose the list in 
accordance with an exception in Sec. 332.14 or 332.15, such as to your 
attorneys or accountants.
    (c) Information you disclose under an exception. If you disclose 
nonpublic personal information to a nonaffiliated third party under an 
exception in Sec. 332.14 or 332.15 of this part, the third party may 
disclose and use that information only as follows:
    (1) The third party may disclose the information to your affiliates;
    (2) The third party may disclose the information to its affiliates, 
but its affiliates may, in turn, disclose and use the information only 
to the extent that the third party may disclose and use the information; 
and
    (3) The third party may disclose and use the information pursuant to 
an exception in Sec. 332.14 or 332.15 in the ordinary course of 
business to carry out the activity covered by the exception under which 
it received the information.
    (d) Information you disclose outside of an exception. If you 
disclose nonpublic personal information to a nonaffiliated third party 
other than under an exception in Sec. 332.14 or 332.15 of this part, 
the third party may disclose the information only:
    (1) To your affiliates;
    (2) To its affiliates, but its affiliates, in turn, may disclose the 
information only to the extent the third party can disclose the 
information; and
    (3) To any other person, if the disclosure would be lawful if you 
made it directly to that person.



Sec. 332.12  Limits on sharing account number information for marketing 

purposes.

    (a) General prohibition on disclosure of account numbers. You must 
not, directly or through an affiliate, disclose, other than to a 
consumer reporting agency, an account number or similar form of access 
number or access code for a consumer's credit card account, deposit 
account, or transaction account to any nonaffiliated third party for use 
in telemarketing, direct mail marketing, or other marketing through 
electronic mail to the consumer.
    (b) Exceptions. Paragraph (a) of this section does not apply if you 
disclose an account number or similar form of access number or access 
code:
    (1) To your agent or service provider solely in order to perform 
marketing for your own products or services, as long as the agent or 
service provider is not authorized to directly initiate charges to the 
account; or
    (2) To a participant in a private label credit card program or an 
affinity or similar program where the participants in the program are 
identified to the customer when the customer enters into the program.
    (c) Examples--(1) Account number. An account number, or similar form 
of access number or access code, does not include a number or code in an 
encrypted form, as long as you do not provide the recipient with a means 
to decode the number or code.
    (2) Transaction account. A transaction account is an account other 
than a deposit account or a credit card account. A transaction account 
does not include an account to which third parties cannot initiate 
charges.



                          Subpart C_Exceptions



Sec. 332.13  Exception to opt out requirements for service providers and joint 

marketing.

    (a) General rule. (1) The opt out requirements in Sec. Sec. 332.7 
and 332.10 do not apply when you provide nonpublic personal information 
to a nonaffiliated

[[Page 353]]

third party to perform services for you or functions on your behalf, if 
you:
    (i) Provide the initial notice in accordance with Sec. 332.4; and
    (ii) Enter into a contractual agreement with the third party that 
prohibits the third party from disclosing or using the information other 
than to carry out the purposes for which you disclosed the information, 
including use under an exception in Sec. 332.14 or 332.15 in the 
ordinary course of business to carry out those purposes.
    (2) Example. If you disclose nonpublic personal information under 
this section to a financial institution with which you perform joint 
marketing, your contractual agreement with that institution meets the 
requirements of paragraph (a)(1)(ii) of this section if it prohibits the 
institution from disclosing or using the nonpublic personal information 
except as necessary to carry out the joint marketing or under an 
exception in Sec. 332.14 or 332.15 in the ordinary course of business 
to carry out that joint marketing.
    (b) Service may include joint marketing. The services a 
nonaffiliated third party performs for you under paragraph (a) of this 
section may include marketing of your own products or services or 
marketing of financial products or services offered pursuant to joint 
agreements between you and one or more financial institutions.
    (c) Definition of joint agreement. For purposes of this section, 
joint agreement means a written contract pursuant to which you and one 
or more financial institutions jointly offer, endorse, or sponsor a 
financial product or service.



Sec. 332.14  Exceptions to notice and opt out requirements for processing and 

servicing transactions.

    (a) Exceptions for processing transactions at consumer's request. 
The requirements for initial notice in Sec. 332.4(a)(2), for the opt 
out in Sec. Sec. 332.7 and 332.10 and for service providers and joint 
marketing in Sec. 332.13 do not apply if you disclose nonpublic 
personal information as necessary to effect, administer, or enforce a 
transaction that a consumer requests or authorizes, or in connection 
with:
    (1) Servicing or processing a financial product or service that a 
consumer requests or authorizes;
    (2) Maintaining or servicing the consumer's account with you, or 
with another entity as part of a private label credit card program or 
other extension of credit on behalf of such entity; or
    (3) A proposed or actual securitization, secondary market sale 
(including sales of servicing rights), or similar transaction related to 
a transaction of the consumer.
    (b) Necessary to effect, administer, or enforce a transaction means 
that the disclosure is:
    (1) Required, or is one of the lawful or appropriate methods, to 
enforce your rights or the rights of other persons engaged in carrying 
out the financial transaction or providing the product or service; or
    (2) Required, or is a usual, appropriate or acceptable method:
    (i) To carry out the transaction or the product or service business 
of which the transaction is a part, and record, service, or maintain the 
consumer's account in the ordinary course of providing the financial 
service or financial product;
    (ii) To administer or service benefits or claims relating to the 
transaction or the product or service business of which it is a part;
    (iii) To provide a confirmation, statement, or other record of the 
transaction, or information on the status or value of the financial 
service or financial product to the consumer or the consumer's agent or 
broker;
    (iv) To accrue or recognize incentives or bonuses associated with 
the transaction that are provided by you or any other party;
    (v) To underwrite insurance at the consumer's request or for 
reinsurance purposes, or for any of the following purposes as they 
relate to a consumer's insurance: account administration, reporting, 
investigating, or preventing fraud or material misrepresentation, 
processing premium payments, processing insurance claims, administering 
insurance benefits (including utilization review activities), 
participating in research projects, or as otherwise required or 
specifically permitted by Federal or State law; or

[[Page 354]]

    (vi) In connection with:
    (A) The authorization, settlement, billing, processing, clearing, 
transferring, reconciling or collection of amounts charged, debited, or 
otherwise paid using a debit, credit, or other payment card, check, or 
account number, or by other payment means;
    (B) The transfer of receivables, accounts, or interests therein; or
    (C) The audit of debit, credit, or other payment information.



Sec. 332.15  Other exceptions to notice and opt out requirements.

    (a) Exceptions to opt out requirements. The requirements for initial 
notice in Sec. 332.4(a)(2), for the opt out in Sec. Sec. 332.7 and 
332.10, and for service providers and joint marketing in Sec. 332.13 do 
not apply when you disclose nonpublic personal information:
    (1) With the consent or at the direction of the consumer, provided 
that the consumer has not revoked the consent or direction;
    (2) (i) To protect the confidentiality or security of your records 
pertaining to the consumer, service, product, or transaction;
    (ii) To protect against or prevent actual or potential fraud, 
unauthorized transactions, claims, or other liability;
    (iii) For required institutional risk control or for resolving 
consumer disputes or inquiries;
    (iv) To persons holding a legal or beneficial interest relating to 
the consumer; or
    (v) To persons acting in a fiduciary or representative capacity on 
behalf of the consumer;
    (3) To provide information to insurance rate advisory organizations, 
guaranty funds or agencies, agencies that are rating you, persons that 
are assessing your compliance with industry standards, and your 
attorneys, accountants, and auditors;
    (4) To the extent specifically permitted or required under other 
provisions of law and in accordance with the Right to Financial Privacy 
Act of 1978 (12 U.S.C. 3401 et seq.), to law enforcement agencies 
(including a federal functional regulator, the Secretary of the 
Treasury, with respect to 31 U.S.C. Chapter 53, Subchapter II (Records 
and Reports on Monetary Instruments and Transactions) and 12 U.S.C. 
Chapter 21 (Financial Recordkeeping), a State insurance authority, with 
respect to any person domiciled in that insurance authority's State that 
is engaged in providing insurance, and the Federal Trade Commission), 
self-regulatory organizations, or for an investigation on a matter 
related to public safety;
    (5) (i) To a consumer reporting agency in accordance with the Fair 
Credit Reporting Act (15 U.S.C. 1681 et seq.), or
    (ii) From a consumer report reported by a consumer reporting agency;
    (6) In connection with a proposed or actual sale, merger, transfer, 
or exchange of all or a portion of a business or operating unit if the 
disclosure of nonpublic personal information concerns solely consumers 
of such business or unit; or
    (7) (i) To comply with Federal, State, or local laws, rules and 
other applicable legal requirements;
    (ii) To comply with a properly authorized civil, criminal, or 
regulatory investigation, or subpoena or summons by Federal, State, or 
local authorities; or
    (iii) To respond to judicial process or government regulatory 
authorities having jurisdiction over you for examination, compliance, or 
other purposes as authorized by law.
    (b) Examples of consent and revocation of consent. (1) A consumer 
may specifically consent to your disclosure to a nonaffiliated insurance 
company of the fact that the consumer has applied to you for a mortgage 
so that the insurance company can offer homeowner's insurance to the 
consumer.
    (2) A consumer may revoke consent by subsequently exercising the 
right to opt out of future disclosures of nonpublic personal information 
as permitted under Sec. 332.7(f).



            Subpart D_Relation to Other Laws; Effective Date



Sec. 332.16  Protection of Fair Credit Reporting Act.

    Nothing in this part shall be construed to modify, limit, or 
supersede the operation of the Fair Credit Reporting Act (15 U.S.C. 1681 
et seq.), and no inference shall be drawn on the

[[Page 355]]

basis of the provisions of this part regarding whether information is 
transaction or experience information under section 603 of that Act.



Sec. 332.17  Relation to State laws.

    (a) In general. This part shall not be construed as superseding, 
altering, or affecting any statute, regulation, order, or interpretation 
in effect in any State, except to the extent that such State statute, 
regulation, order, or interpretation is inconsistent with the provisions 
of this part, and then only to the extent of the inconsistency.
    (b) Greater protection under State law. For purposes of this 
section, a State statute, regulation, order, or interpretation is not 
inconsistent with the provisions of this part if the protection such 
statute, regulation, order, or interpretation affords any consumer is 
greater than the protection provided under this part, as determined by 
the Federal Trade Commission, after consultation with the FDIC, on the 
Federal Trade Commission's own motion, or upon the petition of any 
interested party.



Sec. 332.18  Effective date; transition rule.

    (a) Effective date. This part is effective November 13, 2000. In 
order to provide sufficient time for you to establish policies and 
systems to comply with the requirements of this part, the FDIC has 
extended the time for compliance with this part until July 1, 2001.
    (b)(1) Notice requirement for consumers who are your customers on 
the compliance date. By July 1, 2001, you must have provided an initial 
notice, as required by Sec. 332.4, to consumers who are your customers 
on July 1, 2001.
    (2) Example. You provide an initial notice to consumers who are your 
customers on July 1, 2001, if, by that date, you have established a 
system for providing an initial notice to all new customers and have 
mailed the initial notice to all your existing customers.
    (c) Two-year grandfathering of service agreements. Until July 1, 
2002, a contract that you have entered into with a nonaffiliated third 
party to perform services for you or functions on your behalf satisfies 
the provisions of Sec. 332.13(a)(1)(ii) of this part, even if the 
contract does not include a requirement that the third party maintain 
the confidentiality of nonpublic personal information, as long as you 
entered into the contract on or before July 1, 2000.



               Sec. Appendix A to Part 332--Sample Clauses

    Financial institutions, including a group of financial holding 
company affiliates that use a common privacy notice, may use the 
following sample clauses, if the clause is accurate for each institution 
that uses the notice. (Note that disclosure of certain information, such 
as assets and income, and information from a consumer reporting agency, 
may give rise to obligations under the Fair Credit Reporting Act, such 
as a requirement to permit a consumer to opt out of disclosures to 
affiliates or designation as a consumer reporting agency if disclosures 
are made to nonaffiliated third parties.)

      A-1--Categories of information you collect (all institutions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 332.6(a)(1) to describe the categories of nonpublic personal 
information you collect.
    Sample Clause A-1:
    We collect nonpublic personal information about you from the 
following sources:
     Information we receive from you on applications 
or other forms;
     Information about your transactions with us, our 
affiliates, or others; and
     Information we receive from a consumer reporting 
agency.

A-2--Categories of information you disclose (institutions that disclose 
                       outside of the exceptions)

    You may use one of these clauses, as applicable, to meet the 
requirement of Sec. 332.6(a)(2) to describe the categories of nonpublic 
personal information you disclose. You may use these clauses if you 
disclose nonpublic personal information other than as permitted by the 
exceptions in Sec. Sec. 332.13, 332.14, and 332.15.
    Sample Clause A-2, Alternative 1:
    We may disclose the following kinds of nonpublic personal 
information about you:
     Information we receive from you on applications 
or other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such as 
``your account balance, payment history, parties to transactions, and 
credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative

[[Page 356]]

examples, such as ``your creditworthiness and credit history''].
    Sample Clause A-2, Alternative 2:
    We may disclose all of the information that we collect, as described 
[describe location in the notice, such as ``above'' or ``below''].

  A-3--Categories of information you disclose and parties to whom you 
 disclose (institutions that do not disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirements of 
Sec. Sec. 332.6(a) (2), (3), and (4) to describe the categories of 
nonpublic personal information about customers and former customers that 
you disclose and the categories of affiliates and nonaffiliated third 
parties to whom you disclose. You may use this clause if you do not 
disclose nonpublic personal information to any party, other than as 
permitted by the exceptions in Sec. Sec. 332.14 and 332.15.
    Sample Clause A-3:
    We do not disclose any nonpublic personal information about our 
customers or former customers to anyone, except as permitted by law.

   A-4--Categories of parties to whom you disclose (institutions that 
                   disclose outside of the exceptions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 332.6(a)(3) to describe the categories of affiliates and 
nonaffiliated third parties to whom you disclose nonpublic personal 
information. You may use this clause if you disclose nonpublic personal 
information other than as permitted by the exceptions in Sec. Sec. 
332.13, 332.14, and 332.15, as well as when permitted by the exceptions 
in Sec. Sec. 332.14 and 332.15.
    Sample Clause A-4:
    We may disclose nonpublic personal information about you to the 
following types of third parties:
     Financial service providers, such as [provide 
illustrative examples, such as ``mortgage bankers, securities broker-
dealers, and insurance agents''];
     Non-financial companies, such as [provide 
illustrative examples, such as ``retailers, direct marketers, airlines, 
and publishers'']; and
     Others, such as [provide illustrative examples, 
such as ``non-profit organizations''].
    We may also disclose nonpublic personal information about you to 
nonaffiliated third parties as permitted by law.

             A-5--Service provider/joint marketing exception

    You may use one of these clauses, as applicable, to meet the 
requirements of Sec. 332.6(a)(5) related to the exception for service 
providers and joint marketers in Sec. 332.13. If you disclose nonpublic 
personal information under this exception, you must describe the 
categories of nonpublic personal information you disclose and the 
categories of third parties with whom you have contracted.
    Sample Clause A-5, Alternative 1:
    We may disclose the following information to companies that perform 
marketing services on our behalf or to other financial institutions with 
whom we have joint marketing agreements:
     Information we receive from you on applications 
or other forms, such as [provide illustrative examples, such as ``your 
name, address, social security number, assets, and income''];
     Information about your transactions with us, our 
affiliates, or others, such as [provide illustrative examples, such as 
``your account balance, payment history, parties to transactions, and 
credit card usage'']; and
     Information we receive from a consumer reporting 
agency, such as [provide illustrative examples, such as ``your 
creditworthiness and credit history''].
    Sample Clause A-5, Alternative 2:
    We may disclose all of the information we collect, as described 
[describe location in the notice, such as ``above'' or ``below''] to 
companies that perform marketing services on our behalf or to other 
financial institutions with whom we have joint marketing agreements.

A-6--Explanation of opt out right (institutions that disclose outside of 
                             the exceptions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 332.6(a)(6) to provide an explanation of the consumer's right to 
opt out of the disclosure of nonpublic personal information to 
nonaffiliated third parties, including the method(s) by which the 
consumer may exercise that right. You may use this clause if you 
disclose nonpublic personal information other than as permitted by the 
exceptions in Sec. Sec. 332.13, 332.14, and 332.15.
    Sample Clause A-6:
    If you prefer that we not disclose nonpublic personal information 
about you to nonaffiliated third parties, you may opt out of those 
disclosures, that is, you may direct us not to make those disclosures 
(other than disclosures permitted by law). If you wish to opt out of 
disclosures to nonaffiliated third parties, you may [describe a 
reasonable means of opting out, such as ``call the following toll-free 
number: (insert number)].

          A-7--Confidentiality and security (all institutions)

    You may use this clause, as applicable, to meet the requirement of 
Sec. 332.6(a)(8) to describe your policies and practices with respect 
to protecting the confidentiality and security of nonpublic personal 
information.
    Sample Clause A-7:

[[Page 357]]

    We restrict access to nonpublic personal information about you to 
[provide an appropriate description, such as ``those employees who need 
to know that information to provide products or services to you'']. We 
maintain physical, electronic, and procedural safeguards that comply 
with federal standards to guard your nonpublic personal information.



PART 333_EXTENSION OF CORPORATE POWERS--Table of Contents




                               Regulations

Sec.
333.1 Classification of general character of business.
333.2 Change in general character of business.
333.4 Conversions from mutual to stock form.

                             Interpretations

333.101 Prior consent not required.

    Authority: 12 U.S.C. 1816, 1818, 1819 (``Seventh'', ``Eighth'' and 
``Tenth''), 1828, 1828(m), 1831p-1(c).

                               Regulations



Sec. 333.1  Classification of general character of business.

    State nonmember insured banks are divided into five categories for 
the purpose of classifying their general character or type of 
business,\2\ viz: commercial banks, banks and trust companies, savings 
banks (including mutual and stock), industrial banks, and cash 
depositories.
---------------------------------------------------------------------------

    \2\ A bank's business may include two or more of the general 
classifications.

[15 FR 8644, Dec. 6, 1950]



Sec. 333.2  Change in general character of business.

    No State nonmember insured bank (except a District bank) or branch 
thereof shall hereafter cause or permit any change to be made in the 
general character or type of business exercised by it after the 
effective date of this part without the prior written consent of the 
Corporation.

[15 FR 8644, Dec. 6, 1950]



Sec. 333.4  Conversions from mutual to stock form.

    (a) Scope. This section applies to the conversion of insured mutual 
state savings banks to the stock form of ownership. It supplements the 
procedural and other requirements for such conversions in subpart I of 
part 303 of this chapter. This section also applies, to the extent 
appropriate, to the reorganization of insured mutual state savings banks 
to the mutual holding company form of ownership. As determined by the 
Board of Directors of the FDIC on a case-by-case basis, the requirements 
of paragraphs (d), (e), and (f) of this section do not apply to mutual-
to-stock conversions of insured mutual state savings banks whose capital 
category under Sec. 325.103 of this chapter is ``undercapitalized'', 
``significantly undercapitalized'' or ``critically undercapitalized''. 
As provided in Sec. 303.162 of this chapter, the Board of Directors of 
the FDIC may grant a waiver in writing from any requirement of this 
section for good cause shown.
    (b) Definition of Eligible Depositor. For purposes of this section, 
eligible depositors are depositors holding qualifying deposits at the 
bank as of a date designated in the bank's plan of conversion that is 
not less than one year prior to the date of adoption of the plan of 
conversion by the converting bank's board of directors/trustees.
    (c) Requirements. In addition to other requirements that may be 
imposed by the applicable state statutes and regulations and other 
federal statutes and regulations, including subpart I of part 303 of 
this chapter, an insured mutual state savings bank shall not convert to 
the stock form of ownership unless the following requirements are 
satisfied:
    (1) Eligible depositors shall have higher subscription rights than 
employee stock ownership plans;
    (2) The proposed conversion shall be approved by a vote of at least 
a majority of the bank's depositors and, as reasonably determined by the 
bank's directors or trustees, other stakeholders of the bank who are 
entitled to vote on the conversion, unless the applicable state law 
requires a higher percentage, in which case the higher percentage shall 
be used. Voting may be in person or by proxy; and
    (3) Management shall not use proxies executed outside the context of 
the

[[Page 358]]

proposed conversion to satisfy the voting requirement imposed in the 
previous paragraph.
    (d) Restriction on repurchase of stock. An insured mutual state 
savings bank that has converted from the mutual to stock form of 
ownership may not repurchase its capital stock within one year following 
the date of its conversion to stock form, except that stock repurchases 
of no greater than 5% of the bank's outstanding capital stock may be 
repurchased during this one-year period where compelling and valid 
business reasons are established, to the satisfaction of the FDIC. Any 
stock repurchases shall be subject to the requirements of section 
18(i)(1) of the Federal Deposit Insurance Act (12 U.S.C. 1828(i)(1)).
    (e) Stock benefit plan limitations. The FDIC will presume that a 
stock option plan or management or employee stock benefit plan that does 
not conform with the applicable percentage limitations of the 
regulations issued by the Office of Thrift Supervision constitutes 
excessive insider benefits and thereby evidences a breach of the board 
of directors' or trustees' fiduciary responsibility. In addition, no 
converted insured mutual state savings bank shall, for one year from the 
date of the conversion, implement a stock option plan or management or 
employee stock benefit plan, other than a tax-qualified employee stock 
ownership plan, unless each of the following requirements is met:
    (1) Each of the plans was fully disclosed in the proxy solicitation 
and conversion stock offering materials;
    (2) All such plans are approved by a majority of the bank's 
stockholders, or in the case of a recently formed holding company, its 
stockholders, prior to implementation at a duly called meeting of 
shareholders, either annual or special, to be held no sooner than six 
months after the completion of the conversion;
    (3) In the case of a savings bank subsidiary of a mutual holding 
company, all such plans are approved by a majority of stockholders other 
than its parent mutual holding company prior to implementation at a duly 
called meeting of shareholders, either annual or special, to be held no 
sooner than six months following the stock issuance;
    (4) For stock option plans, stock options are granted at no lower 
than the market price at which the stock is trading at the time of 
grant; and
    (5) For management or employee stock benefit plans, no conversion 
stock is used to fund the plans.

[59 FR 61246, Nov. 30, 1994, as amended at 63 FR 44750, Aug. 20, 1998; 
68 FR 50461, Aug. 21, 2003]

                             Interpretations



Sec. 333.101  Prior consent not required.

    (a) The extension by any State nonmember insured bank of its 
business to include personal, character or installment loans, or the 
extension by an industrial bank of its business to include the business 
of a commercial bank, is not a change in the general character or type 
of business requiring the prior written consent of the Corporation.
    (b) An insured State nonmember bank, not exercising trust powers, 
may act as trustee or custodian of Individual Retirement Accounts 
established pursuant to the Employee Retirement Income Security Act of 
1974 (26 U.S.C. 408), Self-Employed Retirement Plans established 
pursuant to the Self-Employed Individuals Retirement Act of 1962 (26 
U.S.C. 401), Roth Individual Retirement Accounts and Coverdell Education 
Savings Accounts established pursuant to the Taxpayer Relief Act of 1997 
(26 U.S.C. 408A and 530 respectively), Health Savings Accounts 
established pursuant to the Medicare Prescription Drug Improvement, and 
Modernization Act of 2003 (26 U.S.C. 223), and other similar accounts 
without the prior written consent of the Corporation provided:
    (1) The bank's duties as trustee or custodian are essentially 
custodial or ministerial in nature,
    (2) The bank is required to invest the funds from such plans only
    (i) In its own time or savings deposits, or
    (ii) In any other assets at the direction of the customer, provided 
the bank does not exercise any investment discretion or provide any 
investment advice with respect to such account assets, and

[[Page 359]]

    (3) The bank's acceptance of such accounts without trust powers is 
not contrary to applicable State law.

[41 FR 2375, Jan. 16, 1976, as amended at 50 FR 10754, Mar. 18, 1985; 70 
FR 60422, Oct. 18, 2005]



PART 334_FAIR CREDIT REPORTING--Table of Contents




Sec.

                      Subpart A_General Provisions

334.1 Purpose and scope.
334.2 Examples.
334.3 Definitions.

Subparts B [Reserved]

                      Subpart C_Affiliate Marketing

334.20 Coverage and definitions.
334.21 Affiliate marketing opt-out and exceptions.
334.22 Scope and duration of opt-out.
334.23 Contents of opt-out notice; consolidated and equivalent notices.
334.24 Reasonable opportunity to opt out.
334.25 Reasonable and simple methods of opting out.
334.26 Delivery of opt-out notices.
334.27 Renewal of opt-out.
334.28 Effective date, compliance date, and prospective application.

                      Subpart D Medical Information

334.30 Obtaining or using medical information in connection with a 
          determination of eligibility for credit.
334.31 Limits on redisclosure of information.
334.32 Sharing medical information with affiliates.

Subparts E-H [Reserved]

    Subpart I_Duties of Users of Consumer Reports Regarding Address 
                   Discrepancies and Records Disposal

334.80-334.81 [Reserved]
334.82 Duties of users regarding address discrepancies.
334.83 Disposal of consumer information.

                   Subpart J_Identity Theft Red Flags

334.90 Duties regarding the detection, prevention, and mitigation of 
          identity theft.
334.91 Duties of card issuers regarding changes of address.

Appendices A-B to Part 334 [Reserved]
Appendix C to Part 334--Model Forms for Opt-Out Notices
Appendices D-I to Part 334 [Reserved]
Appendix J to Part 334--Interagency Guidelines on Identity Theft 
          Detection, Prevention, and Mitigation

    Authority: 12 U.S.C. 1818, 1819 (Tenth) and 1831p-1; 15 U.S.C. 
1681a, 1681b, 1681c, 1681m, 1681s, 1681s-3, 1681t, 1681w, 6801 and 6805, 
Pub. L. 108-159, 117 Stat. 1952.

    Source: 69 FR 77618, Dec. 28, 2004, unless otherwise noted.



                      Subpart A_General Provisions

    Source: 70 FR 70685, Nov. 22, 2005, unless otherwise noted.



Sec. 334.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to implement the Fair 
Credit Reporting Act. This part generally applies to persons that obtain 
and use information about consumers to determine the consumer's 
eligibility for products, services, or employment, share such 
information among affiliates, and furnish information to consumer 
reporting agencies.
    (b) Scope. Except as otherwise provided in this part, the 
regulations in this part apply to insured state nonmember banks, insured 
state licensed branches of foreign banks, and subsidiaries of such 
entities (except brokers, dealers, persons providing insurance, 
investment companies, and investment advisers).

[72 FR 62963, Nov. 7, 2007]



Sec. 334.2  Examples.

    The examples in this part are not exclusive. Compliance with an 
example, to the extent applicable, constitutes compliance with this 
part. Examples in a paragraph illustrate only the issue described in the 
paragraph and do not illustrate any other issue that may arise in this 
part.



Sec. 334.3  Definitions.

    For purposes of this part, unless explicitly stated otherwise:
    (a) Act means the Fair Credit Reporting Act (15 U.S.C. 1681 et 
seq.).
    (b) Affiliate means any company that is related by common ownership 
or common corporate control with another company.
    (c) [Reserved]

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    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e) Consumer means an individual.
    (f)-(h) [Reserved]
    (i) Common ownership or common corporate control means a 
relationship between two companies under which:
    (1) One company has, with respect to the other company:
    (i) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of a company, 
directly or indirectly, or acting through one or more other persons;
    (ii) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of a company; or
    (iii) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of a company, as the FDIC 
determines; or
    (2) Any other person has, with respect to both companies, a 
relationship described in paragraphs (i)(1)(i) through (i)(1)(iii) of 
this section.
    (j) [Reserved]
    (k) Medical information means:
    (1) Information or data, whether oral or recorded, in any form or 
medium, created by or derived from a health care provider or the 
consumer, that relates to:
    (i) The past, present, or future physical, mental, or behavioral 
health or condition of an individual;
    (ii) The provision of health care to an individual; or
    (iii) The payment for the provision of health care to an individual.
    (2) The term does not include:
    (i) The age or gender of a consumer;
    (ii) Demographic information about the consumer, including a 
consumer's residence address or e-mail address;
    (iii) Any other information about a consumer that does not relate to 
the physical, mental, or behavioral health or condition of a consumer, 
including the existence or value of any insurance policy; or
    (iv) Information that does not identify a specific consumer.
    (l) Person means any individual, partnership, corporation, trust, 
estate cooperative, association, government or governmental subdivision 
or agency, or other entity.

[70 FR 70685, Nov. 22, 2005, as amended at 72 FR 63760, Nov. 9, 2007]

Subparts B [Reserved]



                      Subpart C_Affiliate Marketing

    Source: 72 FR 62963, Nov. 7, 2007, unless otherwise noted.



Sec. 334.20  Coverage and definitions.

    (a) Coverage. Subpart C of this part applies to insured state 
nonmember banks, insured state licensed branches of foreign banks, and 
subsidiaries of such entities (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers).
    (b) Definitions. For purposes of this subpart:
    (1) Clear and conspicuous. The term ``clear and conspicuous'' means 
reasonably understandable and designed to call attention to the nature 
and significance of the information presented.
    (2) Concise. (i) In general. The term ``concise'' means a reasonably 
brief expression or statement.
    (ii) Combination with other required disclosures. A notice required 
by this subpart may be concise even if it is combined with other 
disclosures required or authorized by federal or state law.
    (3) Eligibility information. The term ``eligibility information'' 
means any information the communication of which would be a consumer 
report if the exclusions from the definition of ``consumer report'' in 
section 603(d)(2)(A) of the Act did not apply. Eligibility information 
does not include aggregate or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (4) Pre-existing business relationship. (i) In general. The term 
``pre-existing business relationship'' means a relationship between a 
person, or a person's licensed agent, and a consumer based on--
    (A) A financial contract between the person and the consumer which 
is in

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force on the date on which the consumer is sent a solicitation covered 
by this subpart;
    (B) The purchase, rental, or lease by the consumer of the person's 
goods or services, or a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) between the consumer and the person, during the 18-month 
period immediately preceding the date on which the consumer is sent a 
solicitation covered by this subpart; or
    (C) An inquiry or application by the consumer regarding a product or 
service offered by that person during the three-month period immediately 
preceding the date on which the consumer is sent a solicitation covered 
by this subpart.
    (ii) Examples of pre-existing business relationships. (A) If a 
consumer has a time deposit account, such as a certificate of deposit, 
at a depository institution that is currently in force, the depository 
institution has a pre-existing business relationship with the consumer 
and can use eligibility information it receives from its affiliates to 
make solicitations to the consumer about its products or services.
    (B) If a consumer obtained a certificate of deposit from a 
depository institution, but did not renew the certificate at maturity, 
the depository institution has a pre-existing business relationship with 
the consumer and can use eligibility information it receives from its 
affiliates to make solicitations to the consumer about its products or 
services for 18 months after the date of maturity of the certificate of 
deposit.
    (C) If a consumer obtains a mortgage, the mortgage lender has a pre-
existing business relationship with the consumer. If the mortgage lender 
sells the consumer's entire loan to an investor, the mortgage lender has 
a pre-existing business relationship with the consumer and can use 
eligibility information it receives from its affiliates to make 
solicitations to the consumer about its products or services for 18 
months after the date it sells the loan, and the investor has a pre-
existing business relationship with the consumer upon purchasing the 
loan. If, however, the mortgage lender sells a fractional interest in 
the consumer's loan to an investor but also retains an ownership 
interest in the loan, the mortgage lender continues to have a pre-
existing business relationship with the consumer, but the investor does 
not have a pre-existing business relationship with the consumer. If the 
mortgage lender retains ownership of the loan, but sells ownership of 
the servicing rights to the consumer's loan, the mortgage lender 
continues to have a pre-existing business relationship with the 
consumer. The purchaser of the servicing rights also has a pre-existing 
business relationship with the consumer as of the date it purchases 
ownership of the servicing rights, but only if it collects payments from 
or otherwise deals directly with the consumer on a continuing basis.
    (D) If a consumer applies to a depository institution for a product 
or service that it offers, but does not obtain a product or service from 
or enter into a financial contract or transaction with the institution, 
the depository institution has a pre-existing business relationship with 
the consumer and can therefore use eligibility information it receives 
from an affiliate to make solicitations to the consumer about its 
products or services for three months after the date of the application.
    (E) If a consumer makes a telephone inquiry to a depository 
institution about its products or services and provides contact 
information to the institution, but does not obtain a product or service 
from or enter into a financial contract or transaction with the 
institution, the depository institution has a pre-existing business 
relationship with the consumer and can therefore use eligibility 
information it receives from an affiliate to make solicitations to the 
consumer about its products or services for three months after the date 
of the inquiry.
    (F) If a consumer makes an inquiry to a depository institution by e-
mail about its products or services, but does not obtain a product or 
service from or enter into a financial contract or transaction with the 
institution, the depository institution has a pre-existing business 
relationship with the consumer and can therefore use eligibility

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information it receives from an affiliate to make solicitations to the 
consumer about its products or services for three months after the date 
of the inquiry.
    (G) If a consumer has an existing relationship with a depository 
institution that is part of a group of affiliated companies, makes a 
telephone call to the centralized call center for the group of 
affiliated companies to inquire about products or services offered by 
the insurance affiliate, and provides contact information to the call 
center, the call constitutes an inquiry to the insurance affiliate that 
offers those products or services. The insurance affiliate has a pre-
existing business relationship with the consumer and can therefore use 
eligibility information it receives from its affiliated depository 
institution to make solicitations to the consumer about its products or 
services for three months after the date of the inquiry.
    (iii) Examples where no pre-existing business relationship is 
created. (A) If a consumer makes a telephone call to a centralized call 
center for a group of affiliated companies to inquire about the 
consumer's existing account at a depository institution, the call does 
not constitute an inquiry to any affiliate other than the depository 
institution that holds the consumer's account and does not establish a 
pre-existing business relationship between the consumer and any 
affiliate of the account-holding depository institution.
    (B) If a consumer who has a deposit account with a depository 
institution makes a telephone call to an affiliate of the institution to 
ask about the affiliate's retail locations and hours, but does not make 
an inquiry about the affiliate's products or services, the call does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate. Also, the 
affiliate's capture of the consumer's telephone number does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate.
    (C) If a consumer makes a telephone call to a depository institution 
in response to an advertisement that offers a free promotional item to 
consumers who call a toll-free number, but the advertisement does not 
indicate that the depository institution's products or services will be 
marketed to consumers who call in response, the call does not create a 
pre-existing business relationship between the consumer and the 
depository institution because the consumer has not made an inquiry 
about a product or service offered by the institution, but has merely 
responded to an offer for a free promotional item.
    (5) Solicitation. (i) In general. The term ``solicitation'' means 
the marketing of a product or service initiated by a person to a 
particular consumer that is--
    (A) Based on eligibility information communicated to that person by 
its affiliate as described in this subpart; and
    (B) Intended to encourage the consumer to purchase or obtain such 
product or service.
    (ii) Exclusion of marketing directed at the general public. A 
solicitation does not include marketing communications that are directed 
at the general public. For example, television, general circulation 
magazine, and billboard advertisements do not constitute solicitations, 
even if those communications are intended to encourage consumers to 
purchase products and services from the person initiating the 
communications.
    (iii) Examples of solicitations. A solicitation would include, for 
example, a telemarketing call, direct mail, e-mail, or other form of 
marketing communication directed to a particular consumer that is based 
on eligibility information received from an affiliate.
    (6) You means a person described in paragraph (a) of this section.



Sec. 334.21  Affiliate marketing opt-out and exceptions.

    (a) Initial notice and opt-out requirement--(1) In general. You may 
not use eligibility information about a consumer that you receive from 
an affiliate to make a solicitation for marketing purposes to the 
consumer, unless--
    (i) It is clearly and conspicuously disclosed to the consumer in 
writing or, if the consumer agrees, electronically, in

[[Page 363]]

a concise notice that you may use eligibility information about that 
consumer received from an affiliate to make solicitations for marketing 
purposes to the consumer;
    (ii) The consumer is provided a reasonable opportunity and a 
reasonable and simple method to ``opt out,'' or prohibit you from using 
eligibility information to make solicitations for marketing purposes to 
the consumer; and
    (iii) The consumer has not opted out.
    (2) Example. A consumer has a homeowner's insurance policy with an 
insurance company. The insurance company furnishes eligibility 
information about the consumer to its affiliated depository institution. 
Based on that eligibility information, the depository institution wants 
to make a solicitation to the consumer about its home equity loan 
products. The depository institution does not have a pre-existing 
business relationship with the consumer and none of the other exceptions 
apply. The depository institution is prohibited from using eligibility 
information received from its insurance affiliate to make solicitations 
to the consumer about its home equity loan products unless the consumer 
is given a notice and opportunity to opt out and the consumer does not 
opt out.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By an affiliate that has or has previously had a pre-existing 
business relationship with the consumer; or
    (ii) As part of a joint notice from two or more members of an 
affiliated group of companies, provided that at least one of the 
affiliates on the joint notice has or has previously had a pre-existing 
business relationship with the consumer.
    (b) Making solicitations--(1) In general. For purposes of this 
subpart, you make a solicitation for marketing purposes if--
    (i) You receive eligibility information from an affiliate;
    (ii) You use that eligibility information to do one or more of the 
following:
    (A) Identify the consumer or type of consumer to receive a 
solicitation;
    (B) Establish criteria used to select the consumer to receive a 
solicitation; or
    (C) Decide which of your products or services to market to the 
consumer or tailor your solicitation to that consumer; and
    (iii) As a result of your use of the eligibility information, the 
consumer is provided a solicitation.
    (2) Receiving eligibility information from an affiliate, including 
through a common database. You may receive eligibility information from 
an affiliate in various ways, including when the affiliate places that 
information into a common database that you may access.
    (3) Receipt or use of eligibility information by your service 
provider. Except as provided in paragraph (b)(5) of this section, you 
receive or use an affiliate's eligibility information if a service 
provider acting on your behalf (whether an affiliate or a nonaffiliated 
third party) receives or uses that information in the manner described 
in paragraphs (b)(1)(i) or (b)(1)(ii) of this section. All relevant 
facts and circumstances will determine whether a person is acting as 
your service provider when it receives or uses an affiliate's 
eligibility information in connection with marketing your products and 
services.
    (4) Use by an affiliate of its own eligibility information. Unless 
you have used eligibility information that you receive from an affiliate 
in the manner described in paragraph (b)(1)(ii) of this section, you do 
not make a solicitation subject to this subpart if your affiliate:
    (i) Uses its own eligibility information that it obtained in 
connection with a pre-existing business relationship it has or had with 
the consumer to market your products or services to the consumer; or
    (ii) Directs its service provider to use the affiliate's own 
eligibility information that it obtained in connection with a pre-
existing business relationship it has or had with the consumer to market 
your products or services to the consumer, and you do not communicate 
directly with the service provider regarding that use.
    (5) Use of eligibility information by a service provider--(i) In 
general. You do not make a solicitation subject to Subpart C of this 
part if a service provider

[[Page 364]]

(including an affiliated or third-party service provider that maintains 
or accesses a common database that you may access) receives eligibility 
information from your affiliate that your affiliate obtained in 
connection with a pre-existing business relationship it has or had with 
the consumer and uses that eligibility information to market your 
products or services to the consumer, so long as--
    (A) Your affiliate controls access to and use of its eligibility 
information by the service provider (including the right to establish 
the specific terms and conditions under which the service provider may 
use such information to market your products or services);
    (B) Your affiliate establishes specific terms and conditions under 
which the service provider may access and use the affiliate's 
eligibility information to market your products and services (or those 
of affiliates generally) to the consumer, such as the identity of the 
affiliated companies whose products or services may be marketed to the 
consumer by the service provider, the types of products or services of 
affiliated companies that may be marketed, and the number of times the 
consumer may receive marketing materials, and periodically evaluates the 
service provider's compliance with those terms and conditions;
    (C) Your affiliate requires the service provider to implement 
reasonable policies and procedures designed to ensure that the service 
provider uses the affiliate's eligibility information in accordance with 
the terms and conditions established by the affiliate relating to the 
marketing of your products or services;
    (D) Your affiliate is identified on or with the marketing materials 
provided to the consumer; and
    (E) You do not directly use your affiliate's eligibility information 
in the manner described in paragraph (b)(1)(ii) of this section.
    (ii) Writing requirements. (A) The requirements of paragraphs 
(b)(5)(i)(A) and (C) of this section must be set forth in a written 
agreement between your affiliate and the service provider; and
    (B) The specific terms and conditions established by your affiliate 
as provided in paragraph (b)(5)(i)(B) of this section must be set forth 
in writing.
    (6) Examples of making solicitations. (i) A consumer has a deposit 
account with a depository institution, which is affiliated with an 
insurance company. The insurance company receives eligibility 
information about the consumer from the depository institution. The 
insurance company uses that eligibility information to identify the 
consumer to receive a solicitation about insurance products, and, as a 
result, the insurance company provides a solicitation to the consumer 
about its insurance products. Pursuant to paragraph (b)(1) of this 
section, the insurance company has made a solicitation to the consumer.
    (ii) The same facts as in the example in paragraph (b)(6)(i) of this 
section, except that after using the eligibility information to identify 
the consumer to receive a solicitation about insurance products, the 
insurance company asks the depository institution to send the 
solicitation to the consumer and the depository institution does so. 
Pursuant to paragraph (b)(1) of this section, the insurance company has 
made a solicitation to the consumer because it used eligibility 
information about the consumer that it received from an affiliate to 
identify the consumer to receive a solicitation about its products or 
services, and, as a result, a solicitation was provided to the consumer 
about the insurance company's products.
    (iii) The same facts as in the example in paragraph (b)(6)(i) of 
this section, except that eligibility information about consumers that 
have deposit accounts with the depository institution is placed into a 
common database that all members of the affiliated group of companies 
may independently access and use. Without using the depository 
institution's eligibility information, the insurance company develops 
selection criteria and provides those criteria, marketing materials, and 
related instructions to the depository institution. The depository 
institution reviews eligibility information about its own consumers 
using the selection criteria provided by the insurance company to 
determine which consumers should receive the insurance company's

[[Page 365]]

marketing materials and sends marketing materials about the insurance 
company's products to those consumers. Even though the insurance company 
has received eligibility information through the common database as 
provided in paragraph (b)(2) of this section, it did not use that 
information to identify consumers or establish selection criteria; 
instead, the depository institution used its own eligibility 
information. Therefore, pursuant to paragraph (b)(4)(i) of this section, 
the insurance company has not made a solicitation to the consumer.
    (iv) The same facts as in the example in paragraph (b)(6)(iii) of 
this section, except that the depository institution provides the 
insurance company's criteria to the depository institution's service 
provider and directs the service provider to use the depository 
institution's eligibility information to identify depository institution 
consumers who meet the criteria and to send the insurance company's 
marketing materials to those consumers. The insurance company does not 
communicate directly with the service provider regarding the use of the 
depository institution's information to market its products to the 
depository institution's consumers. Pursuant to paragraph (b)(4)(ii) of 
this section, the insurance company has not made a solicitation to the 
consumer.
    (v) An affiliated group of companies includes a depository 
institution, an insurance company, and a service provider. Each 
affiliate in the group places information about its consumers into a 
common database. The service provider has access to all information in 
the common database. The depository institution controls access to and 
use of its eligibility information by the service provider. This control 
is set forth in a written agreement between the depository institution 
and the service provider. The written agreement also requires the 
service provider to establish reasonable policies and procedures 
designed to ensure that the service provider uses the depository 
institution's eligibility information in accordance with specific terms 
and conditions established by the depository institution relating to the 
marketing of the products and services of all affiliates, including the 
insurance company. In a separate written communication, the depository 
institution specifies the terms and conditions under which the service 
provider may use the depository institution's eligibility information to 
market the insurance company's products and services to the depository 
institution's consumers. The specific terms and conditions are: a list 
of affiliated companies (including the insurance company) whose products 
or services may be marketed to the depository institution's consumers by 
the service provider; the specific products or types of products that 
may be marketed to the depository institution's consumers by the service 
provider; the categories of eligibility information that may be used by 
the service provider in marketing products or services to the depository 
institution's consumers; the types or categories of the depository 
institution's consumers to whom the service provider may market products 
or services of depository institution affiliates; the number and/or 
types of marketing communications that the service provider may send to 
the depository institution's consumers; and the length of time during 
which the service provider may market the products or services of the 
depository institution's affiliates to its consumers. The depository 
institution periodically evaluates the service provider's compliance 
with these terms and conditions. The insurance company asks the service 
provider to market insurance products to certain consumers who have 
deposit accounts with the depository institution. Without using the 
depository institution's eligibility information, the insurance company 
develops selection criteria and provides those criteria, marketing 
materials, and related instructions to the service provider. The service 
provider uses the depository institution's eligibility information from 
the common database to identify the depository institution's consumers 
to whom insurance products will be marketed. When the insurance 
company's marketing materials are provided to the identified consumers, 
the name of the depository institution is displayed on the insurance 
marketing materials, an introductory letter that accompanies the 
marketing

[[Page 366]]

materials, an account statement that accompanies the marketing 
materials, or the envelope containing the marketing materials. The 
requirements of paragraph (b)(5) of this section have been satisfied, 
and the insurance company has not made a solicitation to the consumer.
    (vi) The same facts as in the example in paragraph (b)(6)(v) of this 
section, except that the terms and conditions permit the service 
provider to use the depository institution's eligibility information to 
market the products and services of other affiliates to the depository 
institution's consumers whenever the service provider deems it 
appropriate to do so. The service provider uses the depository 
institution's eligibility information in accordance with the discretion 
afforded to it by the terms and conditions. Because the terms and 
conditions are not specific, the requirements of paragraph (b)(5) of 
this section have not been satisfied.
    (c) Exceptions. The provisions of this subpart do not apply to you 
if you use eligibility information that you receive from an affiliate:
    (1) To make a solicitation for marketing purposes to a consumer with 
whom you have a pre-existing business relationship;
    (2) To facilitate communications to an individual for whose benefit 
you provide employee benefit or other services pursuant to a contract 
with an employer related to and arising out of the current employment 
relationship or status of the individual as a participant or beneficiary 
of an employee benefit plan;
    (3) To perform services on behalf of an affiliate, except that this 
subparagraph shall not be construed as permitting you to send 
solicitations on behalf of an affiliate if the affiliate would not be 
permitted to send the solicitation as a result of the election of the 
consumer to opt out under this subpart;
    (4) In response to a communication about your products or services 
initiated by the consumer;
    (5) In response to an authorization or request by the consumer to 
receive solicitations; or
    (6) If your compliance with this subpart would prevent you from 
complying with any provision of State insurance laws pertaining to 
unfair discrimination in any State in which you are lawfully doing 
business.
    (d) Examples of exceptions--(1) Example of the pre-existing business 
relationship exception. A consumer has a deposit account with a 
depository institution. The consumer also has a relationship with the 
depository institution's securities affiliate for management of the 
consumer's securities portfolio. The depository institution receives 
eligibility information about the consumer from its securities affiliate 
and uses that information to make a solicitation to the consumer about 
the depository institution's wealth management services. The depository 
institution may make this solicitation even if the consumer has not been 
given a notice and opportunity to opt out because the depository 
institution has a pre-existing business relationship with the consumer.
    (2) Examples of service provider exception. (i) A consumer has an 
insurance policy issued by an insurance company. The insurance company 
furnishes eligibility information about the consumer to its affiliated 
depository institution. Based on that eligibility information, the 
depository institution wants to make a solicitation to the consumer 
about its deposit products. The depository institution does not have a 
pre-existing business relationship with the consumer and none of the 
other exceptions in paragraph (c) of this section apply. The consumer 
has been given an opt-out notice and has elected to opt out of receiving 
such solicitations. The depository institution asks a service provider 
to send the solicitation to the consumer on its behalf. The service 
provider may not send the solicitation on behalf of the depository 
institution because, as a result of the consumer's opt-out election, the 
depository institution is not permitted to make the solicitation.
    (ii) The same facts as in paragraph (d)(2)(i) of this section, 
except the consumer has been given an opt-out notice, but has not 
elected to opt out. The depository institution asks a service provider 
to send the solicitation to the consumer on its behalf. The service 
provider may send the solicitation on

[[Page 367]]

behalf of the depository institution because, as a result of the 
consumer's not opting out, the depository institution is permitted to 
make the solicitation.
    (3) Examples of consumer-initiated communications. (i) A consumer 
who has a deposit account with a depository institution initiates a 
communication with the depository institution's credit card affiliate to 
request information about a credit card. The credit card affiliate may 
use eligibility information about the consumer it obtains from the 
depository institution or any other affiliate to make solicitations 
regarding credit card products in response to the consumer-initiated 
communication.
    (ii) A consumer who has a deposit account with a depository 
institution contacts the institution to request information about how to 
save and invest for a child's college education without specifying the 
type of product in which the consumer may be interested. Information 
about a range of different products or services offered by the 
depository institution and one or more affiliates of the institution may 
be responsive to that communication. Such products or services may 
include the following: Mutual funds offered by the institution's mutual 
fund affiliate; section 529 plans offered by the institution, its mutual 
fund affiliate, or another securities affiliate; or trust services 
offered by a different financial institution in the affiliated group. 
Any affiliate offering investment products or services that would be 
responsive to the consumer's request for information about saving and 
investing for a child's college education may use eligibility 
information to make solicitations to the consumer in response to this 
communication.
    (iii) A credit card issuer makes a marketing call to the consumer 
without using eligibility information received from an affiliate. The 
issuer leaves a voice-mail message that invites the consumer to call a 
toll-free number to apply for the issuer's credit card. If the consumer 
calls the toll-free number to inquire about the credit card, the call is 
a consumer-initiated communication about a product or service and the 
credit card issuer may now use eligibility information it receives from 
its affiliates to make solicitations to the consumer.
    (iv) A consumer calls a depository institution to ask about retail 
locations and hours, but does not request information about products or 
services. The institution may not use eligibility information it 
receives from an affiliate to make solicitations to the consumer about 
its products or services because the consumer-initiated communication 
does not relate to the depository institution's products or services. 
Thus, the use of eligibility information received from an affiliate 
would not be responsive to the communication and the exception does not 
apply.
    (v) A consumer calls a depository institution to ask about retail 
locations and hours. The customer service representative asks the 
consumer if there is a particular product or service about which the 
consumer is seeking information. The consumer responds that the consumer 
wants to stop in and find out about certificates of deposit. The 
customer service representative offers to provide that information by 
telephone and mail additional information and application materials to 
the consumer. The consumer agrees and provides or confirms contact 
information for receipt of the materials to be mailed. The depository 
institution may use eligibility information it receives from an 
affiliate to make solicitations to the consumer about certificates of 
deposit because such solicitations would respond to the consumer-
initiated communication about products or services.
    (4) Examples of consumer authorization or request for solicitations. 
(i) A consumer who obtains a mortgage from a mortgage lender authorizes 
or requests information about homeowner's insurance offered by the 
mortgage lender's insurance affiliate. Such authorization or request, 
whether given to the mortgage lender or to the insurance affiliate, 
would permit the insurance affiliate to use eligibility information 
about the consumer it obtains from the mortgage lender or any other 
affiliate to make solicitations to the consumer about homeowner's 
insurance.
    (ii) A consumer completes an online application to apply for a 
credit card from a credit card issuer. The issuer's

[[Page 368]]

online application contains a blank check box that the consumer may 
check to authorize or request information from the credit card issuer's 
affiliates. The consumer checks the box. The consumer has authorized or 
requested solicitations from the card issuer's affiliates.
    (iii) A consumer completes an online application to apply for a 
credit card from a credit card issuer. The issuer's online application 
contains a pre-selected check box indicating that the consumer 
authorizes or requests information from the issuer's affiliates. The 
consumer does not deselect the check box. The consumer has not 
authorized or requested solicitations from the card issuer's affiliates.
    (iv) The terms and conditions of a credit card account agreement 
contain preprinted boilerplate language stating that by applying to open 
an account the consumer authorizes or requests to receive solicitations 
from the credit card issuer's affiliates. The consumer has not 
authorized or requested solicitations from the card issuer's affiliates.
    (e) Relation to affiliate-sharing notice and opt-out. Nothing in 
this subpart limits the responsibility of a person to comply with the 
notice and opt-out provisions of section 603(d)(2)(A)(iii) of the Act 
where applicable.



Sec. 334.22  Scope and duration of opt-out.

    (a) Scope of opt-out--(1) In general. Except as otherwise provided 
in this section, the consumer's election to opt out prohibits any 
affiliate covered by the opt-out notice from using eligibility 
information received from another affiliate as described in the notice 
to make solicitations to the consumer.
    (2) Continuing relationship--(i) In general. If the consumer 
establishes a continuing relationship with you or your affiliate, an 
opt-out notice may apply to eligibility information obtained in 
connection with--
    (A) A single continuing relationship or multiple continuing 
relationships that the consumer establishes with you or your affiliates, 
including continuing relationships established subsequent to delivery of 
the opt-out notice, so long as the notice adequately describes the 
continuing relationships covered by the opt-out; or
    (B) Any other transaction between the consumer and you or your 
affiliates as described in the notice.
    (ii) Examples of continuing relationships. A consumer has a 
continuing relationship with you or your affiliate if the consumer--
    (A) Opens a deposit or investment account with you or your 
affiliate;
    (B) Obtains a loan for which you or your affiliate owns the 
servicing rights;
    (C) Purchases an insurance product from you or your affiliate;
    (D) Holds an investment product through you or your affiliate, such 
as when you act or your affiliate acts as a custodian for securities or 
for assets in an individual retirement arrangement;
    (E) Enters into an agreement or understanding with you or your 
affiliate whereby you or your affiliate undertakes to arrange or broker 
a home mortgage loan for the consumer;
    (F) Enters into a lease of personal property with you or your 
affiliate; or
    (G) Obtains financial, investment, or economic advisory services 
from you or your affiliate for a fee.
    (3) No continuing relationship--(i) In general. If there is no 
continuing relationship between a consumer and you or your affiliate, 
and you or your affiliate obtain eligibility information about a 
consumer in connection with a transaction with the consumer, such as an 
isolated transaction or a credit application that is denied, an opt-out 
notice provided to the consumer only applies to eligibility information 
obtained in connection with that transaction.
    (ii) Examples of isolated transactions. An isolated transaction 
occurs if--
    (A) The consumer uses your or your affiliate's ATM to withdraw cash 
from an account at another financial institution; or
    (B) You or your affiliate sells the consumer a cashier's check or 
money order, airline tickets, travel insurance, or traveler's checks in 
isolated transactions.
    (4) Menu of alternatives. A consumer may be given the opportunity to 
choose from a menu of alternatives when electing to prohibit 
solicitations,

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such as by electing to prohibit solicitations from certain types of 
affiliates covered by the opt-out notice but not other types of 
affiliates covered by the notice, electing to prohibit solicitations 
based on certain types of eligibility information but not other types of 
eligibility information, or electing to prohibit solicitations by 
certain methods of delivery but not other methods of delivery. However, 
one of the alternatives must allow the consumer to prohibit all 
solicitations from all of the affiliates that are covered by the notice.
    (5) Special rule for a notice following termination of all 
continuing relationships--(i) In general. A consumer must be given a new 
opt-out notice if, after all continuing relationships with you or your 
affiliate(s) are terminated, the consumer subsequently establishes 
another continuing relationship with you or your affiliate(s) and the 
consumer's eligibility information is to be used to make a solicitation. 
The new opt-out notice must apply, at a minimum, to eligibility 
information obtained in connection with the new continuing relationship. 
Consistent with paragraph (b) of this section, the consumer's decision 
not to opt out after receiving the new opt-out notice would not override 
a prior opt-out election by the consumer that applies to eligibility 
information obtained in connection with a terminated relationship, 
regardless of whether the new opt-out notice applies to eligibility 
information obtained in connection with the terminated relationship.
    (ii) Example. A consumer has a checking account with a depository 
institution that is part of an affiliated group. The consumer closes the 
checking account. One year after closing the checking account, the 
consumer opens a savings account with the same depository institution. 
The consumer must be given a new notice and opportunity to opt out 
before the depository institution's affiliates may make solicitations to 
the consumer using eligibility information obtained by the depository 
institution in connection with the new savings account relationship, 
regardless of whether the consumer opted out in connection with the 
checking account.
    (b) Duration of opt-out. The election of a consumer to opt out must 
be effective for a period of at least five years (the ``opt-out 
period'') beginning when the consumer's opt-out election is received and 
implemented, unless the consumer subsequently revokes the opt-out in 
writing or, if the consumer agrees, electronically. An opt-out period of 
more than five years may be established, including an opt-out period 
that does not expire unless revoked by the consumer.
    (c) Time of opt-out. A consumer may opt out at any time.



Sec. 334.23  Contents of opt-out notice; consolidated and equivalent notices.

    (a) Contents of opt-out notice. (1) In general. A notice must be 
clear, conspicuous, and concise, and must accurately disclose:
    (i) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies'';
    (ii) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple

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companies with the ABC name or multiple companies in the ABC group or 
family of companies, for example, by stating that the notice is provided 
by ``all of the ABC companies,'' ``the ABC banking, credit card, 
insurance, and securities companies,'' or by listing the name of each 
affiliate providing the notice. But if the affiliates covered by the 
notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance companies'';
    (iii) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (iv) That the consumer may elect to limit the use of eligibility 
information to make solicitations to the consumer;
    (v) That the consumer's election will apply for the specified period 
of time stated in the notice and, if applicable, that the consumer will 
be allowed to renew the election once that period expires;
    (vi) If the notice is provided to consumers who may have previously 
opted out, such as if a notice is provided to consumers annually, that 
the consumer who has chosen to limit solicitations does not need to act 
again until the consumer receives a renewal notice; and
    (vii) A reasonable and simple method for the consumer to opt out.
    (2) Joint relationships. (i) If two or more consumers jointly obtain 
a product or service, a single opt-out notice may be provided to the 
joint consumers. Any of the joint consumers may exercise the right to 
opt out.
    (ii) The opt-out notice must explain how an opt-out direction by a 
joint consumer will be treated. An opt-out direction by a joint consumer 
may be treated as applying to all of the associated joint consumers, or 
each joint consumer may be permitted to opt-out separately. If each 
joint consumer is permitted to opt out separately, one of the joint 
consumers must be permitted to opt out on behalf of all of the joint 
consumers and the joint consumers must be permitted to exercise their 
separate rights to opt out in a single response.
    (iii) It is impermissible to require all joint consumers to opt out 
before implementing any opt-out direction.
    (3) Alternative contents. If the consumer is afforded a broader 
right to opt out of receiving marketing than is required by this 
subpart, the requirements of this section may be satisfied by providing 
the consumer with a clear, conspicuous, and concise notice that 
accurately discloses the consumer's opt-out rights.
    (4) Model notices. Model notices are provided in Appendix C of this 
part.
    (b) Coordinated and consolidated notices. A notice required by this 
subpart may be coordinated and consolidated with any other notice or 
disclosure required to be issued under any other provision of law by the 
entity providing the notice, including but not limited to the notice 
described in section 603(d)(2)(A)(iii) of the Act and the Gramm-Leach-
Bliley Act privacy notice.
    (c) Equivalent notices. A notice or other disclosure that is 
equivalent to the notice required by this subpart, and that is provided 
to a consumer together with disclosures required by any other provision 
of law, satisfies the requirements of this section.



Sec. 334.24  Reasonable opportunity to opt out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable opportunity to opt out, as required by Sec. 
334.21(a)(1)(ii) of this part.
    (b) Examples of a reasonable opportunity to opt out. The consumer is 
given a reasonable opportunity to opt out if:
    (1) By mail. The opt-out notice is mailed to the consumer. The 
consumer is given 30 days from the date the notice is mailed to elect to 
opt out by any reasonable means.
    (2) By electronic means. (i) The opt-out notice is provided 
electronically to the consumer, such as by posting the notice at an 
Internet Web site at which

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the consumer has obtained a product or service. The consumer 
acknowledges receipt of the electronic notice. The consumer is given 30 
days after the date the consumer acknowledges receipt to elect to opt 
out by any reasonable means.
    (ii) The opt-out notice is provided to the consumer by e-mail where 
the consumer has agreed to receive disclosures by e-mail from the person 
sending the notice. The consumer is given 30 days after the e-mail is 
sent to elect to opt out by any reasonable means.
    (3) At the time of an electronic transaction. The opt-out notice is 
provided to the consumer at the time of an electronic transaction, such 
as a transaction conducted on an Internet Web site. The consumer is 
required to decide, as a necessary part of proceeding with the 
transaction, whether to opt out before completing the transaction. There 
is a simple process that the consumer may use to opt out at that time 
using the same mechanism through which the transaction is conducted.
    (4) At the time of an in-person transaction. The opt-out notice is 
provided to the consumer in writing at the time of an in-person 
transaction. The consumer is required to decide, as a necessary part of 
proceeding with the transaction, whether to opt out before completing 
the transaction, and is not permitted to complete the transaction 
without making a choice. There is a simple process that the consumer may 
use during the course of the in-person transaction to opt out, such as 
completing a form that requires consumers to write a ``yes'' or ``no'' 
to indicate their opt-out preference or that requires the consumer to 
check one of two blank check boxes--one that allows consumers to 
indicate that they want to opt out and one that allows consumers to 
indicate that they do not want to opt out.
    (5) By including in a privacy notice. The opt-out notice is included 
in a Gramm-Leach-Bliley Act privacy notice. The consumer is allowed to 
exercise the opt-out within a reasonable period of time and in the same 
manner as the opt-out under that privacy notice.



Sec. 334.25  Reasonable and simple methods of opting out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable and simple method to opt out, as required by Sec. 
334.21(a)(1)(ii) of this part.
    (b) Examples. (1) Reasonable and simple opt-out methods. Reasonable 
and simple methods for exercising the opt-out right include--
    (i) Designating a check-off box in a prominent position on the opt-
out form;
    (ii) Including a reply form and a self-addressed envelope together 
with the opt-out notice;
    (iii) Providing an electronic means to opt out, such as a form that 
can be electronically mailed or processed at an Internet Web site, if 
the consumer agrees to the electronic delivery of information;
    (iv) Providing a toll-free telephone number that consumers may call 
to opt out; or
    (v) Allowing consumers to exercise all of their opt-out rights 
described in a consolidated opt-out notice that includes the privacy 
opt-out under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., the 
affiliate sharing opt-out under the Act, and the affiliate marketing 
opt-out under the Act, by a single method, such as by calling a single 
toll-free telephone number.
    (2) Opt-out methods that are not reasonable and simple. Reasonable 
and simple methods for exercising an opt-out right do not include--
    (i) Requiring the consumer to write his or her own letter;
    (ii) Requiring the consumer to call or write to obtain a form for 
opting out, rather than including the form with the opt-out notice;
    (iii) Requiring the consumer who receives the opt-out notice in 
electronic form only, such as through posting at an Internet Web site, 
to opt out solely by paper mail or by visiting a different Web site 
without providing a link to that site.
    (c) Specific opt-out means. Each consumer may be required to opt out 
through a specific means, as long as

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that means is reasonable and simple for that consumer.



Sec. 334.26  Delivery of opt-out notices.

    (a) In general. The opt-out notice must be provided so that each 
consumer can reasonably be expected to receive actual notice. For opt-
out notices provided electronically, the notice may be provided in 
compliance with either the electronic disclosure provisions in this 
subpart or the provisions in section 101 of the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001 et seq.
    (b) Examples of reasonable expectation of actual notice. A consumer 
may reasonably be expected to receive actual notice if the affiliate 
providing the notice:
    (1) Hand-delivers a printed copy of the notice to the consumer;
    (2) Mails a printed copy of the notice to the last known mailing 
address of the consumer;
    (3) Provides a notice by e-mail to a consumer who has agreed to 
receive electronic disclosures by e-mail from the affiliate providing 
the notice; or
    (4) Posts the notice on the Internet Web site at which the consumer 
obtained a product or service electronically and requires the consumer 
to acknowledge receipt of the notice.
    (c) Examples of no reasonable expectation of actual notice. A 
consumer may not reasonably be expected to receive actual notice if the 
affiliate providing the notice:
    (1) Only posts the notice on a sign in a branch or office or 
generally publishes the notice in a newspaper;
    (2) Sends the notice via e-mail to a consumer who has not agreed to 
receive electronic disclosures by e-mail from the affiliate providing 
the notice; or
    (3) Posts the notice on an Internet Web site without requiring the 
consumer to acknowledge receipt of the notice.



Sec. 334.27  Renewal of opt-out.

    (a) Renewal notice and opt-out requirement--(1) In general. After 
the opt-out period expires, you may not make solicitations based on 
eligibility information you receive from an affiliate to a consumer who 
previously opted out, unless:
    (i) The consumer has been given a renewal notice that complies with 
the requirements of this section and Sec. Sec. 334.24 through 334.26 of 
this part, and a reasonable opportunity and a reasonable and simple 
method to renew the opt-out, and the consumer does not renew the opt-
out; or
    (ii) An exception in Sec. 334.21(c) of this part applies.
    (2) Renewal period. Each opt-out renewal must be effective for a 
period of at least five years as provided in Sec. 334.22(b) of this 
part.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By the affiliate that provided the previous opt-out notice, or 
its successor; or
    (ii) As part of a joint renewal notice from two or more members of 
an affiliated group of companies, or their successors, that jointly 
provided the previous opt-out notice.
    (b) Contents of renewal notice. The renewal notice must be clear, 
conspicuous, and concise, and must accurately disclose:
    (1) The name of the affiliate(s) providing the notice. If the notice 
is provided jointly by multiple affiliates and each affiliate shares a 
common name, such as ``ABC,'' then the notice may indicate that it is 
being provided by multiple companies with the ABC name or multiple 
companies in the ABC group or family of companies, for example, by 
stating that the notice is provided by ``all of the ABC companies,'' 
``the ABC banking, credit card, insurance, and securities companies,'' 
or by listing the name of each affiliate providing the notice. But if 
the affiliates providing the joint notice do not all share a common 
name, then the notice must either separately identify each affiliate by 
name or identify each of the common names used by those affiliates, for 
example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies;''

[[Page 373]]

    (2) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice is 
provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance companies;''
    (3) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (4) That the consumer previously elected to limit the use of certain 
information to make solicitations to the consumer;
    (5) That the consumer's election has expired or is about to expire;
    (6) That the consumer may elect to renew the consumer's previous 
election;
    (7) If applicable, that the consumer's election to renew will apply 
for the specified period of time stated in the notice and that the 
consumer will be allowed to renew the election once that period expires; 
and
    (8) A reasonable and simple method for the consumer to opt out.
    (c) Timing of the renewal notice--(1) In general. A renewal notice 
may be provided to the consumer either--
    (i) A reasonable period of time before the expiration of the opt-out 
period; or
    (ii) Any time after the expiration of the opt-out period but before 
solicitations that would have been prohibited by the expired opt-out are 
made to the consumer.
    (2) Combination with annual privacy notice. If you provide an annual 
privacy notice under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., 
providing a renewal notice with the last annual privacy notice provided 
to the consumer before expiration of the opt-out period is a reasonable 
period of time before expiration of the opt-out in all cases.
    (d) No effect on opt-out period. An opt-out period may not be 
shortened by sending a renewal notice to the consumer before expiration 
of the opt-out period, even if the consumer does not renew the opt-out.



Sec. 334.28  Effective date, compliance date, and prospective application.

    (a) Effective date. This subpart is effective January 1, 2008.
    (b) Mandatory compliance date. Compliance with this subpart is 
required not later than October 1, 2008.
    (c) Prospective application. The provisions of this subpart shall 
not prohibit you from using eligibility information that you receive 
from an affiliate to make solicitations to a consumer if you receive 
such information prior to October 1, 2008. For purposes of this section, 
you are deemed to receive eligibility information when such information 
is placed into a common database and is accessible by you.



                      Subpart D_Medical Information

    Source: 70 FR 70664, Nov. 22, 2005, unless otherwise noted.



Sec. 334.30  Obtaining or using medical information in connection with a 

determination of eligibility for credit.

    (a) Scope. This section applies to:
    (1) Any of the following that participates as a creditor in a 
transaction:
    (i) A State bank insured by the FDIC (other than members of the 
Federal Reserve System);
    (ii) An insured State branch of a foreign bank; or
    (2) Any other person that participates as a creditor in a 
transaction involving a person described in paragraph (a)(1) of this 
section.
    (b) General prohibition on obtaining or using medical information--
(1) In general.

[[Page 374]]

A creditor may not obtain or use medical information pertaining to a 
consumer in connection with any determination of the consumer's 
eligibility, or continued eligibility, for credit, except as provided in 
this section.
    (2) Definitions. (i) Credit has the same meaning as in section 702 
of the Equal Credit Opportunity Act, 15 U.S.C. 1691a.
    (ii) Creditor has the same meaning as in section 702 of the Equal 
Credit Opportunity Act, 15 U.S.C. 1691a.
    (iii) Eligibility, or continued eligibility, for credit means the 
consumer's qualification or fitness to receive, or continue to receive, 
credit, including the terms on which credit is offered. The term does 
not include:
    (A) Any determination of the consumer's qualification or fitness for 
employment, insurance (other than a credit insurance product), or other 
non-credit products or services;
    (B) Authorizing, processing, or documenting a payment or transaction 
on behalf of the consumer in a manner that does not involve a 
determination of the consumer's eligibility, or continued eligibility, 
for credit; or
    (C) Maintaining or servicing the consumer's account in a manner that 
does not involve a determination of the consumer's eligibility, or 
continued eligibility, for credit.
    (c) Rule of construction for obtaining and using unsolicited medical 
information. (1) In general. A creditor does not obtain medical 
information in violation of the prohibition if it receives medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit without specifically requesting medical information.
    (2) Use of unsolicited medical information. A creditor that receives 
unsolicited medical information in the manner described in paragraph 
(c)(1) of this section may use that information in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit to the extent the creditor can rely on at least one of the 
exceptions in Sec. 334.30(d) or (e).
    (3) Examples. A creditor does not obtain medical information in 
violation of the prohibition if, for example:
    (i) In response to a general question regarding a consumer's debts 
or expenses, the creditor receives information that the consumer owes a 
debt to a hospital.
    (ii) In a conversation with the creditor's loan officer, the 
consumer informs the creditor that the consumer has a particular medical 
condition.
    (iii) In connection with a consumer's application for an extension 
of credit, the creditor requests a consumer report from a consumer 
reporting agency and receives medical information in the consumer report 
furnished by the agency even though the creditor did not specifically 
request medical information from the consumer reporting agency.
    (d) Financial information exception for obtaining and using medical 
information.
    (1) In general. A creditor may obtain and use medical information 
pertaining to a consumer in connection with any determination of the 
consumer's eligibility, or continued eligibility, for credit so long as:
    (i) The information is the type of information routinely used in 
making credit eligibility determinations, such as information relating 
to debts, expenses, income, benefits, assets, collateral, or the purpose 
of the loan, including the use of proceeds;
    (ii) The creditor uses the medical information in a manner and to an 
extent that is no less favorable than it would use comparable 
information that is not medical information in a credit transaction; and
    (iii) The creditor does not take the consumer's physical, mental, or 
behavioral health, condition or history, type of treatment, or prognosis 
into account as part of any such determination.
    (2) Examples. (i) Examples of the types of information routinely 
used in making credit eligibility determinations. Paragraph (d)(1)(i) of 
this section permits a creditor, for example, to obtain and use 
information about:
    (A) The dollar amount, repayment terms, repayment history, and 
similar information regarding medical debts to calculate, measure, or 
verify the repayment ability of the consumer, the use of proceeds, or 
the terms for granting credit;
    (B) The value, condition, and lien status of a medical device that 
may serve as collateral to secure a loan;

[[Page 375]]

    (C) The dollar amount and continued eligibility for disability 
income, workers' compensation income, or other benefits related to 
health or a medical condition that is relied on as a source of 
repayment; or
    (D) The identity of creditors to whom outstanding medical debts are 
owed in connection with an application for credit, including but not 
limited to, a transaction involving the consolidation of medical debts.
    (ii) Examples of uses of medical information consistent with the 
exception. (A) A consumer includes on an application for credit 
information about two $20,000 debts. One debt is to a hospital; the 
other debt is to a retailer. The creditor contacts the hospital and the 
retailer to verify the amount and payment status of the debts. The 
creditor learns that both debts are more than 90 days past due. Any two 
debts of this size that are more than 90 days past due would disqualify 
the consumer under the creditor's established underwriting criteria. The 
creditor denies the application on the basis that the consumer has a 
poor repayment history on outstanding debts. The creditor has used 
medical information in a manner and to an extent no less favorable than 
it would use comparable non-medical information.
    (B) A consumer indicates on an application for a $200,000 mortgage 
loan that she receives $15,000 in long-term disability income each year 
from her former employer and has no other income. Annual income of 
$15,000, regardless of source, would not be sufficient to support the 
requested amount of credit. The creditor denies the application on the 
basis that the projected debt-to-income ratio of the consumer does not 
meet the creditor's underwriting criteria. The creditor has used medical 
information in a manner and to an extent that is no less favorable than 
it would use comparable non-medical information.
    (C) A consumer includes on an application for a $10,000 home equity 
loan that he has a $50,000 debt to a medical facility that specializes 
in treating a potentially terminal disease. The creditor contacts the 
medical facility to verify the debt and obtain the repayment history and 
current status of the loan. The creditor learns that the debt is 
current. The applicant meets the income and other requirements of the 
creditor's underwriting guidelines. The creditor grants the application. 
The creditor has used medical information in accordance with the 
exception.
    (iii) Examples of uses of medical information inconsistent with the 
exception. (A) A consumer applies for $25,000 of credit and includes on 
the application information about a $50,000 debt to a hospital. The 
creditor contacts the hospital to verify the amount and payment status 
of the debt, and learns that the debt is current and that the consumer 
has no delinquencies in her repayment history. If the existing debt were 
instead owed to a retail department store, the creditor would approve 
the application and extend credit based on the amount and repayment 
history of the outstanding debt. The creditor, however, denies the 
application because the consumer is indebted to a hospital. The creditor 
has used medical information, here the identity of the medical creditor, 
in a manner and to an extent that is less favorable than it would use 
comparable non-medical information.
    (B) A consumer meets with a loan officer of a creditor to apply for 
a mortgage loan. While filling out the loan application, the consumer 
informs the loan officer orally that she has a potentially terminal 
disease. The consumer meets the creditor's established requirements for 
the requested mortgage loan. The loan officer recommends to the credit 
committee that the consumer be denied credit because the consumer has 
that disease. The credit committee follows the loan officer's 
recommendation and denies the application because the consumer has a 
potentially terminal disease. The creditor has used medical information 
in a manner inconsistent with the exception by taking into account the 
consumer's physical, mental, or behavioral health, condition, or 
history, type of treatment, or prognosis as part of a determination of 
eligibility or continued eligibility for credit.
    (C) A consumer who has an apparent medical condition, such as a 
consumer who uses a wheelchair or an oxygen tank, meets with a loan 
officer to

[[Page 376]]

apply for a home equity loan. The consumer meets the creditor's 
established requirements for the requested home equity loan and the 
creditor typically does not require consumers to obtain a debt 
cancellation contract, debt suspension agreement, or credit insurance 
product in connection with such loans. However, based on the consumer's 
apparent medical condition, the loan officer recommends to the credit 
committee that credit be extended to the consumer only if the consumer 
obtains a debt cancellation contract, debt suspension agreement, or 
credit insurance product from a nonaffiliated third party. The credit 
committee agrees with the loan officer's recommendation. The loan 
officer informs the consumer that the consumer must obtain a debt 
cancellation contract, debt suspension agreement, or credit insurance 
product from a nonaffiliated third party to qualify for the loan. The 
consumer obtains one of these products and the creditor approves the 
loan. The creditor has used medical information in a manner inconsistent 
with the exception by taking into account the consumer's physical, 
mental, or behavioral health, condition, or history, type of treatment, 
or prognosis in setting conditions on the consumer's eligibility for 
credit.
    (e) Specific exceptions for obtaining and using medical 
information--(1) In general. A creditor may obtain and use medical 
information pertaining to a consumer in connection with any 
determination of the consumer's eligibility, or continued eligibility, 
for credit:
    (i) To determine whether the use of a power of attorney or legal 
representative that is triggered by a medical condition or event is 
necessary and appropriate or whether the consumer has the legal capacity 
to contract when a person seeks to exercise a power of attorney or act 
as legal representative for a consumer based on an asserted medical 
condition or event;
    (ii) To comply with applicable requirements of local, state, or 
Federal laws;
    (iii) To determine, at the consumer's request, whether the consumer 
qualifies for a legally permissible special credit program or credit-
related assistance program that is:
    (A) Designed to meet the special needs of consumers with medical 
conditions; and
    (B) Established and administered pursuant to a written plan that:
    (1) Identifies the class of persons that the program is designed to 
benefit; and
    (2) Sets forth the procedures and standards for extending credit or 
providing other credit-related assistance under the program;
    (iv) To the extent necessary for purposes of fraud prevention or 
detection;
    (v) In the case of credit for the purpose of financing medical 
products or services, to determine and verify the medical purpose of a 
loan and the use of proceeds;
    (vi) Consistent with safe and sound practices, if the consumer or 
the consumer's legal representative specifically requests that the 
creditor use medical information in determining the consumer's 
eligibility, or continued eligibility, for credit, to accommodate the 
consumer's particular circumstances, and such request is documented by 
the creditor;
    (vii) Consistent with safe and sound practices, to determine whether 
the provisions of a forbearance practice or program that is triggered by 
a medical condition or event apply to a consumer;
    (viii) To determine the consumer's eligibility for, the triggering 
of, or the reactivation of a debt cancellation contract or debt 
suspension agreement if a medical condition or event is a triggering 
event for the provision of benefits under the contract or agreement; or
    (ix) To determine the consumer's eligibility for, the triggering of, 
or the reactivation of a credit insurance product if a medical condition 
or event is a triggering event for the provision of benefits under the 
product.
    (2) Example of determining eligibility for a special credit program 
or credit assistance program. A not-for-profit organization establishes 
a credit assistance program pursuant to a written plan that is designed 
to assist disabled veterans in purchasing homes by subsidizing the down 
payment for the home purchase mortgage loans of qualifying veterans. The 
organization works through mortgage lenders and requires mortgage

[[Page 377]]

lenders to obtain medical information about the disability of any 
consumer that seeks to qualify for the program, use that information to 
verify the consumer's eligibility for the program, and forward that 
information to the organization. A consumer who is a veteran applies to 
a creditor for a home purchase mortgage loan. The creditor informs the 
consumer about the credit assistance program for disabled veterans and 
the consumer seeks to qualify for the program. Assuming that the program 
complies with all applicable law, including applicable fair lending 
laws, the creditor may obtain and use medical information about the 
medical condition and disability, if any, of the consumer to determine 
whether the consumer qualifies for the credit assistance program.
    (3) Examples of verifying the medical purpose of the loan or the use 
of proceeds. (i) If a consumer applies for $10,000 of credit for the 
purpose of financing vision correction surgery, the creditor may verify 
with the surgeon that the procedure will be performed. If the surgeon 
reports that surgery will not be performed on the consumer, the creditor 
may use that medical information to deny the consumer's application for 
credit, because the loan would not be used for the stated purpose.
    (ii) If a consumer applies for $10,000 of credit for the purpose of 
financing cosmetic surgery, the creditor may confirm the cost of the 
procedure with the surgeon. If the surgeon reports that the cost of the 
procedure is $5,000, the creditor may use that medical information to 
offer the consumer only $5,000 of credit.
    (iii) A creditor has an established medical loan program for 
financing particular elective surgical procedures. The creditor receives 
a loan application from a consumer requesting $10,000 of credit under 
the established loan program for an elective surgical procedure. The 
consumer indicates on the application that the purpose of the loan is to 
finance an elective surgical procedure not eligible for funding under 
the guidelines of the established loan program. The creditor may deny 
the consumer's application because the purpose of the loan is not for a 
particular procedure funded by the established loan program.
    (4) Examples of obtaining and using medical information at the 
request of the consumer. (i) If a consumer applies for a loan and 
specifically requests that the creditor consider the consumer's medical 
disability at the relevant time as an explanation for adverse payment 
history information in his credit report, the creditor may consider such 
medical information in evaluating the consumer's willingness and ability 
to repay the requested loan to accommodate the consumer's particular 
circumstances, consistent with safe and sound practices. The creditor 
may also decline to consider such medical information to accommodate the 
consumer, but may evaluate the consumer's application in accordance with 
its otherwise applicable underwriting criteria. The creditor may not 
deny the consumer's application or otherwise treat the consumer less 
favorably because the consumer specifically requested a medical 
accommodation, if the creditor would have extended the credit or treated 
the consumer more favorably under the creditor's otherwise applicable 
underwriting criteria.
    (ii) If a consumer applies for a loan by telephone and explains that 
his income has been and will continue to be interrupted on account of a 
medical condition and that he expects to repay the loan by liquidating 
assets, the creditor may, but is not required to, evaluate the 
application using the sale of assets as the primary source of repayment, 
consistent with safe and sound practices, provided that the creditor 
documents the consumer's request by recording the oral conversation or 
making a notation of the request in the consumer's file.
    (iii) If a consumer applies for a loan and the application form 
provides a space where the consumer may provide any other information or 
special circumstances, whether medical or non-medical, that the consumer 
would like the creditor to consider in evaluating the consumer's 
application, the creditor may use medical information provided by the 
consumer in that space on that application to accommodate the

[[Page 378]]

consumer's application for credit, consistent with safe and sound 
practices, or may disregard that information.
    (iv) If a consumer specifically requests that the creditor use 
medical information in determining the consumer's eligibility, or 
continued eligibility, for credit and provides the creditor with medical 
information for that purpose, and the creditor determines that it needs 
additional information regarding the consumer's circumstances, the 
creditor may request, obtain, and use additional medical information 
about the consumer as necessary to verify the information provided by 
the consumer or to determine whether to make an accommodation for the 
consumer. The consumer may decline to provide additional information, 
withdraw the request for an accommodation, and have the application 
considered under the creditor's otherwise applicable underwriting 
criteria.
    (v) If a consumer completes and signs a credit application that is 
not for medical purpose credit and the application contains boilerplate 
language that routinely requests medical information from the consumer 
or that indicates that by applying for credit the consumer authorizes or 
consents to the creditor obtaining and using medical information in 
connection with a determination of the consumer's eligibility, or 
continued eligibility, for credit, the consumer has not specifically 
requested that the creditor obtain and use medical information to 
accommodate the consumer's particular circumstances.
    (5) Example of a forbearance practice or program. After an 
appropriate safety and soundness review, a creditor institutes a program 
that allows consumers who are or will be hospitalized to defer payments 
as needed for up to three months, without penalty, if the credit account 
has been open for more than one year and has not previously been in 
default, and the consumer provides confirming documentation at an 
appropriate time. A consumer is hospitalized and does not pay her bill 
for a particular month. This consumer has had a credit account with the 
creditor for more than one year and has not previously been in default. 
The creditor attempts to contact the consumer and speaks with the 
consumer's adult child, who is not the consumer's legal representative. 
The adult child informs the creditor that the consumer is hospitalized 
and is unable to pay the bill at that time. The creditor defers payments 
for up to three months, without penalty, for the hospitalized consumer 
and sends the consumer a letter confirming this practice and the date on 
which the next payment will be due. The creditor has obtained and used 
medical information to determine whether the provisions of a medically-
triggered forbearance practice or program apply to a consumer.



Sec. 334.31  Limits on redisclosure of information.

    (a) Scope. This section applies to State banks insured by the FDIC 
(other than members of the Federal Reserve System) and insured State 
branches of foreign banks.
    (b) Limits on redisclosure. If a person described in paragraph (a) 
of this section receives medical information about a consumer from a 
consumer reporting agency or its affiliate, the person must not disclose 
that information to any other person, except as necessary to carry out 
the purpose for which the information was initially disclosed, or as 
otherwise permitted by statute, regulation, or order.



Sec. 334.32  Sharing medical information with affiliates.

    (a) Scope. This section applies to State banks insured by the FDIC 
(other than members of the Federal Reserve System) and insured State 
branches of foreign banks.
    (b) In general. The exclusions from the term ``consumer report'' in 
section 603(d)(2) of the Act that allow the sharing of information with 
affiliates do not apply if a person described in paragraph (a) of this 
section communicates to an affiliate--
    (1) Medical information;
    (2) An individualized list or description based on the payment 
transactions of the consumer for medical products or services; or
    (3) An aggregate list of identified consumers based on payment 
transactions for medical products or services.

[[Page 379]]

    (c) Exceptions. A person described in paragraph (a) of this section 
may rely on the exclusions from the term ``consumer report'' in section 
603(d)(2) of the Act to communicate the information in paragraph (b) of 
this section to an affiliate--
    (1) In connection with the business of insurance or annuities 
(including the activities described in section 18B of the model Privacy 
of Consumer Financial and Health Information Regulation issued by the 
National Association of Insurance Commissioners, as in effect on January 
1, 2003);
    (2) For any purpose permitted without authorization under the 
regulations promulgated by the Department of Health and Human Services 
pursuant to the Health Insurance Portability and Accountability Act of 
1996 (HIPAA);
    (3) For any purpose referred to in section 1179 of HIPAA;
    (4) For any purpose described in section 502(e) of the Gramm-Leach-
Bliley Act;
    (5) In connection with a determination of the consumer's 
eligibility, or continued eligibility, for credit consistent with Sec. 
334.30; or
    (6) As otherwise permitted by order of the FDIC.

Subparts E-H [Reserved]



    Subpart I_Duties of Users of Consumer Reports Regarding Address 
                   Discrepancies and Records Disposal



Sec. 334.80-334.81  [Reserved]



Sec. 334.82  Duties of users regarding address discrepancies.

    (a) Scope. This section applies to a user of consumer reports (user) 
that receives a notice of address discrepancy from a consumer reporting 
agency and that is an insured state nonmember bank, insured state 
licensed branch of a foreign bank, or a subsidiary of such entities 
(except brokers, dealers, persons providing insurance, investment 
companies, and investment advisers).
    (b) Definition. For purposes of this section, a notice of address 
discrepancy means a notice sent to a user by a consumer reporting agency 
pursuant to 15 U.S.C. 1681c(h)(1), that informs the user of a 
substantial difference between the address for the consumer that the 
user provided to request the consumer report and the address(es) in the 
agency's file for the consumer.
    (c) Reasonable belief. (1) Requirement to form a reasonable belief. 
A user must develop and implement reasonable policies and procedures 
designed to enable the user to form a reasonable belief that a consumer 
report relates to the consumer about whom it has requested the report, 
when the user receives a notice of address discrepancy.
    (2) Examples of reasonable policies and procedures. (i) Comparing 
the information in the consumer report provided by the consumer 
reporting agency with information the user:
    (A) Obtains and uses to verify the consumer's identity in accordance 
with the requirements of the Customer Information Program (CIP) rules 
implementing 31 U.S.C. 5318(l) (31 CFR 103.121);
    (B) Maintains in its own records, such as applications, change of 
address notifications, other customer account records, or retained CIP 
documentation; or
    (C) Obtains from third-party sources; or
    (ii) Verifying the information in the consumer report provided by 
the consumer reporting agency with the consumer.
    (d) Consumer's address. (1) Requirement to furnish consumer's 
address to a consumer reporting agency. A user must develop and 
implement reasonable policies and procedures for furnishing an address 
for the consumer that the user has reasonably confirmed is accurate to 
the consumer reporting agency from whom it received the notice of 
address discrepancy when the user:
    (i) Can form a reasonable belief that the consumer report relates to 
the consumer about whom the user requested the report;
    (ii) Establishes a continuing relationship with the consumer; and
    (iii) Regularly and in the ordinary course of business furnishes 
information to the consumer reporting agency from which the notice of 
address discrepancy relating to the consumer was obtained.

[[Page 380]]

    (2) Examples of confirmation methods. The user may reasonably 
confirm an address is accurate by:
    (i) Verifying the address with the consumer about whom it has 
requested the report;
    (ii) Reviewing its own records to verify the address of the 
consumer;
    (iii) Verifying the address through third-party sources; or
    (iv) Using other reasonable means.
    (3) Timing. The policies and procedures developed in accordance with 
paragraph (d)(1) of this section must provide that the user will furnish 
the consumer's address that the user has reasonably confirmed is 
accurate to the consumer reporting agency as part of the information it 
regularly furnishes for the reporting period in which it establishes a 
relationship with the consumer.

[72 FR 63760, Nov. 9, 2007]



Sec. 334.83  Disposal of consumer information.

    (a) In general. You must properly dispose of any consumer 
information that you maintain or otherwise possess in accordance with 
the Interagency Guidelines Establishing Information Security Standards, 
as set forth in appendix B to part 364 of this chapter, prescribed 
pursuant to section 216 of the Fair and Accurate Credit Transactions Act 
of 2003 (15 U.S.C. 1681w) and section 501(b) of the Gramm-Leach-Bliley 
Act (15 U.S.C. 6801(b)), to the extent the Guidelines are applicable to 
you.
    (b) Rule of construction. Nothing in this section shall be construed 
to:
    (1) Require you to maintain or destroy any record pertaining to a 
consumer that is not imposed under any other law; or
    (2) Alter or affect any requirement imposed under any other 
provision of law to maintain or destroy such a record.



                   Subpart J_Identity Theft Red Flags

    Source: 72 FR 63761, Nov. 9, 2007, unless otherwise noted.



Sec. 334.90  Duties regarding the detection, prevention, and mitigation of 

identity theft.

    (a) Scope. This section applies to a financial institution or 
creditor that is an insured state nonmember bank, insured state licensed 
branch of a foreign bank, or a subsidiary of such entities (except 
brokers, dealers, persons providing insurance, investment companies, and 
investment advisers).
    (b) Definitions. For purposes of this section and Appendix J, the 
following definitions apply:
    (1) Account means a continuing relationship established by a person 
with a financial institution or creditor to obtain a product or service 
for personal, family, household or business purposes. Account includes:
    (i) An extension of credit, such as the purchase of property or 
services involving a deferred payment; and
    (ii) A deposit account.
    (2) The term board of directors includes:
    (i) In the case of a branch or agency of a foreign bank, the 
managing official in charge of the branch or agency; and
    (ii) In the case of any other creditor that does not have a board of 
directors, a designated employee at the level of senior management.
    (3) Covered account means:
    (i) An account that a financial institution or creditor offers or 
maintains, primarily for personal, family, or household purposes, that 
involves or is designed to permit multiple payments or transactions, 
such as a credit card account, mortgage loan, automobile loan, margin 
account, cell phone account, utility account, checking account, or 
savings account; and
    (ii) Any other account that the financial institution or creditor 
offers or maintains for which there is a reasonably foreseeable risk to 
customers or to the safety and soundness of the financial institution or 
creditor from identity theft, including financial, operational, 
compliance, reputation, or litigation risks.
    (4) Credit has the same meaning as in 15 U.S.C. 1681a(r)(5).
    (5) Creditor has the same meaning as in 15 U.S.C. 1681a(r)(5), and 
includes

[[Page 381]]

lenders such as banks, finance companies, automobile dealers, mortgage 
brokers, utility companies, and telecommunications companies.
    (6) Customer means a person that has a covered account with a 
financial institution or creditor.
    (7) Financial institution has the same meaning as in 15 U.S.C. 
1681a(t).
    (8) Identity theft has the same meaning as in 16 CFR 603.2(a).
    (9) Red Flag means a pattern, practice, or specific activity that 
indicates the possible existence of identity theft.
    (10) Service provider means a person that provides a service 
directly to the financial institution or creditor.
    (c) Periodic identification of covered accounts. Each financial 
institution or creditor must periodically determine whether it offers or 
maintains covered accounts. As a part of this determination, a financial 
institution or creditor must conduct a risk assessment to determine 
whether it offers or maintains covered accounts described in paragraph 
(b)(3)(ii) of this section, taking into consideration:
    (1) The methods it provides to open its accounts;
    (2) The methods it provides to access its accounts; and
    (3) Its previous experiences with identity theft.
    (d) Establishment of an Identity Theft Prevention Program--(1) 
Program requirement. Each financial institution or creditor that offers 
or maintains one or more covered accounts must develop and implement a 
written Identity Theft Prevention Program (Program) that is designed to 
detect, prevent, and mitigate identity theft in connection with the 
opening of a covered account or any existing covered account. The 
Program must be appropriate to the size and complexity of the financial 
institution or creditor and the nature and scope of its activities.
    (2) Elements of the Program. The Program must include reasonable 
policies and procedures to:
    (i) Identify relevant Red Flags for the covered accounts that the 
financial institution or creditor offers or maintains, and incorporate 
those Red Flags into its Program;
    (ii) Detect Red Flags that have been incorporated into the Program 
of the financial institution or creditor;
    (iii) Respond appropriately to any Red Flags that are detected 
pursuant to paragraph (d)(2)(ii) of this section to prevent and mitigate 
identity theft; and
    (iv) Ensure the Program (including the Red Flags determined to be 
relevant) is updated periodically, to reflect changes in risks to 
customers and to the safety and soundness of the financial institution 
or creditor from identity theft.
    (e) Administration of the Program. Each financial institution or 
creditor that is required to implement a Program must provide for the 
continued administration of the Program and must:
    (1) Obtain approval of the initial written Program from either its 
board of directors or an appropriate committee of the board of 
directors;
    (2) Involve the board of directors, an appropriate committee 
thereof, or a designated employee at the level of senior management in 
the oversight, development, implementation and administration of the 
Program;
    (3) Train staff, as necessary, to effectively implement the Program; 
and
    (4) Exercise appropriate and effective oversight of service provider 
arrangements.
    (f) Guidelines. Each financial institution or creditor that is 
required to implement a Program must consider the guidelines in Appendix 
J of this part and include in its Program those guidelines that are 
appropriate.



Sec. 334.91  Duties of card issuers regarding changes of address.

    (a) Scope. This section applies to an issuer of a debit or credit 
card (card issuer) that is an insured state nonmember bank, insured 
state licensed branch of a foreign bank, or a subsidiary of such 
entities (except brokers, dealers, persons providing insurance, 
investment companies, and investment advisers).
    (b) Definitions. For purposes of this section:
    (1) Cardholder means a consumer who has been issued a credit or 
debit card.

[[Page 382]]

    (2) Clear and conspicuous means reasonably understandable and 
designed to call attention to the nature and significance of the 
information presented.
    (c) Address validation requirements. A card issuer must establish 
and implement reasonable policies and procedures to assess the validity 
of a change of address if it receives notification of a change of 
address for a consumer's debit or credit card account and, within a 
short period of time afterwards (during at least the first 30 days after 
it receives such notification), the card issuer receives a request for 
an additional or replacement card for the same account. Under these 
circumstances, the card issuer may not issue an additional or 
replacement card, until, in accordance with its reasonable policies and 
procedures and for the purpose of assessing the validity of the change 
of address, the card issuer:
    (1)(i) Notifies the cardholder of the request:
    (A) At the cardholder's former address; or
    (B) By any other means of communication that the card issuer and the 
cardholder have previously agreed to use; and
    (ii) Provides to the cardholder a reasonable means of promptly 
reporting incorrect address changes; or
    (2) Otherwise assesses the validity of the change of address in 
accordance with the policies and procedures the card issuer has 
established pursuant to Sec. 334.90 of this part.
    (d) Alternative timing of address validation. A card issuer may 
satisfy the requirements of paragraph (c) of this section if it 
validates an address pursuant to the methods in paragraph (c)(1) or 
(c)(2) of this section when it receives an address change notification, 
before it receives a request for an additional or replacement card.
    (e) Form of notice. Any written or electronic notice that the card 
issuer provides under this paragraph must be clear and conspicuous and 
provided separately from its regular correspondence with the cardholder.



               Sec. Appendixes A-B to Part 334 [Reserved]



      Sec. Appendix C to Part 334--Model Forms for Opt-Out Notices

    a. Although use of the model forms is not required, use of the model 
forms in this Appendix (as applicable) complies with the requirement in 
section 624 of the Act for clear, conspicuous, and concise notices.
    b. Certain changes may be made to the language or format of the 
model forms without losing the protection from liability afforded by use 
of the model forms. These changes may not be so extensive as to affect 
the substance, clarity, or meaningful sequence of the language in the 
model forms. Persons making such extensive revisions will lose the safe 
harbor that this Appendix provides. Acceptable changes include, for 
example:
    1. Rearranging the order of the references to ``your income,'' 
``your account history,'' and ``your credit score.''
    2. Substituting other types of information for ``income,'' ``account 
history,'' or ``credit score'' for accuracy, such as ``payment 
history,'' ``credit history,'' ``payoff status,'' or ``claims history.''
    3. Substituting a clearer and more accurate description of the 
affiliates providing or covered by the notice for phrases such as ``the 
[ABC] group of companies,'' including without limitation a statement 
that the entity providing the notice recently purchased the consumer's 
account.
    4. Substituting other types of affiliates covered by the notice for 
``credit card,'' ``insurance,'' or ``securities'' affiliates.
    5. Omitting items that are not accurate or applicable. For example, 
if a person does not limit the duration of the opt-out period, the 
notice may omit information about the renewal notice.
    6. Adding a statement informing consumers how much time they have to 
opt out before shared eligibility information may be used to make 
solicitations to them.
    7. Adding a statement that the consumer may exercise the right to 
opt out at any time.
    8. Adding the following statement, if accurate: ``If you previously 
opted out, you do not need to do so again.''
    9. Providing a place on the form for the consumer to fill in 
identifying information, such as his or her name and address:

C-1 Model Form for Initial Opt-out Notice (Single-Affiliate Notice)
C-2 Model Form for Initial Opt-out Notice (Joint Notice)
C-3 Model Form for Renewal Notice (Single-Affiliate Notice)
C-4 Model Form for Renewal Notice (Joint Notice)
C-5 Model Form for Voluntary ``No Marketing'' Notice

[[Page 383]]

 C-1--Model Form for Initial Opt-out Notice (Single-Affiliate Notice)--
          [Your Choice To Limit Marketing]/[Marketing Opt-out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You may limit our affiliates in the [ABC] group 
of companies, such as our [credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based on 
your personal information that we collect and share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].
     Your choice to limit marketing offers from our 
affiliates will apply [until you tell us to change your choice]/[for x 
years from when you tell us your choice]/[for at least 5 years from when 
you tell us your choice]. [Include if the opt-out period expires.] Once 
that period expires, you will receive a renewal notice that will allow 
you to continue to limit marketing offers from our affiliates for 
[another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
our affiliates, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:
     By telephone: 1-877--

     On the Web: www.---.com
     By mail: Check the box and complete the form 
below, and send the form to:

[Company name]
[Company address]

    --Do not allow your affiliates to use my personal information to 
market to me.

C-2--Model Form for Initial Opt-out Notice (Joint Notice)--[Your Choice 
                 To Limit Marketing]/[Marketing Opt-out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You may limit the [ABC] companies, such as the 
[ABC credit card, insurance, and securities] affiliates, from marketing 
their products or services to you based on your personal information 
that they receive from other [ABC] companies. This information includes 
your [income], your [account history], and your [credit score].
     Your choice to limit marketing offers from the 
[ABC] companies will apply [until you tell us to change your choice]/
[for x years from when you tell us your choice]/[for at least 5 years 
from when you tell us your choice]. [Include if the opt-out period 
expires.] Once that period expires, you will receive a renewal notice 
that will allow you to continue to limit marketing offers from the [ABC] 
companies for [another x years]/[at least another 5 years].
     [Include, if applicable, in a subsequent notice, 
including an annual notice, for consumers who may have previously opted 
out.] If you have already made a choice to limit marketing offers from 
the [ABC] companies, you do not need to act again until you receive the 
renewal notice.
    To limit marketing offers, contact us [include all that apply]:
     By telephone: 1-877--

     On the Web: www.---.com
     By mail: Check the box and complete the form 
below, and send the form to:

[Company name]
[Company address]

    --Do not allow any company [in the ABC group of companies] to use my 
personal information to market to me.

C-3--Model Form for Renewal Notice (Single-Affiliate Notice)--[Renewing 
    Your Choice To Limit Marketing]/[Renewing Your Marketing Opt-out]

     [Name of Affiliate] is providing this notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from our affiliates. Federal law also 
requires us to give you this notice to tell you about your choice to 
limit marketing from our affiliates.]
     You previously chose to limit our affiliates in 
the [ABC] group of companies, such as our [credit card, insurance, and 
securities] affiliates, from marketing their products or services to you 
based on your personal information that we share with them. This 
information includes your [income], your [account history with us], and 
your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:
     By telephone: 1-877--

     On the Web: www.---.com
     By mail: Check the box and complete the form 
below, and send the form to:

[Company name]
[Company address]

    --Renew my choice to limit marketing for [x] more years.

[[Page 384]]

C-4--Model Form for Renewal Notice (Joint Notice)--[Renewing Your Choice 
          To Limit Marketing]/[Renewing Your Marketing Opt-out]

     The [ABC group of companies] is providing this 
notice.
     [Optional: Federal law gives you the right to 
limit some but not all marketing from the [ABC] companies. Federal law 
also requires us to give you this notice to tell you about your choice 
to limit marketing from the [ABC] companies.]
     You previously chose to limit the [ABC] 
companies, such as the [ABC credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based on 
your personal information that they receive from other ABC companies. 
This information includes your [income], your [account history], and 
your [credit score].
     Your choice has expired or is about to expire.
    To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:
     By telephone: 1-877--

     On the Web: www.---.com
     By mail: Check the box and complete the form 
below, and send the form to:

[Company name]
[Company address]

    --Renew my choice to limit marketing for [x] more years.

 C-5--Model Form for Voluntary ``No Marketing'' Notice--Your Choice To 
                             Stop Marketing

     [Name of Affiliate] is providing this notice.
     You may choose to stop all marketing from us and 
our affiliates.
    To stop all marketing, contact us [include all that apply]:
     By telephone: 1-877--

     On the Web: www.---.com
     By mail: Check the box and complete the form 
below, and send the form to:

[Company name]
[Company address]

    --Do not market to me.

[72 FR 62971, Nov. 7, 2007]



               Sec. Appendices D-I to Part 334 [Reserved]



 Sec. Appendix J to Part 334--Interagency Guidelines on Identity Theft 
                  Detection, Prevention, and Mitigation

    Section 334.90 of this part requires each financial institution and 
creditor that offers or maintains one or more covered accounts, as 
defined in Sec. 334.90(b)(3) of this part, to develop and provide for 
the continued administration of a written Program to detect, prevent, 
and mitigate identity theft in connection with the opening of a covered 
account or any existing covered account. These guidelines are intended 
to assist financial institutions and creditors in the formulation and 
maintenance of a Program that satisfies the requirements of Sec. 334.90 
of this part.

                             I. The Program

    In designing its Program, a financial institution or creditor may 
incorporate, as appropriate, its existing policies, procedures, and 
other arrangements that control reasonably foreseeable risks to 
customers or to the safety and soundness of the financial institution or 
creditor from identity theft.

                   II. Identifying Relevant Red Flags

    (a) Risk Factors. A financial institution or creditor should 
consider the following factors in identifying relevant Red Flags for 
covered accounts, as appropriate:
    (1) The types of covered accounts it offers or maintains;
    (2) The methods it provides to open its covered accounts;
    (3) The methods it provides to access its covered accounts; and
    (4) Its previous experiences with identity theft.
    (b) Sources of Red Flags. Financial institutions and creditors 
should incorporate relevant Red Flags from sources such as:
    (1) Incidents of identity theft that the financial institution or 
creditor has experienced;
    (2) Methods of identity theft that the financial institution or 
creditor has identified that reflect changes in identity theft risks; 
and
    (3) Applicable supervisory guidance.
    (c) Categories of Red Flags. The Program should include relevant Red 
Flags from the following categories, as appropriate. Examples of Red 
Flags from each of these categories are appended as Supplement A to this 
Appendix J.
    (1) Alerts, notifications, or other warnings received from consumer 
reporting agencies or service providers, such as fraud detection 
services;
    (2) The presentation of suspicious documents;
    (3) The presentation of suspicious personal identifying information, 
such as a suspicious address change;
    (4) The unusual use of, or other suspicious activity related to, a 
covered account; and
    (5) Notice from customers, victims of identity theft, law 
enforcement authorities, or other persons regarding possible identity 
theft in connection with covered accounts held by the financial 
institution or creditor.

[[Page 385]]

                        III. Detecting Red Flags.

    The Program's policies and procedures should address the detection 
of Red Flags in connection with the opening of covered accounts and 
existing covered accounts, such as by:
    (a) Obtaining identifying information about, and verifying the 
identity of, a person opening a covered account, for example, using the 
policies and procedures regarding identification and verification set 
forth in the Customer Identification Program rules implementing 31 
U.S.C. 5318(l)(31 CFR 103.121); and
    (b) Authenticating customers, monitoring transactions, and verifying 
the validity of change of address requests, in the case of existing 
covered accounts.

              IV. Preventing and Mitigating Identity Theft.

    The Program's policies and procedures should provide for appropriate 
responses to the Red Flags the financial institution or creditor has 
detected that are commensurate with the degree of risk posed. In 
determining an appropriate response, a financial institution or creditor 
should consider aggravating factors that may heighten the risk of 
identity theft, such as a data security incident that results in 
unauthorized access to a customer's account records held by the 
financial institution, creditor, or third party, or notice that a 
customer has provided information related to a covered account held by 
the financial institution or creditor to someone fraudulently claiming 
to represent the financial institution or creditor or to a fraudulent 
Web site. Appropriate responses may include the following:
    (a) Monitoring a covered account for evidence of identity theft;
    (b) Contacting the customer;
    (c) Changing any passwords, security codes, or other security 
devices that permit access to a covered account;
    (d) Reopening a covered account with a new account number;
    (e) Not opening a new covered account;
    (f) Closing an existing covered account;
    (g) Not attempting to collect on a covered account or not selling a 
covered account to a debt collector;
    (h) Notifying law enforcement; or
    (i) Determining that no response is warranted under the particular 
circumstances.

                        V. Updating the Program.

    Financial institutions and creditors should update the Program 
(including the Red Flags determined to be relevant) periodically, to 
reflect changes in risks to customers or to the safety and soundness of 
the financial institution or creditor from identity theft, based on 
factors such as:
    (a) The experiences of the financial institution or creditor with 
identity theft;
    (b) Changes in methods of identity theft;
    (c) Changes in methods to detect, prevent, and mitigate identity 
theft;
    (d) Changes in the types of accounts that the financial institution 
or creditor offers or maintains; and
    (e) Changes in the business arrangements of the financial 
institution or creditor, including mergers, acquisitions, alliances, 
joint ventures, and service provider arrangements.

                VI. Methods for Administering the Program

    (a) Oversight of Program. Oversight by the board of directors, an 
appropriate committee of the board, or a designated employee at the 
level of senior management should include:
    (1) Assigning specific responsibility for the Program's 
implementation;
    (2) Reviewing reports prepared by staff regarding compliance by the 
financial institution or creditor with Sec. 334.90 of this part; and
    (3) Approving material changes to the Program as necessary to 
address changing identity theft risks.
    (b) Reports. (1) In general. Staff of the financial institution or 
creditor responsible for development, implementation, and administration 
of its Program should report to the board of directors, an appropriate 
committee of the board, or a designated employee at the level of senior 
management, at least annually, on compliance by the financial 
institution or creditor with Sec. 334.90 of this part.
    (2) Contents of report. The report should address material matters 
related to the Program and evaluate issues such as: the effectiveness of 
the policies and procedures of the financial institution or creditor in 
addressing the risk of identity theft in connection with the opening of 
covered accounts and with respect to existing covered accounts; service 
provider arrangements; significant incidents involving identity theft 
and management's response; and recommendations for material changes to 
the Program.
    (c) Oversight of service provider arrangements. Whenever a financial 
institution or creditor engages a service provider to perform an 
activity in connection with one or more covered accounts the financial 
institution or creditor should take steps to ensure that the activity of 
the service provider is conducted in accordance with reasonable policies 
and procedures designed to detect, prevent, and mitigate the risk of 
identity theft. For example, a financial institution or creditor could 
require the service provider by contract to have policies and procedures 
to detect relevant Red Flags that may arise in the performance of the 
service provider's activities, and either report the Red Flags to the 
financial institution or creditor, or to take appropriate steps to 
prevent or mitigate identity theft.

[[Page 386]]

                VII. Other Applicable Legal Requirements

    Financial institutions and creditors should be mindful of other 
related legal requirements that may be applicable, such as:
    (a) For financial institutions and creditors that are subject to 31 
U.S.C. 5318(g), filing a Suspicious Activity Report in accordance with 
applicable law and regulation;
    (b) Implementing any requirements under 15 U.S.C. 1681c-1(h) 
regarding the circumstances under which credit may be extended when the 
financial institution or creditor detects a fraud or active duty alert;
    (c) Implementing any requirements for furnishers of information to 
consumer reporting agencies under 15 U.S.C. 1681s-2, for example, to 
correct or update inaccurate or incomplete information, and to not 
report information that the furnisher has reasonable cause to believe is 
inaccurate; and
    (d) Complying with the prohibitions in 15 U.S.C. 1681m on the sale, 
transfer, and placement for collection of certain debts resulting from 
identity theft.

                       Supplement A to Appendix J

    In addition to incorporating Red Flags from the sources recommended 
in section II.b. of the Guidelines in Appendix J of this part, each 
financial institution or creditor may consider incorporating into its 
Program, whether singly or in combination, Red Flags from the following 
illustrative examples in connection with covered accounts:

   Alerts, Notifications or Warnings from a Consumer Reporting Agency

    1. A fraud or active duty alert is included with a consumer report.
    2. A consumer reporting agency provides a notice of credit freeze in 
response to a request for a consumer report.
    3. A consumer reporting agency provides a notice of address 
discrepancy, as defined in Sec. 334.82(b) of this part.
    4. A consumer report indicates a pattern of activity that is 
inconsistent with the history and usual pattern of activity of an 
applicant or customer, such as:
    a. A recent and significant increase in the volume of inquiries;
    b. An unusual number of recently established credit relationships;
    c. A material change in the use of credit, especially with respect 
to recently established credit relationships; or
    d. An account that was closed for cause or identified for abuse of 
account privileges by a financial institution or creditor.

                          Suspicious Documents

    5. Documents provided for identification appear to have been altered 
or forged.
    6. The photograph or physical description on the identification is 
not consistent with the appearance of the applicant or customer 
presenting the identification.
    7. Other information on the identification is not consistent with 
information provided by the person opening a new covered account or 
customer presenting the identification.
    8. Other information on the identification is not consistent with 
readily accessible information that is on file with the financial 
institution or creditor, such as a signature card or a recent check.
    9. An application appears to have been altered or forged, or gives 
the appearance of having been destroyed and reassembled.

               Suspicious Personal Identifying Information

    10. Personal identifying information provided is inconsistent when 
compared against external information sources used by the financial 
institution or creditor. For example:
    a. The address does not match any address in the consumer report; or
    b. The Social Security Number (SSN) has not been issued, or is 
listed on the Social Security Administration's Death Master File.
    11. Personal identifying information provided by the customer is not 
consistent with other personal identifying information provided by the 
customer. For example, there is a lack of correlation between the SSN 
range and date of birth.
    12. Personal identifying information provided is associated with 
known fraudulent activity as indicated by internal or third-party 
sources used by the financial institution or creditor. For example:
    a. The address on an application is the same as the address provided 
on a fraudulent application; or
    b. The phone number on an application is the same as the number 
provided on a fraudulent application.
    13. Personal identifying information provided is of a type commonly 
associated with fraudulent activity as indicated by internal or third-
party sources used by the financial institution or creditor. For 
example:
    a. The address on an application is fictitious, a mail drop, or a 
prison; or
    b. The phone number is invalid, or is associated with a pager or 
answering service.
    14. The SSN provided is the same as that submitted by other persons 
opening an account or other customers.
    15. The address or telephone number provided is the same as or 
similar to the account number or telephone number submitted by an 
unusually large number of other persons opening accounts or other 
customers.
    16. The person opening the covered account or the customer fails to 
provide all required personal identifying information on an application 
or in response to notification that the application is incomplete.

[[Page 387]]

    17. Personal identifying information provided is not consistent with 
personal identifying information that is on file with the financial 
institution or creditor.
    18. For financial institutions and creditors that use challenge 
questions, the person opening the covered account or the customer cannot 
provide authenticating information beyond that which generally would be 
available from a wallet or consumer report.

 Unusual Use of, or Suspicious Activity Related to, the Covered Account

    19. Shortly following the notice of a change of address for a 
covered account, the institution or creditor receives a request for a 
new, additional, or replacement card or a cell phone, or for the 
addition of authorized users on the account.
    20. A new revolving credit account is used in a manner commonly 
associated with known patterns of fraud patterns. For example:
    a. The majority of available credit is used for cash advances or 
merchandise that is easily convertible to cash (e.g., electronics 
equipment or jewelry); or
    b. The customer fails to make the first payment or makes an initial 
payment but no subsequent payments.
    21. A covered account is used in a manner that is not consistent 
with established patterns of activity on the account. There is, for 
example:
    a. Nonpayment when there is no history of late or missed payments;
    b. A material increase in the use of available credit;
    c. A material change in purchasing or spending patterns;
    d. A material change in electronic fund transfer patterns in 
connection with a deposit account; or
    e. A material change in telephone call patterns in connection with a 
cellular phone account.
    22. A covered account that has been inactive for a reasonably 
lengthy period of time is used (taking into consideration the type of 
account, the expected pattern of usage and other relevant factors).
    23. Mail sent to the customer is returned repeatedly as 
undeliverable although transactions continue to be conducted in 
connection with the customer's covered account.
    24. The financial institution or creditor is notified that the 
customer is not receiving paper account statements.
    25. The financial institution or creditor is notified of 
unauthorized charges or transactions in connection with a customer's 
covered account.

   Notice From Customers, Victims of Identity Theft, Law Enforcement 
   Authorities, or Other Persons Regarding Possible Identity Theft in 
 Connection With Covered Accounts Held by the Financial Institution or 
                                Creditor

    26. The financial institution or creditor is notified by a customer, 
a victim of identity theft, a law enforcement authority, or any other 
person that it has opened a fraudulent account for a person engaged in 
identity theft.

[72 FR 63762, Nov. 9, 2007]



PART 335_SECURITIES OF NONMEMBER INSURED BANKS--Table of Contents




Sec.
335.101 Scope of part, authority and OMB control number.
335.111 Forms and schedules.
335.121 Listing standards related to audit committees.
335.201 Securities exempted from registration.
335.211 Registration and reporting.
335.221 Forms for registration of securities; optional forms for small 
          business issuers; and incorporation of Regulation FD (Fair 
          Disclosure).
335.231 Certification, suspension of trading, and removal from listing 
          by exchanges.
335.241 Unlisted trading.
335.251 Forms for notification of action taken by national securities 
          exchanges.
335.261 Exemptions; terminations; and definitions.
335.301 Reports of issuers of securities registered pursuant to section 
          12.
335.311 Forms for annual, quarterly, current, and other reports of 
          issuers.
335.321 Maintenance of records and issuer's representations in 
          connection with required reports.
335.331 Acquisition statements, acquisition of securities by issuers, 
          and other matters.
335.401 Solicitations of proxies.
335.501 Tender offers.
335.601 Requirements of section 16 of the Securities Exchange Act of 
          1934.
335.611 Initial statements of beneficial ownership of securities (Form 
          3).
335.612 Statement of changes in beneficial ownership of securities (Form 
          4).
335.613 Annual statement of beneficial ownership of securities (Form 5).
335.701 Filing requirements, public reference, and confidentiality.
335.801 Inapplicable SEC regulations; FDIC substituted regulations; 
          additional information.
335.901 Delegation of authority to act on matters with respect to 
          disclosure laws and regulations.


[[Page 388]]


    Authority: 12 U.S.C. 1819; 15 U.S.C. 78l(i), 78m, 78n, 78p, 78w, 
7241, 7242, 7243, 7244, 7261, 7262, 7264, and 7265.

    Source: 62 FR 6856, Feb. 14, 1997, unless otherwise noted.



Sec. 335.101  Scope of part, authority and OMB control number.

    (a) This part is issued by the Federal Deposit Insurance Corporation 
(the FDIC) under section 12(i) of the Securities Exchange Act of 1934, 
as amended (15 U.S.C. 78) (the Exchange Act) and applies to all 
securities of FDIC insured banks (including foreign banks having an 
insured branch) which are neither a member of the Federal Reserve System 
nor a District bank (collectively referred to as nonmember banks) that 
are subject to the registration requirements of section 12(b) or section 
12(g) of the Exchange Act (registered nonmember banks). The FDIC is 
vested with the powers, functions, and duties vested in the Securities 
and Exchange Commission (the Commission or SEC) to administer and 
enforce the provisions of sections 10A(m), 12, 13, 14(a), 14(c), 14(d), 
14(f), and 16 of the Securities Exchange Act of 1934, as amended (the 
Exchange Act) (15 U.S.C. 78l, 78m, 78n(a), 78n(c), 78n(d), 78n(f), and 
78(p)), and sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of 
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 7244, 7261, 
7262, 7264, and 7265) regarding nonmember banks with one or more classes 
of securities subject to the registration provisions of sections 12(b) 
and 12(g) of the Exchange Act.
    (b) Part 335 generally incorporates through cross reference the 
regulations of the SEC as these regulations are issued, revised, or 
updated from time to time under sections 10A(m), 12, 13, 14(a), 14(c), 
14(d), 14(f), and 16 of the Exchange Act and sections 302, 303, 304, 
306, 401(b), 404, 406, and 407 of the Sarbanes-Oxley Act of 2002 
(Sarbanes-Oxley Act), except as provided at Sec. 335.801 of this part. 
References to the Commission in the regulations of the SEC are deemed to 
refer to the FDIC unless the context otherwise requires.

[62 FR 6856, Feb. 14, 1997, as amended at 69 FR 19088, Apr. 12, 2004; 69 
FR 59783, Oct. 6, 2004; 70 FR 16400, Mar. 31, 2005; 70 FR 44272, Aug. 2, 
2005]



Sec. 335.111  Forms and schedules.

    The Exchange Act regulations of the SEC, which are incorporated by 
cross reference under this part, require the filing of forms and 
schedules as applicable. Reference is made to SEC Exchange Act 
regulation 17 CFR 249.0-1 regarding the availability of all applicable 
SEC Exchange Act forms. Required schedules are codified and are found 
within the context of the SEC's regulations. The filings of all 
applicable SEC forms and schedules shall be made with the FDIC at the 
address in this section. They shall be titled with the name of the FDIC 
in substitution for the name of the SEC. Forms 3 (Sec. 335.611), 4 
(Sec. 335.612), and 5 (Sec. 335.613) are FDIC forms which are issued 
under section 16 of the Exchange Act and can be obtained from the 
Accounting and Securities Disclosure Section, Division of Supervision 
and Consumer Protection, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.

[62 FR 6856, Feb. 14, 1997, as amended at 69 FR 19088, Apr. 12, 2004; 69 
FR 59783, Oct. 6, 2004]



Sec. 335.121  Listing standards related to audit committees.

    The provisions of the applicable SEC regulation under section 
10(A)(m) of the Exchange Act shall be followed as codified at 17 CFR 
240.10A-3.

[70 FR 44272, Aug. 2, 2005]



Sec. 335.201  Securities exempted from registration.

    Persons generally subject to registration requirements under 
Exchange Act section 12 and subject to this part shall follow the 
applicable and currently effective SEC regulations relative to 
exemptions from registration issued under sections 3 and 12 of the 
Exchange Act as codified at 17 CFR 240.3a12-1 through 240.3a12-11, 
240.12a-4 through 240.12a-9, and 240.12g-1 through 240.12h-5.

[70 FR 44272, Aug. 2, 2005]



Sec. 335.211  Registration and reporting.

    Persons with securities subject to registration under Exchange Act 
sections 12(b) and 12(g), required to report under Exchange Act section 
13, and

[[Page 389]]

subject to this part shall follow the applicable and currently effective 
SEC regulations issued under section 12(b) of the Exchange Act as 
codified at 17 CFR 240.12b-1 through 240.12b-37.

[70 FR 44272, Aug. 2, 2005]



Sec. 335.221  Forms for registration of securities; optional forms for small 

business issuers; and incorporation of Regulation FD (Fair Disclosure).

    (a) The applicable forms for registration of securities and similar 
matters are codified in subpart C of 17 CFR part 249. All forms shall be 
filed with the FDIC as appropriate and shall be titled with the name of 
the FDIC instead of the SEC.
    (b) The requirements for Financial Statements can generally be found 
in Regulation S-X (17 CFR part 210). Banks may also refer to the 
instructions for FFIEC Reports of Income and Reports of Condition when 
preparing unaudited interim statements. The requirements for 
Management's Discussion and Analysis of Financial Condition and Results 
of Operations can be found in at 17 CFR 229.300. Industry Guide 3, 
Statistical Disclosure by Bank Holding Companies, is codified at 17 CFR 
229.802.
    (c) A ``small business issuer,'' as defined under 17 CFR 240.12b-2, 
has the option of filing Small Business (SB) Forms (as codified in 17 
CFR part 249) in lieu of the Exchange Act forms otherwise required to be 
filed, which provide for financial and other item disclosures in 
conformance with Regulation S-B of the Securities and Exchange 
Commission (17 CFR part 228). The definition of ``small business 
issuer,'' generally includes banks with annual revenues of less than $25 
million, whose voting stock does not have a public float of $25 million 
or more.
    (d) The provisions of the applicable and currently effective SEC 
regulation FD shall be followed as codified at 17 CFR 243.100 through 
243.103.

[62 FR 6856, Feb. 14, 1997, as amended at 70 FR 16400, Mar. 31, 2005; 70 
FR 44272, Aug. 2, 2005]



Sec. 335.231  Certification, suspension of trading, and removal from listing 

by exchanges.

    The provisions of the applicable and currently effective SEC 
regulations under section 12(d) of the Exchange Act shall be followed as 
codified at 17 CFR 240.12d1-1 through 240.12d2-2.



Sec. 335.241  Unlisted trading.

    The provisions of the applicable and currently effective SEC 
regulations under section 12(f) of the Exchange Act shall be followed as 
codified at 17 CFR 240.12f-1 through 240.12f-6.



Sec. 335.251  Forms for notification of action taken by national securities 

exchanges.

    The applicable forms for notification of action taken by national 
securities exchanges are codified in subpart A of 17 CFR part 249. All 
forms shall be filed with the FDIC as appropriate and shall be titled 
with the name of the FDIC instead of the SEC.



Sec. 335.261  Exemptions; terminations; and definitions.

    The provisions of the applicable and currently effective SEC 
regulations under sections 12(g) and 12(h) of the Exchange Act shall be 
followed as codified at 17 CFR 240.12g-1 through 240.12h-5.

[70 FR 44272, Aug. 2, 2005]



Sec. 335.301  Reports of issuers of securities registered pursuant to section 

12.

    The provisions of the applicable and currently effective SEC 
regulations under section 13(a) of the Exchange Act shall be followed as 
codified at 17 CFR 240.13a-1 through 240.13a-17.



Sec. 335.311  Forms for annual, quarterly, current, and other reports of 

issuers.

    (a) The applicable forms for annual, quarterly, current, and other 
reports are codified in subpart D of 17 CFR part 249. All forms shall be 
filed with the FDIC as appropriate and shall be titled with the name of 
the FDIC instead of the SEC.
    (b) The requirements for Financial Statements can generally be found 
in Regulation S-X (17 CFR part 210).

[[Page 390]]

Banks may also refer to the instructions for FFIEC Reports of Income and 
Reports of Condition when preparing unaudited interim reports. The 
requirements for Management's Discussion and Analysis of Financial 
Condition and Results of Operations can be found at 17 CFR 229.300. 
Industry Guide 3, Statistical Disclosure by Bank Holding Companies, is 
codified at 17 CFR 229.802.
    (c) A ``small business issuer,'' as defined under 17 CFR 240.12b-2, 
has the option of filing Small Business (SB) Forms (as codified in 17 
CFR part 249) in lieu of the Exchange Act forms otherwise required to be 
filed, which provide for financial and other item disclosures in 
conformance with Regulation S-B of the Securities and Exchange 
Commission (17 CFR part 228). The definition of ``small business 
issuer,'' generally includes banks with annual revenues of less than $25 
million, whose voting stock does not have a public float of $25 million 
or more.



Sec. 335.321  Maintenance of records and issuer's representations in 

connection with required reports.

    The provisions of the applicable and currently effective SEC 
regulations under section 13(b) of the Exchange Act shall be followed as 
codified at 17 CFR 240.13b2-1 through 240.13b2-2.



Sec. 335.331  Acquisition statements, acquisition of securities by issuers, 

and other matters.

    The provisions of the applicable and currently effective SEC 
regulations under sections 13(d) and 13(e) of the Exchange Act shall be 
followed as codified at 17 CFR 240.13d-1 through 240.13e-102 and 
240.13k-1.

[70 FR 44272, Aug. 2, 2005]



Sec. 335.401  Solicitations of proxies.

    The provisions of the applicable and currently effective SEC 
regulations under section 14(a) and 14(c) of the Exchange Act shall be 
followed as codified at 17 CFR 240.14a-1 through 240.14a-103 and 
240.14c-1 through 240.14c-101.



Sec. 335.501  Tender offers.

    The provisions of the applicable and currently effective SEC 
regulations under section 14(d), 14(e), and 14(f) of the Exchange Act 
shall be followed as codified at 17 CFR 240.14d-1 through 240.14f-1.



Sec. 335.601  Requirements of section 16 of the Securities Exchange Act of 

1934.

    Persons subject to section 16 of the Act with respect to securities 
registered under this part shall follow the applicable and currently 
effective SEC regulations issued under section 16 of the Act (17 CFR 
240.16a-1 through 240.16e-1(1), except that the forms described in Sec. 
335.611 (FDIC Form 3), Sec. 335.612 (FDIC Form 4), and Sec. 335.613 
(FDIC Form 5) shall be used in lieu of SEC Form 3 (17 CFR 249.103), Form 
4 (17 CFR 249.104), and Form 5 (17 CFR 249.105), respectively. Copies of 
FDIC Forms 3, 4, 5 and the instructions thereto can be obtained from the 
Accounting and Securities Disclosure Section, Division of Supervision 
and Consumer Protection, Federal Deposit Insurance Corporation, 550 17th 
Street NW., Washington, DC 20429.

[69 FR 59783, Oct. 6, 2004]



Sec. 335.611  Initial statement of beneficial ownership of securities (Form 

3).

    This form shall be filed in lieu of SEC Form 3 pursuant to SEC rule 
16a-3 (17 CFR 240.16a-3) for initial statements of beneficial ownership 
of securities. The FDIC is authorized to solicit the information 
required by this form pursuant to sections 16(a) and 23(a) of the 
Securities Exchange Act of 1934 (15 U.S.C. 78p and 78w) and the rules 
and regulations thereunder. SEC regulations referenced in this form are 
codified at 17 CFR 240.16a-1 through 240.16e-1.



Sec. 335.612  Statement of changes in beneficial ownership of securities (Form 

4).

    This form shall be filed pursuant to SEC rule 16a-3 (17 CFR 240.16a-
3) for statements of changes in beneficial ownership of securities. The 
FDIC is authorized to solicit the information required by this form 
pursuant to sections 16(a) and 23(a) of the Securities Exchange Act of 
1934 (15 U.S.C. 78p and 78w) and the rules and regulations thereunder. 
SEC regulations referenced in this form are codified at 17 CFR 240.16a-1 
through 240.16e-1.

[[Page 391]]



Sec. 335.613  Annual statement of beneficial ownership of securities (Form 5).

    This form shall be filed pursuant to SEC rule 16a-3 (17 CFR 240.16a-
3) for annual statements of beneficial ownership of securities. The FDIC 
is authorized to solicit the information required by this form pursuant 
to sections 16(a) and 23(a) of the Securities Exchange Act of 1934 (15 
U.S.C. 78p and 78w), and the rules and regulations thereunder. SEC 
regulations referenced in this form are codified at 17 CFR 240.16a-1 
through 240.16e-1.



Sec. 335.701  Filing requirements, public reference, and confidentiality.

    (a) Filing requirements. Unless otherwise indicated in this part, 
one original and four conformed copies of all papers required to be 
filed with the FDIC under the Exchange Act or regulations thereunder 
shall be filed at its office in Washington, DC Official filings made at 
the FDIC's office in Washington, DC should be addressed as follows: 
Attention: Accounting and Securities Disclosure Section, Division of 
Supervision and Consumer Protection, Federal Deposit Insurance 
Corporation, 550 17th Street NW., Washington, DC 20429. Material may be 
filed by delivery to the FDIC through the mails or otherwise. The date 
on which papers are actually received by the designated FDIC office 
shall be the date of filing thereof if all of the requirements with 
respect to the filing have been complied with.
    (b) Inspection. Except as provided in paragraph (c) of this section, 
all information filed regarding a security registered with the FDIC will 
be available for inspection at the Federal Deposit Insurance 
Corporation, Accounting and Securities Disclosure Section, Division of 
Supervision and Consumer Protection, 550 17th Street, NW., Washington, 
DC. Beneficial ownership report forms that are electronically submitted 
to the FDIC through the interagency Beneficial Ownership Filings system 
will be made available on the FDIC's web site (http://www.fdic.gov).
    (c) Nondisclosure of certain information filed. Any person filing 
any statement, report, or document under the Act may make a written 
objection to the public disclosure of any information contained therein 
in accordance with the procedure set forth in this paragraph (c).
    (1) The person shall omit from the statement, report, or document, 
when it is filed, the portion thereof that it desires to keep 
undisclosed (hereinafter called the confidential portion). In lieu 
thereof, it shall indicate at the appropriate place in the statement, 
report, or document that the confidential portion has been so omitted 
and filed separately with the FDIC.
    (2) The person shall file with the copies of the statement, report, 
or document filed with the FDIC:
    (i) As many copies of the confidential portion, each clearly marked 
``Confidential Treatment,'' as there are copies of the statement, 
report, or document filed with the FDIC and with each exchange, if any. 
Each copy shall contain the complete text of the item and, 
notwithstanding that the confidential portion does not constitute the 
whole of the answer, the entire answer thereto; except that in the case 
where the confidential portion is part of a financial statement or 
schedule, only the particular financial statement or schedule need be 
included. All copies of the confidential portion shall be in the same 
form as the remainder of the statement, report, or document;
    (ii) An application making objection to the disclosure of the 
confidential portion. Such application shall be on a sheet or sheets 
separate from the confidential portion, and shall contain:
    (A) An identification of the portion of the statement, report, or 
document that has been omitted;
    (B) A statement of the grounds of objection;
    (C) Consent that the FDIC may determine the question of public 
disclosure upon the basis of the application, subject to proper judicial 
reviews;
    (D) The name of each exchange, if any, with which the statement, 
report, or document is filed;
    (iii) The copies of the confidential portion and the application 
filed in accordance with this paragraph shall be enclosed in a separate 
envelope marked ``Confidential Treatment'' and addressed to Executive 
Secretary, Federal Deposit Insurance Corporation, Washington, DC 20429.

[[Page 392]]

    (3) Pending the determination by the FDIC as to the objection filed 
in accordance with paragraph (c)(2)(ii) of this section, the 
confidential portion will not be disclosed by FDIC.
    (4) If the FDIC determines that the objection shall be sustained, a 
notation to that effect will be made at the appropriate place in the 
statement, report, or document.
    (5) If the FDIC shall have determined that disclosure of the 
confidential portion is in the public interest, a finding and 
determination to that effect will be entered and notice of the finding 
and determination will be sent by registered or certified mail to the 
person.
    (6) The confidential portion shall be made available to the public:
    (i) Upon the lapse of 15 days after the dispatch of notice by 
registered or certified mail of the finding and determination of the 
FDIC described in paragraph (c)(5) of this section, if prior to the 
lapse of such 15 days the person shall not have filed a written 
statement that he intends in good faith to seek judicial review of the 
finding and determination;
    (ii) Upon the lapse of 60 days after the dispatch of notice by 
registered or certified mail of the finding and determination of the 
FDIC, if the statement described in paragraph (c)(6)(i) of this section 
shall have been filed and if a petition for judicial review shall not 
have been filed within such 60 days; or
    (iii) If such petition for judicial review shall have been filed 
within such 60 days upon final disposition, adverse to the person, of 
the judicial proceedings.
    (7) If the confidential portion is made available to the public, a 
copy thereof shall be attached to each copy of the statement, report, or 
document filed with the FDIC and with each exchange concerned.

[62 FR 6856, Feb. 14, 1997, as amended at 69 FR 19088, Apr. 12, 2004; 69 
FR 59783, Oct. 6, 2004]



Sec. 335.801  Inapplicable SEC regulations; FDIC substituted regulations; 

additional information.

    (a) Filing fees. Filing fees will not be charged relative to any 
filings or submissions of materials made with the FDIC pursuant to the 
cross reference to regulations of the SEC issued under sections 10A(m), 
12, 13, 14, and 16 of the Securities Exchange Act of 1934 (15 U.S.C. 
78), sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of the 
Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 7244, 7261, 
7262, 7264, and 7265), and this part.
    (b) Electronic filings. (1) The FDIC does not participate in the 
SEC's EDGAR (Electronic Data Gathering Analysis and Retrieval) 
electronic filing program (17 CFR part 232). The FDIC does not permit 
electronically transmitted filings or submissions of materials in 
electronic format to the FDIC, with the exception of beneficial 
ownership report filings on FDIC Forms 3, 4 and 5.
    (2) All reporting persons must file beneficial ownership report 
Forms 3, 4 and 5, including amendments and exhibits thereto, in 
electronic format using the Internet based, interagency Beneficial 
Ownership Filings system, which is accessible through the FDICconnect 
Business Center, except that a reporting person that has obtained a 
continuing hardship exemption under these rules may file the forms with 
the FDIC in paper format. For information and answers to questions 
regarding beneficial ownership and the completion and filing of the 
forms, please contact the FDIC Accounting and Securities Disclosure 
Section in Washington DC For information and answers to technical 
questions or problems relating to the use of FDICconnect, contact the 
FDICconnect Project Team toll-free at 877-275-3342 or by mail at 3501 
North Fairfax Drive, Arlington, VA 22226.
    (3) Electronic filings of FDIC beneficial ownership report Forms 3, 
4, and 5 must be submitted to the FDIC through the interagency 
Beneficial Ownership Filings system. Beneficial ownership reports and 
any amendments are deemed filed with the FDIC upon electronic receipt on 
business days from 8 a.m. through 10 p.m., Eastern Standard Time or 
Eastern Daylight Saving Time, whichever is currently in effect (Eastern 
Time). Business days include each day, except Saturdays, Sundays and 
Federal holidays. All filings submitted electronically to the

[[Page 393]]

FDIC commencing after 10 p.m. Eastern Time on business days shall be 
deemed filed as of 8 a.m. on the following business day. All filings 
submitted electronically to the FDIC on non-business days shall be 
deemed filed as of 8 a.m. on the following business day.
    (4) Adjustment of the filing date. If an electronic filer in good 
faith attempts to file a beneficial ownership report with the FDIC in a 
timely manner but the filing is delayed due to technical difficulties 
beyond the electronic filer's control, the electronic filer may request 
an adjustment of the filing date of such submission. The FDIC may grant 
the request if it appears that such adjustment is appropriate and 
consistent with the public interest and the protection of investors.
    (5) Exhibits. (i) Exhibits to an electronic filing that have not 
previously been filed with the FDIC shall be filed in electronic format, 
absent a hardship exemption.
    (ii) Previously filed exhibits, whether in paper or electronic 
format, may be incorporated by reference into an electronic filing to 
the extent permitted by applicable SEC rules under the Exchange Act. An 
electronic filer may, at its option, restate in electronic format an 
exhibit incorporated by reference that originally was filed in paper 
format.
    (iii) Any document filed in paper format in violation of mandated 
electronic filing requirements shall not be incorporated by reference 
into an electronic filing.
    (6) Continuing Hardship Exemption. The FDIC will not accept in paper 
format any beneficial ownership report filing required to be submitted 
electronically under this part unless the filer satisfies the 
requirements for a continuing hardship exemption:
    (i) A filer may apply in writing for a continuing hardship exemption 
if all or part of a filing or group of filings otherwise to be filed in 
electronic format cannot be so filed without undue burden or expense. 
Such written application shall be made at least ten business days prior 
to the required due date of the filing(s) or the proposed filing date, 
as appropriate, or within such shorter period as may be permitted. The 
written application shall be sent to the Accounting and Securities 
Disclosure Section, Division of Supervision and Consumer Protection, 
Federal Deposit Insurance Corporation, 550 17th Street NW., Washington, 
DC 20429, and shall contain the information set forth in paragraph 
(b)(6)(ii) of this section.
    (A) The application shall not be deemed granted until the applicant 
is notified by the FDIC.
    (B) If the FDIC denies the application for a continuing hardship 
exemption, the filer shall file the required document in electronic 
format on the required due date or the proposed filing date or such 
other date as may be permitted.
    (C) If the FDIC determines that the grant of the exemption is 
appropriate and consistent with the public interest and the protection 
of investors and so notifies the applicant, the filer shall follow the 
procedures set forth in paragraph (b)(6)(iii) of this section.
    (ii) The request for the continuing hardship exemption shall 
include, but not be limited to, the following:
    (A) The reason(s) that the necessary hardware and software are not 
available without unreasonable burden and expense;
    (B) The burden and expense involved to employ alternative means to 
make the electronic submission; and/or
    (C) The reasons for not submitting electronically the document or 
group of documents, as well as justification for the requested time 
period for the exemption.
    (iii) If the request for a continuing hardship exemption is granted, 
the electronic filer shall submit the document or group of documents for 
which the exemption is granted in paper format on the required due date 
specified in the applicable form, rule or regulation, or the proposed 
filing date, as appropriate. The paper format document(s) shall have 
placed at the top of page 1, or at the top of an attached cover page, a 
legend in capital letters:


IN ACCORDANCE WITH 12 CFR 335.801(b), THIS (SPECIFY DOCUMENT) IS BEING 
FILED IN PAPER PURSUANT TO A CONTINUING HARDSHIP EXEMPTION.

    (iv) Where a continuing hardship exemption is granted with respect 
to an

[[Page 394]]

exhibit only, the paper format exhibit shall be filed with the FDIC 
under cover of SEC Form SE (17 CFR 249.444). Form SE shall be filed as a 
paper cover sheet to all exhibits to beneficial ownership reports 
submitted to the FDIC in paper form pursuant to a hardship exemption.
    (v) Form SE shall be submitted along with all exhibits filed in 
paper form pursuant to a hardship exemption. Form SE may be filed up to 
six business days prior to, or on the date of filing of, the electronic 
form to which it relates but shall not be filed after such filing date. 
If a paper exhibit is submitted in this manner, requirements that the 
exhibit be filed with, provided with, or accompany the electronic filing 
shall be satisfied. Any requirements as to delivery or furnishing the 
information to persons other than the FDIC shall not be affected by this 
section.
    (7) Signatures. (i) Required signatures to, or within, any 
electronic submission must be in typed form. When used in connection 
with an electronic filing, the term ``signature'' means an electronic 
entry or other form of computer data compilation of any letters or 
series of letters or characters comprising a name, executed, adopted or 
authorized as a signature.
    (ii) Each signatory to an electronic filing shall manually sign a 
signature page or other document authenticating, acknowledging or 
otherwise adopting his or her signature that appears in typed form 
within the electronic filing. Such document shall be executed before or 
at the time the electronic filing is made and shall be retained by the 
filer for a period of five years. Upon request, an electronic filer 
shall furnish to the FDIC a copy of any or all documents retained 
pursuant to this section.
    (iii) Where the FDIC's rules require a filer to furnish to a 
national securities exchange, a national securities association, or a 
bank, paper copies of a document filed with the FDIC in electronic 
format, signatures to such paper copies may be in typed form.
    (c) Legal proceedings. Whenever this part or cross referenced 
provisions of the SEC regulations require disclosure of legal 
proceedings, administrative or judicial proceedings arising under 
section 8 of the Federal Deposit Insurance Act shall be deemed material 
and shall be described.
    (d) Indebtedness of management. Whenever this part or cross 
referenced provisions of the SEC regulations require disclosure of 
indebtedness of management, extensions of credit to specified persons in 
excess of ten (10) percent of the equity capital accounts of the bank or 
$5 million, whichever is less, shall be deemed material and shall be 
disclosed in addition to any other required disclosure. The disclosure 
of this material indebtedness shall include the largest aggregate amount 
of indebtedness (in dollar amounts, and as a percentage of total equity 
capital accounts at the time), including extensions of credit or 
overdrafts, endorsements and guarantees outstanding at any time since 
the beginning of the bank's last fiscal year, and as of the latest 
practicable date.
    (1) If aggregate extensions of credit to all specified persons as a 
group exceeded 20 percent of the equity capital accounts of the bank at 
any time since the beginning of the last fiscal year, the aggregate 
amount of such extensions of credit shall also be disclosed.
    (2) Other loans are deemed material and shall be disclosed where:
    (i) The extension(s) of credit was not made on substantially the 
same terms, including interest rates, collateral and repayment terms as 
those prevailing at the time for comparable transactions with other than 
the specified persons;
    (ii) The extension(s) of credit was not made in the ordinary course 
of business; or
    (iii) The extension(s) of credit has involved or presently involves 
more than a normal risk of collectibility or other unfavorable features 
including the restructuring of an extension of credit, or a delinquency 
as to payment of interest or principal.
    (e) Proxy material required to be filed. (1) Three preliminary 
copies of each information statement, proxy statement, form of proxy, 
and other item of soliciting material to be furnished to security 
holders concurrently therewith, shall be filed with the FDIC by the bank 
or any other person making a solicitation subject to 12 CFR 335.401 at 
least ten calendar days (or 15 calendar

[[Page 395]]

days in the case of other than routine meetings, as defined in paragraph 
(e)(2) of this section) prior to the date such item is first sent or 
given to any security holders, or such shorter date as may be 
authorized.
    (2) For the purposes of this paragraph (e), a routine meeting means:
    (i) A meeting with respect to which no one is soliciting proxies 
subject to Sec. 335.401 other than on behalf of the bank, and at which 
the bank intends to present no matters other than:
    (A) The election of directors;
    (B) The election, approval or ratification of accountants;
    (C) A Security holder proposal included pursuant to SEC Rule 14(a)-8 
(17 CFR 240.14a-8); and
    (D) The approval or ratification of a plan as defined in paragraph 
(a)(7)(ii) of Item 402 of SEC Regulation S-K (17 CFR 229.402(a)(7)(ii)) 
or amendments to such a plan; and
    (ii) The bank does not comment upon or refer to a solicitation in 
opposition (as defined in 17 CFR 240.14a-6) in connection with the 
meeting in its proxy material.
    (3) Where preliminary copies of material are filed with the FDIC 
under this section, the printing of definitive copies for distribution 
to security holders should be deferred until the comments of the FDIC's 
staff have been received and considered.
    (f) Additional information; filing of other statements in certain 
cases. (1) In addition to the information expressly required to be 
included in a statement, form, schedule or report, there shall be added 
such further material information, if any, as may be necessary to make 
the required statements, in light of the circumstances under which they 
are made, not misleading.
    (2) The FDIC may, upon the written request of the bank, and where 
consistent with the protection of investors, permit the omission of one 
or more of the statements or disclosures herein required, or the filing 
in substitution therefor of appropriate statements or disclosures of 
comparable character.
    (3) The FDIC may also require the filing of other statements or 
disclosures in addition to, or in substitution for those herein required 
in any case where such statements are necessary or appropriate for an 
adequate presentation of the financial condition of any person whose 
financial statements are required, or disclosure about which is 
otherwise necessary for the protection of investors.

[62 FR 6856, Feb. 14, 1997, as amended at 69 FR 19088, Apr. 12, 2004; 69 
FR 59783, Oct. 6, 2004; 70 FR 16400, Mar. 31, 2005; 70 FR 44273, Aug. 2, 
2005]



Sec. 335.901  Delegation of authority to act on matters with respect to 

disclosure laws and regulations.

    (a) Except as provided in paragraph (b) of this section, authority 
is delegated to the Director, Division of Supervision and Consumer 
Protection (DSC), and where confirmed in writing by the director, to a 
deputy director or an associate director, or to the appropriate regional 
director or deputy regional director or area director, to act on 
disclosure matters under and pursuant to sections 10A(m), 12, 13, 14(a), 
14(c), 14(d), 14(f) and 16 of the Securities Exchange Act of 1934 (15 
U.S.C. 78), sections 302, 303, 304, 306, 401(b), 404, 406, and 407 of 
the Sarbanes-Oxley Act of 2002 (15 U.S.C. 7241, 7242, 7243, 7244, 7261, 
7262, 7264, and 7265), and this part.
    (b) Authority to act on disclosure matters is retained by the FDIC 
Board of Directors when such matters involve:
    (1) Exemption from disclosure requirements pursuant to section 12(h) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78l(h)); or
    (2) Exemption from tender offer requirements pursuant to section 
14(d)(8) of the Securities Exchange Act of 1934 (15 U.S.C. 78n(d)(8)).

[62 FR 6856, Feb. 14, 1997, as amended at 70 FR 16400, Mar. 31, 2005; 70 
FR 44273, Aug. 2, 2005]

[[Page 396]]



PART 336_FDIC EMPLOYEES--Table of Contents




             Subpart A_Employee Responsibilities and Conduct

Sec.
336.1 Cross-reference to employee ethical conduct standards and 
          financial disclosure regulations.

 Subpart B_Minimum Standards of Fitness for Employment With the Federal 
                      Deposit Insurance Corporation

336.2 Authority, purpose and scope.
336.3 Definitions.
336.4 Minimum standards for appointment to a position with the FDIC.
336.5 Minimum standards for employment with the FDIC.
336.6 Verification of compliance.
336.7 Employee responsibility, counseling and distribution of 
          regulation.
336.8 Sanctions and remedial actions.
336.9 Finality of determination.

 Subpart C_One-Year Restriction on Post-Employment Activities of Senior 
                                Examiners

336.10 Purpose and scope.
336.11 Definitions.
336.12 One-year post-employment restriction.
336.13 Penalties.

    Source: 61 FR 28728, June 6, 1996, unless otherwise noted.



             Subpart A_Employee Responsibilities and Conduct

    Authority: 5 U.S.C. 7301; 12 U.S.C. 1819(a).



Sec. 336.1  Cross-reference to employee ethical conduct standards and 

financial disclosure regulations.

    Employees of the Federal Deposit Insurance Corporation (Corporation) 
are subject to the Executive Branch-wide Standards of Ethical Conduct at 
5 CFR part 2635, the Corporation regulation at 5 CFR part 3201 which 
supplements the Executive Branch-wide Standards, the Executive Branch-
wide financial disclosure regulations at 5 CFR part 2634, and the 
Corporation regulation at 5 CFR part 3202, which supplements the 
Executive Branch-wide financial disclosure regulations.



 Subpart B_Minimum Standards of Fitness for Employment With the Federal 
                      Deposit Insurance Corporation

    Authority: 12 U.S.C. 1819 (Tenth), 1822(f).



Sec. 336.2  Authority, purpose and scope.

    (a) Authority. This part is adopted pursuant to section 12(f) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1822, and the rulemaking 
authority of the Federal Deposit Insurance Corporation (FDIC) found at 
12 U.S.C. 1819. This part is in addition to, and not in lieu of, any 
other statutes or regulations which may apply to standards for ethical 
conduct or fitness for employment with the FDIC and is consistent with 
the goals and purposes of 18 U.S.C. 201, 203, 205, 208, and 209.
    (b) Purpose. The purpose of this part is to state the minimum 
standards of fitness and integrity required of individuals who provide 
service to or on behalf of the FDIC and provide procedures for 
implementing these requirements.
    (c) Scope. (1) This part applies to applicants for employment with 
the FDIC under title 5 of the U.S. Code appointing authority in either 
the excepted or competitive service, including Special Government 
Employees. This part applies to all appointments, regardless of tenure, 
including intermittent, temporary, time-limited and permanent 
appointments.
    (2) In addition, this part applies to all employees of the FDIC who 
serve under an appointing authority under chapter 21 of title 5 of the 
U.S. Code.
    (3) Further, this part applies to any individual who, pursuant to a 
contract or any other arrangement, performs functions or activities of 
the Corporation, under the direct supervision of an officer or employee 
of the Corporation.



Sec. 336.3  Definitions.

    For the purposes of this part:
    (a) Company means any corporation, firm, partnership, society, joint 
venture, business trust, association or similar organization, or any 
other trust unless by its terms it must terminate within twenty-five 
years or not later than twenty-one years and ten

[[Page 397]]

months after the death of individuals living on the effective date of 
the trust, or any other organization or institution, but shall not 
include any corporation the majority of the shares of which are owned by 
the United States, any state, or the District of Columbia.
    (b) Control means the power to vote, directly or indirectly, 25 
percent or more of any class of the voting stock of a company, the 
ability to direct in any manner the election of a majority of a 
company's directors or trustees, or the ability to exercise a 
controlling influence over the company's management and policies. For 
purposes of this definition, a general partner of a limited partnership 
is presumed to be in control of that partnership. For purposes of this 
part, an entity or individual shall be presumed to have control of a 
company if the entity or individual directly or indirectly, or acting in 
concert with one or more entities or individuals, or through one or more 
subsidiaries, owns or controls 25 percent or more of its equity, or 
otherwise controls or has power to control its management or policies.
    (c) Default on a material obligation means a loan or advance from an 
insured depository institution which is or was delinquent for 90 or more 
days as to payment of principal or interest, or any combination thereof.
    (d) Employee means any officer or employee, including a liquidation 
graded or temporary employee, providing service to or on behalf of the 
FDIC who has been appointed to a position under an authority contained 
in title 5 of the U.S. Code. This definition excludes those individuals 
designated by title 5 of the U.S. Code as officials in the Federal 
Executive Schedule.
    (e) Federal banking agency means the Office of the Comptroller of 
the Currency, the Office of Thrift Supervision, the Board of Governors 
of the Federal Reserve System, or the Federal Deposit Insurance 
Corporation, or their successors.
    (f) Federal deposit insurance fund means the Deposit Insurance Fund, 
the former Bank Insurance Fund, the former Savings Association Insurance 
Fund, the Federal Savings and Loan Insurance Corporation (FSLIC) 
Resolution Trust, or the funds formerly maintained by the Resolution 
Trust Corporation (RTC), or their successors, for the benefit of insured 
depositors.
    (g) FDIC means the Federal Deposit Insurance Corporation, in its 
receivership and corporate capacities.
    (h) Insured depository institution means any bank or savings 
association the deposits of which are insured by the FDIC.
    (i) Pattern or practice of defalcation regarding obligations means:
    (1) A history of financial irresponsibility with regard to debts 
owed to insured depository institutions which are in default in excess 
of $50,000 in the aggregate. Examples of such financial irresponsibility 
include, without limitation:
    (i) Failure to pay a debt or debts totalling more than $50,000 
secured by an uninsured property which is destroyed; or
    (ii) Abuse of credit cards or incurring excessive debt well beyond 
the individual's ability to repay resulting in default(s) in excess of 
$50,000 in the aggregate.
    (2) Wrongful refusal to fulfill duties and obligations to insured 
depository institutions. Examples of such wrongful refusal to fulfill 
duties and obligations include, without limitation:
    (i) Any use of false financial statements;
    (ii) Misrepresentation as to the individual's ability to repay 
debts;
    (iii) Concealing assets from the insured depository institution;
    (iv) Any instance of fraud, embezzlement or similar misconduct in 
connection with an obligation to the insured depository institution; and
    (v) Any conduct described in any civil or criminal judgment against 
an individual for breach of any obligation, contractual or otherwise, or 
any duty of loyalty or care that the individual owed to an insured 
depository institution.
    (3) Defaults shall not be considered a pattern or practice of 
defalcation where the defaults are caused by catastrophic events beyond 
the control of the employee such as death, disability, illness or loss 
of financial support.
    (j) Substantial loss to federal deposit insurance funds--(1) 
Substantial loss to federal deposit insurance funds means:

[[Page 398]]

    (i) A loan or advance from an insured depository institution, which 
is now owed to the FDIC, RTC, FSLIC or their successors, or any federal 
deposit insurance fund, that is delinquent for ninety (90) or more days 
as to payment of principal, interest, or a combination thereof and on 
which there remains a legal obligation to pay an amount in excess of 
$50,000; or
    (ii) A final judgment in excess of $50,000 in favor of any federal 
deposit insurance fund, the FDIC, RTC, FSLIC, or their successors 
regardless of whether it becomes forgiven in whole or in part in a 
bankruptcy proceeding.
    (2) For purposes of computing the $50,000 ceiling in paragraphs 
(j)(1)(i) and (ii) of this section, all delinquent judgments, loans, or 
advances currently owed to the FDIC, RTC, FSLIC or their successors, or 
any federal deposit insurance fund, shall be aggregated. In no event 
shall delinquent loans or advances from different insured depository 
institutions be separately considered.

[61 FR 28728, June 6, 1996, as amended at 71 FR 20526, Apr. 21, 2006]



Sec. 336.4  Minimum standards for appointment to a position with the FDIC.

    (a) No person shall become employed on or after June 18, 1994, by 
the FDIC or otherwise perform any service for or on behalf of the FDIC 
who has:
    (1) Been convicted of any felony;
    (2) Been removed from, or prohibited from participating in the 
affairs of, any insured depository institution pursuant to any final 
enforcement action by any appropriate federal banking agency;
    (3) Demonstrated a pattern or practice of defalcation regarding 
obligations to insured depository institutions; or
    (4) Caused a substantial loss to federal deposit insurance funds.
    (b) Prior to an offer of employment, any person applying for 
employment with the FDIC shall sign a certification of compliance with 
the minimum standards listed in paragraphs (a) (1) through (4) of this 
section. In addition, any person applying for employment with the FDIC 
shall provide as an attachment to the certification any instance in 
which the applicant, or a company under the applicant's control, 
defaulted on a material obligation to an insured depository institution 
within the preceding five years.
    (c) Incumbent employees who separate from the FDIC and are 
subsequently reappointed after a break in service of more than three 
days are subject to the minimum standards listed in paragraphs (a) (1) 
though (4) of this section. The former employee is required to submit a 
new certification statement including attachments, as provided in 
paragraph (b) of this section, prior to appointment to the new position.



Sec. 336.5  Minimum standards for employment with the FDIC.

    (a) No person who is employed by the FDIC shall continue in 
employment in any manner whatsoever or perform any service for or on 
behalf of the FDIC who, beginning June 18, 1994 and thereafter:
    (1) Is convicted of any felony;
    (2) Is prohibited from participating in the affairs of any insured 
depository institution pursuant to any final enforcement action by any 
appropriate federal banking agency;
    (3) Demonstrates a pattern or practice of defalcation regarding 
obligations to insured depository institution(s); or
    (4) Causes a substantial loss to federal deposit insurance funds.
    (b) Any noncompliance with the standards listed in paragraphs (a) 
(1) through (4) of this section is a basis for removal from employment 
with the FDIC.



Sec. 336.6  Verfication of compliance.

    The FDIC's Division of Administration shall order appropriate 
investigations as authorized by 12 U.S.C. 1819 and 1822 on newly 
appointed employees, either prior to or following appointment, to verify 
compliance with the minimum standards listed under Sec. 336.4(a) (1) 
through (4).

[[Page 399]]



Sec. 336.7  Employee responsibility, counseling and distribution of 

regulation.

    (a) Each employee is responsible for being familiar with and 
complying with the provisions of this part.
    (b) The Ethics Counselor shall provide a copy of this part to each 
new employee within 30 days of initial appointment.
    (c) An employee who believes that he or she may not be in compliance 
with the minimum standards provided under Sec. 336.5(a)(1) through (4), 
or who receives a demand letter from the FDIC for any reason, shall make 
a written report of all relevant facts to the Ethics Counselor within 
ten (10) business days after the employee discovers the possible 
noncompliance, or after the receipt of a demand letter from the FDIC.
    (d) The Ethics Counselor shall provide guidance to employees 
regarding the appropriate statutes, regulations and corporate policies 
affecting employee's ethical responsibilities and conduct under this 
part.
    (e) The Ethics Counselor shall provide the Personnel Services Branch 
with notice of an employee's noncompliance.



Sec. 336.8  Sanctions and remedial actions.

    (a) Any employee found not in compliance with the minimum standards 
except as provided in paragraph (b) of this section below shall be 
terminated and prohibited from providing further service for or on 
behalf of the FDIC in any capacity. No other remedial action is 
authorized for sanctions for noncompliance.
    (b) Any employee found not in compliance with the minimum standards 
under Sec. 336.5(a)(3) based on financial irresponsibility as defined 
in Sec. 336.3(i)(1) shall be terminated consistent with applicable 
procedures and prohibited from providing future services for or on 
behalf of the FDIC in any capacity, unless the employee brings him or 
herself into compliance with the minimum standards as provided in 
paragraphs (b) (1) and (2) of this section.
    (1) Upon written notification by the Corporation of financial 
irresponsibility, the employee will be allowed a reasonable period of 
time to establish an agreement that satisfies the creditor and the FDIC 
as to resolution of outstanding indebtedness or otherwise resolves the 
matter to the satisfaction of the FDIC prior to the initiation of a 
termination action.
    (2) As part of the agreement described in paragraph (b)(1) of this 
section, the employee shall provide authority to the creditor to report 
any violation by the employee of the terms of the agreement directly to 
the FDIC Ethics Counselor.



Sec. 336.9  Finality of determination.

    Any determination made by the FDIC pursuant to this part shall be at 
the FDIC's sole discretion and shall not be subject to further review.



 Subpart C_One-Year Restriction on Post-Employment Activities of Senior 
                                Examiners

    Source: 70 FR 69639, Nov. 17, 2005, unless otherwise noted.

    Authority: 12 U.S.C. 1819 and 1820(k).



Sec. 336.10  Purpose and scope.

    This subpart applies to officers or employees of the FDIC who are 
subject to the post-employment restrictions set forth in section 10(k) 
of the Federal Deposit Insurance Act, 12 U.S.C. 1820(k), and implements 
those restrictions as they apply to officers and employees of the FDIC.



Sec. 336.11  Definitions.

    For purposes of this subpart:
    (a) Bank holding company has the meaning given to such term in 
section 2 of the Bank Holding Company Act of 1956 (12 U.S.C. 1841(a)).
    (b) A consultant for an insured depository institution or other 
company shall include only individuals who work directly on matters for, 
or on behalf of, such institution or other company.
    (c) Control has the meaning given to such term in section 336.3(b), 
and a foreign bank shall be deemed to control any insured branch of the 
foreign bank.
    (d) Depository institution means any bank or savings association, 
including a branch of a foreign bank, if such branch is located in the 
United States.

[[Page 400]]

    (e) Foreign bank means any bank or company described in section 8(a) 
of the International Banking Act of 1978 (12 U.S.C. 3106(a)).
    (f) Savings and loan holding company has the meaning given to such 
term in section 10(a)(1)(D) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(D)).
    (g) A senior examiner for an insured depository institution means an 
officer or employee of the FDIC--
    (1) who has been authorized by the FDIC to conduct examinations or 
inspections of insured depository institutions on behalf of the FDIC;
    (2) who has been assigned continuing, broad, and lead responsibility 
for the examination or inspection of the institution;
    (3) who routinely interacts with officers or employees of the 
institution or its affiliates; and
    (4) whose responsibilities with respect to the institution represent 
a substantial portion of the FDIC officer or employee's overall 
responsibilities.



Sec. 336.12  One-year post-employment restriction.

    (a) Prohibition. An officer or employee of the FDIC who serves as a 
senior examiner of an insured depository institution for at least 2 
months during the last 12 months of that individual's employment with 
the FDIC may not, within 1 year after the termination date of his or her 
employment with the FDIC, knowingly accept compensation as an employee, 
officer, director, or consultant from--
    (1) The insured depository institution; or
    (2) Any company (including a bank holding company or savings and 
loan holding company) that controls such institution.
    (b) Waivers. The post-employment restrictions in paragraph (a) of 
this section will not apply to a senior examiner if the FDIC Chairperson 
certifies in writing and on a case-by case basis that a waiver of the 
restrictions will not affect the integrity of the FDIC's supervisory 
program.
    (c) Effective Date. The post-employment restrictions in paragraph 
(a) of this section will not apply to any officer or employee of the 
FDIC, or any former officer or employee of the FDIC, who ceased to be an 
officer or employee of the FDIC before December 17, 2005.



Sec. 336.13  Penalties.

    (a) Penalties under section 10(k) of the FDI Act. A senior examiner 
of the FDIC who violates the post-employment restrictions set forth in 
Sec. 336.12 shall be subject to the following penalties--
    (1) An order--
    (i) Removing such person from office or prohibiting such person from 
further participation in the affairs of the relevant insured depository 
institution or company (including a bank holding company or savings and 
loan holding company) that controls such institution for a period of up 
to five years, and
    (ii) Prohibiting any further participation by such person, in any 
manner, in the affairs of any insured depository institution for a 
period of up to five years; or
    (2) A civil monetary penalty of not more than $250,000; or
    (3) Both.
    (b) Enforcement by appropriate Federal banking agency of hiring 
entity. Violations of Sec. 336.12 shall be enforced by the appropriate 
Federal banking agency of the depository institution, depository 
institution holding company, or other company at which the violation 
occurred, as determined under section 10(k)(6), which may be an agency 
other than the FDIC.
    (c) Scope of prohibition orders. Any senior examiner who is subject 
to an order issued under paragraph (a)(1) of this section shall, as 
required by 12 U.S.C. 1820(k)(6)(B), be subject to paragraphs (6) and 
(7) of section 8(e) in the same manner and to the same extent as a 
person subject to an order issued under section 8(e).
    (d) Other penalties. The penalties set forth in paragraph (a) of 
this section are not exclusive, and a senior examiner who violates the 
restrictions in Sec. 336.12 may also be subject to other 
administrative, civil, or criminal remedies or penalties as provided by 
law.



PART 337_UNSAFE AND UNSOUND BANKING PRACTICES--Table of Contents




Sec.
337.1 Scope.

[[Page 401]]

337.2 Standby letters of credit.
337.3 Limits on extensions of credit to executive officers, directors, 
          and principal shareholders of insured nonmember banks.
337.4 [Reserved]
337.5 Exemption.
337.6 Brokered deposits.
337.7-337.9 [Reserved]
337.10 Waiver.
337.11 Effect on other banking practices.
337.12 Frequency of examination.

    Authority: 12 U.S.C. 375a(4), 375b, 1816, 1818(a), 1818(b), 1819, 
1820(d)(10), 1821(f), 1828(j)(2), 1831.

    Source: 39 FR 29179, Aug. 14, 1974, unless otherwise noted.



Sec. 337.1  Scope.

    The provisions of this part apply to certain banking practices which 
are likely to have adverse effects on the safety and soundness of 
insured State nonmember banks or which are likely to result in 
violations of law, rule, or regulation.



Sec. 337.2  Standby letters of credit.

    (a) Definition. As used in this section, the term standby letter of 
credit means any letter of credit, or similar arrangement however named 
or described, which represents an obligation to the beneficiary on the 
part of the issuer: (1) To repay money borrowed by or advanced to or for 
the account of the account party, or (2) to make payment on account of 
any indebtedness undertaken by the account party, or (3) to make payment 
on account of any default (including any statement of default) by the 
account party in the performance of an obligation.\1\ The term similar 
arrangement includes the creation of an acceptance or similar 
undertaking.
---------------------------------------------------------------------------

    \1\ As defined in this paragraph (a), the term standby letter of 
credit would not include commercial letters of credit and similar 
instruments where the issuing bank expects the beneficiary to draw upon 
the issuer, which do not ``guaranty'' payment of a money obligation of 
the account party and which do not provide that payment is occasioned by 
default on the part of the account party.
---------------------------------------------------------------------------

    (b) Restriction. A standby letter of credit issued by an insured 
State nonmember bank shall be combined with all other standby letters of 
credit and all loans for purposes of applying any legal limitation on 
loans of the bank (including limitations on loans to any one borrower, 
on loans to affiliates of the bank, or on aggregate loans); Provided, 
however, That if such standby letter of credit is subject to separate 
limitation under applicable State or federal law, then the separate 
limitation shall apply in lieu of the loan limitation.\2\
---------------------------------------------------------------------------

    \2\ Where the standby letter of credit is subject to a non-recourse 
participation agreement with another bank or other banks, this section 
shall apply to the issuer and each participant in the same manner as in 
the case of a participated loan.
---------------------------------------------------------------------------

    (c) Exceptions. All standby letters of credit shall be subject to 
the provisions of paragraph (b) of this section except where:
    (1) Prior to or at the time of issuance, the issuing bank is paid an 
amount equal to the bank's maximum liability under the standby letter of 
credit; or,
    (2) Prior to or at the time of issuance, the issuing bank has set 
aside sufficient funds in a segregated deposit account, clearly 
earmarked for that purpose, to cover the bank's maximum liability under 
the standby letter of credit.
    (d) Disclosure. Each insured State nonmember bank must maintain 
adequate control and subsidiary records of its standby letters of credit 
comparable to the records maintained in connection with the bank's 
direct loans so that at all times the bank's potential liability 
thereunder and the bank's compliance with this section may be readily 
determined. In addition, all such standby letters of credit must be 
adequately reflected on the bank's published financial statements.



Sec. 337.3  Limits on extensions of credit to executive officers, directors, 

and principal shareholders of insured nonmember banks.

    (a) With the exception of 12 CFR 215.5(b), 215.5(c)(3), 215.5(c)(4), 
and 215.11, insured nonmember banks are subject to the restrictions 
contained in subpart A of Federal Reserve Board Regulation O (12 CFR 
part 215, subpart A) to the same extent and to the same manner as though 
they were member banks.

[[Page 402]]

    (b) For the purposes of compliance with Sec. 215.4(b) of Federal 
Reserve Board Regulation O, no insured nonmember bank may extend credit 
or grant a line of credit to any of its executive officers, directors, 
or principal shareholders or to any related interest of any such person 
in an amount that, when aggregated with the amount of all other 
extensions of credit and lines of credit by the bank to that person and 
to all related interests of that person, exceeds the greater of $25,000 
or five percent of the bank's capital and unimpaired surplus,\3\ or 
$500,000 unless (1) the extension of credit or line of credit has been 
approved in advance by a majority of the entire board of directors of 
that bank and (2) the interested party has abstained from participating 
directly or indirectly in the voting.
---------------------------------------------------------------------------

    \3\ For the purposes of Sec. 337.3, an insured nonmember bank's 
capital and unimpaired surplus shall have the same meaning as found in 
Sec. 215.2(f) of Federal Reserve Board Regulation O (12 CFR 215.2(f)).
---------------------------------------------------------------------------

    (c)(1) No insured nonmember bank may extend credit in an aggregate 
amount greater than the amount permitted in paragraph (c)(2) of this 
section to a partnership in which one or more of the bank's executive 
officers are partners and, either individually or together, hold a 
majority interest. For the purposes of paragraph (c)(2) of this section, 
the total amount of credit extended by an insured nonmember bank to such 
partnership is considered to be extended to each executive officer of 
the insured nonmember bank who is a member of the partnership.
    (2) An insured nonmember bank is authorized to extend credit to any 
executive officer of the bank for any other purpose not specified in 
Sec. 215.5(c)(1) and (2) of Federal Reserve Board Regulation O (12 CFR 
215.5(c)(1) and (2)) if the aggregate amount of such other extensions of 
credit does not exceed at any one time the higher of 2.5 percent of the 
bank's capital and unimpaired surplus or $25,000 but in no event more 
than $100,000, provided, however, that no such extension of credit shall 
be subject to this limit if the extension of credit is secured by:
    (i) A perfected security interest in bonds, notes, certificates of 
indebtedness, or Treasury bills of the United States or in other such 
obligations fully guaranteed as to principal and interest by the United 
States;
    (ii) Unconditional takeout commitments or guarantees of any 
department, agency, bureau, board, commission or establishment of the 
United States or any corporation wholly owned directly or indirectly by 
the United States; or
    (iii) A perfected security interest in a segregated deposit account 
in the lending bank.
    (3) Any extension of credit that was outstanding on May 28, 1992 and 
that would if made on or after that date violate paragraph (c)(1) or 
paragraph (c)(2) of this Sec. 337.3 shall be reduced in amount by May 
28, 1993 so that the extension of credit is in compliance with the 
lending limit set forth in paragraphs (c)(1) and (c)(2) of this section. 
Any renewal or extension of such an extension of credit on or after May 
28, 1992 shall be made only on terms that will bring the extension of 
credit into compliance with the lending limit of paragraphs (c)(1) and 
(c)(2) of this section by May 28, 1993, however, any extension of credit 
made before May 28, 1992 that bears a specific maturity date of May 28, 
1993 or later shall be repaid in accordance with its repayment schedule 
in existence on or before May 28, 1992.
    (4) If an insured nonmember bank is unable to bring all extensions 
of credit outstanding as of May 28, 1992 into compliance as required by 
paragraph (c)(3) of this Sec. 337.3, the bank may at the discretion of 
the appropriate FDIC regional director (Division of Supervision and 
Consumer Protection (DSC)) obtain, for good cause shown, not more than 
two additional one-year periods to come into compliance.
    (5) For the purposes of paragraph (c) of this section, the 
definitions of the terms used in Federal Reserve Board Regulation O 
shall apply including the exclusion of executive officers of a bank's 
parent bank holding company and executive officers of any other 
subsidiary of that bank holding company from the definition of executive 
officer for the purposes of complying with the loan restrictions 
contained in section 22(g) of the Federal Reserve Act. For the purposes 
of complying with

[[Page 403]]

Sec. 215.5(d) of Federal Reserve Board Regulation O, the reference to 
``the amount specified for a category of credit in paragraph (c) of this 
section'' shall be understood to refer to the amount specified in 
paragraph (c)(2) of this Sec. 337.3.

(Approved by the Office of Management and Budget under control number 
3064-0108)

[47 FR 47003, Oct. 22, 1982, as amended at 48 FR 42971, Sept. 21, 1983; 
57 FR 7649, Mar. 4, 1992; 57 FR 17850, Apr. 28, 1992; 57 FR 28457, June 
25, 1992; 59 FR 66668, Dec. 28, 1994]



Sec. 337.4  [Reserved]



Sec. 337.5  Exemption.

    Check guaranty card programs, customer-sponsored credit card 
programs, and similar arrangements in which a bank undertakes to 
guarantee the obligations of individuals who are its retail banking 
deposit customers are exempted from Sec. 337.2: Provided, however, That 
the bank establishes the creditworthiness of the individual before 
undertaking to guarantee his/her obligations and that any such 
arrangement to which a bank's principal shareholders, directors, or 
executive officers are a party be in compliance with applicable 
provisions of Federal Reserve Regulation O (12 CFR part 215).

[50 FR 10495, Mar. 15, 1985]



Sec. 337.6  Brokered deposits.

    (a) Definitions. For the purposes of this Sec. 337.6, the following 
definitions apply:
    (1) Appropriate Federal banking agency has the same meaning as 
provided under section 3(q) of the Federal Deposit Insurance Act (12 
U.S.C. 1813(q)).
    (2) Brokered deposit means any deposit that is obtained, directly or 
indirectly, from or through the mediation or assistance of a deposit 
broker.
    (3) Capital categories. (i) For purposes of section 29 of the 
Federal Deposit Insurance Act and this Sec. 337.6, the terms well 
capitalized, adequately capitalized, and undercapitalized,\11\ shall 
have the same meaning as to each insured depository institution as 
provided under regulations implementing section 38 of the Federal 
Deposit Insurance Act issued by the appropriate federal banking agency 
for that institution.\12\
---------------------------------------------------------------------------

    \11\ The term undercapitalized includes any institution that is 
significantly undercapitalized or critically undercapitalized under 
regulations implementing section 38 of the Federal Deposit Insurance Act 
and issued by the appropriate federal banking agency for that 
institution.
    \12\ For the most part, the capital measure terms are defined in the 
following regulations: FDIC--12 CFR part 325, subpart B; Board of 
Governors of the Federal Reserve System--12 CFR part 208; Office of the 
Comptroller of the Currency--12 CFR part 6; Office of Thrift 
Supervision--12 CFR part 565.
---------------------------------------------------------------------------

    (ii) If the appropriate federal banking agency reclassifies a well 
capitalized insured depository institution as adequately capitalized 
pursuant to section 38 of the Federal Deposit Insurance Act, the 
institution so reclassified shall be subject to the provisions 
applicable to such lower capital category under this Sec. 337.6.
    (iii) An insured depository institution shall be deemed to be within 
a given capital category for purposes of this Sec. 337.6 as of the date 
the institution is notified of, or is deemed to have notice of, its 
capital category, under regulations implementing section 38 of the 
Federal Deposit Insurance Act issued by the appropriate federal banking 
agency for that institution.\13\
---------------------------------------------------------------------------

    \13\ The regulations implementing section 38 of the Federal Deposit 
Insurance Act and issued by the federal banking agencies generally 
provide that an insured depository institution is deemed to have been 
notified of its capital levels and its capital category as of the most 
recent date: (1) A Consolidated Report of Condition and Income or Thrift 
Financial Report is required to be filed with the appropriate federal 
banking agency; (2) A final report of examination is delivered to the 
institution; or (3) Written notice is provided by the appropriate 
federal banking agency to the institution of its capital category for 
purposes of section 38 of the Federal Deposit Insurance Act and 
implementing regulations or that the institution's capital category has 
changed. Provisions specifying the effective date of determination of 
capital category are generally published in the following regulations: 
FDIC--12 CFR 325.102. Board of Governors of the Federal Reserve System--
12 CFR 208.32. Office of the Comptroller of the Currency--12 CFR 6.3. 
Office of Thrift Supervision--12 CFR 565.3.

---------------------------------------------------------------------------

[[Page 404]]

    (4) Deposit has the same meaning as provided under section 3(l) of 
the Federal Deposit Insurance Act (12 U.S.C. 1813(1)).
    (5) Deposit broker. (i) The term deposit broker means:
    (A) Any person engaged in the business of placing deposits, or 
facilitating the placement of deposits, of third parties with insured 
depository institutions, or the business of placing deposits with 
insured depository institutions for the purpose of selling interests in 
those deposits to third parties; and
    (B) An agent or trustee who establishes a deposit account to 
facilitate a business arrangement with an insured depository institution 
to use the proceeds of the account to fund a prearranged loan.
    (ii) The term deposit broker does not include:
    (A) An insured depository institution, with respect to funds placed 
with that depository institution;
    (B) An employee of an insured depository institution, with respect 
to funds placed with the employing depository institution;
    (C) A trust department of an insured depository institution, if the 
trust or other fiduciary relationship in question has not been 
established for the primary purpose of placing funds with insured 
depository institutions;
    (D) The trustee of a pension or other employee benefit plan, with 
respect to funds of the plan;
    (E) A person acting as a plan administrator or an investment adviser 
in connection with a pension plan or other employee benefit plan 
provided that person is performing managerial functions with respect to 
the plan;
    (F) The trustee of a testamentary account;
    (G) The trustee of an irrevocable trust (other than one described in 
paragraph (a)(5)(i)(B) of this section), as long as the trust in 
question has not been established for the primary purpose of placing 
funds with insured depository institutions;
    (H) A trustee or custodian of a pension or profit-sharing plan 
qualified under section 401(d) or 403(a) of the Internal Revenue Code of 
1986 (26 U.S.C. 401(d) or 403(a));
    (I) An agent or nominee whose primary purpose is not the placement 
of funds with depository institutions; or
    (J) An insured depository institution acting as an intermediary or 
agent of a U.S. government department or agency for a government 
sponsored minority or women-owned depository institution deposit 
program.
    (iii) Notwithstanding paragraph (a)(5)(ii) of this section, the term 
deposit broker includes any insured depository institution that is not 
well-capitalized, and any employee of any such insured depository 
institution, which engages, directly or indirectly, in the solicitation 
of deposits by offering rates of interest (with respect to such 
deposits) which are significantly higher than the prevailing rates of 
interest on deposits offered by other insured depository institutions in 
such depository institution's normal market area.
    (6) Employee means any employee: (i) Who is employed exclusively by 
the insured depository institution;
    (ii) Whose compensation is primarily in the form of a salary;
    (iii) Who does not share such employee's compensation with a deposit 
broker; and
    (iv) Whose office space or place of business is used exclusively for 
the benefit of the insured depository institution which employs such 
individual.
    (7) FDIC means the Federal Deposit Insurance Corporation.
    (8) Insured depository institution means any bank, savings 
association, or branch of a foreign bank insured under the provisions of 
the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.).
    (b) Solicitation and acceptance of brokered deposits by insured 
depository institutions. (1) A well capitalized insured depository 
institution may solicit and accept, renew or roll over any brokered 
deposit without restriction by this section.
    (2)(i) An adequately capitalized insured depository institution may 
not accept, renew or roll over any brokered deposit unless it has 
applied for and been granted a waiver of this prohibition by the FDIC in 
accordance with the provisions of this section.
    (ii) Any adequately capitalized insured depository institution that 
has

[[Page 405]]

been granted a waiver to accept, renew or roll over a brokered deposit 
may not pay an effective yield on any such deposit which, at the time 
that such deposit is accepted, renewed or rolled over, exceeds by more 
than 75 basis points:
    (A) The effective yield paid on deposits of comparable size and 
maturity in such institution's normal market area for deposits accepted 
from within its normal market area; or
    (B) The national rate paid on deposits of comparable size and 
maturity for deposits accepted outside the institution's normal market 
area. For purposes of this paragraph (b)(2)(ii)(B), the national rate 
shall be:
    (1) 120 percent of the current yield on similar maturity U.S. 
Treasury obligations; or
    (2) In the case of any deposit at least half of which is uninsured, 
130 percent of such applicable yield.
    (3)(i) An undercapitalized insured depository institution may not 
accept, renew or roll over any brokered deposit.
    (ii) An undercapitalized insured depository institution may not 
solicit deposits by offering an effective yield that exceeds by more 
than 75 basis points the prevailing effective yields on insured deposits 
of comparable maturity in such institution's normal market area or in 
the market area in which such deposits are being solicited.
    (4) For purposes of the restriction contained in paragraphs 
(b)(2)(ii)(A) and (b)(3)(ii) of this section, the effective yields in 
the relevant markets are the average of effective yields offered by 
other insured depository institutions in the market area in which 
deposits are being solicited. An effective yield on a deposit with an 
odd maturity violates paragraphs (b)(2)(ii)(A) and (b)(3)(ii) of this 
section if it is more than 75 basis points higher than the yield 
calculated by interpolating between the yields offered by other insured 
depository institutions on deposits of the next longer and shorter 
maturities offered in the market. A market area is any readily defined 
geographical area in which the rates offered by any one insured 
depository institution soliciting deposits in that area may affect the 
rates offered by other insured depository institutions operating in the 
same area.
    (c) Waiver. The FDIC may, on a case-by-case basis and upon 
application by an adequately capitalized insured depository institution, 
waive the prohibition on the acceptance, renewal or rollover of brokered 
deposits upon a finding that such acceptance, renewal or rollover does 
not constitute an unsafe or unsound practice with respect to such 
institution. The FDIC may conclude that it is not unsafe or unsound and 
may grant a waiver when the acceptance, renewal or rollover of brokered 
deposits is determined to pose no undue risk to the institution. Any 
waiver granted may be revoked at any time by written notice to the 
institution. For filing requirements, consult 12 CFR 303.243.
    (d) Exclusion for institutions in FDIC conservatorship. No insured 
depository institution for which the FDIC has been appointed conservator 
shall be subject to the prohibition on the acceptance, renewal or 
rollover of brokered deposits contained in this Sec. 337.6 or section 
29 of the Federal Deposit Insurance Act for 90 days after the date on 
which the institution was placed in conservatorship. During this 90-day 
period, the institution shall, nevertheless, be subject to the 
restriction on the payment of interest contained in paragraph (b)(2)(ii) 
of the section. After such 90-day period, the institution may not 
accept, renew or roll over any brokered deposit.
    (e) [Reserved]

[57 FR 23941, June 5, 1992, as amended at 58 FR 54935, Oct. 25, 1993; 60 
FR 31384, June 15, 1995; 63 FR 44750, Aug. 20, 1998; 66 FR 17622, Apr. 
3, 2001]



Sec. Sec. 337.7-337.9  [Reserved]



Sec. 337.10  Waiver.

    An insured State nonmember bank has the right to petition the Board 
of Directors of the Corporation for a waiver of this part or any subpart 
thereof with respect to any particular transaction or series of similar 
transactions. A waiver may be granted at the discretion of the Board 
upon a

[[Page 406]]

showing of good cause. All such petitions should be filed with the 
Executive Secretary, Federal Deposit Insurance Corporation, 550 17th 
Street, NW., Washington, DC 20429.

[39 FR 29179, Aug. 14, 1974, as amended at 67 FR 71071, Nov. 29, 2002]



Sec. 337.11  Effect on other banking practices.

    Nothing in this part shall be construed as restricting in any manner 
the Corporation's authority to deal with any banking practice which is 
deemed to be unsafe or unsound or otherwise not in accordance with law, 
rule, or regulation; or which violates any condition imposed in writing 
by the Corporation in connection with the granting of any application or 
other request by an insured State nonmember bank, or any written 
agreement entered into by such bank with the Corporation. Compliance 
with the provisions of this part shall not relieve an insured State 
nonmember bank from its duty to conduct its operations in a safe and 
sound manner nor prevent the Corporation from taking whatever action it 
deems necessary and desirable to deal with specific acts or practices 
which, although they do not violate the provisions of this part, are 
considered detrimental to the safety and sound operation of the bank 
engaged therein.



Sec. 337.12  Frequency of examination.

    (a) General. The Federal Deposit Insurance Corporation examines 
insured state nonmember banks pursuant to authority conferred by section 
10 of the Federal Deposit Insurance Act (12 U.S.C. 1820). The FDIC is 
required to conduct a full-scope, on-site examination of every insured 
state nonmember bank at least once during each 12-month period.
    (b) 18-month rule for certain small institutions. The FDIC may 
conduct a full-scope, on-site examination of an insured state nonmember 
bank at least once during each 18-month period, rather than each 12-
month period as provided in paragraph (a) of this section, if the 
following conditions are satisfied:
    (1) The bank has total assets of less than $500 million;
    (2) The bank is well capitalized as defined in Sec. 325.103(b)(1) 
of this chapter;
    (3) At the most recent FDIC or applicable State banking agency 
examination, the FDIC--
    (i) Assigned the bank a rating of 1 or 2 for management as part of 
the bank's composite rating under the Uniform Financial Institutions 
Rating System (commonly referred to as CAMELS); and
    (ii) Assigned the bank a composite rating of 1 or 2 under the 
Uniform Financial Institutions Rating System (copies of which are 
available at the addresses specified in Sec. 309.4 of this chapter);
    (4) The bank currently is not subject to a formal enforcement 
proceeding or order by the FDIC, OCC or the Federal Reserve and
    (5) No person acquired control of the bank during the preceding 12-
month period in which a full-scope, on-site examination would have been 
required but for this section.
    (c) Authority to conduct more frequent examinations. This section 
does not limit the authority of the FDIC to examine any insured state 
nonmember bank as frequently as the agency deems necessary.

[63 FR 16381, Apr. 2, 1998, as amended at 72 FR 17803, Apr. 10, 2007]



PART 338_FAIR HOUSING--Table of Contents




                          Subpart A_Advertising

Sec.
338.1 Purpose.
338.2 Definitions applicable to subpart A of this part.
338.3 Nondiscriminatory advertising.
338.4 Fair housing poster.

                         Subpart B_Recordkeeping

338.5 Purpose.
338.6 Definitions applicable to this subpart B.
338.7 Recordkeeping requirements.
338.8 Compilation of loan data in register format.
338.9 Mortgage lending of a controlled entity.

    Authority: 12 U.S.C. 1817, 1818, 1819, 1820(b), 2801 et seq.; 15 
U.S.C. 1691 et seq.; 42 U.S.C. 3605, 3608; 12 CFR parts 202, 203; 24 CFR 
part 110.

[[Page 407]]



                          Subpart A_Advertising



Sec. 338.1  Purpose.

    The purpose of this subpart A is to prohibit insured state nonmember 
banks from engaging in discriminatory advertising with regard to 
residential real estate-related transactions. This subpart A also 
requires insured state nonmember banks to publicly display either the 
Equal Housing Lender poster set forth in Sec. 338.4(b) of the FDIC's 
regulations or the Equal Housing Opportunity poster prescribed by part 
110 of the regulations of the United States Department of Housing and 
Urban Development (24 CFR part 110). This subpart A enforces section 805 
of title VIII of the Civil Rights Act of 1968, 42 U.S.C. 3601-3619 (Fair 
Housing Act), as amended by the Fair Housing Amendments Act of 1988.

[62 FR 36204, July 7, 1997]



Sec. 338.2  Definitions applicable to subpart A of this part.

    For purposes of subpart A of this part:
    (a) Bank means an insured State nonmember bank as defined in section 
3 of the Federal Deposit Insurance Act.
    (b) Dwelling means any building, structure, or portion thereof which 
is occupied as, or designed or intended for occupancy as, a residence by 
one or more families, and any vacant land wihch is offered for sale or 
lease for the construction or location thereon of any such building, 
structure, portion thereof.
    (c) Handicap means, with respect to a person:
    (1) A physical or mental impairment which substantially limits one 
or more of such person's major life activities;
    (2) A record of having such an impairment; or
    (3) Being regarded as having such an impairment, but such term does 
not include current, illegal use of or addition to a controlled 
substance (as defined in section 102 of the Controlled Substances Act 
(21 U.S.C. 802)).
    (d) Familial status means one or more individuals (who have not 
attained the age of 18 years) being domiciled with:
    (1) A parent or another person having legal custody of such 
individual or individuals; or
    (2) The designee of such parent or other person having such custody, 
with the written persmission of such parent or other person.

The protections afforded against discrimination on the basis of familial 
status shall apply to any person who is pregnant or is in the process of 
securing legal custody of any indivdual who has not attained the age of 
18 years.

[56 FR 50039, Oct. 3, 1991]



Sec. 338.3  Nondiscriminatory advertising.

    (a) Any bank which directly or through third parties engages in any 
form of advertising of any loan for the purpose of purchasing, 
constructing, improving, repairing, or maintaining a dwelling or any 
loan secured by a dwelling shall prominently indicate in such 
advertisement, in a manner appropriate to the advertising medium and 
format utilized, that the bank makes such loans without regard to race, 
color, religion, national origin, sex, handicap, or familial status.
    (1) With respect to written and visual advertisements, this 
requirement may be satisfied by including in the advertisement a copy of 
the logotype with the Equal Housing Lender legend contained in the Equal 
Housing Lender poster prescribed in Sec. 338.4(b) of the FDIC's 
regulations or a copy of the logotype with the Equal Housing Opportunity 
legend contained in the Equal Housing Opportunity poster prescribed in 
Sec. 110.25(a) of the United States Department of Housing and Urban 
Development's regulations (24 CFR 110.25(a)).
    (2) With respect to oral advertisements, this requirement may be 
satisfied by a statement, in the spoken text of the advertisement, that 
the bank is an ``Equal Housing Lender'' or an ``Equal Opportunity 
Lender.''
    (3) When an oral advertisement is used in conjunction with a written 
or visual advertisement, the use of either of the methods specified in 
paragraphs (a) (1) and (2) of this section will satisfy the requirements 
of this paragraph (a).
    (b) No advertisement shall contain any words, symbols, models or 
other forms of communication which express, imply, or suggest a 
discriminatory

[[Page 408]]

preference or policy of exclusion in violation of the provisions of the 
Fair Housing Act or the Equal Credit Opportunity Act.

[43 FR 11563, Mar. 20, 1978, as amended at 54 FR 52930, Dec. 26, 1989. 
Redesignated and amended at 56 FR 50039, Oct. 3, 1991; 62 FR 36204, July 
7, 1997]



Sec. 338.4  Fair housing poster.

    (a) Each bank engaged in extending loans for the purpose of 
purchasing, constructing, improving, repairing, or maintaining a 
dwelling or any loan secured by a dwelling shall conspicuously display 
either the Equal Housing Lender poster set forth in paragraph (b) of 
this section or the Equal Housing Opportunity poster prescribed by Sec. 
110.25(a) of the United States Department of Housing and Urban 
Development's regulations (24 CFR 110.25(a)), in a central location 
within the bank where deposits are received or where such loans are made 
in a manner clearly visible to the general public entering the area, 
where the poster is displayed.
    (b) The Equal Housing Lender Poster shall be at least 11 by 14 
inches in size and have the following text:

[[Page 409]]

[GRAPHIC] [TIFF OMITTED] TR07AU08.000

    (c) The Equal Housing Lender Poster specified in this section was 
adopted under Sec. 110.25(b) of the United States Department of Housing 
and Urban Development's rules and regulations as an authorized 
substitution for the poster

[[Page 410]]

required in Sec. 110.25(a) of those rules and regulations.

[54 FR 52930, Dec. 26, 1989. Redesignated at 56 FR 50039, Oct. 3, 1991, 
as amended by 59 FR 52667, Oct. 19, 1994; 62 FR 36204, July 7, 1997; 73 
FR 45855, Aug. 7, 2008]



                         Subpart B_Recordkeeping



Sec. 338.5  Purpose.

    The purpose of this subpart B is two-fold. First, this subpart B 
notifies all insured state nonmember banks of their duty to collect and 
retain certain information about a home loan applicant's personal 
characteristics in accordance with Regulation B of the Board of 
Governors of the Federal Reserve System (12 CFR part 202) in order to 
monitor an institution's compliance with the Equal Credit Opportunity 
Act of 1974 (15 U.S.C. 1691 et seq.). Second, this subpart B notifies 
certain insured state nonmember banks of their duty to maintain, update 
and report a register of home loan applications in accordance with 
Regulation C of the Board of Governors of the Federal Reserve System (12 
CFR part 203), which implements the Home Mortgage Disclosure Act (12 
U.S.C. 2801 et seq.).

[62 FR 36204, July 7, 1997]



Sec. 338.6  Definitions applicable to this subpart B.

    For purposes of this subpart B--
    (a) Bank means an insured state nonmember bank as defined in section 
3 of the Federal Deposit Insurance Act.
    (b) Controlled entity means a corporation, partnership, association, 
or other business entity with respect to which a bank possesses, 
directly or indirectly, the power to direct or cause the direction of 
management and policies, whether through the ownership of voting 
securities, by contract, or otherwise.

[62 FR 36204, July 7, 1997]



Sec. 338.7  Recordkeeping requirements.

    All banks that receive an application for credit primarily for the 
purchase or refinancing of a dwelling occupied or to be occupied by the 
applicant as a principal residence where the extension of credit will be 
secured by the dwelling shall request and retain the monitoring 
information required by Regulation B of the Board of Governors of the 
Federal Reserve System (12 CFR part 202).

[62 FR 36204, July 7, 1997]



Sec. 338.8  Compilation of loan data in register format.

    Banks and other lenders required to file a Home Mortgage Disclosure 
Act loan application register (LAR) with the Federal Deposit Insurance 
Corporation shall maintain, update and report such LAR in accordance 
with Regulation C of the Board of Governors of the Federal Reserve 
System (12 CFR part 203).

[62 FR 36204, July 7, 1997]



Sec. 338.9  Mortgage lending of a controlled entity.

    Any bank which refers any applicants to a controlled entity and 
which purchases any home purchase loans or home improvement loans as 
defined in Regulation C of the Board of Governors of the Federal Reserve 
Board (12 CFR part 203) originated by the controlled entity, as a 
condition to transacting any business with the controlled entity, shall 
require the controlled entity to enter into a written agreement with the 
bank. The written agreement shall provide that the entity shall:
    (a) Comply with the requirements of Sec. Sec. 338.3, 338.4 and 
338.7, and, if otherwise subject to Regulation C of the Board of 
Governors of the Federal Reserve System (12 CFR part 203), Sec. 338.8;
    (b) Open its books and records to examination by the Federal Deposit 
Insurance Corporation; and
    (c) Comply with all instructions and orders issued by the Federal 
Deposit Insurance Corporation with respect to its home loan practices.

[49 FR 35764, Sept. 12, 1984. Redesignated and amended at 56 FR 50039, 
Oct. 3, 1991; 62 FR 36204, July 7, 1997]



PART 339_LOANS IN AREAS HAVING SPECIAL FLOOD HAZARDS--Table of Contents




Sec.
339.1 Authority, purpose, and scope.
339.2 Definitions.
339.3 Requirement to purchase flood insurance where available.
339.4 Exemptions.
339.5 Escrow requirement.

[[Page 411]]

339.6 Required use of standard flood hazard determination form.
339.7 Forced placement of flood insurance.
339.8 Determination fees.
339.9 Notice of special flood hazards and availability of Federal 
          disaster relief assistance.
339.10 Notice of servicer's identity.

Appendix A to Part 339--Sample Form of Notice of Special Flood Hazards 
          and Availability of Federal Disaster Relief Assistance

    Authority: 42 U.S.C. 4012a, 4104a, 4104b, 4106, and 4128.

    Source: 61 FR 45706, Aug. 29, 1996, unless otherwise noted.



Sec. 339.1  Authority, purpose, and scope.

    (a) Authority. This part is issued pursuant to 42 U.S.C. 4012a, 
4104a, 4104b, 4106, and 4128.
    (b) Purpose. The purpose of this part is to implement the 
requirements of the National Flood Insurance Act of 1968 and the Flood 
Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129).
    (c) Scope. This part, except for Sec. Sec. 339.6 and 339.8, applies 
to loans secured by buildings or mobile homes located or to be located 
in areas determined by the Director of the Federal Emergency Management 
Agency to have special flood hazards. Sections 339.6 and 339.8 apply to 
loans secured by buildings or mobile homes, regardless of location.



Sec. 339.2  Definitions.

    (a) Act means the National Flood Insurance Act of 1968, as amended 
(42 U.S.C. 4001-4129).
    (b) Bank means an insured state nonmember bank and an insured state 
branch of a foreign bank or any subsidiary of an insured state nonmember 
bank.
    (c) Building means a walled and roofed structure, other than a gas 
or liquid storage tank, that is principally above ground and affixed to 
a permanent site, and a walled and roofed structure while in the course 
of construction, alteration, or repair.
    (d) Community means a State or a political subdivision of a State 
that has zoning and building code jurisdiction over a particular area 
having special flood hazards.
    (e) Designated loan means a loan secured by a building or mobile 
home that is located or to be located in a special flood hazard area in 
which flood insurance is available under the Act.
    (f) Director of FEMA means the Director of the Federal Emergency 
Management Agency.
    (g) Mobile home means a structure, transportable in one or more 
sections, that is built on a permanent chassis and designed for use with 
or without a permanent foundation when attached to the required 
utilities. The term mobile home does not include a recreational vehicle. 
For purposes of this part, the term mobile home means a mobile home on a 
permanent foundation. The term mobile home includes a manufactured home 
as that term is used in the NFIP.
    (h) NFIP means the National Flood Insurance Program authorized under 
the Act.
    (i) Residential improved real estate means real estate upon which a 
home or other residential building is located or to be located.
    (j) Servicer means the person responsible for:
    (1) Receiving any scheduled, periodic payments from a borrower under 
the terms of a loan, including amounts for taxes, insurance premiums, 
and other charges with respect to the property securing the loan; and
    (2) Making payments of principal and interest and any other payments 
from the amounts received from the borrower as may be required under the 
terms of the loan.
    (k) Special flood hazard area means the land in the flood plain 
within a community having at least a one percent chance of flooding in 
any given year, as designated by the Director of FEMA.
    (l) Table funding means a settlement at which a loan is funded by a 
contemporaneous advance of loan funds and an assignment of the loan to 
the person advancing the funds.



Sec. 339.3  Requirement to purchase flood insurance where available.

    (a) In general. A bank shall not make, increase, extend, or renew 
any designated loan unless the building or mobile home and any personal 
property securing the loan is covered by flood insurance for the term of 
the loan. The

[[Page 412]]

amount of insurance must be at least equal to the lesser of the 
outstanding principal balance of the designated loan or the maximum 
limit of coverage available for the particular type of property under 
the Act. Flood insurance coverage under the Act is limited to the 
overall value of the property securing the designated loan minus the 
value of the land on which the property is located.
    (b) Table funded loans. A bank that acquires a loan from a mortgage 
broker or other entity through table funding shall be considered to be 
making a loan for the purposes of this part.



Sec. 339.4  Exemptions.

    The flood insurance requirement prescribed by Sec. 339.3 does not 
apply with respect to:
    (a) Any State-owned property covered under a policy of self-
insurance satisfactory to the Director of FEMA, who publishes and 
periodically revises the list of States falling within this exemption; 
or
    (b) Property securing any loan with an original principal balance of 
$5,000 or less and a repayment term of one year or less.



Sec. 339.5  Escrow requirement.

    If a bank requires the escrow of taxes, insurance premiums, fees, or 
any other charges for a loan secured by residential improved real estate 
or a mobile home that is made, increased, extended, or renewed on or 
after October 1, 1996, the bank shall also require the escrow of all 
premiums and fees for any flood insurance required under Sec. 339.3. 
The bank, or a servicer acting on behalf of the bank, shall deposit the 
flood insurance premiums on behalf of the borrower in an escrow account. 
This escrow account will be subject to escrow requirements adopted 
pursuant to section 10 of the Real Estate Settlement Procedures Act of 
1974 (12 U.S.C. 2609) (RESPA), which generally limits the amount that 
may be maintained in escrow accounts for certain types of loans and 
requires escrow account statements for those accounts, only if the loan 
is otherwise subject to RESPA. Following receipt of a notice from the 
Director of FEMA or other provider of flood insurance that premiums are 
due, the bank, or a servicer acting on behalf of the bank, shall pay the 
amount owed to the insurance provider from the escrow account by the 
date when such premiums are due.



Sec. 339.6  Required use of standard flood hazard determination form.

    (a) Use of form. A bank shall use the standard flood hazard 
determination form developed by the Director of FEMA when determining 
whether the building or mobile home offered as collateral security for a 
loan is or will be located in a special flood hazard area in which flood 
insurance is available under the Act. The standard flood hazard 
determination form may be used in a printed, computerized, or electronic 
manner. A non-member bank may obtain the standard flood hazard 
determination form by written request to FEMA, P.O. Box 2012, Jessup, MD 
20794-2012.
    (b) Retention of form. A bank shall retain a copy of the completed 
standard flood hazard determination form, in either hard copy or 
electronic form, for the period of time the bank owns the loan.

[61 FR 45706, Aug. 29, 1996, as amended at 64 FR 71274, Dec. 21, 1999]



Sec. 339.7  Forced placement of flood insurance.

    If a bank, or a servicer acting on behalf of the bank, determines, 
at any time during the term of a designated loan, that the building or 
mobile home and any personal property securing the designated loan is 
not covered by flood insurance or is covered by flood insurance in an 
amount less than the amount required under Sec. 339.3, then the bank or 
its servicer shall notify the borrower that the borrower should obtain 
flood insurance, at the borrower's expense, in an amount at least equal 
to the amount required under Sec. 339.3, for the remaining term of the 
loan. If the borrower fails to obtain flood insurance within 45 days 
after notification, then the bank or its servicer shall purchase 
insurance on the borrower's behalf. The bank or its servicer may charge 
the borrower for the cost of premiums and fees incurred in purchasing 
the insurance.

[[Page 413]]



Sec. 339.8  Determination fees.

    (a) General. Notwithstanding any Federal or State law other than the 
Flood Disaster Protection Act of 1973, as amended (42 U.S.C. 4001-4129), 
any bank, or a servicer acting on behalf of the bank, may charge a 
reasonable fee for determining whether the building or mobile home 
securing the loan is located or will be located in a special flood 
hazard area. A determination fee may also include, but is not limited 
to, a fee for life-of-loan monitoring.
    (b) Borrower fee. The determination fee authorized by paragraph (a) 
of this section may be charged to the borrower if the determination:
    (1) Is made in connection with a making, increasing, extending, or 
renewing of the loan that is initiated by the borrower;
    (2) Reflects the Director of FEMA's revision or updating of 
floodplain areas or flood-risk zones;
    (3) Reflects the Director of FEMA's publication of a notice or 
compendium that:
    (i) Affects the area in which the building or mobile home securing 
the loan is located; or
    (ii) By determination of the Director of FEMA, may reasonably 
require a determination whether the building or mobile home securing the 
loan is located in a special flood hazard area; or
    (4) Results in the purchase of flood insurance coverage by the 
lender or its servicer on behalf of the borrower under Sec. 339.7.
    (c) Purchaser or transferee fee. The determination fee authorized by 
paragraph (a) of this section may be charged to the purchaser or 
transferee of a loan in the case of the sale or transfer of the loan.



Sec. 339.9  Notice of special flood hazards and availability of Federal 

disaster relief assistance.

    (a) Notice requirement. When a bank makes, increases, extends, or 
renews a loan secured by a building or a mobile home located or to be 
located in a special flood hazard area, the bank shall mail or deliver a 
written notice to the borrower and to the servicer in all cases whether 
or not flood insurance is available under the Act for the collateral 
securing the loan.
    (b) Contents of notice. The written notice must include the 
following information:
    (1) A warning, in a form approved by the Director of FEMA, that the 
building or the mobile home is or will be located in a special flood 
hazard area;
    (2) A description of the flood insurance purchase requirements set 
forth in section 102(b) of the Flood Disaster Protection Act of 1973, as 
amended (42 U.S.C. 4012a(b));
    (3) A statement, where applicable, that flood insurance coverage is 
available under the NFIP and may also be available from private 
insurers; and
    (4) A statement whether Federal disaster relief assistance may be 
available in the event of damage to the building or mobile home caused 
by flooding in a Federally-declared disaster.
    (c) Timing of notice. The bank shall provide the notice required by 
paragraph (a) of this section to the borrower within a reasonable time 
before the completion of the transaction, and to the servicer as 
promptly as practicable after the bank provides notice to the borrower 
and in any event no later than the time the bank provides other similar 
notices to the servicer concerning hazard insurance and taxes. Notice to 
the servicer may be made electronically or may take the form of a copy 
of the notice to the borrower.
    (d) Record of receipt. The bank shall retain a record of the receipt 
of the notices by the borrower and the servicer for the period of time 
the bank owns the loan.
    (e) Alternate method of notice. Instead of providing the notice to 
the borrower required by paragraph (a) of this section, a bank may 
obtain satisfactory written assurance from a seller or lessor that, 
within a reasonable time before the completion of the sale or lease 
transaction, the seller or lessor has provided such notice to the 
purchaser or lessee. The bank shall retain a record of the written 
assurance from the seller or lessor for the period of time the bank owns 
the loan.
    (f) Use of prescribed form of notice. A bank will be considered to 
be in compliance with the requirement for notice to the borrower of this 
section by providing written notice to the borrower containing the 
language presented in

[[Page 414]]

appendix A to this part within a reasonable time before the completion 
of the transaction. The notice presented in appendix A to this part 
satisfies the borrower notice requirements of the Act.



Sec. 339.10  Notice of servicer's identity.

    (a) Notice requirement. When a bank makes, increases, extends, 
renews, sells, or transfers a loan secured by a building or mobile home 
located or to be located in a special flood hazard area, the bank shall 
notify the Director of FEMA (or the Director of FEMA's designee) in 
writing of the identity of the servicer of the loan. The Director of 
FEMA has designated the insurance provider to receive the bank's notice 
of the servicer's identity. This notice may be provided electronically 
if electronic transmission is satisfactory to the Director of FEMA's 
designee.
    (b) Transfer of servicing rights. The bank shall notify the Director 
of FEMA (or the Director of FEMA's designee) of any change in the 
servicer of a loan described in paragraph (a) of this section within 60 
days after the effective date of the change. This notice may be provided 
electronically if electronic transmission is satisfactory to the 
Director of FEMA's designee. Upon any change in the servicing of a loan 
described in paragraph (a) of this section, the duty to provide notice 
under this paragraph (b) shall transfer to the transferee servicer.



  Sec. Appendix A to Part 339--Sample Form of Notice of Special Flood 
     Hazards and Availability of Federal Disaster Relief Assistance

    We are giving you this notice to inform you that:
    The building or mobile home securing the loan for which you have 
applied is or will be located in an area with special flood hazards.
    The area has been identified by the Director of the Federal 
Emergency Management Agency (FEMA) as a special flood hazard area using 
FEMA's Flood Insurance Rate Map or the Flood Hazard Boundary Map for the 
following community: ----------------. This area has at least a one 
percent (1%) chance of a flood equal to or exceeding the base flood 
elevation (a 100-year flood) in any given year. During the life of a 30-
year mortgage loan, the risk of a 100-year flood in a special flood 
hazard area is 26 percent (26%).
    Federal law allows a lender and borrower jointly to request the 
Director of FEMA to review the determination of whether the property 
securing the loan is located in a special flood hazard area. If you 
would like to make such a request, please contact us for further 
information.
    ------ The community in which the property securing the loan is 
located participates in the National Flood Insurance Program (NFIP). 
Federal law will not allow us to make you the loan that you have applied 
for if you do not purchase flood insurance. The flood insurance must be 
maintained for the life of the loan. If you fail to purchase or renew 
flood insurance on the property, Federal law authorizes and requires us 
to purchase the flood insurance for you at your expense.
     Flood insurance coverage under the NFIP may be 
purchased through an insurance agent who will obtain the policy either 
directly through the NFIP or through an insurance company that 
participates in the NFIP. Flood insurance also may be available from 
private insurers that do not participate in the NFIP.
     At a minimum, flood insurance purchased must 
cover the lesser of:
    (1) the outstanding principal balance of the loan; or
    (2) the maximum amount of coverage allowed for the type of property 
under the NFIP.
    Flood insurance coverage under the NFIP is limited to the overall 
value of the property securing the loan minus the value of the land on 
which the property is located.
     Federal disaster relief assistance (usually in 
the form of a low-interest loan) may be available for damages incurred 
in excess of your flood insurance if your community's participation in 
the NFIP is in accordance with NFIP requirements.
    ------ Flood insurance coverage under the NFIP is not available for 
the property securing the loan because the community in which the 
property is located does not participate in the NFIP. In addition, if 
the non-participating community has been identified for at least one 
year as containing a special flood hazard area, properties located in 
the community will not be eligible for Federal disaster relief 
assistance in the event of a Federally-declared flood disaster.



PART 340_RESTRICTIONS ON SALE OF ASSETS BY THE FEDERAL DEPOSIT INSURANCE 

CORPORATION--Table of Contents




Sec.
340.1 What is the statutory authority for the regulation, what are its 
          purpose and

[[Page 415]]

          scope, and can the FDIC have other policies on related topics?
340.2 Definitions.
340.3 What are the restrictions on the sale of assets by the FDIC if the 
          buyer wants to finance the purchase with a loan from the FDIC?
340.4 What are the restrictions on the sale of assets by the FDIC 
          regardless of the method of financing?
340.5 Can the FDIC deny a loan to a buyer who is not disqualified from 
          purchasing assets using seller-financing under this 
          regulation?
340.6 What is the effect of this part on transactions that were entered 
          into before its effective date?
340.7 When is a certification required, and who does not have to provide 
          a certification?
340.8 Does this part apply in the case of a workout, resolution, or 
          settlement of obligations?

    Authority: 12 U.S.C. 1819 (Tenth), 1821(p).

    Source: 65 FR 14818, Mar. 20, 2000, unless otherwise noted.



Sec. 340.1  What is the statutory authority for the regulation, what are its 

purpose and scope, and can the FDIC have other policies on related topics?

    (a) Authority. The statutory authority for adopting this part is 
section 11(p) of the Federal Deposit Insurance Act (FDI Act), 12 U.S.C. 
1821(p). Section 11(p) was added to the FDI Act by section 20 of the 
Resolution Trust Corporation Completion Act (Pub. L. 103-204, 107 Stat. 
2369 (1993)).
    (b) Purpose. The purpose of this part is to prohibit individuals or 
entities who profited or engaged in wrongdoing at the expense of an 
insured institution, or seriously mismanaged an insured institution, 
from buying assets of failed financial institutions from the FDIC.
    (c) Scope. The restrictions of this part generally apply to assets 
of failed institutions owned or controlled by the FDIC in any capacity, 
even though the assets are not owned by the insured institution that the 
prospective purchaser injured. Unless we determine otherwise, this part 
does not apply to the sale of securities in connection with the 
investment of corporate and receivership funds pursuant to the 
Investment Policy for Liquidation Funds managed by the FDIC as it is in 
effect from time to time. In the case of a sale of securities backed by 
a pool of assets that may include assets of failed institutions by a 
trust or other entity, this part applies only to the sale of assets by 
the FDIC to an underwriter in an initial offering, and not to any other 
purchaser of the securities.
    (d) The FDIC retains the authority to establish other policies 
restricting asset sales. Neither section 11(p) of the FDI Act nor this 
part in any way limits the authority of the FDIC to establish policies 
prohibiting the sale of assets to prospective purchasers who have 
injured any failed financial institution, or to other prospective 
purchasers, such as certain employees or contractors of the FDIC, or 
individuals who are not in compliance with the terms of any debt or duty 
owed to the FDIC. Any such policies may be independent of, in 
conjunction with, or in addition to the restrictions set forth in this 
part.



Sec. 340.2  Definitions.

    (a) Associated person of an individual or entity means:
    (1) With respect to an individual:
    (i) The individual's spouse or dependent child or any member of his 
or her immediate household;
    (ii) A partnership of which the individual is or was a general or 
limited partner; or
    (iii) A corporation of which the individual is or was an officer or 
director;
    (2) With respect to a partnership, a managing or general partner of 
the partnership; or
    (3) With respect to any entity, an individual or entity who, acting 
individually or in concert with one or more individuals or entities, 
owns or controls 25 percent or more of the entity.
    (b) Default means any failure to comply with the terms of an 
obligation to such an extent that:
    (1) A judgment has been rendered in favor of the FDIC or a failed 
institution; or
    (2) In the case of a secured obligation, the property securing such 
obligation is foreclosed on.
    (c) FDIC means the Federal Deposit Insurance Corporation.
    (d) Failed institution means any bank or savings association that 
has been

[[Page 416]]

under the conservatorship or receivership of the FDIC or RTC. For the 
purpose of this part, ``failed institution'' includes any entity owned 
and controlled by a failed institution.
    (e) Obligation means any debt or duty to pay money owed to the FDIC 
or a failed institution, including any guarantee of any such debt or 
duty.
    (f) Person means an individual, or an entity with a legally 
independent existence, including: a trustee; the beneficiary of at least 
a 25 percent share of the proceeds of a trust; a partnership; a 
corporation; an association; or other organization or society.
    (g) RTC means the former Resolution Trust Corporation.
    (h) Substantial loss means:
    (1) An obligation that is delinquent for ninety (90) or more days 
and on which there remains an outstanding balance of more than $50,000;
    (2) An unpaid final judgment in excess of $50,000 regardless of 
whether it becomes forgiven in whole or in part in a bankruptcy 
proceeding;
    (3) A deficiency balance following a foreclosure of collateral in 
excess of $50,000, regardless of whether it becomes forgiven in whole or 
in part in a bankruptcy proceeding;
    (4) Any loss in excess of $50,000 evidenced by an IRS Form 1099-C 
(Information Reporting for Discharge of Indebtedness).



Sec. 340.3  What are the restrictions on the sale of assets by the FDIC if the 

buyer wants to finance the purchase with a loan from the FDIC?

    A person may not borrow money or accept credit from the FDIC in 
connection with the purchase of any assets from the FDIC or any failed 
institution if:
    (a) There has been a default with respect to one or more obligations 
totaling in excess of $1,000,000 owed by that person or its associated 
person; and
    (b) The person or its associated person made any fraudulent 
misrepresentations in connection with any such obligation(s).



Sec. 340.4  What are the restrictions on the sale of assets by the FDIC 

regardless of the method of financing?

    (a) A person may not acquire any assets from the FDIC or from any 
failed institution if the person or its associated person:
    (1) Has participated, as an officer or director of a failed 
institution or of an affiliate of a failed institution, in a material 
way in one or more transaction(s) that caused a substantial loss to that 
failed institution;
    (2) Has been removed from, or prohibited from participating in the 
affairs of, a failed institution pursuant to any final enforcement 
action by the Office of the Comptroller of the Currency, the Office of 
Thrift Supervision, the Board of Governors of the Federal Reserve 
System, the FDIC, or any of their successors;
    (3) Has demonstrated a pattern or practice of defalcation regarding 
obligations to any failed institution; or
    (4) Has been convicted of committing or conspiring to commit any 
offense under 18 U.S.C. 215, 656, 657, 1005, 1006, 1007, 1014, 1032, 
1341, 1343 or 1344 affecting any failed institution and there has been a 
default with respect to one or more obligations owed by that person or 
its associated person.
    (b) For purposes of paragraph (a) of this section, a person has 
participated ``in a material way in a transaction that caused a 
substantial loss to a failed institution'' if, in connection with a 
substantial loss to a failed institution, the person has been found in a 
final determination by a court or administrative tribunal, or is alleged 
in a judicial or administrative action brought by the FDIC or by any 
component of the government of the United States or of any state:
    (1) To have violated any law, regulation, or order issued by a 
federal or state banking agency, or breached or defaulted on a written 
agreement with a federal or state banking agency, or breached a written 
agreement with a failed institution;
    (2) To have engaged in an unsafe or unsound practice in conducting 
the affairs of a failed institution; or
    (3) To have breached a fiduciary duty owed to a failed institution.

[[Page 417]]

    (c) For purposes of paragraph (a) of this section, a person or its 
associated person has demonstrated a ``pattern or practice of 
defalcation'' regarding obligations to a failed institution if the 
person or associated person has:
    (1) Engaged in more than one transaction that created an obligation 
on the part of such person or its associated person with intent to cause 
a loss to any financial institution insured by the FDIC or with reckless 
disregard for whether such transactions would cause a loss to any such 
insured financial institution; and
    (2) The transactions, in the aggregate, caused a substantial loss to 
one or more failed institution(s).



Sec. 340.5  Can the FDIC deny a loan to a buyer who is not disqualified from 

purchasing assets using seller-financing under this regulation?

    The FDIC still has the right to make an independent determination, 
based upon all relevant facts of a person's financial condition and 
history, of that person's eligibility to receive any loan or extension 
of credit from the FDIC, even if the person is not in any way 
disqualified from purchasing assets from the FDIC under the restrictions 
set forth in this part.



Sec. 340.6  What is the effect of this part on transactions that were entered 

into before its effective date?

    This part does not affect the enforceability of a contract of sale 
and/or agreement for seller financing in effect prior to July 1, 2000.



Sec. 340.7  When is a certification required, and who does not have to provide 

a certification?

    (a) Before any person may purchase any asset from the FDIC that 
person must certify, under penalty of perjury, that none of the 
restrictions contained in this part applies to the purchase. The FDIC 
may establish the form of the certification and may change the form from 
time to time.
    (b) Notwithstanding paragraph (a) of this section, a state or 
political subdivision of a state, a federal agency or instrumentality 
such as the Government National Mortgage Association, or a federally-
regulated, government-sponsored enterprise such as Fannie Mae or Freddie 
Mac does not have to give a certification before it can purchase assets 
from the FDIC, unless the Director of the FDIC's Division of Resolutions 
and Receiverships, or his designee, in his discretion, requires a 
certification of any such entity.



Sec. 340.8  Does this part apply in the case of a workout, resolution, or 

settlement of obligations?

    The restrictions of Sec. Sec. 340.3 and 340.4 do not apply if the 
sale or transfer of an asset resolves or settles, or is part of the 
resolution or settlement of, one or more obligations, regardless of the 
amount of such obligations.



PART 341_REGISTRATION OF SECURITIES TRANSFER AGENTS--Table of Contents




Sec.
341.1 Scope.
341.2 Definitions.
341.3 Registration as securities transfer agent.
341.4 Amendments to registration.
341.5 Withdrawal from registration.
341.6 Reports.
341.7 Delegation of authority.

    Authority: Secs. 2, 3, 17, 17A and 23(a), Securities Exchange Act of 
1934, as amended (15 U.S.C. 78b, 78c, 78q, 78q-1 and 78w(a)).

    Source: 47 FR 38106, Aug. 30, 1982, unless otherwise noted.



Sec. 341.1  Scope.

    This part is issued by the Federal Deposit Insurance Corporation 
(the FDIC) under sections 2, 3(a)(34)(B), 17, 17A and 23(a) of the 
Securities Exchange Act of 1934 (the Act), as amended (15 U.S.C. 78b, 
78c(a)(34)(B), 78q, 78q-1 and 78w(a)) and applies to all insured 
nonmember banks, or subsidiaries of such banks, that act as transfer 
agents for securities registered under section 12 of the Act (15 U.S.C. 
78l), or for securities exempt from registration under subsections 
(g)(2)(B) or (g)(2)(G) of section 12 (15 U.S.C. 781(g)(2)(B) and (G)) 
(securities of investment companies, including mutual funds, and 
insurance companies). Such securities are qualifying securities for 
purposes of this part.

[[Page 418]]



Sec. 341.2  Definitions.

    For the purpose of this part, including all forms and instructions 
promulgated for use in connection herewith, unless the context otherwise 
requires:
    (a) The term transfer agent means any person who engages on behalf 
of an issuer of qualifying securities or on behalf of itself as an 
issuer of qualifying securities in: (1) Countersigning such securities 
upon issuance;
    (2) Monitoring the issuance of such securities with a view to 
preventing unauthorized issuance, a function commonly performed by a 
person called a registrar;
    (3) Registering the transfer of such securities;
    (4) Exchanging or converting such securities; or
    (5) Transferring record ownership of securities by bookkeeping entry 
without physical issuance of such securities certificates. The term 
transfer agent includes any person who performs these functions as a co-
transfer agent with respect to equity or debt issues, and any person who 
performs these functions as registrar or co-registrar with respect to 
debt issued by corporations.

    Note: The following examples are illustrative of the kinds of 
activities engaged in by transfer agents under this part.

    1. A transfer agent of stock or shares in a mutual fund maintains 
the records of shareholders and transfers stock from one shareholder to 
another by cancellation of the surrendered certificates and issuance of 
new certificates in the name of the new shareholder. A co-transfer agent 
also performs these functions.
    2. A registrar of stock or shares in a mutual fund monitors the 
issuance of such securities to prevent over-issuance of shares, affixing 
its signature of each stock certificate issued to signify its authorized 
issuance. A co-registrar also performs these functions.
    3. A registrar of corporate debt securities maintains the records of 
ownership of registered bonds; makes changes in such records; issues, 
transfers, and exchanges such certificates; and monitors the securities 
to prevent over-issuance of certificates. A co-registrar also performs 
these functions.
    (b) The term Act means the Securities Exchange Act of 1934.
    (c) The acronym ARA means the appropriate regulatory agency, as 
defined in section 3(a)(34)(B) of the Act.
    (d) The phrase Federal bank regulators means the Office of the 
Comptroller of the Currency, the Board of Governors of the Federal 
Reserve System, and the Federal Deposit Insurance Corporation.
    (e) The term Form TA-1 means the form and any attachments to that 
form, whether filed as a registration or an amendment to a registration.
    (f) The term registrant means the entity on whose behalf Form TA-1 
is filed.
    (g) The acronym SEC means the Securities and Exchange Commission.
    (h) The term insured nonmember bank means a bank whose Deposits are 
insured by the Federal Deposit Insurance Corporation and that is not a 
member of the Federal Reserve System.
    (i) The term qualifying securities means:
    (1) Securities registered on a national securities exchange;
    (2) Securities issued by a company or bank with 500 or more 
shareholders and $1 million or more in total assets, except for 
securities exempted from registration with the SEC by section 12(g)(2) 
(C, D, E, F and H) of the Act.



Sec. 341.3  Registration as securities transfer agent.

    (a) Requirement for registration. Any insured nonmember bank which 
performs any of the functions of a transfer agent as described in Sec. 
341.2(a) with respect to qualifying securities shall register with the 
FDIC in the manner indicated in this section.
    (b) Application to register as transfer agent. An application for 
registration under section 17A(c) of the Act, of a transfer agent for 
which the FDIC is the appropriate regulatory agency, as defined in 
section 3(a)(34)(B)(iii) of the Act, shall be filed with the FDIC at its 
Washington, DC headquarters on Form TA-1, in accordance with the 
instructions contained therein.
    (c) Effective date of registration. Registration shall become 
effective 30 days after the date an application on Form

[[Page 419]]

TA-1 is filed unless the FDIC accelerates, denies, or postpones such 
registration in accordance with section 17A(c) of the Act. The effective 
date of such registration may be postponed by order for a period not to 
exceed 15 days. Postponement of registration for more than 15 days shall 
be after notice and opportunity for hearing. Form TA-1 is available upon 
request from the Review Unit, Division of Supervision and Consumer 
Protection (DSC), FDIC, Washington, DC 20429.

[47 FR 38106, Aug. 30, 1982, as amended at 60 FR 31384, June 15, 1995]



Sec. 341.4  Amendments to registration.

    (a) Within 60 calendar days following the date which any information 
reported on Form TA-1 becomes inaccurate, misleading, or incomplete, the 
registrant shall file an amendment on Form TA-1 correcting the 
inaccurate, misleading, or incomplete information.
    (b) The filing of an amendment to an application for registration as 
a transfer agent under Sec. 341.3, which registration has not become 
effective, shall postpone the effective date of the registration for 30 
days following the date on which the amendment is filed unless the FDIC 
accelerates, denies, or postpones the registration in accordance with 
section 17A(c) of the Act.

[47 FR 38106, Aug. 30, 1982, as amended at 52 FR 1182, Jan. 12, 1987]



Sec. 341.5  Withdrawal from registration.

    (a) Notice of withdrawal from registration. Any transfer agent 
registered under this part that ceases to engage in the functions of a 
transfer agent as defined in Sec. 341.2(a) shall file a written notice 
of withdrawal from registration with the FDIC. A registered transfer 
agent that ceases to engage in one or more of the functions of transfer 
agent as defined in Sec. 341.2(a), but continues to engage in another 
such function, shall not withdraw from registration.
    (b) A notice of withdrawal shall be filed with the FDIC at its 
Washington, DC headquarters. Deregistration shall be effective upon 
receipt of notice of withdrawal by the FDIC. A Request for 
Deregistration form is available from the Review Unit, Division of 
Supervision and Consumer Protection (DSC), FDIC, Washington, DC 20429.
    (c) If the FDIC finds that any registered transfer agent for which 
it is the ARA, is no longer in existence or has ceased to do business as 
a transfer agent, FDIC shall cancel or deny the registration by order of 
the Board of Directors.
    (d) Registration of a transfer agent with another ARA shall cancel 
registration of the transfer agent with FDIC.

[47 FR 38106, Aug. 30, 1982, as amended at 60 FR 31384, June 15, 1995]



Sec. 341.6  Reports.

    Every registration or amendment filed under this section shall 
constitute a report or application within the meaning or sections 17, 
17A(c), and 32(a) of the Act.



Sec. 341.7  Delegation of authority.

    (a) Except as provided in paragraph (b) of this section, authority 
is delegated to the Director and Deputy Director (DSC) and, where 
confirmed in writing by the Director, to an associate director and the 
appropriate regional director and deputy regional director, to act on 
disclosure matters under and pursuant to sections 17 and 17A of the 
Securities Exchange Act of 1934 (15 U.S.C. 78).
    (b) Authority to act on disclosure matters is retained by the Board 
of Directors when such matters involve exemption from registration 
requirements pursuant to section 17A(c)(1) of the Securities Exchange 
Act of 1934 (15 U.S.C. 78q-1(c)(1)).

[63 FR 44750, Aug. 20, 1998]

                           PART 342 [RESERVED]



PART 343_CONSUMER PROTECTION IN SALES OF INSURANCE--Table of Contents




Sec.
343.10 Purpose and scope.
343.20 Definitions.
343.30 Prohibited practices.
343.40 What you must disclose.
343.50 Where insurance activities may take place.
343.60 Qualification and licensing requirements for insurance sales 
          personnel.

[[Page 420]]


Appendix A to Part 343--Consumer Grievance Process

    Authority: 12 U.S.C. 1819 (Seventh and Tenth); 12 U.S.C. 1831x.

    Source: 65 FR 75843, Dec. 4, 2000, unless otherwise noted.



Sec. 343.10  Purpose and scope.

    This part establishes consumer protections in connection with retail 
sales practices, solicitations, advertising, or offers of any insurance 
product or annuity to a consumer by:
    (a) Any bank; or
    (b) Any other person that is engaged in such activities at an office 
of the bank or on behalf of the bank.



Sec. 343.20  Definitions.

    As used in this part:
    (a) Affiliate means a company that controls, is controlled by, or is 
under common control with another company.
    (b) Bank means an FDIC-insured, state-chartered commercial or 
savings bank that is not a member of the Federal Reserve System and for 
which the FDIC is the appropriate federal banking agency pursuant to 
section 3(q) of the Federal Deposit Insurance Act (12 U.S.C. 1813(q)).
    (c) Company means any corporation, partnership, business trust, 
association or similar organization, or any other trust (unless by its 
terms the trust must terminate within twenty-five years or not later 
than twenty-one years and ten months after the death of individuals 
living on the effective date of the trust). It does not include any 
corporation the majority of the shares of which are owned by the United 
States or by any State, or a qualified family partnership, as defined in 
section 2(o)(10) of the Bank Holding Company Act of 1956, as amended (12 
U.S.C. 1841(o)(10)).
    (d) Consumer means an individual who purchases, applies to purchase, 
or is solicited to purchase from you insurance products or annuities 
primarily for personal, family, or household purposes.
    (e) Control of a company has the same meaning as in section 3(w)(5) 
of the Federal Deposit Insurance Act (12 U.S.C. 1813(w)(5)).
    (f) Domestic violence means the occurrence of one or more of the 
following acts by a current or former family member, household member, 
intimate partner, or caretaker:
    (1) Attempting to cause or causing or threatening another person 
physical harm, severe emotional distress, psychological trauma, rape, or 
sexual assault;
    (2) Engaging in a course of conduct or repeatedly committing acts 
toward another person, including following the person without proper 
authority, under circumstances that place the person in reasonable fear 
of bodily injury or physical harm;
    (3) Subjecting another person to false imprisonment; or
    (4) Attempting to cause or causing damage to property so as to 
intimidate or attempt to control the behavior of another person.
    (g) Electronic media includes any means for transmitting messages 
electronically between you and a consumer in a format that allows visual 
text to be displayed on equipment, for example, a personal computer 
monitor.
    (h) Office means the premises of a bank where retail deposits are 
accepted from the public.
    (i) Subsidiary has the same meaning as in section 3(w)(4) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(w)(4)).
    (j) (1) You means:
    (i) A bank; or
    (ii) Any other person only when the person sells, solicits, 
advertises, or offers an insurance product or annuity to a consumer at 
an office of the bank or on behalf of a bank.
    (2) For purposes of this definition, activities on behalf of a bank 
include activities where a person, whether at an office of the bank or 
at another location sells, solicits, advertises, or offers an insurance 
product or annuity and at least one of the following applies:
    (i) The person represents to a consumer that the sale, solicitation, 
advertisement, or offer of any insurance product or annuity is by or on 
behalf of the bank;
    (ii) The bank refers a consumer to a seller of insurance products or 
annuities and the bank has a contractual arrangement to receive 
commissions or

[[Page 421]]

fees derived from a sale of an insurance product or annuity resulting 
from that referral; or
    (iii) Documents evidencing the sale, solicitation, advertising, or 
offer of an insurance product or annuity identify or refer to the bank.



Sec. 343.30  Prohibited practices.

    (a) Anticoercion and antitying rules. You may not engage in any 
practice that would lead a consumer to believe that an extension of 
credit, in violation of section 106(b) of the Bank Holding Company Act 
Amendments of 1970 (12 U.S.C. 1972), is conditional upon either:
    (1) The purchase of an insurance product or annuity from the bank or 
any of its affiliates; or
    (2) An agreement by the consumer not to obtain, or a prohibition on 
the consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (b) Prohibition on misrepresentations generally. You may not engage 
in any practice or use any advertisement at any office of, or on behalf 
of, the bank or a subsidiary of the bank that could mislead any person 
or otherwise cause a reasonable person to reach an erroneous belief with 
respect to:
    (1) The fact that an insurance product or annuity sold or offered 
for sale by you or any subsidiary of the bank is not backed by the 
Federal government or the bank, or the fact that the insurance product 
or annuity is not insured by the Federal Deposit Insurance Corporation;
    (2) In the case of an insurance product or annuity that involves 
investment risk, the fact that there is an investment risk, including 
the potential that principal may be lost and that the product may 
decline in value; or
    (3) In the case of a bank or subsidiary of the bank at which 
insurance products or annuities are sold or offered for sale, the fact 
that:
    (i) The approval of an extension of credit to a consumer by the bank 
or subsidiary may not be conditioned on the purchase of an insurance 
product or annuity by the consumer from the bank or a subsidiary of the 
bank; and
    (ii) The consumer is free to purchase the insurance product or 
annuity from another source.
    (c) Prohibition on domestic violence discrimination. You may not 
sell or offer for sale, as principal, agent, or broker, any life or 
health insurance product if the status of the applicant or insured as a 
victim of domestic violence or as a provider of services to victims of 
domestic violence is considered as a criterion in any decision with 
regard to insurance underwriting, pricing, renewal, or scope of coverage 
of such product, or with regard to the payment of insurance claims on 
such product, except as required or expressly permitted under State law.



Sec. 343.40  What you must disclose.

    (a) Insurance disclosures. In connection with the initial purchase 
of an insurance product or annuity by a consumer from you, you must 
disclose to the consumer, except to the extent the disclosure would not 
be accurate, that:
    (1) The insurance product or annuity is not a deposit or other 
obligation of, or guaranteed by, the bank or an affiliate of the bank;
    (2) The insurance product or annuity is not insured by the Federal 
Deposit Insurance Corporation (FDIC) or any other agency of the United 
States, the bank, or (if applicable) an affiliate of the bank; and
    (3) In the case of an insurance product or annuity that involves an 
investment risk, there is investment risk associated with the product, 
including the possible loss of value.
    (b) Credit disclosure. In the case of an application for credit in 
connection with which an insurance product or annuity is solicited, 
offered, or sold, you must disclose that the bank may not condition an 
extension of credit on either:
    (1) The consumer's purchase of an insurance product or annuity from 
the bank or any of its affiliates; or
    (2) The consumer's agreement not to obtain, or a prohibition on the 
consumer from obtaining, an insurance product or annuity from an 
unaffiliated entity.
    (c) Timing and method of disclosures--(1) In general. The 
disclosures required by paragraph (a) of this section must be provided 
orally and in writing before the completion of the initial sale of an

[[Page 422]]

insurance product or annuity to a consumer. The disclosure required by 
paragraph (b) of this section must be made orally and in writing at the 
time the consumer applies for an extension of credit in connection with 
which an insurance product or annuity is solicited, offered, or sold.
    (2) Exception for transactions by mail. If a sale of an insurance 
product or annuity is conducted by mail, you are not required to make 
the oral disclosures required by paragraph (a) of this section. If you 
take an application for credit by mail, you are not required to make the 
oral disclosure required by paragraph (b).
    (3) Exception for transactions by telephone. If a sale of an 
insurance product or annuity is conducted by telephone, you may provide 
the written disclosures required by paragraph (a) of this section by 
mail within 3 business days beginning on the first business day after 
the sale, excluding Sundays and the legal public holidays specified in 5 
U.S.C. 6103(a). If you take an application for credit by telephone, you 
may provide the written disclosure required by paragraph (b) of this 
section by mail, provided you mail it to the consumer within three days 
beginning the first business day after the application is taken, 
excluding Sundays and the legal public holidays specified in 5 U.S.C. 
6103(a).
    (4) Electronic form of disclosures. (i) Subject to the requirements 
of section 101(c) of the Electronic Signatures in Global and National 
Commerce Act (12 U.S.C. 7001(c)), you may provide the written 
disclosures required by paragraph (a) and (b) of this section through 
electronic media instead of on paper, if the consumer affirmatively 
consents to receiving the disclosures electronically and if the 
disclosures are provided in a format that the consumer may retain or 
obtain later, for example, by printing or storing electronically (such 
as by downloading).
    (ii) Any disclosure required by paragraphs (a) or (b) of this 
section that is provided by electronic media is not required to be 
provided orally.
    (5) Disclosures must be readily understandable. The disclosures 
provided shall be conspicuous, simple, direct, readily understandable, 
and designed to call attention to the nature and significance of the 
information provided. For instance, you may use the following 
disclosures in visual media, such as television broadcasting, ATM 
screens, billboards, signs, posters and written advertisements and 
promotional materials, as appropriate and consistent with paragraphs (a) 
and (b) of this section:

 NOT A DEPOSIT
 NOT FDIC-INSURED
 NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY
 NOT GUARANTEED BY THE BANK
 MAY GO DOWN IN VALUE

    (6) Disclosures must be meaningful. (i) You must provide the 
disclosures required by paragraphs (a) and (b) of this section in a 
meaningful form. Examples of the types of methods that could call 
attention to the nature and significance of the information provided 
include:
    (A) A plain-language heading to call attention to the disclosures;
    (B) A typeface and type size that are easy to read;
    (C) Wide margins and ample line spacing;
    (D) Boldface or italics for key words; and
    (E) Distinctive type size, style, and graphic devices, such as 
shading or sidebars, when the disclosures are combined with other 
information.
    (ii) You have not provided the disclosures in a meaningful form if 
you merely state to the consumer that the required disclosures are 
available in printed material, but do not provide the printed material 
when required and do not orally disclose the information to the consumer 
when required.
    (iii) With respect to those disclosures made through electronic 
media for which paper or oral disclosures are not required, the 
disclosures are not meaningfully provided if the consumer may bypass the 
visual text of the disclosures before purchasing an insurance product or 
annuity.
    (7) Consumer acknowledgment. You must obtain from the consumer, at 
the time a consumer receives the disclosures required under paragraphs 
(a) or (b) of this section, or at the time of the initial purchase by 
the consumer of an

[[Page 423]]

insurance product or annuity, a written acknowledgment by the consumer 
that the consumer received the disclosures. You may permit a consumer to 
acknowledge receipt of the disclosures electronically or in paper form. 
If the disclosures required under paragraphs (a) or (b) of this section 
are provided in connection with a transaction that is conducted by 
telephone, you must:
    (i) Obtain an oral acknowledgment of receipt of the disclosures and 
maintain sufficient documentation to show that the acknowledgment was 
given; and
    (ii) Make reasonable efforts to obtain a written acknowledgment from 
the consumer.
    (d) Advertisements and other promotional material for insurance 
products or annuities. The disclosures described in paragraph (a) of 
this section are required in advertisements and promotional material for 
insurance products or annuities unless the advertisements and 
promotional materials are of a general nature describing or listing the 
services or products offered by the bank.



Sec. 343.50  Where insurance activities may take place.

    (a) General rule. A bank must, to the extent practicable, keep the 
area where the bank conducts transactions involving insurance products 
or annuities physically segregated from areas where retail deposits are 
routinely accepted from the general public, identify the areas where 
insurance product or annuity sales activities occur, and clearly 
delineate and distinguish those areas from the areas where the bank's 
retail deposit-taking activities occur.
    (b) Referrals. Any person who accepts deposits from the public in an 
area where such transactions are routinely conducted in the bank may 
refer a consumer who seeks to purchase an insurance product or annuity 
to a qualified person who sells that product only if the person making 
the referral receives no more than a one-time, nominal fee of a fixed 
dollar amount for each referral that does not depend on whether the 
referral results in a transaction.



Sec. 343.60  Qualification and licensing requirements for insurance sales 

personnel.

    A bank may not permit any person to sell or offer for sale any 
insurance product or annuity in any part of its office or on its behalf, 
unless the person is at all times appropriately qualified and licensed 
under applicable State insurance licensing standards with regard to the 
specific products being sold or recommended.



         Sec. Appendix A to Part 343--Consumer Grievance Process

    Any consumer who believes that any bank or any other person selling, 
soliciting, advertising, or offering insurance products or annuities to 
the consumer at an office of the bank or on behalf of the bank has 
violated the requirements of this part should contact the Division of 
Supervision and Consumer Protection (DSC), Federal Deposit Insurance 
Corporation, at the following address: 550 17th Street, NW., Washington, 
DC 20429, or telephone 202-942-3100 or 800-934-3342, or e-mail 
[email protected].



PART 344_RECORDKEEPING AND CONFIRMATION REQUIREMENTS FOR SECURITIES 

TRANSACTIONS--Table of Contents




Sec.
344.1 Purpose and scope.
344.2 Exceptions.
344.3 Definitions.
344.4 Recordkeeping.
344.5 Content and time of notification.
344.6 Notification by agreement; alternative forms and times of 
          notification.
344.7 Settlement of securities transactions.
344.8 Securities trading policies and procedures.
344.9 Personal securities trading reporting by bank officers and 
          employees.
344.10 Waivers.

    Authority: 12 U.S.C. 1817, 1818 and 1819.

    Source: 62 FR 9919, Mar. 5, 1997, unless otherwise noted.



Sec. 344.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to ensure that purchasers 
of securities in transactions effected by a state nonmember insured bank 
(except a District bank) or a foreign bank having an insured branch are 
provided adequate information regarding transactions. This part is also 
designed to ensure

[[Page 424]]

that banks subject to this part maintain adequate records and controls 
with respect to the securities transactions they effect.
    (b) Scope; general. Any security transaction effected for a customer 
by a bank is subject to this part unless excepted by Sec. 344.2. A bank 
effecting transactions in government securities is subject to the 
notification, recordkeeping, and policies and procedures requirements of 
this part. This part also applies to municipal securities transactions 
by a bank that is not registered as a ``municipal securities dealer'' 
with the Securities and Exchange Commission. See 15 U.S.C. 78c(a)(30) 
and 78o-4.



Sec. 344.2  Exceptions.

    (a) A bank effecting securities transactions for customers is not 
subject to all or part of this part 344 to the extent that they qualify 
for one or more of the following exceptions:
    (1) Small number of transactions. The requirements of Sec. Sec. 
344.4(a) (2) through (4) and 344.8(a) (1) through (3) do not apply to a 
bank effecting an average of fewer than 200 securities transactions per 
year for customers over the prior three calendar year period. The 
calculation of this average does not include transactions in government 
securities.
    (2) Government securities. The recordkeeping requirements of Sec. 
344.4 do not apply to banks effecting fewer than 500 government 
securities brokerage transactions per year. This exemption does not 
apply to government securities dealer transactions by banks.
    (3) Municipal securities. This part does not apply to transactions 
in municipal securities effected by a bank registered with the 
Securities and Exchange Commission as a ``municipal securities dealer'' 
as defined in title 15 U.S.C. 78c(a)(30). See 15 U.S.C. 78o-4.
    (4) Foreign branches. Activities of foreign branches of a bank shall 
not be subject to the requirements of this part.
    (5) Transactions effected by registered broker/dealers. (i) This 
part does not apply to securities transactions effected for a bank 
customer by a registered broker/dealer if:
    (A) The broker/dealer is fully disclosed to the bank customer; and
    (B) The bank customer has a direct contractual agreement with the 
broker/dealer.
    (ii) This exemption extends to bank arrangements with broker/dealers 
which involve bank employees when acting as employees of, and subject to 
the supervision of, the registered broker/dealer when soliciting, 
recommending, or effecting securities transactions.
    (b) Safe and sound operations. Notwithstanding this section, every 
bank effecting securities transactions for customers shall maintain, 
directly or indirectly, effective systems of records and controls 
regarding their customer securities transactions to ensure safe and 
sound operations. The records and systems maintained must clearly and 
accurately reflect the information required under this part and provide 
an adequate basis for an audit.



Sec. 344.3  Definitions.

    (a) Asset-backed security means a security that is serviced 
primarily by the cash flows of a discrete pool of receivables or other 
financial assets, either fixed or revolving, that by their terms convert 
into cash within a finite time period plus any rights or other assets 
designed to assure the servicing or timely distribution of proceeds to 
the security holders.
    (b) Bank means a state nonmember insured bank (except a District 
bank) or a foreign bank having an insured branch.
    (c) Cash management sweep account means a prearranged, automatic 
transfer of funds above a certain dollar level from a deposit account to 
purchase a security or securities, or any prearranged, automatic 
redemption or sale of a security or securities when a deposit account 
drops below a certain level with the proceeds being transferred into a 
deposit account.
    (d) Collective investment fund means funds held by a bank as 
fiduciary and, consistent with local law, invested collectively:
    (1) In a common trust fund maintained by such bank exclusively for 
the collective investment and reinvestment of monies contributed thereto 
by

[[Page 425]]

the bank in its capacity as trustee, executor, administrator, guardian, 
or custodian under the Uniform Gifts to Minors Act; or
    (2) In a fund consisting solely of assets of retirement, pension, 
profit sharing, stock bonus or similar trusts which are exempt from 
Federal income taxation under the Internal Revenue Code (26 U.S.C.).
    (e) Completion of the transaction means:
    (1) For purchase transactions, the time when the customer pays the 
bank any part of the purchase price (or the time when the bank makes the 
book-entry for any part of the purchase price, if applicable), however, 
if the customer pays for the security prior to the time payment is 
requested or becomes due, then the transaction shall be completed when 
the bank transfers the security into the account of the customer; and
    (2) For sale transactions, the time when the bank transfers the 
security out of the account of the customer or, if the security is not 
in the bank's custody, then the time when the security is delivered to 
the bank, however, if the customer delivers the security to the bank 
prior to the time delivery is requested or becomes due then the 
transaction shall be completed when the bank makes payment into the 
account of the customer.
    (f) Crossing of buy and sell orders means a security transaction in 
which the same bank acts as agent for both the buyer and the seller.
    (g) Customer means any person or account, including any agency, 
trust, estate, guardianship, or other fiduciary account for which a bank 
effects or participates in effecting the purchase or sale of securities, 
but does not include a broker, dealer, bank acting as a broker or a 
dealer, issuer of the securities that are the subject of the transaction 
or a person or account having a direct, contractual agreement with a 
fully disclosed broker/dealer.
    (h) Debt security means any security, such as a bond, debenture, 
note, or any other similar instrument that evidences a liability of the 
issuer (including any security of this type that is convertible into 
stock or a similar security) and fractional or participation interests 
in one or more of any of the foregoing; provided, however, that 
securities issued by an investment company registered under the 
Investment Company Act of 1940, 15 U.S.C. 80a-1 et seq., shall not be 
included in this definition.
    (i) Government security means:
    (1) A security that is a direct obligation of, or obligation 
guaranteed as to principal and interest by, the United States;
    (2) A security that is issued or guaranteed by a corporation in 
which the United States has a direct or indirect interest and which is 
designated by the Secretary of the Treasury for exemption as necessary 
or appropriate in the public interest or for the protection of 
investors;
    (3) A security issued or guaranteed as to principal and interest by 
any corporation whose securities are designated, by statute specifically 
naming the corporation, to constitute exempt securities within the 
meaning of the laws administered by the Securities and Exchange 
Commission; or
    (4) Any put, call, straddle, option, or privilege on a security 
described in paragraph (i) (1), (2), or (3) of this section other than a 
put, call, straddle, option, or privilege that is traded on one or more 
national securities exchanges, or for which quotations are disseminated 
through an automated quotation system operated by a registered 
securities association.
    (j) Investment discretion means that, with respect to an account, a 
bank directly or indirectly:
    (1) Is authorized to determine what securities or other property 
shall be purchased or sold by or for the account; or
    (2) Makes decisions as to what securities or other property shall be 
purchased or sold by or for the account even though some other person 
may have responsibility for these investment decisions.
    (k) Municipal security means a security which is a direct obligation 
of, or an obligation guaranteed as to principal or interest by, a State 
or any political subdivision, or any agency or instrumentality of a 
State or any political subdivision, or any municipal corporate 
instrumentality of one or more

[[Page 426]]

States or any security which is an industrial development bond (as 
defined in 26 U.S.C. 103(c)(2)) the interest on which is excludable from 
gross income under 26 U.S.C. 103(a)(1) if, by reason of the application 
of paragraph (4) or (6) of 26 U.S.C. 103(c) (determined as if paragraphs 
(4)(A), (5) and (7) were not included in 26 U.S.C. 103(c), paragraph (1) 
of 26 U.S.C. 103(c) does not apply to such security.
    (l) Periodic plan means any written authorization for a bank to act 
as agent to purchase or sell for a customer a specific security or 
securities, in a specific amount (calculated in security units or 
dollars) or to the extent of dividends and funds available, at specific 
time intervals, and setting forth the commission or charges to be paid 
by the customer or the manner of calculating them. Periodic plans 
include dividend reinvestment plans, automatic investment plans, and 
employee stock purchase plans.
    (m) Security means any note, stock, treasury stock, bond, debenture, 
certificate of interest or participation in any profit-sharing agreement 
or in any oil, gas, or other mineral royalty or lease, any collateral-
trust certificate, preorganization certificate or subscription, 
transferable share, investment contract, voting-trust certificate, and 
any put, call, straddle, option, or privilege on any security or group 
or index of securities (including any interest therein or based on the 
value thereof), or, in general, any instrument commonly known as a 
``security''; or any certificate of interest or participation in, 
temporary or interim certificate for, receipt for, or warrant or right 
to subscribe to or purchase, any of the foregoing. The term security 
does not include:
    (1) A deposit or share account in a federally or state insured 
depository institution;
    (2) A loan participation;
    (3) A letter of credit or other form of bank indebtedness incurred 
in the ordinary course of business;
    (4) Currency;
    (5) Any note, draft, bill of exchange, or bankers acceptance which 
has a maturity at the time of issuance of not exceeding nine months, 
exclusive of days of grace, or any renewal thereof the maturity of which 
is likewise limited;
    (6) Units of a collective investment fund;
    (7) Interests in a variable amount (master) note of a borrower of 
prime credit; or
    (8) U.S. Savings Bonds.



Sec. 344.4  Recordkeeping.

    (a) General rule. A bank effecting securities transactions for 
customers shall maintain the following records for at least three years:
    (1) Chronological records. An itemized daily record of each purchase 
and sale of securities maintained in chronological order, and including:
    (i) Account or customer name for which each transaction was 
effected;
    (ii) Description of the securities;
    (iii) Unit and aggregate purchase or sale price;
    (iv) Trade date; and
    (v) Name or other designation of the broker/dealer or other person 
from whom the securities were purchased or to whom the securities were 
sold;
    (2) Account records. Account records for each customer, reflecting:
    (i) Purchases and sales of securities;
    (ii) Receipts and deliveries of securities;
    (iii) Receipts and disbursements of cash; and
    (iv) Other debits and credits pertaining to transactions in 
securities;
    (3) A separate memorandum (order ticket) of each order to purchase 
or sell securities (whether executed or canceled), which shall include:
    (i) The accounts for which the transaction was effected;
    (ii) Whether the transaction was a market order, limit order, or 
subject to special instructions;
    (iii) The time the order was received by the trader or other bank 
employee responsible for effecting the transaction;
    (iv) The time the order was placed with the broker/dealer, or if 
there was no broker/dealer, time the order was executed or canceled;
    (v) The price at which the order was executed; and
    (vi) The broker/dealer utilized;
    (4) Record of broker/dealers. A record of all broker/dealers 
selected by the

[[Page 427]]

bank to effect securities transactions and the amount of commissions 
paid or allocated to each broker during the calendar year; and
    (5) Notifications. A copy of the written notification required by 
Sec. Sec. 344.5 and 344.6.
    (b) Manner of maintenance. Records may be maintained in whatever 
manner, form or format a bank deems appropriate, provided however, the 
records required by this section must clearly and accurately reflect the 
information required and provide an adequate basis for the audit of the 
information. Records may be maintained in hard copy, automated or 
electronic form provided the records are easily retrievable, readily 
available for inspection, and capable of being reproduced in a hard 
copy. A bank may contract with third party service providers, including 
broker/dealers, to maintain records required under this part.



Sec. 344.5  Content and time of notification.

    Every bank effecting a securities transaction for a customer shall 
give or send, by mail, facsimile or other means of electronic 
transmission, to the customer at or before completion of the transaction 
one of the types of written notification identified below:
    (a) Broker/dealer's confirmations. (1) A copy of the confirmation of 
a broker/dealer relating to the securities transaction. A bank may 
either have the broker/dealer send the confirmation directly to the 
bank's customer or send a copy of the broker/dealer's confirmation to 
the customer upon receipt of the confirmation by the bank. If a bank 
chooses to send a copy of the broker/dealer's confirmation, it must be 
sent within one business day from the bank's receipt of the broker/
dealer's confirmation; and
    (2) If the bank is to receive remuneration from the customer or any 
other source in connection with the transaction, a statement of the 
source and amount of any remuneration to be received if such would be 
required under paragraph (b)(6) of this section; or
    (b) Written notification. A written notification disclosing:
    (1) Name of the bank;
    (2) Name of the customer;
    (3) Whether the bank is acting as agent for such customer, as agent 
for both such customer and some other person, as principal for its own 
account, or in any other capacity;
    (4) The date and time of execution, or the fact that the time of 
execution will be furnished within a reasonable time upon written 
request of the customer, and the identity, price, and number of shares 
or units (or principal amount in the case of debt securities) of the 
security purchased or sold by the customer;
    (5) The amount of any remuneration received or to be received, 
directly or indirectly, by any broker/dealer from such customer in 
connection with the transaction;
    (6)(i) The amount of any remuneration received or to be received by 
the bank from the customer, and the source and amount of any other 
remuneration received or to be received by the bank in connection with 
the transaction, unless:
    (A) Remuneration is determined pursuant to a prior written agreement 
between the bank and the customer; or
    (B) In the case of government securities and municipal securities, 
the bank received the remuneration in other than an agency transaction; 
or
    (C) In the case of open end investment company securities, the bank 
has provided the customer with a current prospectus which discloses all 
current fees, loads and expenses at or before completion of the 
transaction;
    (ii) If the bank elects not to disclose the source and amount of 
remuneration it has or will receive from a party other than the customer 
pursuant to paragraph (b)(6)(i) (A), (B), or (C) of this section, the 
written notification must disclose whether the bank has received or will 
receive remuneration from a party other than the customer, and that the 
bank will furnish within a reasonable time the source and amount of this 
remuneration upon written request of the customer. This election is not 
available, however, if, with respect to a purchase, the bank was 
participating in a distribution of that security; or, with respect to a 
sale, the bank was participating in a tender offer for that security;

[[Page 428]]

    (7) Name of the broker/dealer utilized; or where there is no broker/
dealer, the name of the person from whom the security was purchased or 
to whom the security was sold, or a statement that the bank will furnish 
this information within a reasonable time upon written request;
    (8) In the case of a transaction in a debt security subject to 
redemption before maturity, a statement to the effect that the debt 
security may be redeemed in whole or in part before maturity, that the 
redemption could affect the yield represented and that additional 
information is available upon request;
    (9) In the case of a transaction in a debt security effected 
exclusively on the basis of a dollar price:
    (i) The dollar price at which the transaction was effected; and
    (ii) The yield to maturity calculated from the dollar price, 
provided however, that this shall not apply to a transaction in a debt 
security that either has a maturity date that may be extended by the 
issuer thereof, with a variable interest payable thereon, or is an 
asset-backed security that represents an interest in or is secured by a 
pool of receivables or other financial assets that are subject 
continuously to prepayment;
    (10) In the case of a transaction in a debt security effected on the 
basis of yield:
    (i) The yield at which the transaction was effected, including the 
percentage amount and its characterization (e.g., current yield, yield 
to maturity, or yield to call) and if effected at yield to call, the 
type of call, the call date and call price;
    (ii) The dollar price calculated from the yield at which the 
transaction was effected; and
    (iii) If effected on a basis other than yield to maturity and the 
yield to maturity is lower than the represented yield, the yield to 
maturity as well as the represented yield; provided however, that this 
paragraph (b)(10) shall not apply to a transaction in a debt security 
that either has a maturity date that may be extended by the issuer with 
a variable interest rate payable thereon, or is an asset-backed security 
that represents an interest in or is secured by a pool of receivables or 
other financial assets that are subject continuously to prepayment;
    (11) In the case of a transaction in a debt security that is an 
asset-backed security, which represents an interest in or is secured by 
a pool of receivables or other financial assets that are subject 
continuously to prepayment, a statement indicating that the actual yield 
of the asset-backed security may vary according to the rate at which the 
underlying receivables or other financial assets are prepaid and a 
statement of the fact that information concerning the factors that 
affect yield (including at a minimum estimated yield, weighted average 
life, and the prepayment assumptions underlying yield) will be furnished 
upon written request of the customer; and
    (12) In the case of a transaction in a debt security, other than a 
government security, that the security is unrated by a nationally 
recognized statistical rating organization, if that is the case.



Sec. 344.6  Notification by agreement; alternative forms and times of 

notification.

    A bank may elect to use the following alternative notification 
procedures if the transaction is effected for:
    (a) Notification by agreement. Accounts (except periodic plans) 
where the bank does not exercise investment discretion and the bank and 
the customer agree in writing to a different arrangement as to the time 
and content of the written notification; provided however, that such 
agreement makes clear the customer's right to receive the written 
notification pursuant to Sec. 344.5 (a) or (b) at no additional cost to 
the customer.
    (b) Trust accounts. Accounts (except collective investment funds) 
where the bank exercises investment discretion in other than in an 
agency capacity, in which instance the bank shall, upon request of the 
person having the power to terminate the account or, if there is no such 
person, upon the request of any person holding a vested beneficial 
interest in such account, give or send to such person the written 
notification within a reasonable time. The bank may charge such person a 
reasonable fee for providing this information.

[[Page 429]]

    (c) Agency accounts. Accounts where the bank exercises investment 
discretion in an agency capacity, in which instance:
    (1) The bank shall give or send to each customer not less frequently 
than once every three months an itemized statement which shall specify 
the funds and securities in the custody or possession of the bank at the 
end of such period and all debits, credits and transactions in the 
customer's accounts during such period; and
    (2) If requested by the customer, the bank shall give or send to 
each customer within a reasonable time the written notification 
described in Sec. 344.5. The bank may charge a reasonable fee for 
providing the information described in Sec. 344.5.
    (d) Cash management sweep accounts. A bank effecting a securities 
transaction for a cash management sweep account shall give or send its 
customer a written statement, in the same form as required under 
paragraph (f) of this section, for each month in which a purchase or 
sale of a security takes place in the account and not less than once 
every three months if there are no securities transactions in the 
account. Notwithstanding the provisions of this paragraph (d), banks 
that retain custody of government securities that are the subject of a 
hold-in-custody repurchase agreement are subject to the requirements of 
17 CFR 403.5(d).
    (e) Collective investment fund accounts. The bank shall at least 
annually give or send to the customer a copy of a financial report of 
the fund, or provide notice that a copy of such report is available and 
will be furnished upon request to each person to whom a regular periodic 
accounting would ordinarily be rendered with respect to each 
participating account. This report shall be based upon an audit made by 
independent public accountants or internal auditors responsible only to 
the board of directors of the bank.
    (f) Periodic plan accounts. The bank shall give or send to the 
customer not less than once every three months a written statement 
showing:
    (1) The funds and securities in the custody or possession of the 
bank;
    (2) All service charges and commissions paid by the customer in 
connection with the transaction; and
    (3) All other debits and credits of the customer's account involved 
in the transaction; provided that upon written request of the customer, 
the bank shall give or send the information described in Sec. 344.5, 
except that any such information relating to remuneration paid in 
connection with the transaction need not be provided to the customer 
when the remuneration is paid by a source other than the customer. The 
bank may charge a reasonable fee for providing information described in 
Sec. 344.5.



Sec. 344.7  Settlement of securities transactions.

    (a) A bank shall not effect or enter into a contract for the 
purchase or sale of a security (other than an exempted security as 
defined in 15 U.S.C. 78c(a)(12), government security, municipal 
security, commercial paper, bankers' acceptances, or commercial bills) 
that provides for payment of funds and delivery of securities later than 
the third business day after the date of the contract unless otherwise 
expressly agreed to by the parties at the time of the transaction.
    (b) Paragraphs (a) and (c) of this section shall not apply to 
contracts:
    (1) For the purchase or sale of limited partnership interests that 
are not listed on an exchange or for which quotations are not 
disseminated through an automated quotation system of a registered 
securities association; or
    (2) For the purchase or sale of securities that the Securities and 
Exchange Commission (SEC) may from time to time, taking into account 
then existing market practices, exempt by order from the requirements of 
paragraph (a) of SEC Rule 15c6-1, 17 CFR 240.15c6-1(a), either 
unconditionally or on specified terms and conditions, if the SEC 
determines that an exemption is consistent with the public interest and 
the protection of investors.
    (c) Paragraph (a) of this section shall not apply to contracts for 
the sale for cash of securities that are priced after 4:30 p.m. Eastern 
time on the date the securities are priced and that are sold

[[Page 430]]

by an issuer to an underwriter pursuant to a firm commitment 
underwritten offering registered under the Securities Act of 1933, 15 
U.S.C. 77a et seq., or sold to an initial purchaser by a bank 
participating in the offering. A bank shall not effect or enter into a 
contract for the purchase or sale of the securities that provides for 
payment of funds and delivery of securities later than the fourth 
business day after the date of the contract unless otherwise expressly 
agreed to by the parties at the time of the transaction.
    (d) For purposes of paragraphs (a) and (c) of this section, the 
parties to a contract shall be deemed to have expressly agreed to an 
alternate date for payment of funds and delivery of securities at the 
time of the transaction for a contract for the sale for cash of 
securities pursuant to a firm commitment offering if the managing 
underwriter and the issuer have agreed to the date for all securities 
sold pursuant to the offering and the parties to the contract have not 
expressly agreed to another date for payment of funds and delivery of 
securities at the time of the transaction.



Sec. 344.8  Securities trading policies and procedures.

    (a) Policies and procedures. Every bank effecting securities 
transactions for customers shall establish written policies and 
procedures providing:
    (1) Assignment of responsibility for supervision of all officers or 
employees who:
    (i) Transmit orders to or place orders with broker/dealers; or
    (ii) Execute transactions in securities for customers;
    (2) Assignment of responsibility for supervision and reporting, 
separate from those in paragraph (a)(1) of this section, with respect to 
all officers or employees who process orders for notification or 
settlement purposes, or perform other back office functions with respect 
to securities transactions effected for customers;
    (3) For the fair and equitable allocation of securities and prices 
to accounts when orders for the same security are received at 
approximately the same time and are placed for execution either 
individually or in combination; and
    (4) Where applicable, and where permissible under local law, for the 
crossing of buy and sell orders on a fair and equitable basis to the 
parties to the transaction.



Sec. 344.9  Personal securities trading reporting by bank officers and 

employees.

    (a) Officers and employees subject to reporting. Bank officers and 
employees who:
    (1) Make investment recommendations or decisions for the accounts of 
customers;
    (2) Participate in the determination of such recommendations or 
decisions; or
    (3) In connection with their duties, obtain information concerning 
which securities are being purchased or sold or recommend such action, 
must report to the bank, within 30-calendar days after the end of the 
calendar quarter, all transactions in securities made by them or on 
their behalf, either at the bank or elsewhere in which they have a 
beneficial interest. The report shall identify the securities purchased 
or sold and indicate the dates of the transactions and whether the 
transactions were purchases or sales.
    (b) Exempt transactions. Excluded from this reporting requirement 
are:
    (1) Transactions for the benefit of the officer or employee over 
which the officer or employee has no direct or indirect influence or 
control;
    (2) Transactions in registered investment company shares;
    (3) Transactions in government securities; and
    (4) All transactions involving in the aggregate $10,000 or less 
during the calendar quarter.
    (c) Alternative report. Where a bank acts as an investment adviser 
to an investment company registered under the Investment Company Act of 
1940, the bank's officers and employees may fulfill their reporting 
requirement under paragraph (a) of this section by

[[Page 431]]

filing with the bank the ``access persons'' personal securities trading 
report required by (SEC) Rule 17j-1, 17 CFR 270.17j-1.

[62 FR 9919, Mar. 5, 1997, as amended at 72 FR 60547, Oct. 25, 2007]



Sec. 344.10  Waivers.

    The Board of Directors of the FDIC, in its discretion, may waive for 
good cause all or any part of this part 344.



PART 345_COMMUNITY REINVESTMENT--Table of Contents




                            Subpart A_General

Sec.
345.11 Authority, purposes, and scope.
345.12 Definitions.

              Subpart B_Standards for Assessing Performance

345.21 Performance tests, standards, and ratings, in general.
345.22 Lending test.
345.23 Investment test.
345.24 Service test.
345.25 Community development test for wholesale or limited purpose 
          banks.
345.26 Small bank performance standards.
345.27 Strategic plan.
345.28 Assigned ratings.
345.29 Effect of CRA performance on applications.

        Subpart C_Records, Reporting, and Disclosure Requirements

345.41 Assessment area delineation.
345.42 Data collection, reporting, and disclosure.
345.43 Content and availability of public file.
345.44 Public notice by banks.
345.45 Publication of planned examination schedule.

Appendix A to Part 345--Ratings
Appendix B to Part 345--CRA Notice

    Authority: 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2907, 3103-3104, and 3108(a).

    Source: 43 FR 47151, Oct. 12, 1978, unless otherwise noted.



                            Subpart A_General

    Source: 60 FR 22201, May 4, 1995, unless otherwise noted.



Sec. 345.11  Authority, purposes, and scope.

    (a) Authority and OMB control number--(1) Authority. The authority 
for this part is 12 U.S.C. 1814-1817, 1819-1820, 1828, 1831u and 2901-
2907, 3103-3104, and 3108(a).
    (2) OMB control number. The information collection requirements 
contained in this part were approved by the Office of Management and 
Budget under the provisions of 44 U.S.C. 3501 et seq. and have been 
assigned OMB control number 3064-0092.
    (b) Purposes. In enacting the Community Reinvestment Act (CRA), the 
Congress required each appropriate Federal financial supervisory agency 
to assess an institution's record of helping to meet the credit needs of 
the local communities in which the institution is chartered, consistent 
with the safe and sound operation of the institution, and to take this 
record into account in the agency's evaluation of an application for a 
deposit facility by the institution. This part is intended to carry out 
the purposes of the CRA by:
    (1) Establishing the framework and criteria by which the Federal 
Deposit Insurance Corporation (FDIC) assesses a bank's record of helping 
to meet the credit needs of its entire community, including low- and 
moderate-income neighborhoods, consistent with the safe and sound 
operation of the bank; and
    (2) Providing that the FDIC takes that record into account in 
considering certain applications.
    (c) Scope--(1) General. Except for certain special purpose banks 
described in paragraph (c)(3) of this section, this part applies to all 
insured State nonmember banks, including insured State branches as 
described in paragraph (c)(2) and any uninsured State branch that 
results from an acquisition described in section 5(a)(8) of the 
International Banking Act of 1978 (12 U.S.C. 3103(a)(8)).
    (2) Insured State branches. Insured State branches are branches of a 
foreign bank established and operating under the laws of any State, the 
deposits of which are insured in accordance with the provisions of the 
Federal Deposit Insurance Act. In the case of insured State branches, 
references in this part to main office mean the principal

[[Page 432]]

branch within the United States and the term branch or branches refers 
to any insured State branch or branches located within the United 
States. The assessment area of an insured State branch is the community 
or communities located within the United States served by the branch as 
described in Sec. 345.41.
    (3) Certain special purpose banks. This part does not apply to 
special purpose banks that do not perform commercial or retail banking 
services by granting credit to the public in the ordinary course of 
business, other than as incident to their specialized operations. These 
banks include banker's banks, as defined in 12 U.S.C. 24 (Seventh), and 
banks that engage only in one or more of the following activities: 
providing cash management controlled disbursement services or serving as 
correspondent banks, trust companies, or clearing agents.



Sec. 345.12  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company. The term control has the 
meaning given to that term in 12 U.S.C. 1841(a)(2), and a company is 
under common control with another company if both companies are directly 
or indirectly controlled by the same company.
    (b) Area median income means:
    (1) The median family income for the MSA, if a person or geography 
is located in an MSA, or for the metropolitan division, if a person or 
geography is located in an MSA that has been subdivided into 
metropolitan divisions; or
    (2) The statewide nonmetropolitan median family income, if a person 
or geography is located outside an MSA.
    (c) Assessment area means a geographic area delineated in accordance 
with Sec. 345.41.
    (d) Remote Service Facility (RSF) means an automated, unstaffed 
banking facility owned or operated by, or operated exclusively for, the 
bank, such as an automated teller machine, cash dispensing machine, 
point-of-sale terminal, or other remote electronic facility, at which 
deposits are received, cash dispersed, or money lent.
    (e) Bank means a State nonmember bank, as that term is defined in 
section 3(e)(2) of the Federal Deposit Insurance Act, as amended (FDIA) 
(12 U.S.C. 1813(e)(2)), with Federally insured deposits, except as 
provided in Sec. 345.11(c). The term bank also includes an insured 
State branch as defined in Sec. 345.11(c).
    (f) Branch means a staffed banking facility authorized as a branch, 
whether shared or unshared, including, for example, a mini-branch in a 
grocery store or a branch operated in conjunction with any other local 
business or nonprofit organization. The term ``branch'' only includes a 
``domestic branch'' as that term is defined in section 3(o) of the FDIA 
(12 U.S.C. 1813(o)).
    (g) Community development means:
    (1) Affordable housing (including multifamily rental housing) for 
low- or moderate-income individuals;
    (2) Community services targeted to low- or moderate-income 
individuals;
    (3) Activities that promote economic development by financing 
businesses or farms that meet the size eligibility standards of the 
Small Business Administration's Development Company or Small Business 
Investment Company programs (13 CFR 121.301) or have gross annual 
revenues of $1 million or less; or
    (4) Activities that revitalize or stabilize--
    (i) Low-or moderate-income geographies;
    (ii) Designated disaster areas; or
    (iii) Distressed or underserved nonmetropolitan middle-income 
geographies designated by the Board of Governors of the Federal Reserve 
System, FDIC, and Office of the Comptroller of the Currency, based on--
    (A) Rates of poverty, unemployment, and population loss; or
    (B) Population size, density, and dispersion. Activities revitalize 
and stabilize geographies designated based on population size, density, 
and dispersion if they help to meet essential community needs, including 
needs of low- and moderate-income individuals.
    (h) Community development loan means a loan that:
    (1) Has as its primary purpose community development; and

[[Page 433]]

    (2) Except in the case of a wholesale or limited purpose bank:
    (i) Has not been reported or collected by the bank or an affiliate 
for consideration in the bank's assessment as a home mortgage, small 
business, small farm, or consumer loan, unless it is a multifamily 
dwelling loan (as described in Appendix A to Part 203 of this title); 
and
    (ii) Benefits the bank's assessment area(s) or a broader statewide 
or regional area that includes the bank's assessment area(s).
    (i) Community development service means a service that:
    (1) Has as its primary purpose community development;
    (2) Is related to the provision of financial services; and
    (3) Has not been considered in the evaluation of the bank's retail 
banking services under Sec. 345.24(d).
    (j) Consumer loan means a loan to one or more individuals for 
household, family, or other personal expenditures. A consumer loan does 
not include a home mortgage, small business, or small farm loan. 
Consumer loans include the following categories of loans:
    (1) Motor vehicle loan, which is a consumer loan extended for the 
purchase of and secured by a motor vehicle;
    (2) Credit card loan, which is a line of credit for household, 
family, or other personal expenditures that is accessed by a borrower's 
use of a ``credit card,'' as this term is defined in Sec. 226.2 of this 
title;
    (3) Home equity loan, which is a consumer loan secured by a 
residence of the borrower;
    (4) Other secured consumer loan, which is a secured consumer loan 
that is not included in one of the other categories of consumer loans; 
and
    (5) Other unsecured consumer loan, which is an unsecured consumer 
loan that is not included in one of the other categories of consumer 
loans.
    (k) Geography means a census tract delineated by the United States 
Bureau of the Census in the most recent decennial census.
    (l) Home mortgage loan means a ``home improvement loan,'' ``home 
purchase loan,'' or a ``refinancing'' as defined in Sec. 203.2 of this 
title.
    (m) Income level includes:
    (1) Low-income, which means an individual income that is less than 
50 percent of the area median income or a median family income that is 
less than 50 percent in the case of a geography.
    (2) Moderate-income, which means an individual income that is at 
least 50 percent and less than 80 percent of the area median income or a 
median family income that is at least 50 and less than 80 percent in the 
case of a geography.
    (3) Middle-income, which means an individual income that is at least 
80 percent and less than 120 percent of the area median income or a 
median family income that is at least 80 and less than 120 percent in 
the case of a geography.
    (4) Upper-income, which means an individual income that is 120 
percent or more of the area median income or a median family income that 
is 120 percent or more in the case of a geography.
    (n) Limited purpose bank means a bank that offers only a narrow 
product line (such as credit card or motor vehicle loans) to a regional 
or broader market and for which a designation as a limited purpose bank 
is in effect, in accordance with Sec. 345.25(b).
    (o) Loan location. A loan is located as follows:
    (1) A consumer loan is located in the geography where the borrower 
resides;
    (2) A home mortgage loan is located in the geography where the 
property to which the loan relates is located; and
    (3) A small business or small farm loan is located in the geography 
where the main business facility or farm is located or where the loan 
proceeds otherwise will be applied, as indicated by the borrower.
    (p) Loan production office means a staffed facility, other than a 
branch, that is open to the public and that provides lending-related 
services, such as loan information and applications.
    (q) Metropolitan division means a metropolitan division as defined 
by the Director of the Office of Management and Budget.
    (r) MSA means a metropolitan statistical area as defined by the 
Director of the Office of Management and Budget.
    (s) Nonmetropolitan area means any area that is not located in an 
MSA.

[[Page 434]]

    (t) Qualified investment means a lawful investment, deposit, 
membership share, or grant that has as its primary purpose community 
development.
    (u) Small bank--(1) Definition. Small bank means a bank that, as of 
December 31 of either of the prior two calendar years, had assets of 
less than $1.109 billion. Intermediate small bank means a small bank 
with assets of at least $277 million as of December 31 of both of the 
prior two calendar years and less than $1.109 billion as of December 31 
of either of the prior two calendar years.
    (2) Adjustment. The dollar figures in paragraph (u)(1) of this 
section shall be adjusted annually and published by the FDIC, based on 
the year-to-year change in the average of the Consumer Price Index for 
Urban Wage Earners and Clerical Workers, not seasonally adjusted, for 
each twelve-month period ending in November, with rounding to the 
nearest million.
    (v) Small business loan means a loan included in ``loans to small 
businesses'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
    (w) Small farm loan means a loan included in ``loans to small 
farms'' as defined in the instructions for preparation of the 
Consolidated Report of Condition and Income.
    (x) Wholesale bank means a bank that is not in the business of 
extending home mortgage, small business, small farm, or consumer loans 
to retail customers, and for which a designation as a wholesale bank is 
in effect, in accordance with Sec. 345.25(b).

[60 FR 22201, May 4, 1995, as amended at 60 FR 66050, Dec. 20, 1995; 61 
FR 21364, May 10, 1996; 69 FR 41187, July 8, 2004; 70 FR 44269, Aug. 2, 
2005; 71 FR 78337, Dec. 29, 2006; 72 FR 72573, Dec. 21, 2007; 73 FR 
78155, Dec. 22, 2008]



              Subpart B_Standards for Assessing Performance

    Source: 60 FR 22201, May 4, 1995, unless otherwise noted.



Sec. 345.21  Performance tests, standards, and ratings, in general.

    (a) Performance tests and standards. The FDIC assesses the CRA 
performance of a bank in an examination as follows:
    (1) Lending, investment, and service tests. The FDIC applies the 
lending, investment, and service tests, as provided in Sec. Sec. 345.22 
through 345.24, in evaluating the performance of a bank, except as 
provided in paragraphs (a)(2), (a)(3), and (a)(4) of this section.
    (2) Community development test for wholesale or limited purpose 
banks. The FDIC applies the community development test for a wholesale 
or limited purpose bank, as provided in Sec. 345.25, except as provided 
in paragraph (a)(4) of this section.
    (3) Small bank performance standards. The FDIC applies the small 
bank performance standards as provided in Sec. 345.26 in evaluating the 
performance of a small bank or a bank that was a small bank during the 
prior calendar year, unless the bank elects to be assessed as provided 
in paragraphs (a)(1), (a)(2), or (a)(4) of this section. The bank may 
elect to be assessed as provided in paragraph (a)(1) of this section 
only if it collects and reports the data required for other banks under 
Sec. 345.42.
    (4) Strategic plan. The FDIC evaluates the performance of a bank 
under a strategic plan if the bank submits, and the FDIC approves, a 
strategic plan as provided in Sec. 345.27.
    (b) Performance context. The FDIC applies the tests and standards in 
paragraph (a) of this section and also considers whether to approve a 
proposed strategic plan in the context of:
    (1) Demographic data on median income levels, distribution of 
household income, nature of housing stock, housing costs, and other 
relevant data pertaining to a bank's assessment area(s);
    (2) Any information about lending, investment, and service 
opportunities in the bank's assessment area(s) maintained by the bank or 
obtained from community organizations, state, local, and tribal 
governments, economic development agencies, or other sources;
    (3) The bank's product offerings and business strategy as determined 
from data provided by the bank;
    (4) Institutional capacity and constraints, including the size and 
financial condition of the bank, the economic climate (national, 
regional, and

[[Page 435]]

local), safety and soundness limitations, and any other factors that 
significantly affect the bank's ability to provide lending, investments, 
or services in its assessment area(s);
    (5) The bank's past performance and the performance of similarly 
situated lenders;
    (6) The bank's public file, as described in Sec. 345.43, and any 
written comments about the bank's CRA performance submitted to the bank 
or the FDIC; and
    (7) Any other information deemed relevant by the FDIC.
    (c) Assigned ratings. The FDIC assigns to a bank one of the 
following four ratings pursuant to Sec. 345.28 and Appendix A of this 
part: ``outstanding''; ``satisfactory''; ``needs to improve''; or 
``substantial noncompliance'' as provided in 12 U.S.C. 2906(b)(2). The 
rating assigned by the FDIC reflects the bank's record of helping to 
meet the credit needs of its entire community, including low- and 
moderate-income neighborhoods, consistent with the safe and sound 
operation of the bank.
    (d) Safe and sound operations. This part and the CRA do not require 
a bank to make loans or investments or to provide services that are 
inconsistent with safe and sound operations. To the contrary, the FDIC 
anticipates banks can meet the standards of this part with safe and 
sound loans, investments, and services on which the banks expect to make 
a profit. Banks are permitted and encouraged to develop and apply 
flexible underwriting standards for loans that benefit low- or moderate-
income geographies or individuals, only if consistent with safe and 
sound operations.



Sec. 345.22  Lending test.

    (a) Scope of test. (1) The lending test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) through its 
lending activities by considering a bank's home mortgage, small 
business, small farm, and community development lending. If consumer 
lending constitutes a substantial majority of a bank's business, the 
FDIC will evaluate the bank's consumer lending in one or more of the 
following categories: motor vehicle, credit card, home equity, other 
secured, and other unsecured loans. In addition, at a bank's option, the 
FDIC will evaluate one or more categories of consumer lending, if the 
bank has collected and maintained, as required in Sec. 345.42(c)(1), 
the data for each category that the bank elects to have the FDIC 
evaluate.
    (2) The FDIC considers originations and purchases of loans. The FDIC 
will also consider any other loan data the bank may choose to provide, 
including data on loans outstanding, commitments and letters of credit.
    (3) A bank may ask the FDIC to consider loans originated or 
purchased by consortia in which the bank participates or by third 
parties in which the bank has invested only if the loans meet the 
definition of community development loans and only in accordance with 
paragraph (d) of this section. The FDIC will not consider these loans 
under any criterion of the lending test except the community development 
lending criterion.
    (b) Performance criteria. The FDIC evaluates a bank's lending 
performance pursuant to the following criteria:
    (1) Lending activity. The number and amount of the bank's home 
mortgage, small business, small farm, and consumer loans, if applicable, 
in the bank's assessment area(s);
    (2) Geographic distribution. The geographic distribution of the 
bank's home mortgage, small business, small farm, and consumer loans, if 
applicable, based on the loan location, including:
    (i) The proportion of the bank's lending in the bank's assessment 
area(s);
    (ii) The dispersion of lending in the bank's assessment area(s); and
    (iii) The number and amount of loans in low-, moderate-, middle-, 
and upper-income geographies in the bank's assessment area(s);
    (3) Borrower characteristics. The distribution, particularly in the 
bank's assessment area(s), of the bank's home mortgage, small business, 
small farm, and consumer loans, if applicable, based on borrower 
characteristics, including the number and amount of:
    (i) Home mortgage loans to low-, moderate-, middle-, and upper-
income individuals;

[[Page 436]]

    (ii) Small business and small farm loans to businesses and farms 
with gross annual revenues of $1 million or less;
    (iii) Small business and small farm loans by loan amount at 
origination; and
    (iv) Consumer loans, if applicable, to low-, moderate-, middle-, and 
upper-income individuals;
    (4) Community development lending. The bank's community development 
lending, including the number and amount of community development loans, 
and their complexity and innovativeness; and
    (5) Innovative or flexible lending practices. The bank's use of 
innovative or flexible lending practices in a safe and sound manner to 
address the credit needs of low- or moderate-income individuals or 
geographies.
    (c) Affiliate lending. (1) At a bank's option, the FDIC will 
consider loans by an affiliate of the bank, if the bank provides data on 
the affiliate's loans pursuant to Sec. 345.42.
    (2) The FDIC considers affiliate lending subject to the following 
constraints:
    (i) No affiliate may claim a loan origination or loan purchase if 
another institution claims the same loan origination or purchase; and
    (ii) If a bank elects to have the FDIC consider loans within a 
particular lending category made by one or more of the bank's affiliates 
in a particular assessment area, the bank shall elect to have the FDIC 
consider, in accordance with paragraph (c)(1) of this section, all the 
loans within that lending category in that particular assessment area 
made by all of the bank's affiliates.
    (3) The FDIC does not consider affiliate lending in assessing a 
bank's performance under paragraph (b)(2)(i) of this section.
    (d) Lending by a consortium or a third party. Community development 
loans originated or purchased by a consortium in which the bank 
participates or by a third party in which the bank has invested:
    (1) Will be considered, at the bank's option, if the bank reports 
the data pertaining to these loans under Sec. 345.42(b)(2); and
    (2) May be allocated among participants or investors, as they 
choose, for purposes of the lending test, except that no participant or 
investor:
    (i) May claim a loan origination or loan purchase if another 
participant or investor claims the same loan origination or purchase; or
    (ii) May claim loans accounting for more than its percentage share 
(based on the level of its participation or investment) of the total 
loans originated by the consortium or third party.
    (e) Lending performance rating. The FDIC rates a bank's lending 
performance as provided in Appendix A of this part.



Sec. 345.23  Investment test.

    (a) Scope of test. The investment test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) through 
qualified investments that benefit its assessment area(s) or a broader 
statewide or regional area that includes the bank's assessment area(s).
    (b) Exclusion. Activities considered under the lending or service 
tests may not be considered under the investment test.
    (c) Affiliate investment. At a bank's option, the FDIC will 
consider, in its assessment of a bank's investment performance, a 
qualified investment made by an affiliate of the bank, if the qualified 
investment is not claimed by any other institution.
    (d) Disposition of branch premises. Donating, selling on favorable 
terms, or making available on a rent-free basis a branch of the bank 
that is located in a predominantly minority neighborhood to a minority 
depository institution or women's depository institution (as these terms 
are defined in 12 U.S.C. 2907(b)) will be considered as a qualified 
investment.
    (e) Performance criteria. The FDIC evaluates the investment 
performance of a bank pursuant to the following criteria:
    (1) The dollar amount of qualified investments;
    (2) The innovativeness or complexity of qualified investments;
    (3) The responsiveness of qualified investments to credit and 
community development needs; and

[[Page 437]]

    (4) The degree to which the qualified investments are not routinely 
provided by private investors.
    (f) Investment performance rating. The FDIC rates a bank's 
investment performance as provided in Appendix A of this part.



Sec. 345.24  Service test.

    (a) Scope of test. The service test evaluates a bank's record of 
helping to meet the credit needs of its assessment area(s) by analyzing 
both the availability and effectiveness of a bank's systems for 
delivering retail banking services and the extent and innovativeness of 
its community development services.
    (b) Area(s) benefited. Community development services must benefit a 
bank's assessment area(s) or a broader statewide or regional area that 
includes the bank's assessment area(s).
    (c) Affiliate service. At a bank's option, the FDIC will consider, 
in its assessment of a bank's service performance, a community 
development service provided by an affiliate of the bank, if the 
community development service is not claimed by any other institution.
    (d) Performance criteria--retail banking services. The FDIC 
evaluates the availability and effectiveness of a bank's systems for 
delivering retail banking services, pursuant to the following criteria:
    (1) The current distribution of the bank's branches among low-,

moderate-, middle-, and upper-income geographies;
    (2) In the context of its current distribution of the bank's 
branches, the bank's record of opening and closing branches, 
particularly branches located in low- or moderate-income geographies or 
primarily serving low- or moderate-income individuals;
    (3) The availability and effectiveness of alternative systems for 
delivering retail banking services (e.g., RSFs, RSFs not owned or 
operated by or exclusively for the bank, banking by telephone or 
computer, loan production offices, and bank-at-work or bank-by-mail 
programs) in low- and moderate-income geographies and to low- and 
moderate-income individuals; and
    (4) The range of services provided in low-, moderate-, middle-, and 
upper-income geographies and the degree to which the services are 
tailored to meet the needs of those geographies.
    (e) Performance criteria--community development services. The FDIC 
evaluates community development services pursuant to the following 
criteria:
    (1) The extent to which the bank provides community development 
services; and
    (2) The innovativeness and responsiveness of community development 
services.
    (f) Service performance rating. The FDIC rates a bank's service 
performance as provided in Appendix A of this part.



Sec. 345.25  Community development test for wholesale or limited purpose 

banks.

    (a) Scope of test. The FDIC assesses a wholesale or limited purpose 
bank's record of helping to meet the credit needs of its assessment 
area(s) under the community development test through its community 
development lending, qualified investments, or community development 
services.
    (b) Designation as a wholesale or limited purpose bank. In order to 
receive a designation as a wholesale or limited purpose bank, a bank 
shall file a request, in writing, with the FDIC, at least three months 
prior to the proposed effective date of the designation. If the FDIC 
approves the designation, it remains in effect until the bank requests 
revocation of the designation or until one year after the FDIC notifies 
the bank that the FDIC has revoked the designation on its own 
initiative.
    (c) Performance criteria. The FDIC evaluates the community 
development performance of a wholesale or limited purpose bank pursuant 
to the following criteria:
    (1) The number and amount of community development loans (including 
originations and purchases of loans and other community development loan 
data provided by the bank, such as data on loans outstanding, 
commitments, and letters of credit), qualified investments, or community 
development services;

[[Page 438]]

    (2) The use of innovative or complex qualified investments, 
community development loans, or community development services and the 
extent to which the investments are not routinely provided by private 
investors; and
    (3) The bank's responsiveness to credit and community development 
needs.
    (d) Indirect activities. At a bank's option, the FDIC will consider 
in its community development performance assessment:
    (1) Qualified investments or community development services provided 
by an affiliate of the bank, if the investments or services are not 
claimed by any other institution; and
    (2) Community development lending by affiliates, consortia and third 
parties, subject to the requirements and limitations in Sec. 345.22 (c) 
and (d).
    (e) Benefit to assessment area(s)--(1) Benefit inside assessment 
area(s). The FDIC considers all qualified investments, community 
development loans, and community development services that benefit areas 
within the bank's assessment area(s) or a broader statewide or regional 
area that includes the bank's assessment area(s).
    (2) Benefit outside assessment area(s). The FDIC considers the 
qualified investments, community development loans, and community 
development services that benefit areas outside the bank's assessment 
area(s), if the bank has adequately addressed the needs of its 
assessment area(s).
    (f) Community development performance rating. The FDIC rates a 
bank's community development performance as provided in Appendix A of 
this part.



Sec. 345.26  Small bank performance standards.

    (a) Performance criteria--(1) Small banks that are not intermediate 
small banks. The FDIC evaluates the record of a small bank that is not, 
or that was not during the prior calendar year, an intermediate small 
bank, of helping to meet the credit needs of its assessment area(s) 
pursuant to the criteria set forth in paragraph (b) of this section.
    (2) Intermediate small banks. The FDIC evaluates the record of a 
small bank that is, or that was during the prior calendar year, an 
intermediate small bank, of helping to meet the credit needs of its 
assessment area(s) pursuant to the criteria set forth in paragraphs (b) 
and (c) of this section.
    (b) Lending test. A small bank's lending performance is evaluated 
pursuant to the following criteria:
    (1) The bank's loan-to-deposit ratio, adjusted for seasonal 
variation, and, as appropriate, other lending-related activities, such 
as loan originations for sale to the secondary markets, community 
development loans, or qualified investments;
    (2) The percentage of loans and, as appropriate, other lending-
related activities located in the bank's assessment area(s);
    (3) The bank's record of lending to and, as appropriate, engaging in 
other lending-related activities for borrowers of different income 
levels and businesses and farms of different sizes;
    (4) The geographic distribution of the bank's loans; and
    (5) The bank's record of taking action, if warranted, in response to 
written complaints about its performance in helping to meet credit needs 
in its assessment area(s).
    (c) Community development test. An intermediate small bank's 
community development performance also is evaluated pursuant to the 
following criteria:
    (1) The number and amount of community development loans;
    (2) The number and amount of qualified investments;
    (3) The extent to which the bank provides community development 
services; and
    (4) The bank's responsiveness through such activities to community 
development lending, investment, and services needs.
    (d) Small bank performance rating. The FDIC rates the performance of 
a bank evaluated under this section as provided in appendix A of this 
part.

[70 FR 44269, Aug. 2, 2005, as amended at 71 FR 78337, Dec. 29, 2006; 72 
FR 72573, Dec. 21, 2007]



Sec. 345.27  Strategic plan.

    (a) Alternative election. The FDIC will assess a bank's record of 
helping to meet the credit needs of its assessment area(s) under a 
strategic plan if:

[[Page 439]]

    (1) The bank has submitted the plan to the FDIC as provided for in 
this section;
    (2) The FDIC has approved the plan;
    (3) The plan is in effect; and
    (4) The bank has been operating under an approved plan for at least 
one year.
    (b) Data reporting. The FDIC's approval of a plan does not affect 
the bank's obligation, if any, to report data as required by Sec. 
345.42.
    (c) Plans in general--(1) Term. A plan may have a term of no more 
than five years, and any multi-year plan must include annual interim 
measurable goals under which the FDIC will evaluate the bank's 
performance.
    (2) Multiple assessment areas. A bank with more than one assessment 
area may prepare a single plan for all of its assessment areas or one or 
more plans for one or more of its assessment areas.
    (3) Treatment of affiliates. Affiliated institutions may prepare a 
joint plan if the plan provides measurable goals for each institution. 
Activities may be allocated among institutions at the institutions' 
option, provided that the same activities are not considered for more 
than one institution.
    (d) Public participation in plan development. Before submitting a 
plan to the FDIC for approval, a bank shall:
    (1) Informally seek suggestions from members of the public in its 
assessment area(s) covered by the plan while developing the plan;
    (2) Once the bank has developed a plan, formally solicit public 
comment on the plan for at least 30 days by publishing notice in at 
least one newspaper of general circulation in each assessment area 
covered by the plan; and
    (3) During the period of formal public comment, make copies of the 
plan available for review by the public at no cost at all offices of the 
bank in any assessment area covered by the plan and provide copies of 
the plan upon request for a reasonable fee to cover copying and mailing, 
if applicable.
    (e) Submission of plan. The bank shall submit its plan to the FDIC 
at least three months prior to the proposed effective date of the plan. 
The bank shall also submit with its plan a description of its informal 
efforts to seek suggestions from members of the public, any written 
public comment received, and, if the plan was revised in light of the 
comment received, the initial plan as released for public comment.
    (f) Plan content--(1) Measurable goals. (i) A bank shall specify in 
its plan measurable goals for helping to meet the credit needs of each 
assessment area covered by the plan, particularly the needs of low- and 
moderate-income geographies and low- and moderate-income individuals, 
through lending, investment, and services, as appropriate.
    (ii) A bank shall address in its plan all three performance 
categories and, unless the bank has been designated as a wholesale or 
limited purpose bank, shall emphasize lending and lending-related 
activities. Nevertheless, a different emphasis, including a focus on one 
or more performance categories, may be appropriate if responsive to the 
characteristics and credit needs of its assessment area(s), considering 
public comment and the bank's capacity and constraints, product 
offerings, and business strategy.
    (2) Confidential information. A bank may submit additional 
information to the FDIC on a confidential basis, but the goals stated in 
the plan must be sufficiently specific to enable the public and the FDIC 
to judge the merits of the plan.
    (3) Satisfactory and outstanding goals. A bank shall specify in its 
plan measurable goals that constitute ``satisfactory'' performance. A 
plan may specify measurable goals that constitute ``outstanding'' 
performance. If a bank submits, and the FDIC approves, both 
``satisfactory'' and ``outstanding'' performance goals, the FDIC will 
consider the bank eligible for an ``outstanding'' performance rating.
    (4) Election if satisfactory goals not substantially met. A bank may 
elect in its plan that, if the bank fails to meet substantially its plan 
goals for a satisfactory rating, the FDIC will evaluate the bank's 
performance under the lending, investment, and service tests, the 
community development test, or the small bank performance standards, as 
appropriate.
    (g) Plan approval--(1) Timing. The FDIC will act upon a plan within 
60 calendar days after the FDIC receives the complete plan and other 
material

[[Page 440]]

required under paragraph (e) of this section. If the FDIC fails to act 
within this time period, the plan shall be deemed approved unless the 
FDIC extends the review period for good cause.
    (2) Public participation. In evaluating the plan's goals, the FDIC 
considers the public's involvement in formulating the plan, written 
public comment on the plan, and any response by the bank to public 
comment on the plan.
    (3) Criteria for evaluating plan. The FDIC evaluates a plan's 
measurable goals using the following criteria, as appropriate:
    (i) The extent and breadth of lending or lending-related activities, 
including, as appropriate, the distribution of loans among different 
geographies, businesses and farms of different sizes, and individuals of 
different income levels, the extent of community development lending, 
and the use of innovative or flexible lending practices to address 
credit needs;
    (ii) The amount and innovativeness, complexity, and responsiveness 
of the bank's qualified investments; and
    (iii) The availability and effectiveness of the bank's systems for 
delivering retail banking services and the extent and innovativeness of 
the bank's community development services.
    (h) Plan amendment. During the term of a plan, a bank may request 
the FDIC to approve an amendment to the plan on grounds that there has 
been a material change in circumstances. The bank shall develop an 
amendment to a previously approved plan in accordance with the public 
participation requirements of paragraph (d) of this section.
    (i) Plan assessment. The FDIC approves the goals and assesses 
performance under a plan as provided for in Appendix A of this part.

[60 FR 22201, May 4, 1995, as amended at 60 FR 66050, Dec. 20, 1995; 69 
FR 41188, July 8, 2004]



Sec. 345.28  Assigned ratings.

    (a) Ratings in general. Subject to paragraphs (b) and (c) of this 
section, the FDIC assigns to a bank a rating of ``outstanding,'' 
``satisfactory,'' ``needs to improve,'' or ``substantial noncompliance'' 
based on the bank's performance under the lending, investment and 
service tests, the community development test, the small bank 
performance standards, or an approved strategic plan, as applicable.
    (b) Lending, investment, and service tests. The FDIC assigns a 
rating for a bank assessed under the lending, investment, and service 
tests in accordance with the following principles:
    (1) A bank that receives an ``outstanding'' rating on the lending 
test receives an assigned rating of at least ``satisfactory'';
    (2) A bank that receives an ``outstanding'' rating on both the 
service test and the investment test and a rating of at least ``high 
satisfactory'' on the lending test receives an assigned rating of 
``outstanding''; and
    (3) No bank may receive an assigned rating of ``satisfactory'' or 
higher unless it receives a rating of at least ``low satisfactory'' on 
the lending test.
    (c) Effect of evidence of discriminatory or other illegal credit 
practices. (1) The FDIC's evaluation of a bank's CRA performance is 
adversely affected by evidence of discriminatory or other illegal credit 
practices in any geography by the bank or in any assessment area by any 
affiliate whose loans have been considered as part of the bank's lending 
performance. In connection with any type of lending activity described 
in Sec. 345.22(a), evidence of discriminatory or other credit practices 
that violate an applicable law, rule, or regulation includes, but is not 
limited to:
    (i) Discrimination against applicants on a prohibited basis in 
violation, for example, of the Equal Credit Opportunity Act or the Fair 
Housing Act;
    (ii) Violations of the Home Ownership and Equity Protection Act;
    (iii) Violations of section 5 of the Federal Trade Commission Act;
    (iv) Violations of section 8 of the Real Estate Settlement 
Procedures Act; and
    (v) Violations of the Truth in Lending Act provisions regarding a 
consumer's right of rescission.
    (2) In determining the effect of evidence of practices described in 
paragraph (c)(1) of this section on the bank's assigned rating, the FDIC 
considers the nature, extent, and strength of the evidence of the 
practices; the

[[Page 441]]

policies and procedures that the bank (or affiliate, as applicable) has 
in place to prevent the practices; any corrective action that the bank 
(or affiliate, as applicable) has taken or has committed to take, 
including voluntary corrective action resulting from self-assessment; 
and any other relevant information.

[60 FR 22201, May 4, 1995, as amended at 70 FR 44269, Aug. 2, 2005]



Sec. 345.29  Effect of CRA performance on applications.

    (a) CRA performance. Among other factors, the FDIC takes into 
account the record of performance under the CRA of each applicant bank 
in considering an application for approval of:
    (1) The establishment of a domestic branch or other facility with 
the ability to accept deposits;
    (2) The relocation of the bank's main office or a branch;
    (3) The merger, consolidation, acquisition of assets, or assumption 
of liabilities; and
    (4) Deposit insurance for a newly chartered financial institution.
    (b) New financial institutions. A newly chartered financial 
institution shall submit with its application for deposit insurance a 
description of how it will meet its CRA objectives. The FDIC takes the 
description into account in considering the application and may deny or 
condition approval on that basis.
    (c) Interested parties. The FDIC takes into account any views 
expressed by interested parties that are submitted in accordance with 
the FDIC's procedures set forth in part 303 of this chapter in 
considering CRA performance in an application listed in paragraphs (a) 
and (b) of this section.
    (d) Denial or conditional approval of application. A bank's record 
of performance may be the basis for denying or conditioning approval of 
an application listed in paragraph (a) of this section.



        Subpart C_Records, Reporting, and Disclosure Requirements

    Source: 60 FR 22201, May 4, 1995, unless otherwise noted.



Sec. 345.41  Assessment area delineation.

    (a) In general. A bank shall delineate one or more assessment areas 
within which the FDIC evaluates the bank's record of helping to meet the 
credit needs of its community. The FDIC does not evaluate the bank's 
delineation of its assessment area(s) as a separate performance 
criterion, but the FDIC reviews the delineation for compliance with the 
requirements of this section.
    (b) Geographic area(s) for wholesale or limited purpose banks. The 
assessment area(s) for a wholesale or limited purpose bank must consist 
generally of one or more MSAs or metropolitan divisions (using the MSA 
or metropolitan division boundaries that were in effect as of January 1 
of the calendar year in which the delineation is made) or one or more 
contiguous political subdivisions, such as counties, cities, or towns, 
in which the bank has its main office, branches, and deposit-taking 
ATMs.
    (c) Geographic area(s) for other banks. The assessment area(s) for a 
bank other than a wholesale or limited purpose bank must:
    (1) Consist generally of one or more MSAs or metropolitan divisions 
(using the MSA or metropolitan division boundaries that were in effect 
as of January 1 of the calendar year in which the delineation is made) 
or one or more contiguous political subdivisions, such as counties, 
cities, or towns; and
    (2) Include the geographies in which the bank has its main office, 
its branches, and its deposit-taking RSFs, as well as the surrounding 
geographies in which the bank has originated or purchased a substantial 
portion of its loans (including home mortgage loans, small business and 
small farm loans, and any other loans the bank chooses, such as those 
consumer loans on which the bank elects to have its performance 
assessed).
    (d) Adjustments to geographic area(s). A bank may adjust the 
boundaries of its assessment area(s) to include only the portion of a 
political subdivision that it reasonably can be expected to serve. An 
adjustment is particularly

[[Page 442]]

appropriate in the case of an assessment area that otherwise would be 
extremely large, of unusual configuration, or divided by significant 
geographic barriers.
    (e) Limitations on the delineation of an assessment area. Each 
bank's assessment area(s):
    (1) Must consist only of whole geographies;
    (2) May not reflect illegal discrimination;
    (3) May not arbitrarily exclude low- or moderate-income geographies, 
taking into account the bank's size and financial condition; and
    (4) May not extend substantially beyond an MSA boundary or beyond a 
state boundary unless the assessment area is located in a multistate 
MSA. If a bank serves a geographic area that extends substantially 
beyond a state boundary, the bank shall delineate separate assessment 
areas for the areas in each state. If a bank serves a geographic area 
that extends substantially beyond an MSA boundary, the bank shall 
delineate separate assessment areas for the areas inside and outside the 
MSA.
    (f) Banks serving military personnel. Notwithstanding the 
requirements of this section, a bank whose business predominantly 
consists of serving the needs of military personnel or their dependents 
who are not located within a defined geographic area may delineate its 
entire deposit customer base as its assessment area.
    (g) Use of assessment area(s). The FDIC uses the assessment area(s) 
delineated by a bank in its evaluation of the bank's CRA performance 
unless the FDIC determines that the assessment area(s) do not comply 
with the requirements of this section.

[60 FR 22201, May 4, 1995, as amended at 69 FR 41188, July 8, 2004]



Sec. 345.42  Data collection, reporting, and disclosure.

    (a) Loan information required to be collected and maintained. A 
bank, except a small bank, shall collect, and maintain in machine 
readable form (as prescribed by the FDIC) until the completion of its 
next CRA examination, the following data for each small business or 
small farm loan originated or purchased by the bank:
    (1) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
    (2) The loan amount at origination;
    (3) The loan location; and
    (4) An indicator whether the loan was to a business or farm with 
gross annual revenues of $1 million or less.
    (b) Loan information required to be reported. A bank, except a small 
bank or a bank that was a small bank during the prior calendar year, 
shall report annually by March 1 to the FDIC in machine readable form 
(as prescribed by the FDIC) the following data for the prior calendar 
year:
    (1) Small business and small farm loan data. For each geography in 
which the bank originated or purchased a small business or small farm 
loan, the aggregate number and amount of loans:
    (i) With an amount at origination of $100,000 or less;
    (ii) With an amount at origination of more than $100,000 but less 
than or equal to $250,000;
    (iii) With an amount at origination of more than $250,000; and
    (iv) To businesses and farms with gross annual revenues of $1 
million or less (using the revenues that the bank considered in making 
its credit decision);
    (2) Community development loan data. The aggregate number and 
aggregate amount of community development loans originated or purchased; 
and
    (3) Home mortgage loans. If the bank is subject to reporting under 
part 203 of this title, the location of each home mortgage loan 
application, origination, or purchase outside the MSAs in which the bank 
has a home or branch office (or outside any MSA) in accordance with the 
requirements of part 203 of this title.
    (c) Optional data collection and maintenance--(1) Consumer loans. A 
bank may collect and maintain in machine readable form (as prescribed by 
the FDIC) data for consumer loans originated or purchased by the bank 
for consideration under the lending test. A bank may maintain data for 
one or more of the following categories of consumer loans: motor 
vehicle, credit card, home

[[Page 443]]

equity, other secured, and other unsecured. If the bank maintains data 
for loans in a certain category, it shall maintain data for all loans 
originated or purchased within that category. The bank shall maintain 
data separately for each category, including for each loan:
    (i) A unique number or alpha-numeric symbol that can be used to 
identify the relevant loan file;
    (ii) The loan amount at origination or purchase;
    (iii) The loan location; and
    (iv) The gross annual income of the borrower that the bank 
considered in making its credit decision.
    (2) Other loan data. At its option, a bank may provide other 
information concerning its lending performance, including additional 
loan distribution data.
    (d) Data on affiliate lending. A bank that elects to have the FDIC 
consider loans by an affiliate, for purposes of the lending or community 
development test or an approved strategic plan, shall collect, maintain, 
and report for those loans the data that the bank would have collected, 
maintained, and reported pursuant to paragraphs (a), (b), and (c) of 
this section had the loans been originated or purchased by the bank. For 
home mortgage loans, the bank shall also be prepared to identify the 
home mortgage loans reported under part 203 of this title by the 
affiliate.
    (e) Data on lending by a consortium or a third party. A bank that 
elects to have the FDIC consider community development loans by a 
consortium or third party, for purposes of the lending or community 
development tests or an approved strategic plan, shall report for those 
loans the data that the bank would have reported under paragraph (b)(2) 
of this section had the loans been originated or purchased by the bank.
    (f) Small banks electing evaluation under the lending, investment, 
and service tests. A bank that qualifies for evaluation under the small 
bank performance standards but elects evaluation under the lending, 
investment, and service tests shall collect, maintain, and report the 
data required for other banks pursuant to paragraphs (a) and (b) of this 
section.
    (g) Assessment area data. A bank, except a small bank or a bank that 
was a small bank during the prior calendar year, shall collect and 
report to the FDIC by March 1 of each year a list for each assessment 
area showing the geographies within the area.
    (h) CRA Disclosure Statement. The FDIC prepares annually for each 
bank that reports data pursuant to this section a CRA Disclosure 
Statement that contains, on a state-by-state basis:
    (1) For each county (and for each assessment area smaller than a 
county) with a population of 500,000 persons or fewer in which the bank 
reported a small business or small farm loan:
    (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in low-, moderate-, middle-, 
and upper-income geographies;
    (ii) A list grouping each geography according to whether the 
geography is low-, moderate-, middle-, or upper-income;
    (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
    (iv) The number and amount of small business and small farm loans to 
businesses and farms with gross annual revenues of $1 million or less;
    (2) For each county (and for each assessment area smaller than a 
county) with a population in excess of 500,000 persons in which the bank 
reported a small business or small farm loan:
    (i) The number and amount of small business and small farm loans 
reported as originated or purchased located in geographies with median 
income relative to the area median income of less than 10 percent, 10 or 
more but less than 20 percent, 20 or more but less than 30 percent, 30 
or more but less than 40 percent, 40 or more but less than 50 percent, 
50 or more but less than 60 percent, 60 or more but less than 70 
percent, 70 or more but less than 80 percent, 80 or more but less than 
90 percent, 90 or more but less than 100 percent, 100 or more but less 
than 110 percent, 110 or more but less than 120 percent, and 120 percent 
or more;
    (ii) A list grouping each geography in the county or assessment area 
according to whether the median income in

[[Page 444]]

the geography relative to the area median income is less than 10 
percent, 10 or more but less than 20 percent, 20 or more but less than 
30 percent, 30 or more but less than 40 percent, 40 or more but less 
than 50 percent, 50 or more but less than 60 percent, 60 or more but 
less than 70 percent, 70 or more but less than 80 percent, 80 or more 
but less than 90 percent, 90 or more but less than 100 percent, 100 or 
more but less than 110 percent, 110 or more but less than 120 percent, 
and 120 percent or more;
    (iii) A list showing each geography in which the bank reported a 
small business or small farm loan; and
    (iv) The number and amount of small business and small farm loans to 
businesses and farms with gross annual revenues of $1 million or less;
    (3) The number and amount of small business and small farm loans 
located inside each assessment area reported by the bank and the number 
and amount of small business and small farm loans located outside the 
assessment area(s) reported by the bank; and
    (4) The number and amount of community development loans reported as 
originated or purchased.
    (i) Aggregate disclosure statements. The FDIC, in conjunction with 
the Board of Governors of the Federal Reserve System, the Office of the 
Comptroller of the Currency, and the Office of Thrift Supervision, 
prepares annually, for each MSA or metropolitan division (including an 
MSA or metropolitan division that crosses a state boundary) and the 
nonmetropolitan portion of each state, an aggregate disclosure statement 
of small business and small farm lending by all institutions subject to 
reporting under this part or parts 25, 228, or 563e of this title. These 
disclosure statements indicate, for each geography, the number and 
amount of all small business and small farm loans originated or 
purchased by reporting institutions, except that the FDIC may adjust the 
form of the disclosure if necessary, because of special circumstances, 
to protect the privacy of a borrower or the competitive position of an 
institution.
    (j) Central data depositories. The FDIC makes the aggregate 
disclosure statements, described in paragraph (i) of this section, and 
the individual bank CRA Disclosure Statements, described in paragraph 
(h) of this section, available to the public at central data 
depositories. The FDIC publishes a list of the depositories at which the 
statements are available.

[60 FR 22201, May 4, 1995, as amended at 69 FR 41188, July 8, 2004]



Sec. 345.43  Content and availability of public file.

    (a) Information available to the public. A bank shall maintain a 
public file that includes the following information:
    (1) All written comments received from the public for the current 
year and each of the prior two calendar years that specifically relate 
to the bank's performance in helping to meet community credit needs, and 
any response to the comments by the bank, if neither the comments nor 
the responses contain statements that reflect adversely on the good name 
or reputation of any persons other than the bank or publication of which 
would violate specific provisions of law;
    (2) A copy of the public section of the bank's most recent CRA 
Performance Evaluation prepared by the FDIC. The bank shall place this 
copy in the public file within 30 business days after its receipt from 
the FDIC;
    (3) A list of the bank's branches, their street addresses, and 
geographies;
    (4) A list of branches opened or closed by the bank during the 
current year and each of the prior two calendar years, their street 
addresses, and geographies;
    (5) A list of services (including hours of operation, available loan 
and deposit products, and transaction fees) generally offered at the 
bank's branches and descriptions of material differences in the 
availability or cost of services at particular branches, if any. At its 
option, a bank may include information regarding the availability of 
alternative systems for delivering retail banking services (e.g., RSFs, 
RSFs not owned or operated by or exclusively for the bank, banking by 
telephone or computer, loan production offices, and bank-at-work or 
bank-by-mail programs);

[[Page 445]]

    (6) A map of each assessment area showing the boundaries of the area 
and identifying the geographies contained within the area, either on the 
map or in a separate list; and
    (7) Any other information the bank chooses.
    (b) Additional information available to the public--(1) Banks other 
than small banks. A bank, except a small bank or a bank that was a small 
bank during the prior calendar year, shall include in its public file 
the following information pertaining to the bank and its affiliates, if 
applicable, for each of the prior two calendar years:
    (i) If the bank has elected to have one or more categories of its 
consumer loans considered under the lending test, for each of these 
categories, the number and amount of loans:
    (A) To low-, moderate-, middle-, and upper-income individuals;
    (B) Located in low-, moderate-, middle-, and upper-income census 
tracts; and
    (C) Located inside the bank's assessment area(s) and outside the 
bank's assessment area(s); and
    (ii) The bank's CRA Disclosure Statement. The bank shall place the 
statement in the public file within three business days of its receipt 
from the FDIC.
    (2) Banks required to report Home Mortgage Disclosure Act (HMDA) 
data. A bank required to report home mortgage loan data pursuant part 
203 of this title shall include in its public file a copy of the HMDA 
Disclosure Statement provided by the Federal Financial Institutions 
Examination Council pertaining to the bank for each of the prior two 
calendar years. In addition, a bank that elected to have the FDIC 
consider the mortgage lending of an affiliate for any of these years 
shall include in its public file the affiliate's HMDA Disclosure 
Statement for those years. The bank shall place the statement(s) in the 
public file within three business days after receipt.
    (3) Small banks. A small bank or a bank that was a small bank during 
the prior calendar year shall include in its public file:
    (i) The bank's loan-to-deposit ratio for each quarter of the prior 
calendar year and, at its option, additional data on its loan-to-deposit 
ratio; and
    (ii) The information required for other banks by paragraph (b)(1) of 
this section, if the bank has elected to be evaluated under the lending, 
investment, and service tests.
    (4) Banks with strategic plans. A bank that has been approved to be 
assessed under a strategic plan shall include in its public file a copy 
of that plan. A bank need not include information submitted to the FDIC 
on a confidential basis in conjunction with the plan.
    (5) Banks with less than satisfactory ratings. A bank that received 
a less than satisfactory rating during its most recent examination shall 
include in its public file a description of its current efforts to 
improve its performance in helping to meet the credit needs of its 
entire community. The bank shall update the description quarterly.
    (c) Location of public information. A bank shall make available to 
the public for inspection upon request and at no cost the information 
required in this section as follows:
    (1) At the main office and, if an interstate bank, at one branch 
office in each state, all information in the public file; and
    (2) At each branch:
    (i) A copy of the public section of the bank's most recent CRA 
Performance Evaluation and a list of services provided by the branch; 
and
    (ii) Within five calendar days of the request, all the information 
in the public file relating to the assessment area in which the branch 
is located.
    (d) Copies. Upon request, a bank shall provide copies, either on 
paper or in another form acceptable to the person making the request, of 
the information in its public file. The bank may charge a reasonable fee 
not to exceed the cost of copying and mailing (if applicable).
    (e) Updating. Except as otherwise provided in this section, a bank 
shall ensure that the information required by this section is current as 
of April 1 of each year.



Sec. 345.44  Public notice by banks.

    A bank shall provide in the public lobby of its main office and each 
of its branches the appropriate public notice

[[Page 446]]

set forth in Appendix B of this part. Only a branch of a bank having 
more than one assessment area shall include the bracketed material in 
the notice for branch offices. Only a bank that is an affiliate of a 
holding company shall include the next to the last sentence of the 
notices. A bank shall include the last sentence of the notices only if 
it is an affiliate of a holding company that is not prevented by statute 
from acquiring additional banks.



Sec. 345.45  Publication of planned examination schedule.

    The FDIC publishes at least 30 days in advance of the beginning of 
each calendar quarter a list of banks scheduled for CRA examinations in 
that quarter.



                  Sec. Appendix A to Part 345--Ratings

    (a) Ratings in general. (1) In assigning a rating, the FDIC 
evaluates a bank's performance under the applicable performance criteria 
in this part, in accordance with Sec. 345.21, and Sec. 345.28, which 
provides for adjustments on the basis of evidence of discriminatory or 
other illegal credit practices.
    (2) A bank's performance need not fit each aspect of a particular 
rating profile in order to receive that rating, and exceptionally strong 
performance with respect to some aspects may compensate for weak 
performance in others. The bank's overall performance, however, must be 
consistent with safe and sound banking practices and generally with the 
appropriate rating profile as follows.
    (b) Banks evaluated under the lending, investment, and service 
tests.--(1) Lending performance rating. The FDIC assigns each bank's 
lending performance one of the five following ratings.
    (i) Outstanding. The FDIC rates a bank's lending performance 
``outstanding'' if, in general, it demonstrates:
    (A) Excellent responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A substantial majority of its loans are made in its assessment 
area(s);
    (C) An excellent geographic distribution of loans in its assessment 
area(s);
    (D) An excellent distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product lines 
offered by the bank;
    (E) An excellent record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-income 
individuals, or businesses (including farms) with gross annual revenues 
of $1 million or less, consistent with safe and sound operations;
    (F) Extensive use of innovative or flexible lending practices in a 
safe and sound manner to address the credit needs of low- or moderate-
income individuals or geographies; and
    (G) It is a leader in making community development loans.
    (ii) High satisfactory. The FDIC rates a bank's lending performance 
``high satisfactory'' if, in general, it demonstrates:
    (A) Good responsiveness to credit needs in its assessment area(s), 
taking into account the number and amount of home mortgage, small 
business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A high percentage of its loans are made in its assessment 
area(s);
    (C) A good geographic distribution of loans in its assessment 
area(s);
    (D) A good distribution, particularly in its assessment area(s), of 
loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines offered by 
the bank;
    (E) A good record of serving the credit needs of highly economically 
disadvantaged areas in its assessment area(s), low-income individuals, 
or businesses (including farms) with gross annual revenues of $1 million 
or less, consistent with safe and sound operations;
    (F) Use of innovative or flexible lending practices in a safe and 
sound manner to address the credit needs of low- or moderate-income 
individuals or geographies; and
    (G) It has made a relatively high level of community development 
loans.
    (iii) Low satisfactory. The FDIC rates a bank's lending performance 
``low satisfactory'' if, in general, it demonstrates:
    (A) Adequate responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) An adequate percentage of its loans are made in its assessment 
area(s);
    (C) An adequate geographic distribution of loans in its assessment 
area(s);
    (D) An adequate distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product lines 
offered by the bank;
    (E) An adequate record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-income 
individuals, or businesses (including farms) with gross annual revenues 
of $1 million or less, consistent with safe and sound operations;
    (F) Limited use of innovative or flexible lending practices in a 
safe and sound manner

[[Page 447]]

to address the credit needs of low- or moderate-income individuals or 
geographies; and
    (G) It has made an adequate level of community development loans.
    (iv) Needs to improve. The FDIC rates a bank's lending performance 
``needs to improve'' if, in general, it demonstrates:
    (A) Poor responsiveness to credit needs in its assessment area(s), 
taking into account the number and amount of home mortgage, small 
business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A small percentage of its loans are made in its assessment 
area(s);
    (C) A poor geographic distribution of loans, particularly to low- or 
moderate-income geographies, in its assessment area(s);
    (D) A poor distribution, particularly in its assessment area(s), of 
loans among individuals of different income levels and businesses 
(including farms) of different sizes, given the product lines offered by 
the bank;
    (E) A poor record of serving the credit needs of highly economically 
disadvantaged areas in its assessment area(s), low-income individuals, 
or businesses (including farms) with gross annual revenues of $1 million 
or less, consistent with safe and sound operations;
    (F) Little use of innovative or flexible lending practices in a safe 
and sound manner to address the credit needs of low- or moderate-income 
individuals or geographies; and
    (G) It has made a low level of community development loans.
    (v) Substantial noncompliance. The FDIC rates a bank's lending 
performance as being in ``substantial noncompliance'' if, in general, it 
demonstrates:
    (A) A very poor responsiveness to credit needs in its assessment 
area(s), taking into account the number and amount of home mortgage, 
small business, small farm, and consumer loans, if applicable, in its 
assessment area(s);
    (B) A very small percentage of its loans are made in its assessment 
area(s);
    (C) A very poor geographic distribution of loans, particularly to 
low- or moderate-income geographies, in its assessment area(s);
    (D) A very poor distribution, particularly in its assessment 
area(s), of loans among individuals of different income levels and 
businesses (including farms) of different sizes, given the product lines 
offered by the bank;
    (E) A very poor record of serving the credit needs of highly 
economically disadvantaged areas in its assessment area(s), low-income 
individuals, or businesses (including farms) with gross annual revenues 
of $1 million or less, consistent with safe and sound operations;
    (F) No use of innovative or flexible lending practices in a safe and 
sound manner to address the credit needs of low- or moderate-income 
individuals or geographies; and
    (G) It has made few, if any, community development loans.
    (2) Investment performance rating. The FDIC assigns each bank's 
investment performance one of the five following ratings.
    (i) Outstanding. The FDIC rates a bank's investment performance 
``outstanding'' if, in general, it demonstrates:
    (A) An excellent level of qualified investments, particularly those 
that are not routinely provided by private investors, often in a 
leadership position;
    (B) Extensive use of innovative or complex qualified investments; 
and
    (C) Excellent responsiveness to credit and community development 
needs.
    (ii) High satisfactory. The FDIC rates a bank's investment 
performance ``high satisfactory'' if, in general, it demonstrates:
    (A) A significant level of qualified investments, particularly those 
that are not routinely provided by private investors, occasionally in a 
leadership position;
    (B) Significant use of innovative or complex qualified investments; 
and
    (C) Good responsiveness to credit and community development needs.
    (iii) Low satisfactory. The FDIC rates a bank's investment 
performance ``low satisfactory'' if, in general, it demonstrates:
    (A) An adequate level of qualified investments, particularly those 
that are not routinely provided by private investors, although rarely in 
a leadership position;
    (B) Occasional use of innovative or complex qualified investments; 
and
    (C) Adequate responsiveness to credit and community development 
needs.
    (iv) Needs to improve. The FDIC rates a bank's investment 
performance ``needs to improve'' if, in general, it demonstrates:
    (A) A poor level of qualified investments, particularly those that 
are not routinely provided by private investors;
    (B) Rare use of innovative or complex qualified investments; and
    (C) Poor responsiveness to credit and community development needs.
    (v) Substantial noncompliance. The FDIC rates a bank's investment 
performance as being in ``substantial noncompliance'' if, in general, it 
demonstrates:
    (A) Few, if any, qualified investments, particularly those that are 
not routinely provided by private investors;
    (B) No use of innovative or complex qualified investments; and
    (C) Very poor responsiveness to credit and community development 
needs.
    (3) Service performance rating. The FDIC assigns each bank's service 
performance one of the five following ratings.
    (i) Outstanding. The FDIC rates a bank's service performance 
``outstanding'' if, in general, the bank demonstrates:
    (A) Its service delivery systems are readily accessible to 
geographies and individuals of

[[Page 448]]

different income levels in its assessment area(s);
    (B) To the extent changes have been made, its record of opening and 
closing branches has improved the accessibility of its delivery systems, 
particularly in low- or moderate-income geographies or to low- or 
moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) are 
tailored to the convenience and needs of its assessment area(s), 
particularly low- or moderate-income geographies or low- or moderate-
income individuals; and
    (D) It is a leader in providing community development services.
    (ii) High satisfactory. The FDIC rates a bank's service performance 
``high satisfactory'' if, in general, the bank demonstrates:
    (A) Its service delivery systems are accessible to geographies and 
individuals of different income levels in its assessment area(s);
    (B) To the extent changes have been made, its record of opening and 
closing branches has not adversely affected the accessibility of its 
delivery systems, particularly in low- and moderate-income geographies 
and to low- and moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) do 
not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and moderate-
income individuals; and
    (D) It provides a relatively high level of community development 
services.
    (iii) Low satisfactory. The FDIC rates a bank's service performance 
``low satisfactory'' if, in general, the bank demonstrates:
    (A) Its service delivery systems are reasonably accessible to 
geographies and individuals of different income levels in its assessment 
area(s);
    (B) To the extent changes have been made, its record of opening and 
closing branches has generally not adversely affected the accessibility 
of its delivery systems, particularly in low- and moderate-income 
geographies and to low- and moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) do 
not vary in a way that inconveniences its assessment area(s), 
particularly low- and moderate-income geographies and low- and moderate-
income individuals; and
    (D) It provides an adequate level of community development services.
    (iv) Needs to improve. The FDIC rates a bank's service performance 
``needs to improve'' if, in general, the bank demonstrates:
    (A) Its service delivery systems are unreasonably inaccessible to 
portions of its assessment area(s), particularly to low- or moderate-
income geographies or to low- or moderate-income individuals;
    (B) To the extent changes have been made, its record of opening and 
closing branches has adversely affected the accessibility its delivery 
systems, particularly in low- or moderate-income geographies or to low- 
or moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) vary 
in a way that inconveniences its assessment area(s), particularly low- 
or moderate-income geographies or low- or moderate-income individuals; 
and
    (D) It provides a limited level of community development services.
    (v) Substantial noncompliance. The FDIC rates a bank's service 
performance as being in ``substantial noncompliance'' if, in general, 
the bank demonstrates:
    (A) Its service delivery systems are unreasonably inaccessible to 
significant portions of its assessment area(s), particularly to low- or 
moderate-income geographies or to low- or moderate-income individuals;
    (B) To the extent changes have been made, its record of opening and 
closing branches has significantly adversely affected the accessibility 
of its delivery systems, particularly in low- or moderate-income 
geographies or to low- or moderate-income individuals;
    (C) Its services (including, where appropriate, business hours) vary 
in a way that significantly inconveniences its assessment area(s), 
particularly low- or moderate-income geographies or low- or moderate-
income individuals; and
    (D) It provides few, if any, community development services.
    (c) Wholesale or limited purpose banks. The FDIC assigns each 
wholesale or limited purpose bank's community development performance 
one of the four following ratings.
    (1) Outstanding. The FDIC rates a wholesale or limited purpose 
bank's community development performance ``outstanding'' if, in general, 
it demonstrates:
    (i) A high level of community development loans, community 
development services, or qualified investments, particularly investments 
that are not routinely provided by private investors;
    (ii) Extensive use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Excellent responsiveness to credit and community development 
needs in its assessment area(s).
    (2) Satisfactory. The FDIC rates a wholesale or limited purpose 
bank's community development performance ``satisfactory'' if, in 
general, it demonstrates:
    (i) An adequate level of community development loans, community 
development services, or qualified investments, particularly investments 
that are not routinely provided by private investors;

[[Page 449]]

    (ii) Occasional use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Adequate responsiveness to credit and community development 
needs in its assessment area(s).
    (3) Needs to improve. The FDIC rates a wholesale or limited purpose 
bank's community development performance as ``needs to improve'' if, in 
general, it demonstrates:
    (i) A poor level of community development loans, community 
development services, or qualified investments, particularly investments 
that are not routinely provided by private investors;
    (ii) Rare use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Poor responsiveness to credit and community development needs 
in its assessment area(s).
    (4) Substantial noncompliance. The FDIC rates a wholesale or limited 
purpose bank's community development performance in ``substantial 
noncompliance'' if, in general, it demonstrates:
    (i) Few, if any, community development loans, community development 
services, or qualified investments, particularly investments that are 
not routinely provided by private investors;
    (ii) No use of innovative or complex qualified investments, 
community development loans, or community development services; and
    (iii) Very poor responsiveness to credit and community development 
needs in its assessment area(s).
    (d) Banks evaluated under the small bank performance standards--(1) 
Lending test ratings--(i) Eligibility for a satisfactory lending test 
rating. The FDIC rates a small bank's lending performance 
``satisfactory'' if, in general, the bank demonstrates:
    (A) A reasonable loan-to-deposit ratio (considering seasonal 
variations) given the bank's size, financial condition, the credit needs 
of its assessment area(s), and taking into account, as appropriate, 
other lending-related activities such as loan originations for sale to 
the secondary markets and community development loans and qualified 
investments;
    (B) A majority of its loans and, as appropriate, other lending-
related activities, are in its assessment area;
    (C) A distribution of loans to and, as appropriate, other lending-
related activities for individuals of different income levels (including 
low- and moderate-income individuals) and businesses and farms of 
different sizes that is reasonable given the demographics of the bank's 
assessment area(s);
    (D) A record of taking appropriate action, when warranted, in 
response to written complaints, if any, about the bank's performance in 
helping to meet the credit needs of its assessment area(s); and
    (E) A reasonable geographic distribution of loans given the bank's 
assessment area(s).
    (ii) Eligibility for an ``outstanding'' lending test rating. A small 
bank that meets each of the standards for a ``satisfactory'' rating 
under this paragraph and exceeds some or all of those standards may 
warrant consideration for a lending test rating of ``outstanding.''
    (iii) Needs to improve or substantial noncompliance ratings. A small 
bank may also receive a lending test rating of ``needs to improve'' or 
``substantial noncompliance'' depending on the degree to which its 
performance has failed to meet the standard for a ``satisfactory'' 
rating.
    (2) Community development test ratings for intermediate small 
banks--(i) Eligibility for a satisfactory community development test 
rating. The FDIC rates an intermediate small bank's community 
development performance ``satisfactory'' if the bank demonstrates 
adequate responsiveness to the community development needs of its 
assessment area(s) through community development loans, qualified 
investments, and community development services. The adequacy of the 
bank's response will depend on its capacity for such community 
development activities, its assessment area's need for such community 
development activities, and the availability of such opportunities for 
community development in the bank's assessment area(s).
    (ii) Eligibility for an outstanding community development test 
rating. The FDIC rates an intermediate small bank's community 
development performance ``outstanding'' if the bank demonstrates 
excellent responsiveness to community development needs in its 
assessment area(s) through community development loans, qualified 
investments, and community development services, as appropriate, 
considering the bank's capacity and the need and availability of such 
opportunities for community development in the bank's assessment 
area(s).
    (iii) Needs to improve or substantial noncompliance ratings. An 
intermediate small bank may also receive a community development test 
rating of ``needs to improve'' or ``substantial noncompliance'' 
depending on the degree to which its performance has failed to meet the 
standards for a ``satisfactory'' rating.
    (3) Overall rating--(i) Eligibility for a satisfactory overall 
rating. No intermediate small bank may receive an assigned overall 
rating of ``satisfactory'' unless it receives a rating of at least 
``satisfactory'' on both the lending test and the community development 
test.
    (ii) Eligibility for an outstanding overall rating. (A) An 
intermediate small bank that receives an ``outstanding'' rating on one 
test

[[Page 450]]

and at least ``satisfactory'' on the other test may receive an assigned 
overall rating of ``outstanding.''
    (B) A small bank that is not an intermediate small bank that meets 
each of the standards for a ``satisfactory'' rating under the lending 
test and exceeds some or all of those standards may warrant 
consideration for an overall rating of ``outstanding.'' In assessing 
whether a bank's performance is ``outstanding,'' the FDIC considers the 
extent to which the bank exceeds each of the performance standards for a 
``satisfactory'' rating and its performance in making qualified 
investments and its performance in providing branches and other services 
and delivery systems that enhance credit availability in its assessment 
area(s).
    (iii) Needs to improve or substantial noncompliance overall ratings. 
A small bank may also receive a rating of ``needs to improve'' or 
``substantial noncompliance'' depending on the degree to which its 
performance has failed to meet the standards for a ``satisfactory'' 
rating.
    (e) Strategic plan assessment and rating--(1) Satisfactory goals. 
The FDIC approves as ``satisfactory'' measurable goals that adequately 
help to meet the credit needs of the bank's assessment area(s).
    (2) Outstanding goals. If the plan identifies a separate group of 
measurable goals that substantially exceed the levels approved as 
``satisfactory,'' the FDIC will approve those goals as ``outstanding.''
    (3) Rating. The FDIC assesses the performance of a bank operating 
under an approved plan to determine if the bank has met its plan goals:
    (i) If the bank substantially achieves its plan goals for a 
satisfactory rating, the FDIC will rate the bank's performance under the 
plan as ``satisfactory.''
    (ii) If the bank exceeds its plan goals for a satisfactory rating 
and substantially achieves its plan goals for an outstanding rating, the 
FDIC will rate the bank's performance under the plan as ``outstanding.''
    (iii) If the bank fails to meet substantially its plan goals for a 
satisfactory rating, the FDIC will rate the bank as either ``needs to 
improve'' or ``substantial noncompliance,'' depending on the extent to 
which it falls short of its plan goals, unless the bank elected in its 
plan to be rated otherwise, as provided in Sec. 345.27(f)(4).

[60 FR 22201, May 4, 1995, as amended at 70 FR 44270, Aug. 2, 2005]



                 Sec. Appendix B to Part 345--CRA Notice

    (a) Notice for main offices and, if an interstate bank, one branch 
office in each state.

                    Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the Federal 
Deposit Insurance Corporation (FDIC) evaluates our record of helping to 
meet the credit needs of this community consistent with safe and sound 
operations. The FDIC also takes this record into account when deciding 
on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and our 
performance under the CRA, including, for example, information about our 
branches, such as their location and services provided at them; the 
public section of our most recent CRA Performance Evaluation, prepared 
by the FDIC; and comments received from the public relating to our 
performance in helping to meet community credit needs, as well as our 
responses to those comments. You may review this information today.
    At least 30 days before the beginning of each quarter, the FDIC 
publishes a nationwide list of the banks that are scheduled for CRA 
examination in that quarter. This list is available from the Regional 
Manager, Division of Supervision and Consumer Protection(DSC), FDIC 
(address). You may send written comments about our performance in 
helping to meet community credit needs to (name and address of official 
at bank) and FDIC Regional Manager. Your letter, together with any 
response by us, will be considered by the FDIC in evaluating our CRA 
performance and may be made public.
    You may ask to look at any comments received by the FDIC Regional 
Manager. You may also request from the FDIC Regional Manager an 
announcement of our applications covered by the CRA filed with the FDIC. 
We are an affiliate of (name of holding company), a bank holding 
company. You may request from the (title of responsible official), 
Federal Reserve Bank of -------------------- (address) an announcement 
of applications covered by the CRA filed by bank holding companies.
    (b) Notice for branch offices.

                    Community Reinvestment Act Notice

    Under the Federal Community Reinvestment Act (CRA), the Federal 
Deposit Insurance Corporation (FDIC) evaluates our record of helping to 
meet the credit needs of this community consistent with safe and sound 
operations. The FDIC also takes this record into account when deciding 
on certain applications submitted by us.
    Your involvement is encouraged.
    You are entitled to certain information about our operations and our 
performance under the CRA. You may review today the public section of 
our most recent CRA evaluation, prepared by the FDIC, and a list of 
services provided at this branch. You may

[[Page 451]]

also have access to the following additional information, which we will 
make available to you at this branch within five calendar days after you 
make a request to us: (1) a map showing the assessment area containing 
this branch, which is the area in which the FDIC evaluates our CRA 
performance in this community; (2) information about our branches in 
this assessment area; (3) a list of services we provide at those 
locations; (4) data on our lending performance in this assessment area; 
and (5) copies of all written comments received by us that specifically 
relate to our CRA performance in this assessment area, and any responses 
we have made to those comments. If we are operating under an approved 
strategic plan, you may also have access to a copy of the plan.

[If you would like to review information about our CRA performance in 
other communities served by us, the public file for our entire bank is 
available at (name of office located in state), located at (address).]

    At least 30 days before the beginning of each quarter, the FDIC 
publishes a nationwide list of the banks that are scheduled for CRA 
examination in that quarter. This list is available from the Regional 
Manager, Division of Supervision and Consumer Protection(DSC), FDIC 
(address). You may send written comments about our performance in 
helping to meet community credit needs to (name and address of official 
at bank) and the FDIC Regional Manager. Your letter, together with any 
response by us, will be considered by the FDIC in evaluating our CRA 
performance and may be made public.
    You may ask to look at any comments received by the FDIC Regional 
Manager. You may also request from the FDIC Regional Manager an 
announcement of our applications covered by the CRA filed with the FDIC. 
We are an affiliate of (name of holding company), a bank holding 
company. You may request from the (title of responsible official), 
Federal Reserve Bank of -------------------- (address) an announcement 
of applications covered by the CRA filed by bank holding companies.



PART 346_DISCLOSURE AND REPORTING OF CRA-RELATED AGREEMENTS--Table of Contents




Sec.
346.1 Purpose and scope of this part.
346.2 Definition of covered agreement.
346.3 CRA communications.
346.4 Fulfillment of the CRA.
346.5 Related agreements considered a single agreement.
346.6 Disclosure of covered agreements.
346.7 Annual reports.
346.8 Release of information under FOIA.
346.9 Compliance provisions.
346.10 Transition provisions.
346.11 Other definitions and rules of construction used in this part.

    Authority: 12 U.S.C. 1831y.

    Source: 66 FR 2099, Jan. 10, 2001, unless otherwise noted.



Sec. 346.1  Purpose and scope of this part.

    (a) General. This part implements section 711 of the Gramm-Leach-
Bliley Act (12 U.S.C. 1831y). That section requires any nongovernmental 
entity or person, insured depository institution, or affiliate of an 
insured depository institution that enters into a covered agreement to--
    (1) Make the covered agreement available to the public and the 
appropriate Federal banking agency; and
    (2) File an annual report with the appropriate Federal banking 
agency concerning the covered agreement.
    (b) Scope of this part. The provisions of this part apply to--
    (1) State nonmember insured banks;
    (2) Subsidiaries of state nonmember insured banks;
    (3) Nongovernmental entities or persons that enter into covered 
agreements with any company listed in paragraph (b)(1) and (2) of this 
section.
    (c) Relation to Community Reinvestment Act. This part does not 
affect in any way the Community Reinvestment Act of 1977 (12 U.S.C. 2901 
et seq.) or the FDIC's Community Reinvestment regulation found at 12 CFR 
part 345, or the FDIC's interpretations or administration of that Act or 
regulation.
    (d) Examples. (1) The examples in this part are not exclusive. 
Compliance with an example, to the extent applicable, constitutes 
compliance with this part.
    (2) Examples in a paragraph illustrate only the issue described in 
the paragraph and do not illustrate any other issues that may arise in 
this part.



Sec. 346.2  Definition of covered agreement.

    (a) General definition of covered agreement. A covered agreement is 
any contract, arrangement, or understanding that meets all of the 
following criteria--
    (1) The agreement is in writing.

[[Page 452]]

    (2) The parties to the agreement include--
    (i) One or more insured depository institutions or affiliates of an 
insured depository institution; and
    (ii) One or more nongovernmental entities or persons (referred to 
hereafter as NGEPs).
    (3) The agreement provides for the insured depository institution or 
any affiliate to--
    (i) Provide to one or more individuals or entities (whether or not 
parties to the agreement) cash payments, grants, or other consideration 
(except loans) that have an aggregate value of more than $10,000 in any 
calendar year; or
    (ii) Make to one or more individuals or entities (whether or not 
parties to the agreement) loans that have an aggregate principal amount 
of more than $50,000 in any calendar year.
    (4) The agreement is made pursuant to, or in connection with, the 
fulfillment of the Community Reinvestment Act of 1977 (12 U.S.C. 2901 et 
seq.) (CRA), as defined in Sec. 346.4.
    (5) The agreement is with a NGEP that has had a CRA communication as 
described in Sec. 346.3 prior to entering into the agreement.
    (b) Examples concerning written arrangements or understandings--(1) 
Example 1. A NGEP meets with an insured depository institution and 
states that the institution needs to make more community development 
investments in the NGEP's community. The NGEP and insured depository 
institution do not reach an agreement concerning the community 
development investments the institution should make in the community, 
and the parties do not reach any mutual arrangement or understanding. 
Two weeks later, the institution unilaterally issues a press release 
announcing that it has established a general goal of making $100 million 
of community development grants in low- and moderate-income 
neighborhoods served by the insured depository institution over the next 
5 years. The NGEP is not identified in the press release. The press 
release is not a written arrangement or understanding.
    (2) Example 2. A NGEP meets with an insured depository institution 
and states that the institution needs to offer new loan programs in the 
NGEP's community. The NGEP and the insured depository institution reach 
a mutual arrangement or understanding that the institution will provide 
additional loans in the NGEP's community. The institution tells the NGEP 
that it will issue a press release announcing the program. Later, the 
insured depository institution issues a press release announcing the 
loan program. The press release incorporates the key terms of the 
understanding reached between the NGEP and the insured depository 
institution. The written press release reflects the mutual arrangement 
or understanding of the NGEP and the insured depository institution and 
is, therefore, a written arrangement or understanding.
    (3) Example 3. An NGEP sends a letter to an insured depository 
institution requesting that the institution provide a $15,000 grant to 
the NGEP. The insured depository institution responds in writing and 
agrees to provide the grant in connection with its annual grant program. 
The exchange of letters constitutes a written arrangement or 
understanding.
    (c) Loan agreements that are not covered agreements. A covered 
agreement does not include--
    (1) Any individual loan that is secured by real estate; or
    (2) Any specific contract or commitment for a loan or extension of 
credit to an individual, business, farm, or other entity, or group of 
such individuals or entities if--
    (i) The funds are loaned at rates that are not substantially below 
market rates; and
    (ii) The loan application or other loan documentation does not 
indicate that the borrower intends or is authorized to use the borrowed 
funds to make a loan or extension of credit to one or more third 
parties.
    (d) Examples concerning loan agreements--(1) Example 1. An insured 
depository institution provides an organization with a $1 million loan 
that is documented in writing and is secured by real estate owned or to-
be-acquired by the organization. The agreement is an individual mortgage 
loan and is exempt from coverage under paragraph (c)(1) of this section, 
regardless of the

[[Page 453]]

interest rate on the loan or whether the organization intends or is 
authorized to re-loan the funds to a third party.
    (2) Example 2. An insured depository institution commits to provide 
a $500,000 line of credit to a small business that is documented by a 
written agreement. The loan is made at rates that are within the range 
of rates offered by the institution to similarly situated small 
businesses in the market and the loan documentation does not indicate 
that the small business intends or is authorized to re-lend the borrowed 
funds. The agreement is exempt from coverage under paragraph (c)(2) of 
this section.
    (3) Example 3. An insured depository institution offers small 
business loans that are guaranteed by the Small Business Administration 
(SBA). A small business obtains a $75,000 loan, documented in writing, 
from the institution under the institution's SBA loan program. The loan 
documentation does not indicate that the borrower intends or is 
authorized to re-lend the funds. Although the rate charged on the loan 
is well below that charged by the institution on commercial loans, the 
rate is within the range of rates that the institution would charge a 
similarly situated small business for a similar loan under the SBA loan 
program. Accordingly, the loan is not made at substantially below market 
rates and is exempt from coverage under paragraph (c)(2) of this 
section.
    (4) Example 4. A bank holding company enters into a written 
agreement with a community development organization that provides that 
insured depository institutions owned by the bank holding company will 
make $250 million in small business loans in the community over the next 
5 years. The written agreement is not a specific contract or commitment 
for a loan or an extension of credit and, thus, is not exempt from 
coverage under paragraph (c)(2) of this section. Each small business 
loan made by the insured depository institution pursuant to this general 
commitment would, however, be exempt from coverage if the loan is made 
at rates that are not substantially below market rates and the loan 
documentation does not indicate that the borrower intended or was 
authorized to re-lend the funds.
    (e) Agreements that include exempt loan agreements. If an agreement 
includes a loan, extension of credit or loan commitment that, if 
documented separately, would be exempt under paragraph (c) of this 
section, the exempt loan, extension of credit or loan commitment may be 
excluded for purposes of determining whether the agreement is a covered 
agreement.
    (f) Determining annual value of agreements that lack schedule of 
disbursements. For purposes of paragraph (a)(3) of this section, a 
multi-year agreement that does not include a schedule for the 
disbursement of payments, grants, loans or other consideration by the 
insured depository institution or affiliate, is considered to have a 
value in the first year of the agreement equal to all payments, grants, 
loans and other consideration to be provided at any time under the 
agreement.



Sec. 346.3  CRA communications.

    (a) Definition of CRA communication. A CRA communication is any of 
the following--
    (1) Any written or oral comment or testimony provided to a Federal 
banking agency concerning the adequacy of the performance under the CRA 
of the insured depository institution, any affiliated insured depository 
institution, or any CRA affiliate.
    (2) Any written comment submitted to the insured depository 
institution that discusses the adequacy of the performance under the CRA 
of the institution and must be included in the institution's CRA public 
file.
    (3) Any discussion or other contact with the insured depository 
institution or any affiliate about--
    (i) Providing (or refraining from providing) written or oral 
comments or testimony to any Federal banking agency concerning the 
adequacy of the performance under the CRA of the insured depository 
institution, any affiliated insured depository institution, or any CRA 
affiliate;
    (ii) Providing (or refraining from providing) written comments to 
the insured depository institution that concern the adequacy of the 
institution's performance under the CRA and must

[[Page 454]]

be included in the institution's CRA public file; or
    (iii) The adequacy of the performance under the CRA of the insured 
depository institution, any affiliated insured depository institution, 
or any CRA affiliate.
    (b) Discussions or contacts that are not CRA communications--(1) 
Timing of contacts with a Federal banking agency. An oral or written 
communication with a Federal banking agency is not a CRA communication 
if it occurred more than 3 years before the parties entered into the 
agreement.
    (2) Timing of contacts with insured depository institutions and 
affiliates. A communication with an insured depository institution or 
affiliate is not a CRA communication if the communication occurred--
    (i) More than 3 years before the parties entered into the agreement, 
in the case of any written communication;
    (ii) More than 3 years before the parties entered into the 
agreement, in the case of any oral communication in which the NGEP 
discusses providing (or refraining from providing) comments or testimony 
to a Federal banking agency or written comments that must be included in 
the institution's CRA public file in connection with a request to, or 
agreement by, the institution or affiliate to take (or refrain from 
taking) any action that is in fulfillment of the CRA; or
    (iii) More than 1 year before the parties entered into the 
agreement, in the case of any other oral communication not described in 
paragraph (b)(2)(ii) of this section.
    (3) Knowledge of communication by insured depository institution or 
affiliate. (i) A communication is only a CRA communication under 
paragraph (a) of this section if the insured depository institution or 
its affiliate has knowledge of the communication under this paragraph 
(b)(3)(ii) or (b)(3)(iii) of this section.
    (ii) Communication with insured depository institution or affiliate. 
An insured depository institution or affiliate has knowledge of a 
communication by the NGEP to the institution or its affiliate under this 
paragraph only if one of the following representatives of the insured 
depository institution or any affiliate has knowledge of the 
communication--
    (A) An employee who approves, directs, authorizes, or negotiates the 
agreement with the NGEP; or
    (B) An employee designated with responsibility for compliance with 
the CRA or executive officer if the employee or executive officer knows 
that the institution or affiliate is negotiating, intends to negotiate, 
or has been informed by the NGEP that it expects to request that the 
institution or affiliate negotiate an agreement with the NGEP.
    (iii) Other communications. An insured depository institution or 
affiliate is deemed to have knowledge of--
    (A) Any testimony provided to a Federal banking agency at a public 
meeting or hearing;
    (B) Any comment submitted to a Federal banking agency that is 
conveyed in writing by the agency to the insured depository institution 
or affiliate; and
    (C) Any written comment submitted to the insured depository 
institution that must be and is included in the institution's CRA public 
file.
    (4) Communication where NGEP has knowledge. A NGEP has a CRA 
communication with an insured depository institution or affiliate only 
if any of the following individuals has knowledge of the communication--
    (i) A director, employee, or member of the NGEP who approves, 
directs, authorizes, or negotiates the agreement with the insured 
depository institution or affiliate;
    (ii) A person who functions as an executive officer of the NGEP and 
who knows that the NGEP is negotiating or intends to negotiate an 
agreement with the insured depository institution or affiliate; or
    (iii) Where the NGEP is an individual, the NGEP.
    (c) Examples of CRA communications--(1) Examples of actions that are 
CRA communications. The following are examples of CRA communications. 
These examples are not exclusive and assume that the communication 
occurs within the relevant time period as described

[[Page 455]]

in paragraph (b)(1) or (b)(2) of this section and the appropriate 
representatives have knowledge of the communication as specified in 
paragraphs (b)(3) and (b)(4) of this section.
    (i) Example 1. A NGEP files a written comment with a Federal banking 
agency that states than an insured depository institution successfully 
addresses the credit needs of its community. The written comment is in 
response to a general request from the agency for comments on an 
application of the insured depository institution to open a new branch 
and a copy of the comment is provided to the institution.
    (ii) Example 2. A NGEP meets with an executive officer of an insured 
depository institution and states that the institution must improve its 
CRA performance.
    (iii) Example 3. A NGEP meets with an executive officer of an 
insured depository institution and states that the institution needs to 
make more mortgage loans in low- and moderate-income neighborhoods in 
its community.
    (iv) Example 4. A bank holding company files an application with a 
Federal banking agency to acquire an insured depository institution. Two 
weeks later, the NGEP meets with an executive officer of the bank 
holding company to discuss the adequacy of the performance under the CRA 
of the target insured depository institution. The insured depository 
institution was an affiliate of the bank holding company at the time the 
NGEP met with the target institution. (See Sec. 346.11(a).) 
Accordingly, the NGEP had a CRA communication with an affiliate of the 
bank holding company.
    (2) Examples of actions that are not CRA communications. The 
following are examples of actions that are not by themselves CRA 
communications. These examples are not exclusive.
    (i) Example 1. A NGEP provides to a Federal banking agency comments 
or testimony concerning an insured depository institution or affiliate 
in response to a direct request by the agency for comments or testimony 
from that NGEP. Direct requests for comments or testimony do not include 
a general invitation by a Federal banking agency for comments or 
testimony from the public in connection with a CRA performance 
evaluation of, or application for a deposit facility (as defined in 
section 803 of the CRA (12 U.S.C. 2902(3)) by, an insured depository 
institution or an application by a company to acquire an insured 
depository institution.
    (ii) Example 2. A NGEP makes a statement concerning an insured 
depository institution or affiliate at a widely attended conference or 
seminar regarding a general topic. A public or private meeting, public 
hearing, or other meeting regarding one or more specific institutions, 
affiliates or transactions involving an application for a deposit 
facility is not considered a widely attended conference or seminar.
    (iii) Example 3. A NGEP, such as a civil rights group, community 
group providing housing and other services in low- and moderate-income 
neighborhoods, veterans organization, community theater group, or youth 
organization, sends a fundraising letter to insured depository 
institutions and to other businesses in its community. The letter 
encourages all businesses in the community to meet their obligation to 
assist in making the local community a better place to live and work by 
supporting the fundraising efforts of the NGEP.
    (iv) Example 4. A NGEP discusses with an insured depository 
institution or affiliate whether particular loans, services, 
investments, community development activities, or other activities are 
generally eligible for consideration by a Federal banking agency under 
the CRA. The NGEP and insured depository institution or affiliate do not 
discuss the adequacy of the CRA performance of the insured depository 
institution or affiliate.
    (v) Example 5. A NGEP engaged in the sale or purchase of loans in 
the secondary market sends a general offering circular to financial 
institutions offering to sell or purchase a portfolio of loans. An 
insured depository institution that receives the offering circular 
discusses with the NGEP the types of loans included in the loan pool, 
whether such loans are generally eligible for consideration under the 
CRA, and which loans are made to borrowers in the institution's local 
community. The

[[Page 456]]

NGEP and insured depository institution do not discuss the adequacy of 
the institution's CRA performance.
    (d) Multiparty covered agreements. (1) A NGEP that is a party to a 
covered agreement that involves multiple NGEPs is not required to comply 
with the requirements of this part if--
    (i) The NGEP has not had a CRA communication; and
    (ii) No representative of the NGEP identified in paragraph (b)(4) of 
this section has knowledge at the time of the agreement that another 
NGEP that is a party to the agreement has had a CRA communication.
    (2) An insured depository institution or affiliate that is a party 
to a covered agreement that involves multiple insured depository 
institutions or affiliates is not required to comply with the disclosure 
and annual reporting requirements in Sec. Sec. 346.6 and 346.7 if--
    (i) No NGEP that is a party to the agreement has had a CRA 
communication concerning the insured depository institution or any 
affiliate; and
    (ii) No representative of the insured depository institution or any 
affiliate identified in paragraph (b)(3) of this section has knowledge 
at the time of the agreement that an NGEP that is a party to the 
agreement has had a CRA communication concerning any other insured 
depository institution or affiliate that is a party to the agreement.



Sec. 346.4  Fulfillment of the CRA.

    (a) List of factors that are in fulfillment of the CRA. Fulfillment 
of the CRA, for purposes of this part, means the following list of 
factors--
    (1) Comments to a Federal banking agency or included in CRA public 
file. Providing or refraining from providing written or oral comments or 
testimony to any Federal banking agency concerning the performance under 
the CRA of an insured depository institution or CRA affiliate that is a 
party to the agreement or an affiliate of a party to the agreement or 
written comments that are required to be included in the CRA public file 
of any such insured depository institution; or
    (2) Activities given favorable CRA consideration. Performing any of 
the following activities if the activity is of the type that is likely 
to receive favorable consideration by a Federal banking agency in 
evaluating the performance under the CRA of the insured depository 
institution that is a party to the agreement or an affiliate of a party 
to the agreement--
    (i) Home-purchase, home-improvement, small business, small farm, 
community development, and consumer lending, as described in 12 CFR 
345.22, including loan purchases, loan commitments, and letters of 
credit;
    (ii) Making investments, deposits, or grants, or acquiring 
membership shares, that have as their primary purpose community 
development, as described in 12 CFR 345.23;
    (iii) Delivering retail banking services, as described in 12 CFR 
345.24(d);
    (iv) Providing community development services, as described in 12 
CFR 345.24(e);
    (v) In the case of a wholesale or limited-purpose insured depository 
institution, community development lending, including originating and 
purchasing loans and making loan commitments and letters of credit, 
making qualified investments, or providing community development 
services, as described in 12 CFR 345.25(c);
    (vi) In the case of a small insured depository institution, any 
lending or other activity described in 12 CFR 345.26(a); or
    (vii) In the case of an insured depository institution that is 
evaluated on the basis of a strategic plan, any element of the strategic 
plan, as described in 12 CFR 345.27(f).
    (b) Agreements relating to activities of CRA affiliates. An insured 
depository institution or affiliate that is a party to a covered 
agreement that concerns any activity described in paragraph (a) of this 
section of a CRA affiliate must, prior to the time the agreement is 
entered into, notify each NGEP that is a party to the agreement that the 
agreement concerns a CRA affiliate.



Sec. 346.5  Related agreements considered a single agreement.

    The following rules must be applied in determining whether an 
agreement is a covered agreement under Sec. 346.2.
    (a) Agreements entered into by same parties. All written agreements 
to

[[Page 457]]

which an insured depository institution or an affiliate of the insured 
depository institution is a party shall be considered to be a single 
agreement if the agreements--
    (1) Are entered into with the same NGEP;
    (2) Were entered into within the same 12-month period; and
    (3) Are each in fulfillment of the CRA.
    (b) Substantively related contracts. All written contracts to which 
an insured depository institution or an affiliate of the insured 
depository institution is a party shall be considered to be a single 
agreement, without regard to whether the other parties to the contracts 
are the same or whether each such contract is in fulfillment of the CRA, 
if the contracts were negotiated in a coordinated fashion and a NGEP is 
a party to each contract.



Sec. 346.6  Disclosure of covered agreements.

    (a) Applicability date. This section applies only to covered 
agreements entered into after November 12, 1999.
    (b) Disclosure of covered agreements to the public--(1) Disclosure 
required. Each NGEP and each insured depository institution or affiliate 
that enters into a covered agreement must promptly make a copy of the 
covered agreement available to any individual or entity upon request.
    (2) Nondisclosure of confidential and proprietary information 
permitted. In responding to a request for a covered agreement from any 
individual or entity under paragraph (b)(1) of this section, a NGEP, 
insured depository institution, or affiliate may withhold from public 
disclosure confidential or proprietary information that the party 
believes the relevant supervisory agency could withhold from disclosure 
under the Freedom of Information Act (5 U.S.C. 552 et seq.) (FOIA).
    (3) Information that must be disclosed. Notwithstanding paragraph 
(b)(2) of this section, a party must disclose any of the following 
information that is contained in a covered agreement--
    (i) The names and addresses of the parties to the agreement;
    (ii) The amount of any payments, fees, loans, or other consideration 
to be made or provided by any party to the agreement;
    (iii) Any description of how the funds or other resources provided 
under the agreement are to be used;
    (iv) The term of the agreement (if the agreement establishes a 
term); and
    (v) Any other information that the relevant supervisory agency 
determines is not properly exempt from public disclosure.
    (4) Request for review of withheld information. Any individual or 
entity may request that the relevant supervisory agency review whether 
any information in a covered agreement withheld by a party must be 
disclosed. Any requests for agency review of withheld information must 
be filed, and will be processed in accordance with, the relevant 
supervisory agency's rules concerning the availability of information 
(see the FDIC's rules regarding Disclosure of Information (12 CFR part 
309)).
    (5) Duration of obligation. The obligation to disclose a covered 
agreement to the public terminates 12 months after the end of the term 
of the agreement.
    (6) Reasonable copy and mailing fees. Each NGEP and each insured 
depository institution or affiliate may charge an individual or entity 
that requests a copy of a covered agreement a reasonable fee not to 
exceed the cost of copying and mailing the agreement.
    (7) Use of CRA public file by insured depository institution or 
affiliate. An insured depository institution and any affiliate of an 
insured depository institution may fulfill its obligation under this 
paragraph (b) by placing a copy of the covered agreement in the insured 
depository institution's CRA public file if the institution makes the 
agreement available in accordance with the procedures set forth in 12 
CFR 345.43.
    (c) Disclosure by NGEPs of covered agreements to the relevant 
supervisory agency--(1) Each NGEP that is a party to a covered agreement 
must provide the following within 30 days of receiving a request from 
the relevant supervisory agency--
    (i) A complete copy of the agreement; and
    (ii) In the event the NGEP proposes the withholding of any 
information

[[Page 458]]

contained in the agreement in accordance with paragraph (b)(2) of this 
section, a public version of the agreement that excludes such 
information and an explanation justifying the exclusions. Any public 
version must include the information described in paragraph (b)(3) of 
this section.
    (2) The obligation of a NGEP to provide a covered agreement to the 
relevant supervisory agency terminates 12 months after the end of the 
term of the covered agreement.
    (d) Disclosure by insured depository institution or affiliate of 
covered agreements to the relevant supervisory agency--(1) In general. 
Within 60 days of the end of each calendar quarter, each insured 
depository institution and affiliate must provide each relevant 
supervisory agency with--
    (i)(A) A complete copy of each covered agreement entered into by the 
insured depository institution or affiliate during the calendar quarter; 
and
    (B) In the event the institution or affiliate proposes the 
withholding of any information contained in the agreement in accordance 
with paragraph (b)(2) of this section, a public version of the agreement 
that excludes such information (other than any information described in 
paragraph (b)(3) of this section) and an explanation justifying the 
exclusions; or
    (ii) A list of all covered agreements entered into by the insured 
depository institution or affiliate during the calendar quarter that 
contains--
    (A) The name and address of each insured depository institution or 
affiliate that is a party to the agreement;
    (B) The name and address of each NGEP that is a party to the 
agreement;
    (C) The date the agreement was entered into;
    (D) The estimated total value of all payments, fees, loans and other 
consideration to be provided by the institution or any affiliate of the 
institution under the agreement; and
    (E) The date the agreement terminates.
    (2) Prompt filing of covered agreements contained in list 
required.--(i) If an insured depository institution or affiliate files a 
list of the covered agreements entered into by the institution or 
affiliate pursuant to paragraph (d)(1)(ii) of this section, the 
institution or affiliate must provide any relevant supervisory agency a 
complete copy and public version of any covered agreement referenced in 
the list within 7 calendar days of receiving a request from the agency 
for a copy of the agreement.
    (ii) The obligation of an insured depository institution or 
affiliate to provide a covered agreement to the relevant supervisory 
agency under this paragraph (d)(2) terminates 36 months after the end of 
the term of the agreement.
    (3) Joint filings. In the event that 2 or more insured depository 
institutions or affiliates are parties to a covered agreement, the 
insured depository institution(s) and affiliate(s) may jointly file the 
documents required by this paragraph (d). Any joint filing must identify 
the insured depository institution(s) and affiliate(s) for whom the 
filings are being made.



Sec. 346.7  Annual reports.

    (a) Applicability date. This section applies only to covered 
agreements entered into on or after May 12, 2000.
    (b) Annual report required. Each NGEP and each insured depository 
institution or affiliate that is a party to a covered agreement must 
file an annual report with each relevant supervisory agency concerning 
the disbursement, receipt, and uses of funds or other resources under 
the covered agreement.
    (c) Duration of reporting requirement--(1) NGEPs. A NGEP must file 
an annual report for a covered agreement for any fiscal year in which 
the NGEP receives or uses funds or other resources under the agreement.
    (2) Insured depository institutions and affiliates. An insured 
depository institution or affiliate must file an annual report for a 
covered agreement for any fiscal year in which the institution or 
affiliate--
    (i) provides or receives any payments, fees, or loans under the 
covered agreement that must be reported under paragraphs (e)(1)(iii) and 
(iv) of this section; or
    (ii) has data to report on loans, investments, and services provided 
by a party to the covered agreement under

[[Page 459]]

the covered agreement under paragraph (e)(1)(vi) of this section.
    (d) Annual reports filed by NGEP--(1) Contents of report. The annual 
report filed by a NGEP under this section must include the following--
    (i) The name and mailing address of the NGEP filing the report;
    (ii) Information sufficient to identify the covered agreement for 
which the annual report is being filed, such as by providing the names 
of the parties to the agreement and the date the agreement was entered 
into or by providing a copy of the agreement;
    (iii) The amount of funds or resources received under the covered 
agreement during the fiscal year; and
    (iv) A detailed, itemized list of how any funds or resources 
received by the NGEP under the covered agreement were used during the 
fiscal year, including the total amount used for--
    (A) Compensation of officers, directors, and employees;
    (B) Administrative expenses;
    (C) Travel expenses;
    (D) Entertainment expenses;
    (E) Payment of consulting and professional fees; and
    (F) Other expenses and uses (specify expense or use).
    (2) More detailed reporting of uses of funds or resources 
permitted--(i) In general. If a NGEP allocated and used funds received 
under a covered agreement for a specific purpose, the NGEP may fulfill 
the requirements of paragraph (d)(1)(iv) of this section with respect to 
such funds by providing--
    (A) A brief description of each specific purpose for which the funds 
or other resources were used; and
    (B) The amount of funds or resources used during the fiscal year for 
each specific purpose.
    (ii) Specific purpose defined. A NGEP allocates and uses funds for a 
specific purpose if the NGEP receives and uses the funds for a purpose 
that is more specific and limited than the categories listed in 
paragraph (d)(1)(iv) of this section.
    (3) Use of other reports. The annual report filed by a NGEP may 
consist of or incorporate a report prepared for any other purpose, such 
as the Internal Revenue Service Return of Organization Exempt From 
Income Tax on Form 990, or any other Internal Revenue Service form, 
state tax form, report to members or shareholders, audited or unaudited 
financial statements, audit report, or other report, so long as the 
annual report filed by the NGEP contains all of the information required 
by this paragraph (d).
    (4) Consolidated reports permitted. A NGEP that is a party to 2 or 
more covered agreements may file with each relevant supervisory agency a 
single consolidated annual report covering all the covered agreements. 
Any consolidated report must contain all the information required by 
this paragraph (d). The information reported under paragraphs (d)(1)(iv) 
and (d)(2) of this section may be reported on an aggregate basis for all 
covered agreements.
    (5) Examples of annual report requirements for NGEPs--(i) Example 1. 
A NGEP receives an unrestricted grant of $15,000 under a covered 
agreement, includes the funds in its general operating budget, and uses 
the funds during its fiscal year. The NGEP's annual report for the 
fiscal year must provide the name and mailing address of the NGEP, 
information sufficient to identify the covered agreement, and state that 
the NGEP received $15,000 during the fiscal year. The report must also 
indicate the total expenditures made by the NGEP during the fiscal year 
for compensation, administrative expenses, travel expenses, 
entertainment expenses, consulting and professional fees, and other 
expenses and uses. The NGEP's annual report may provide this information 
by submitting an Internal Revenue Service Form 990 that includes the 
required information. If the Internal Revenue Service Form does not 
include information for all of the required categories listed in this 
part, the NGEP must report the total expenditures in the remaining 
categories either by providing that information directly or by providing 
another form or report that includes the required information.
    (ii) Example 2. An organization receives $15,000 from an insured 
depository institution under a covered agreement and allocates and uses 
the $15,000 during the fiscal year to purchase computer equipment to 
support its functions. The organization's annual report must include the 
name and address of

[[Page 460]]

the organization, information sufficient to identify the agreement, and 
a statement that the organization received $15,000 during the year. In 
addition, since the organization allocated and used the funds for a 
specific purpose that is more narrow and limited than the categories of 
expenses included in the detailed, itemized list of expenses, the 
organization would have the option of providing either the total amount 
it used during the year for each category of expenses included in 
paragraph (d)(1)(iv) of this section, or a statement that it used the 
$15,000 to purchase computer equipment and a brief description of the 
equipment purchased.
    (iii) Example 3. A community group receives $50,000 from an insured 
depository institution under a covered agreement. During its fiscal 
year, the community group specifically allocates and uses $5,000 of the 
funds to pay for a particular business trip and uses the remaining 
$45,000 for general operating expenses. The group's annual report for 
the fiscal year must include the name and address of the group, 
information sufficient to identify the agreement, and a statement that 
the group received $50,000. Because the group did not allocate and use 
all of the funds for a specific purpose, the group's annual report must 
provide the total amount of funds it used during the year for each 
category of expenses included in paragraph (d)(1)(iv) of this section. 
The group's annual report also could state that it used $5,000 for a 
particular business trip and include a brief description of the trip.
    (iv) Example 4. A community development organization is a party to 
two separate covered agreements with two unaffiliated insured depository 
institutions. Under each agreement, the organization receives $15,000 
during its fiscal year and uses the funds to support its activities 
during that year. If the organization elects to file a consolidated 
annual report, the consolidated report must identify the organization 
and the two covered agreements, state that the organization received 
$15,000 during the fiscal year under each agreement, and provide the 
total amount that the organization used during the year for each 
category of expenses included in paragraph (d)(1)(iv) of this section.
    (e) Annual report filed by insured depository institution or 
affiliate--(1) General. The annual report filed by an insured depository 
institution or affiliate must include the following--
    (i) The name and principal place of business of the insured 
depository institution or affiliate filing the report;
    (ii) Information sufficient to identify the covered agreement for 
which the annual report is being filed, such as by providing the names 
of the parties to the agreement and the date the agreement was entered 
into or by providing a copy of the agreement;
    (iii) The aggregate amount of payments, aggregate amount of fees, 
and aggregate amount of loans provided by the insured depository 
institution or affiliate under the covered agreement to any other party 
to the agreement during the fiscal year;
    (iv) The aggregate amount of payments, aggregate amount of fees, and 
aggregate amount of loans received by the insured depository institution 
or affiliate under the covered agreement from any other party to the 
agreement during the fiscal year;
    (v) A general description of the terms and conditions of any 
payments, fees, or loans reported under paragraphs (e)(1)(iii) and (iv) 
of this section, or, in the event such terms and conditions are set 
forth--
    (A) In the covered agreement, a statement identifying the covered 
agreement and the date the agreement (or a list identifying the 
agreement) was filed with the relevant supervisory agency; or
    (B) In a previous annual report filed by the insured depository 
institution or affiliate, a statement identifying the date the report 
was filed with the relevant supervisory agency; and
    (vi) The aggregate amount and number of loans, aggregate amount and 
number of investments, and aggregate amount of services provided under 
the covered agreement to any individual or entity not a party to the 
agreement--
    (A) By the insured depository institution or affiliate during its 
fiscal year; and
    (B) By any other party to the agreement, unless such information is 
not

[[Page 461]]

known to the insured depository institution or affiliate filing the 
report or such information is or will be contained in the annual report 
filed by another party under this section.
    (2) Consolidated reports permitted--(i) Party to multiple 
agreements. An insured depository institution or affiliate that is a 
party to 2 or more covered agreements may file a single consolidated 
annual report with each relevant supervisory agency concerning all the 
covered agreements.
    (ii) Affiliated entities party to the same agreement. An insured 
depository institution and its affiliates that are parties to the same 
covered agreement may file a single consolidated annual report relating 
to the agreement with each relevant supervisory agency for the covered 
agreement.
    (iii) Content of report. Any consolidated annual report must contain 
all the information required by this paragraph (e). The amounts and data 
required to be reported under paragraphs (e)(1)(iv) and (vi) of this 
section may be reported on an aggregate basis for all covered 
agreements.
    (f) Time and place of filing--(1) General. Each party must file its 
annual report with each relevant supervisory agency for the covered 
agreement no later than six months following the end of the fiscal year 
covered by the report.
    (2) Alternative method of fulfilling annual reporting requirement 
for a NGEP. (i) A NGEP may fulfill the filing requirements of this 
section by providing the following materials to an insured depository 
institution or affiliate that is a party to the agreement no later than 
six months following the end of the NGEP's fiscal year--
    (A) A copy of the NGEP's annual report required under paragraph (d) 
of this section for the fiscal year; and
    (B) Written instructions that the insured depository institution or 
affiliate promptly forward the annual report to the relevant supervisory 
agency or agencies on behalf of the NGEP.
    (ii) An insured depository institution or affiliate that receives an 
annual report from a NGEP pursuant to paragraph (f)(2)(i) of this 
section must file the report with the relevant supervisory agency or 
agencies on behalf of the NGEP within 30 days.



Sec. 346.8  Release of information under FOIA.

    The FDIC will make covered agreements and annual reports available 
to the public in accordance with the Freedom of Information Act (5 
U.S.C. 552 et seq.) and the FDIC's rules regarding Disclosure of 
Information (12 CFR part 309). A party to a covered agreement may 
request confidential treatment of proprietary and confidential 
information in a covered agreement or an annual report under those 
procedures.



Sec. 346.9  Compliance provisions.

    (a) Willful failure to comply with disclosure and reporting 
obligations. (1) If the FDIC determines that a NGEP has willfully failed 
to comply in a material way with Sec. Sec. 346.6 or 346.7, the FDIC 
will notify the NGEP in writing of that determination and provide the 
NGEP a period of 90 days (or such longer period as the FDIC finds to be 
reasonable under the circumstances) to comply.
    (2) If the NGEP does not comply within the time period established 
by the FDIC, the agreement shall thereafter be unenforceable by that 
NGEP by operation of section 48 of the Federal Deposit Insurance Act (12 
U.S.C. 1831y).
    (3) The FDIC may assist any insured depository institution or 
affiliate that is a party to a covered agreement that is unenforceable 
by a NGEP by operation of section 48 of the Federal Deposit Insurance 
Act (12 U.S.C. 1831y) in identifying a successor to assume the NGEP's 
responsibilities under the agreement.
    (b) Diversion of funds. If a court or other body of competent 
jurisdiction determines that funds or resources received under a covered 
agreement have been diverted contrary to the purposes of the covered 
agreement for an individual's personal financial gain, the FDIC may take 
either or both of the following actions--
    (1) Order the individual to disgorge the diverted funds or resources 
received under the agreement;
    (2) Prohibit the individual from being a party to any covered 
agreement for a period not to exceed 10 years.
    (c) Notice and opportunity to respond. Before making a determination 
under

[[Page 462]]

paragraph (a)(1) of this section, or taking any action under paragraph 
(b) of this section, the FDIC will provide written notice and an 
opportunity to present information to the FDIC concerning any relevant 
facts or circumstances relating to the matter.
    (d) Inadvertent or de minimis errors. Inadvertent or de minimis 
errors in annual reports or other documents filed with the FDIC under 
Sec. Sec. 346.6 or 346.7 will not subject the reporting party to any 
penalty.
    (e) Enforcement of provisions in covered agreements. No provision of 
this part shall be construed as authorizing the FDIC to enforce the 
provisions of any covered agreement.

[66 FR 2099, Jan. 10, 2001, as amended at 66 FR 14071, Mar. 9, 2001]



Sec. 346.10  Transition provisions.

    (a) Disclosure of covered agreements entered into before the 
effective date of this part. The following disclosure requirements apply 
to covered agreements that were entered into after November 12, 1999, 
and that terminated before April 1, 2001.
    (1) Disclosure to the public. Each NGEP and each insured depository 
institution or affiliate that was a party to the agreement must make the 
agreement available to the public under Sec. 346.6 until at least April 
1, 2002.
    (2) Disclosure to the relevant supervisory agency. (i) Each NGEP 
that was a party to the agreement must make the agreement available to 
the relevant supervisory agency under Sec. 346.6 until at least April 
1, 2002.
    (ii) Each insured depository institution or affiliate that was a 
party to the agreement must, by June 30, 2001, provide each relevant 
supervisory agency either--
    (A) A copy of the agreement under Sec. 346.6(d)(1)(i); or
    (B) The information described in Sec. 346.6(d)(1)(ii) for each 
agreement.
    (b) Filing of annual reports that relate to fiscal years ending on 
or before December 31, 2000. In the event that a NGEP, insured 
depository institution or affiliate has any information to report under 
Sec. 346.7 for a fiscal year that ends on or before December 31, 2000, 
and that concerns a covered agreement entered into between May 12, 2000, 
and December 31, 2000, the annual report for that fiscal year must be 
provided no later than June 30, 2001, to--
    (1) Each relevant supervisory agency; or
    (2) In the case of a NGEP, to an insured depository institution or 
affiliate that is a party to the agreement in accordance with Sec. 
346.7(f)(2).



Sec. 346.11  Other definitions and rules of construction used in this part.

    (a) Affiliate. ``Affiliate'' means--
    (1) Any company that controls, is controlled by, or is under common 
control with another company; and
    (2) For the purpose of determining whether an agreement is a covered 
agreement under Sec. 346.2, an ``affiliate'' includes any company that 
would be under common control or merged with another company on 
consummation of any transaction pending before a Federal banking agency 
at the time--
    (i) The parties enter into the agreement; and
    (ii) The NGEP that is a party to the agreement makes a CRA 
communication, as described in Sec. 346.3.
    (b) Control. ``Control'' is defined in section 2(a) of the Bank 
Holding Company Act (12 U.S.C. 1841(a)).
    (c) CRA affiliate. A ``CRA affiliate'' of an insured depository 
institution is any company that is an affiliate of an insured depository 
institution to the extent, and only to the extent, that the activities 
of the affiliate were considered by the appropriate Federal banking 
agency when evaluating the CRA performance of the institution at its 
most recent CRA examination prior to the agreement. An insured 
depository institution or affiliate also may designate any company as a 
CRA affiliate at any time prior to the time a covered agreement is 
entered into by informing the NGEP that is a party to the agreement of 
such designation.
    (d) CRA public file. ``CRA public file'' means the public file 
maintained by an insured depository institution and described in 12 CFR 
345.43.
    (e) Executive officer. The term ``executive officer'' has the same 
meaning as in Sec. 215.2(e)(1) of the Board of Governors of the Federal 
Reserve System's Regulation O (12 CFR 215.2(e)(1)).

[[Page 463]]

    (f) Federal banking agency; appropriate Federal banking agency. The 
terms ``Federal banking agency'' and ``appropriate Federal banking 
agency'' have the same meanings as in section 3 of the Federal Deposit 
Insurance Act (12 U.S.C. 1813).
    (g) Fiscal year. (1) The fiscal year for a NGEP that does not have a 
fiscal year shall be the calendar year.
    (2) Any NGEP, insured depository institution, or affiliate that has 
a fiscal year may elect to have the calendar year be its fiscal year for 
purposes of this part.
    (h) Insured depository institution. ``Insured depository 
institution'' has the same meaning as in section 3 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813).
    (i) NGEP. ``NGEP'' means a nongovernmental entity or person.
    (j) Nongovernmental entity or person--(1) General. A 
``nongovernmental entity or person'' is any partnership, association, 
trust, joint venture, joint stock company, corporation, limited 
liability corporation, company, firm, society, other organization, or 
individual.
    (2) Exclusions. A nongovernmental entity or person does not 
include--
    (i) The United States government, a state government, a unit of 
local government (including a county, city, town, township, parish, 
village, or other general-purpose subdivision of a state) or an Indian 
tribe or tribal organization established under Federal, state or Indian 
tribal law (including the Department of Hawaiian Home Lands), or a 
department, agency, or instrumentality of any such entity;
    (ii) A federally-chartered public corporation that receives Federal 
funds appropriated specifically for that corporation;
    (iii) An insured depository institution or affiliate of an insured 
depository institution; or
    (iv) An officer, director, employee, or representative (acting in 
his or her capacity as an officer, director, employee, or 
representative) of an entity listed in paragraphs (j)(2)(i) through 
(iii) of this section.
    (k) Party. The term ``party''. The authority citation for part 405 
continues to read as follows: with respect to a covered agreement means 
each NGEP and each insured depository institution or affiliate that 
entered into the agreement.
    (l) Relevant supervisory agency. The ``relevant supervisory agency'' 
for a covered agreement means the appropriate Federal banking agency 
for--
    (1) Each insured depository institution (or subsidiary thereof) that 
is a party to the covered agreement;
    (2) Each insured depository institution (or subsidiary thereof) or 
CRA affiliate that makes payments or loans or provides services that are 
subject to the covered agreement; and
    (3) Any company (other than an insured depository institution or 
subsidiary thereof) that is a party to the covered agreement.
    (m) Term of agreement. An agreement that does not have a fixed 
termination date is considered to terminate on the last date on which 
any party to the agreement makes any payment or provides any loan or 
other resources under the agreement, unless the relevant supervisory 
agency for the agreement otherwise notifies each party in writing.

[66 FR 2099, Jan. 10, 2001, as amended at 66 FR 14071, Mar. 9, 2001]



PART 347_INTERNATIONAL BANKING--Table of Contents




  Subpart A_Foreign Banking and Investment by Insured State Nonmember 
                                  Banks

Sec.
347.101 Authority, purpose, and scope.
347.102 Definitions.
347.103 Effect of state law on actions taken under this subpart.
347.104 Insured state nonmember bank investment in foreign 
          organizations.
347.105 Permissible financial activities outside the United States.
347.106 Going concerns.
347.107 Joint ventures.
347.108 Portfolio investments.
347.109 Limitations on indirect investments in nonfinancial 
          organizations.
347.110 Affiliate holdings.
347.111 Underwriting and dealing limits applicable to foreign 
          organizations held by insured state nonmember banks.
347.112 Restrictions applicable to foreign organizations that act as 
          futures commission merchants.

[[Page 464]]

347.113 Restrictions applicable to activities by a foreign organization 
          in the United States.
347.114 Extensions of credit to foreign organizations held by insured 
          state nonmember banks; shares of foreign organizations held in 
          connection with debts previously contracted.
347.115 Permissible activities for a foreign branch of an insured state 
          nonmember bank.
347.116 Recordkeeping and supervision of the foreign activities of 
          insured state nonmember banks.
347.117 General consent.
347.118 Expedited processing.
347.119 Specific consent.
347.120 Computation of investment amounts.
347.121 Requirements for insured state nonmember bank to close a foreign 
          branch.
347.122 Limitations applicable to the authority provided in this 
          subpart.

                         Subpart B_Foreign Banks

347.201 Authority, purpose, and scope.
347.202 Definitions.
347.203 Deposit insurance required for all branches of foreign banks 
          engaged in domestic retail deposit activity in the same state.
347.204 Commitment to be examined and provide information.
347.205 Record maintenance.
347.206 Domestic retail deposit activity requiring deposit insurance by 
          U.S. branch of a foreign bank.
347.207 Disclosure of supervisory information to foreign supervisors.
347.208 Assessment base deductions by insured branch.
347.209 Pledge of assets.
347.210 Asset maintenance.
347.211 Examination of branches of foreign banks.
347.212 FDIC approval to conduct activities that are not permissible for 
          federal branches.
347.213 Establishment or operation of noninsured foreign branch.
347.214 Branch established under section 5 of the International Banking 
          Act.
347.215 Exemptions from deposit insurance requirement.
347.216 Depositor notification.

                     Subpart C_International Lending

347.301 Purpose, authority, and scope.
347.302 Definitions.
347.303 Allocated transfer risk reserve.
347.304 Accounting for fees on international loans.
347.305 Reporting and disclosure of international assets.

    Authority: 12 U.S.C. 1813, 1815, 1817, 1819, 1820, 1828, 3103, 3104, 
3105, 3108, 3109; Title IX, Pub. L. 98-181, 97 Stat. 1153.

    Source: 70 FR 17560, Apr. 6, 2005; 70 FR 20704, April 21, 2005, 
unless otherwise noted.



Sec. 347.101  Authority, purpose, and scope.

    (a) This subpart is issued pursuant to section 18(d) and (l) of the 
Federal Deposit Insurance Act (12 U.S.C. 1828(d), 1828(l)).
    (b) The rules in subpart A address the FDIC's requirements for 
insured state nonmember bank investments in foreign organizations, 
permissible foreign financial activities, loans or extensions of credit 
to or for the account of foreign organizations, and the FDIC's 
recordkeeping, supervision, and approval requirements. The rules also 
address the permissible activities for foreign branches of insured state 
nonmember banks, as well as the FDIC's requirements for establishing, 
operating, relocating and closing of branches in foreign countries.



Sec. 347.102  Definitions.

    For the purposes of this subpart:
    (a) An affiliate of an insured state nonmember bank means:
    (1) Any entity of which the insured state nonmember bank is a direct 
or indirect subsidiary or which otherwise controls the insured state 
nonmember bank;
    (2) Any organization which is a direct or indirect subsidiary of 
such entity or which is otherwise controlled by such entity; or
    (3) Any other organization that is a direct or indirect subsidiary 
of the insured state nonmember bank or is otherwise controlled by the 
insured state nonmember bank.
    (b) Control means the ability to control in any manner the election 
of a majority of an organization's directors or trustees; or the ability 
to exercise a controlling influence over the management and policies of 
an organization. An insured state nonmember bank is deemed to control an 
organization of which it is a general partner or its affiliate is a 
general partner.
    (c) Domestic means United States.

[[Page 465]]

    (d) Eligible insured state nonmember bank means an eligible 
depository institution as defined in Sec. 303.2(r) of this chapter.
    (e) Equity interest means any ownership interest or rights in an 
organization, whether through an equity security, contribution to 
capital, general or limited partnership interest, debt or warrants 
convertible into ownership interests or rights, loans providing profit 
participation, binding commitments to acquire any such items, or some 
other form of business transaction.
    (f) Equity security means voting or nonvoting shares, stock, 
investment contracts, or other interests representing ownership or 
participation in a company or similar enterprise, as well as any 
instrument convertible to any such interest at the option of the holder 
without payment of substantial additional consideration.
    (g) FRB means the Board of Governors of the Federal Reserve System.
    (h) Foreign bank means an organization that is organized under the 
laws of a foreign country, a territory of the United States, Puerto 
Rico, Guam, American Samoa, or the Virgin Islands that:
    (1) Is recognized as a bank by the bank supervisory or monetary 
authority of the country of its organization or the country in which its 
principal banking operations are located;
    (2) Receives deposits to a substantial extent in the regular course 
of its business; and
    (3) Has the power to accept demand deposits.
    (i) Foreign banking organization means a foreign organization that 
is formed for the sole purpose of either holding shares of a foreign 
bank or performing nominee, fiduciary, or other banking services 
incidental to the activities of a foreign branch or foreign bank 
affiliate of the insured state nonmember bank.
    (j) Foreign branch means an office or place of business located 
outside the United States, its territories, Puerto Rico, Guam, American 
Samoa, the Trust Territory of the Pacific Islands, or the Virgin 
Islands, at which banking operations are conducted, but does not include 
a representative office.
    (k) Foreign country means any country other than the United States 
and includes any territory, dependency, or possession of any such 
country or of the United States.
    (l) Foreign organization means an organization that is organized 
under the laws of a foreign country.
    (m) Insured state nonmember bank or bank means a state bank, as 
defined by Sec. 3(a)(2) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(a)(2)), whose deposits are insured by the FDIC and that is not a 
member of the Federal Reserve System.
    (n) Indirectly means investments held or activities conducted by a 
subsidiary of an organization.
    (o) Investment grade means a security that is rated in one of the 
four highest categories by:
    (1) Two or more NRSROs; or
    (2) One NRSRO if the security is rated by only one NRSRO.
    (p) Loan or extension of credit means all direct and indirect 
advances of funds to a person, government, or entity made on the basis 
of any obligation of that person, government, or entity to repay funds.
    (q) Organization or entity means a corporation, partnership, 
association, bank, or other similar entity.
    (r) NRSRO means a nationally recognized statistical rating 
organization as designated by the Securities and Exchange Commission.
    (s) Representative office means an office that engages solely in 
representative functions such as soliciting new business for its home 
office or acting as liaison between the home office and local customers, 
but which has no authority to make business or contracting decisions 
other than those relating to the personnel and premises of the 
representative office.
    (t) Subsidiary means any organization more than 50 percent of the 
voting equity interests of which are directly or indirectly held by 
another organization.
    (u) Tier 1 capital means Tier 1 capital as defined in Sec. 325.2 of 
this chapter.
    (v) Well capitalized means well capitalized as defined in Sec. 
325.103 of this chapter.

[[Page 466]]



Sec. 347.103  Effect of state law on actions taken under this subpart.

    A bank may acquire and retain equity interests in a foreign 
organization or establish a foreign branch, subject to the requirements 
of this subpart, if it is authorized to do so by the law of the state in 
which the bank is chartered.



Sec. 347.104  Insured state nonmember bank investments in foreign organizations.

    (a) Investment in foreign banks or foreign banking organizations. A 
bank may directly or indirectly acquire and retain equity interests in a 
foreign bank or foreign banking organization.
    (b) Investment in other foreign organizations. A bank may only:
    (1) acquire and retain equity interests in foreign organizations, 
other than foreign banks or foreign banking organizations in amounts of 
50 percent or less of the foreign organization's voting equity 
interests, if the equity interest is held through a domestic or foreign 
subsidiary; and
    (2) The bank meets its minimum capital requirements.



Sec. 347.105  Permissible financial activities outside the United States.

    (a) Limitation on authorized activities. A bank may not directly or 
indirectly acquire or hold equity interests in a foreign organization 
that will result in the bank and its affiliates:
    (1) Holding more than 50 percent, in the aggregate, of the voting 
equity interest in such foreign organization; or
    (2) Controlling such foreign organization, unless the activities of 
a foreign organization are limited to those authorized under paragraph 
(b) of this section.
    (b) Authorized activities. The following financial activities are 
authorized outside the United States:
    (1) Commercial and other banking activities.
    (2) Financing, including commercial financing, consumer financing, 
mortgage banking, and factoring, subject to compliance with any 
attendant restrictions contained in 12 CFR 225.28(b).
    (3) Leasing real or personal property, acting as agent, broker or 
advisor in leasing real or personal property, subject to compliance with 
any attendant restrictions in 12 CFR 225.28(b).
    (4) Acting as a fiduciary, subject to compliance with any attendant 
restrictions in 12 CFR 225.28(b).
    (5) Underwriting credit life, credit accident and credit health 
insurance.
    (6) Performing services for other direct or indirect operations of a 
domestic banking organization, including representative functions, sale 
of long-term debt, name saving, liquidating assets acquired to prevent 
loss on a debt previously contracted in good faith, and other activities 
that are permissible for a bank holding company under sections 
4(a)(2)(A) and 4(c)(1)(C) of the Bank Holding Company Act.
    (7) Holding the premises of a branch of an Edge corporation or 
insured state nonmember bank or the premises of a direct or indirect 
subsidiary, or holding or leasing the residence of an officer or 
employee of a branch or a subsidiary.
    (8) Providing investment, financial, or economic services, subject 
to compliance with any attendant restrictions in 12 CFR 225.28(b).
    (9) General insurance agency and brokerage.
    (10) Data processing.
    (11) Organizing, sponsoring, and managing a mutual fund if the 
fund's shares are not sold or distributed in the United States or to 
U.S. residents and the fund does not exercise management control over 
the firms in which it invests.
    (12) Performing management consulting services, provided that such 
services when rendered with respect to the domestic market must be 
restricted to the initial entry.
    (13) Underwriting, distributing, and dealing in debt securities 
outside the United States.
    (14) With the prior approval of the FDIC under section 347.119(d), 
underwriting, distributing, and dealing in equity securities outside the 
United States.
    (15) Operating a travel agency in connection with financial services 
offered outside the United States by the bank or others.
    (16) Providing futures commission merchant services, subject to 
compliance with any attendant restrictions in 12 CFR 225.28(b).

[[Page 467]]

    (17) Engaging in activities that the FRB has determined in 
Regulation Y (12 CFR 225.28(b)) are closely related to banking under 
section 4(c)(8) of the Bank Holding Company Act.
    (18) Engaging in other activities, with the prior approval of the 
FDIC.
    (c) Limitation on activities authorized under Regulation Y. If a 
bank relies solely on the cross-reference to Regulation Y contained in 
paragraph (b)(17) of this section as authority to engage in an activity, 
compliance with any attendant restrictions on the activity that are 
contained in 12 CFR 225.28(b) is required.
    (d) Approval of other activities. Activities that are not 
specifically authorized by this section, but that are authorized by 12 
CFR 211.10 or FRB interpretations of activities authorized by that 
section, may be authorized by specific consent of the FDIC on an 
individual basis and upon such terms and conditions as the FDIC may 
consider appropriate. Activities that will be engaged in as principal 
(defined by reference to section 362.1(b) of this chapter), and that are 
not authorized by 12 CFR 211.10 or FRB interpretations of activities 
authorized under that section, must satisfy the requirements of part 362 
of this chapter and be approved by the FDIC under this part as well as 
part 362 of this chapter.



Sec. 347.106  Going concerns.

    Going concerns. If a bank acquires an equity interest in a foreign 
organization that is a going concern, no more than 5 percent of either 
the consolidated assets or revenues of the foreign organization may be 
attributable to activities that are not permissible under Sec. 
347.105(b).



Sec. 347.107  Joint ventures.

    (a) Joint ventures. If a bank, directly or indirectly, acquires or 
holds an equity interest in a foreign organization that is a joint 
venture, and the bank or its affiliates do not control the foreign 
organization, no more than 10 percent of either the consolidated assets 
or revenues of the foreign organization may be attributable to 
activities that are not permissible under Sec. 347.105(b).
    (b) Joint venture defined. For purposes of this section, the term 
``joint venture'' means any organization in which 20 percent or more but 
not in excess of 50 percent of the voting equity interests, in the 
aggregate, are directly or indirectly held by a bank or its affiliates.



Sec. 347.108  Portfolio investments.

    (a) Portfolio investments. If a bank, directly or indirectly, 
acquires or holds an equity interest in a foreign organization as a 
portfolio investment and the foreign organization is not controlled, 
directly or indirectly, by the bank or its affiliates:
    (1) No more than 10 percent of either the consolidated assets or 
revenues of the foreign organization may be attributable to activities 
that are not permissible under Sec. 347.105(b); and
    (2) Any loans or extensions of credit made by the bank and its 
affiliates to the foreign organization must be on substantially the same 
terms, including interest rates and collateral, as those prevailing at 
the same time for comparable transactions between the bank or its 
affiliates and nonaffiliated organizations.
    (b) Portfolio investment defined. For purposes of this section, the 
term ``portfolio investment'' means an investment in an organization in 
which less than 20 percent of the voting equity interests, in the 
aggregate, are directly or indirectly held by a bank or its affiliates.



Sec. 347.109  Limitations on indirect investments in nonfinancial foreign 

organizations.

    (a) A bank may, through a subsidiary authorized by Sec. Sec. 
347.105 or 347.106, or an Edge corporation if also authorized by the 
FRB, acquire and hold equity interests in foreign organizations that are 
not foreign banks or foreign banking organizations and that engage 
generally in activities beyond those listed in Sec. 347.105(b), subject 
to the following:
    (1) The amount of the investment does not exceed 15 percent of the 
bank's Tier 1 capital;
    (2) The aggregate holding of voting equity interests of one foreign 
organization by the bank and its affiliates must be less than:
    (i) 20 percent of the foreign organization's voting equity 
interests; and

[[Page 468]]

    (ii) 40 percent of the foreign organization's voting and nonvoting 
equity interests;
    (b) The bank or its affiliates must not otherwise control the 
foreign organization; and
    (c) Loans or extensions of credit made by the bank and its 
affiliates to the foreign organization must be on substantially the same 
terms, including interest rates and collateral, as those prevailing at 
the same time for comparable transactions between the bank or its 
affiliates and nonaffiliated organizations.



Sec. 347.110  Affiliate holdings.

    References in Sec. Sec. 347.107, 347.108, and 347.109 to equity 
interests of foreign organizations held by an affiliate of a bank 
include equity interests held in connection with an underwriting or for 
distribution or dealing by an affiliate permitted to do so by Sec. Sec. 
362.8 or 362.18 of this chapter or section 4(c)(8) of the Bank Holding 
Company Act (12 U.S.C. 1843(c)(8)).



Sec. 347.111  Underwriting and dealing limits applicable to foreign 

organizations held by insured state nonmember banks.

    A bank that holds an equity interest in one or more foreign 
organizations which underwrite, deal, or distribute equity securities 
outside the United States as authorized by Sec. 347.105(b)(14) is 
subject to the following limitations:
    (a) Underwriting commitment limits. (1) The aggregate underwriting 
commitments by the foreign organizations for the equity securities of a 
single entity, taken together with underwriting commitments by any 
affiliate of the bank under the authority of 12 CFR 211.10(b), may not 
exceed the lesser of $60 million or 25 percent of the bank's Tier 1 
capital, except as otherwise provided in this paragraph.
    (2) Underwriting commitments in excess of this limit must be either:
    (i) Covered by binding commitments from subunderwriters or 
purchasers; or
    (ii) Deducted from the capital of the bank, with at least 50 percent 
of the deduction being taken from Tier 1 capital, with the bank 
remaining well capitalized after this deduction.
    (b) Distribution and dealing limits. The equity securities of any 
single entity held for distribution or dealing by the foreign 
organizations, taken together with equity securities held for 
distribution or dealing by any affiliate of the bank under the authority 
of 12 CFR 211.10:
    (1) May not exceed the lesser of $30 million or 5 percent of the 
bank's Tier 1 capital, subject to the following:
    (i) Any equity securities acquired pursuant to any underwriting 
commitment extending up to 90 days after the payment date for the 
underwriting may be excluded from this limit;
    (ii) Any equity securities of the entity held under the authority of 
Sec. Sec. 347.105 through 347.109 or 12 CFR 211.10 for purposes other 
than distribution or dealing must be included in this limit; and
    (iii) Up to 75 percent of the position in an equity security may be 
reduced by netting long and short positions in the same security, or 
offsetting cash positions against derivative instruments referenced to 
the same security so long as the derivatives are part of a prudent 
hedging strategy; and
    (2) Must be included in calculating the general consent limits under 
Sec. 347.117(b)(3) if the bank relies on the general consent provisions 
as authority to acquire equity interests of the same foreign entity for 
investment or trading.
    (c) Additional distribution and dealing limits. With the exception 
of equity securities acquired pursuant to any underwriting commitment 
extending up to 90 days after the payment date for the underwriting, 
equity securities of a single entity held for distribution or dealing by 
all affiliates of the bank (this includes shares held in connection with 
an underwriting or for distribution or dealing by an affiliate permitted 
to do so by Sec. Sec. 362.8 or 362.18 of this chapter or section 
4(c)(8) of the Bank Holding Company Act), combined with any equity 
interests held for investment or trading purposes by all affiliates of 
the bank, must conform to the limits of Sec. Sec. 347.105 through 
347.109.
    (d) Combined limits. The aggregate of the following may not exceed 
25 percent of the bank's Tier 1 capital:
    (1) All equity interests of foreign organizations held for 
investment or

[[Page 469]]

trading under Sec. 347.109 or by an affiliate of the bank under the 
corresponding paragraph of 12 CFR 211.10.
    (2) All underwriting commitments under paragraph (a) of this 
section, taken together with all underwriting commitments by any 
affiliate of the bank under the authority of 12 CFR 211.10, after 
excluding the amount of any underwriting commitment:
    (i) Covered by binding commitments from subunderwriters or 
purchasers under paragraph (a)(1) of this section or the comparable 
provision of 12 CFR 211.10; or
    (ii) Already deducted from the bank's capital under paragraph (a)(2) 
of this section, or the appropriate affiliate's capital under the 
comparable provisions of 12 CFR 211.10; and
    (3) All equity securities held for distribution or dealing under 
paragraph (b) of this section, taken together with all equity securities 
held for distribution or dealing by any affiliate of the bank under the 
authority of 12 CFR 211.10, after reducing by up to 75 percent the 
position in any equity security by netting and offset, as permitted by 
paragraph (b)(1)(iii) of this section or the comparable provision of 12 
CFR 211.10.



Sec. 347.112  Restrictions applicable to foreign organizations that act as 

futures commission merchants.

    (a) If a bank acquires or retains an equity interest in a foreign 
organization that acts as a futures commission merchant pursuant to 
Sec. 347.105(b)(16), the foreign organization may not be a member of an 
exchange or clearing association that requires members to guarantee or 
otherwise contract to cover losses suffered by other members unless the:
    (1) Foreign organization's liability does not exceed two percent of 
the bank's Tier 1 capital, or
    (2) Bank has obtained the prior approval of the FDIC under Sec. 
347.120(d).
    (b) [Reserved]



Sec. 347.113  Restrictions applicable to activities by a foreign organization 

in the United States.

    (a) A bank, acting under the authority provided in this subpart, may 
not directly or indirectly hold:
    (1) Equity interests of any foreign organization that engages in the 
general business of buying or selling goods, wares, merchandise, or 
commodities in the United States; or
    (2) More than 5 percent of the equity interests of any foreign 
organization that engages in activities in the United States unless any 
activities in which the foreign organization engages in the United 
States are incidental to its international or foreign business.
    (b) For purposes of this section:
    (1) A foreign organization is not engaged in any business or 
activities in the United States unless it maintains an office in the 
United States other than a representative office.
    (2) The following activities are incidental to international or 
foreign business:
    (i) Activities that are permissible for an Edge corporation in the 
United States under 12 CFR 211.6; or
    (ii) Other activities approved by the FDIC.



Sec. 347.114  Extensions of credit to foreign organizations held by insured 

state nonmember banks; shares of foreign organizations held in connection with 

          debts previously contracted.

    (a) Loans or extensions of credit. A bank that directly or 
indirectly holds equity interests in a foreign organization pursuant to 
the authority of this subpart may make loans or extensions of credit to 
or for the accounts of the organization without regard to the provisions 
of section 18(j) of the FDI Act (12 U.S.C. 1828(j)).
    (b) Debts previously contracted. Equity interests acquired to 
prevent a loss upon a debt previously contracted in good faith are not 
subject to the limitations or procedures of this subpart; however, they 
must be disposed of promptly but in no event later than two years after 
their acquisition, unless the FDIC authorizes retention for a longer 
period.



Sec. 347.115  Permissible activities for a foreign branch of an insured state 

nonmember bank.

    In addition to its general banking powers and if permitted by the 
law of the state in which the bank is chartered, a foreign branch of a 
bank may

[[Page 470]]

conduct the following activities to the extent that they are consistent 
with banking practices in a foreign country where the bank maintains a 
branch:
    (a) Guarantees. Guarantee debts, or otherwise agree to make payments 
on the occurrence of readily ascertainable events including, without 
limitation, nonpayment of taxes, rentals, customs duties, or costs of 
transport and loss or nonconformance of shipping documents, if:
    (1) The guarantee or agreement specifies a maximum monetary 
liability; and
    (2) To the extent the guarantee or agreement is not subject to a 
separate amount limit under state or federal law, the amount of the 
guarantee or agreement is combined with loans and other obligations for 
purposes of applying any legal lending limits.
    (b) Government obligations. Engage in the following types of 
transactions with respect to the obligations of foreign countries, so 
long as aggregate investments, securities held in connection with 
distribution and dealing, and underwriting commitments do not exceed ten 
percent of the bank's Tier 1 capital:
    (1) Underwrite, distribute and deal, invest in, or trade obligations 
of:
    (i) The national government of the country in which the branch is 
located or its political subdivisions; and
    (ii) An agency or instrumentality of such national government if 
supported by the taxing authority, guarantee, or full faith and credit 
of the national government.
    (2) Underwrite, distribute and deal, invest in or trade obligations 
\1\ rated as investment grade of:
---------------------------------------------------------------------------

    \1\ If the obligation is an equity interest, it must be held through 
a subsidiary of the foreign branch and the insured state nonmember bank 
must meet its minimum capital requirements.
---------------------------------------------------------------------------

    (i) The national government of any foreign country or its political 
subdivisions, to the extent permissible under the law of the issuing 
foreign country; and
    (ii) An agency or instrumentality of the national government of any 
foreign country to the extent permissible under the law of the issuing 
foreign country, if supported by the taxing authority, guarantee, or 
full faith and credit of the national government.
    (c) Local investments. (1) Acquire and hold local investments in:
    (i) Equity securities of the central bank, clearinghouses, 
governmental entities, and government sponsored development banks of the 
country in which the branch is located;
    (ii) Other debt securities eligible to meet local reserve or similar 
requirements; and
    (iii) Shares of automated electronic payment networks, professional 
societies, schools, and similar entities necessary to the business of 
the branch.
    (2) Aggregate local investments (other than those required by the 
law of the foreign country or permissible under section 5136 of the 
Revised Statutes (12 U.S.C. 24 (Seventh)) by all the bank's branches in 
a single foreign country must not exceed 1 percent of the total deposits 
in all the bank's branches in that country as reported in the preceding 
year-end Report of Income and Condition (Call Report): \2\
---------------------------------------------------------------------------

    \2\ If a branch has recently been acquired by the bank and the 
branch was not previously required to file a Call Report, branch 
deposits as of the acquisition date must be used.
---------------------------------------------------------------------------

    (d) Insurance. Act as an insurance agent or broker.
    (e) Employee benefits program. Pay to an employee of a branch, as 
part of an employee benefits program, a greater rate of interest than 
that paid to other depositors of the branch.
    (f) Repurchase agreements. Engage in repurchase agreements involving 
securities and commodities that are the functional equivalents of 
extensions of credit.
    (g) Other activities. Engage in other activities, with the prior 
approval of the FDIC.
    (h) Approval of other activities. Activities that are not 
specifically authorized by this section, but that are authorized by 12 
CFR 211.4 or FRB interpretations of activities authorized by that 
section, may be authorized by specific consent of the FDIC on an 
individual basis and upon such terms and conditions as the FDIC may 
consider appropriate. Activities that will be engaged in as principal 
(defined by reference to section 362.1(b) of this chapter), and that are 
not authorized by 12

[[Page 471]]

CFR 211.4 or FRB interpretations of activities authorized under that 
section, must satisfy the requirements of part 362 of this chapter and 
be approved by the FDIC under this part as well as part 362 of this 
chapter.



Sec. 347.116  Recordkeeping and supervision of foreign activities of insured 

state nonmember banks.

    (a) Records, controls and reports. A bank with any foreign branch, 
any investment in a foreign organization of 20 percent or more of the 
organization's voting equity interests, or control of a foreign 
organization must maintain a system of records, controls and reports 
that, at minimum, provide for the following:
    (1) Risk assets. To permit assessment of exposure to loss, 
information furnished or available to the main office should be 
sufficient to permit periodic and systematic appraisals of the quality 
of risk assets, including loans and other extensions of credit. Coverage 
should extend to a substantial proportion of the risk assets in the 
branch or foreign organization, and include the status of all large 
credit lines and of credits to customers also borrowing from other 
offices or affiliates of the bank. Appropriate information on risk 
assets may include:
    (i) A recent financial statement of the borrower or obligee and 
current information on the borrower's or obligee's financial condition;
    (ii) Terms, conditions, and collateral;
    (iii) Data on any guarantors;
    (iv) Payment history; and
    (v) Status of corrective measures employed.
    (2) Liquidity. To enable assessment of local management's ability to 
meet its obligations from available resources, reports should identify 
the general sources and character of the deposits, borrowing, and other 
funding sources employed in the branch or foreign organization with 
special reference to their terms and volatility. Information should be 
available on sources of liquidity--cash, balances with banks, marketable 
securities, and repayment flows--such as will reveal their accessibility 
in time and any risk elements involved.
    (3) Contingencies. Data on the volume and nature of contingent items 
such as loan commitments and guarantees or their equivalents that permit 
analysis of potential risk exposure and liquidity requirements.
    (4) Controls. Reports on the internal and external audits of the 
branch or foreign organization in sufficient detail to permit 
determination of conformance to auditing guidelines. Appropriate audit 
reports may include coverage of:
    (i) Verification and identification of entries on financial 
statements;
    (ii) Income and expense accounts, including descriptions of 
significant chargeoffs and recoveries;
    (iii) Operations and dual-control procedures and other internal 
controls;
    (iv) Conformance to head office guidelines on loans, deposits, 
foreign exchange activities, accounting procedures in compliance with 
applicable accounting standards, and discretionary authority of local 
management;
    (v) Compliance with local laws and regulations; and
    (vi) Compliance with applicable U.S. laws and regulations.
    (b) Availability of information to examiners; reports. (1) 
Information about foreign branches or foreign organizations must be made 
available to the FDIC by the bank for examination and other supervisory 
purposes.
    (2) The FDIC may from time to time require a bank to make and submit 
such reports and information as may be necessary to implement and 
enforce the provisions of this subpart, and the bank shall submit an 
annual report of condition for each foreign branch pursuant to 
instructions provided by the FDIC.



Sec. 347.117  General consent.

    (a) General consent to establish or relocate a foreign branch. 
General consent of the FDIC is granted, subject to the written 
notification requirement contained in section 303.182(a) and consistent 
with the requirements of this subpart, for an:
    (1) Eligible bank to establish a foreign branch conducting 
activities authorized by section 347.115 of this section in any foreign 
country in which:

[[Page 472]]

    (i) The bank already operates one or more foreign branches or 
foreign bank subsidiaries;
    (ii) The bank's holding company operates a foreign bank subsidiary; 
or
    (iii) An affiliated bank or Edge or Agreement corporation operates 
one or more foreign branches or foreign bank subsidiaries.
    (2) Insured state nonmember bank to relocate an existing foreign 
branch within a foreign country.
    (b) General consent to invest in a foreign organization. General 
consent of the FDIC is granted, subject to the written notification 
requirement contained in section 303.183(a) (unless no notification is 
required because the investment is acquired for trading purposes) and 
consistent with the requirements of this subpart, for an eligible bank 
to make investments in foreign organizations, directly or indirectly, 
if:
    (1) The bank operates at least one foreign bank subsidiary or 
foreign branch, an affiliated bank or Edge or Agreement corporation 
operates at least one foreign bank subsidiary or foreign branch, or the 
bank's holding company operates at least one foreign bank subsidiary in 
the country where the foreign organization will be located;
    (2) In any instance where the bank and its affiliates will hold 20 
percent or more of the foreign organization's voting equity interests or 
control the foreign organization, at least one state nonmember bank has 
a foreign bank subsidiary or foreign branch (other than a shell branch) 
in the country where the foreign organization will be located; \3\ and
---------------------------------------------------------------------------

    \3\ A list of these countries can be obtained from the FDIC's 
Internet Web Site at http://www.fdic.gov.
---------------------------------------------------------------------------

    (3) The investment is within one of the following limits:
    (i) The investment is acquired at net asset value from an affiliate;
    (ii) The investment is a reinvestment of cash dividends received 
from the same foreign organization during the preceding 12 months; or
    (iii) The total investment, directly or indirectly, in a single 
foreign organization in any transaction or series of transactions during 
a twelve-month period does not exceed 2 percent of the bank's Tier 1 
capital, and such investments in all foreign organizations in the 
aggregate do not exceed:
    (A) 5 percent of the bank's Tier 1 capital during a 12-month period; 
and
    (B) Up to an additional 5 percent of the bank's Tier 1 capital if 
the investments are acquired for trading purposes.



Sec. 347.118  Expedited processing.

    (a) Expedited processing of branch applications. An eligible bank 
may establish a foreign branch conducting activities authorized by Sec. 
347.115 in an additional foreign country, after complying with the 
expedited processing requirements contained in Sec. 303.182(b) and 
(c)(1), if any of the following are located in two or more foreign 
countries:
    (1) Foreign branches or foreign bank subsidiaries of the eligible 
bank;
    (2) Foreign branches or foreign bank subsidiaries of banks and Edge 
or Agreement corporations affiliated with the eligible bank; and
    (3) Foreign bank subsidiaries of the eligible bank's holding 
company.
    (b) Expedited processing of applications for investment in foreign 
organizations. An investment that does not qualify for general consent 
but is otherwise in conformity with the limits and requirements of this 
subpart may be made 45 days after an eligible bank files a substantially 
complete application with the FDIC in compliance with the expedited 
processing requirements contained in Sec. 303.183(b) and (c)(1), or 
within such earlier time as authorized by the FDIC.



Sec. 347.119  Specific consent.

    General consent and expedited processing under this subpart do not 
apply in the following circumstances:
    (a) Limitation on access to supervisory information in foreign 
country.
    (1) Applicable law or practice in the foreign country where the 
foreign organization or foreign branch would be located would limit the 
FDIC's access to information for supervisory purposes; and
    (i) A bank would hold 20 percent or more of the voting equity 
interests of a

[[Page 473]]

foreign organization or control such organization as a result of a 
foreign investment; or
    (ii) A bank would be establishing a foreign branch.
    (b) World Heritage site. A foreign branch of a bank would be located 
on a site on the World Heritage List or on the foreign country's 
equivalent of the National Register of Historic Places, in accordance 
with section 403 of the National Historic Preservation Act Amendments of 
1980 (16 U.S.C. 470a-2).
    (c) Modification or suspension of general consent or expedited 
processing. The FDIC at any time notifies the bank that the FDIC is 
modifying or suspending its general consent or expedited processing 
procedure.
    (d) Specific consent. Direct or indirect investments in or 
activities of foreign organizations by banks, the establishment of 
foreign branches or issues regarding the types or amounts of activity 
that can be engaged in by foreign branches, which are not authorized 
under Sec. Sec. 347.117 or 347.118 require prior review and specific 
consent of the FDIC.



Sec. 347.120  Computation of investment amounts.

    In computing the amount that may be invested in any foreign 
organization under Sec. Sec. 347.117 through 347.119, any investments 
held by an affiliate of a bank must be included.



Sec. 347.121  Requirements for insured state nonmember bank to close a foreign 

branch.

    A bank must comply with the written notification requirement 
contained in Sec. 303.182(d) when it closes a foreign branch.



Sec. 347.122  Limitations applicable to the authority provided in this 

subpart.

    The FDIC may impose such conditions on authority granted in this 
subpart as it considers appropriate. If a bank is unable or fails to 
comply with the requirements of this subpart or any conditions imposed 
by the FDIC regarding transactions under this subpart, the FDIC may 
require termination of any activities or divestiture of investments 
permitted under this subpart after giving the bank notice and a 
reasonable opportunity to be heard on the matter.



                         Subpart B_Foreign Banks



Sec. 347.201  Authority, purpose, and scope.

    (a) This subpart is issued pursuant to sections 5(c) and 10(b)(4) of 
the Federal Deposit Insurance Act (FDI Act)(12 U.S.C. 1815(c) and 
1820(b)(4)) and sections 6, 7, and 15 of the International Banking Act 
of 1978 (IBA)(12 U.S.C. 3104, 3105, and 3109).
    (b) This subpart implements the insured branch asset pledge and 
examination commitment requirement for foreign banks in the FDI Act. It 
also implements the deposit insurance, permissible activity, and cross-
border cooperation provisions of the IBA regarding the FDIC. Sections 
347.203-347.211 apply to state and federal branches whose deposits are 
insured. Sections 347.204 and 347.207 are applicable to depository 
institution subsidiaries of a foreign bank. Section 347.212 applies to 
insured state branches and Sec. Sec. 347.213-347.216 apply to state 
branches whose deposits are not insured by the FDIC.



Sec. 347.202  Definitions.

    For the purposes of this subpart:
    (a) Affiliate means any entity that controls, is controlled by, or 
is under common control with another entity. An entity shall be deemed 
to ``control'' another entity if the entity directly or indirectly owns, 
controls, or has the power to vote 25 percent or more of any class of 
voting securities of the other entity or controls in any manner the 
election of a majority of the directors or trustees of the other entity.
    (b) Branch means any office or place of business of a foreign bank 
located in any state of the United States at which deposits are 
received. The term does not include any office or place of business 
deemed by the state licensing authority or the Comptroller of the 
Currency to be an agency.
    (c) Deposit has the same meaning as that term in section 3(l) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(l)).
    (d) Depository means any insured state bank, national bank, or 
insured branch.

[[Page 474]]

    (e) Domestic retail deposit activity means the acceptance by a 
federal or state branch of any initial deposit of less than $100,000.
    (f) Federal branch means a branch of a foreign bank established and 
operating under the provisions of section 4 of the International Banking 
Act of 1978 (12 U.S.C. 3102).
    (g) Foreign bank means any company organized under the laws of a 
foreign country, any territory of the United States, Puerto Rico, Guam, 
American Samoa, the Northern Mariana Islands, or the Virgin Islands, 
which engages in the business of banking. The term includes foreign 
commercial banks, foreign merchant banks and other foreign institutions 
that engage in banking activities usual in connection with the business 
of banking in the countries where such foreign institutions are 
organized and operating. Except as otherwise specifically provided by 
the Federal Deposit Insurance Corporation, banks organized under the 
laws of a foreign country, any territory of the United States, Puerto 
Rico, Guam, American Samoa, the Northern Mariana Islands, or the Virgin 
Islands which are insured banks other than by reason of having an 
insured branch are not considered to be foreign banks for purposes of 
Sec. Sec. 347.204, 347.205, 347.209, and 347.210.
    (h) Foreign business means any entity including, but not limited to, 
a corporation, partnership, sole proprietorship, association, foundation 
or trust, which is organized under the laws of a foreign country or any 
United States entity which is owned or controlled by an entity which is 
organized under the laws of a foreign country or a foreign national.
    (i) Foreign country means any country other than the United States 
and includes any colony, dependency or possession of any such country.
    (j) FRB means the Board of Governors of the Federal Reserve System.
    (k) Home state of a foreign bank means the state so determined by 
the election of the foreign bank, or in default of such election, by the 
Board of Governors of the Federal Reserve System.
    (l) Immediate family member of a natural person means the spouse, 
father, mother, brother, sister, son or daughter of that natural person.
    (m) Initial deposit means the first deposit transaction between a 
depositor and the branch where there is no existing deposit 
relationship. The initial deposit may be placed into different deposit 
accounts or into different kinds of deposit accounts, such as demand, 
savings or time. Deposit accounts that are held by a depositor in the 
same right and capacity may be added together for the purposes of 
determining the dollar amount of the initial deposit.
    (n) Insured bank means any bank, including a foreign bank with an 
insured branch, the deposits of which are insured in accordance with the 
provisions of the Federal Deposit Insurance Act.
    (o) Insured branch means a branch of a foreign bank any deposits of 
which branch are insured in accordance with the provisions of the 
Federal Deposit Insurance Act.
    (p) Large United States business means any entity including, but not 
limited to, a corporation, partnership, sole proprietorship, 
association, foundation or trust which is organized under the laws of 
the United States or any state thereof, and:
    (1) Whose securities are registered on a national securities 
exchange or quoted on the National Association of Securities Dealers 
Automated Quotation System; or
    (2) Has annual gross revenues in excess of $1,000,000 for the fiscal 
year immediately preceding the initial deposit.
    (q) A majority owned subsidiary means a company the voting stock of 
which is more than 50 percent owned or controlled by another company.
    (r) Noninsured branch means a branch of a foreign bank deposits of 
which branch are not insured in accordance with the provisions of the 
Federal Deposit Insurance Act.
    (s) OCC means the Office of the Comptroller of the Currency.
    (t) Person means an individual, bank, corporation, partnership, 
trust, association, foundation, joint venture, pool, syndicate, sole 
proprietorship, unincorporated organization, or any other form of 
entity.
    (u) Significant risk to the deposit insurance fund shall be 
understood to be

[[Page 475]]

present whenever there is a high probability that the Deposit Insurance 
Fund administered by the FDIC may suffer a loss.
    (v) State means any state of the United States or the District of 
Columbia.
    (w) State branch means a branch of a foreign bank established and 
operating under the laws of any state.
    (x) Wholly owned subsidiary means a company the voting stock of 
which is 100 percent owned or controlled by another company except for a 
nominal number of directors' shares.

[70 FR 17560, Apr. 6, 2005; 70 FR 20704, April 21, 2005, as amended at 
71 FR 20527, Apr. 21, 2006]



Sec. 347.203  Deposit insurance required for all branches of foreign banks 

engaged in domestic retail deposit activity in the same State.

    The FDIC will not insure deposits in any branch of a foreign bank 
unless the foreign bank agrees that every branch established or operated 
by the foreign bank in the same state that engages in domestic retail 
deposit activity will be an insured branch.



Sec. 347.204  Commitment to be examined and provide information.

    (a) In connection with an application for deposit insurance for a 
U.S. branch or depository institution subsidiary of a foreign bank that 
has been determined to be subject to comprehensive consolidated 
supervision by the appropriate Federal banking agency, as defined in 
section 3(q) of the FDI Act (12 U.S.C. 1813(q)), the foreign bank shall 
provide binding written commitments (including a consent to U.S. 
jurisdiction and designation of agent for service, acceptable to the 
FDIC) to the following terms:
    (1) The FDIC will be provided with any information about the foreign 
bank and its affiliates located outside of the United States that the 
FDIC requests to determine:
    (i) The relationship between the U.S. branch or depository 
institution subsidiary and its affiliates; and
    (ii) The effect of such relationship on such U.S. branch or 
depository institution subsidiary;
    (2) The FDIC will be allowed to examine the affairs of any office, 
agency, branch or affiliate of the foreign bank located in the United 
States and will be provided any information requested to determine:
    (i) The relationship between the U.S. branch or depository 
institution subsidiary and such offices, agencies, branches or 
affiliates; and
    (ii) The effect of such relationship on such U.S. branch or 
depository institution subsidiary.
    (3) The FDIC will not process a deposit insurance application for 
any U.S. branch or depository institution subsidiary of a foreign bank 
if the foreign bank fails to provide the written commitments, consent to 
U.S. jurisdiction, and designation of agent for service required by this 
section.
    (b) The FDIC will consider the existence and extent of any 
prohibition or restrictions, if any, on its ability to utilize the 
commitments, consent to U.S. jurisdiction, and designation of agent for 
service required by this section, in determining whether to grant or 
deny a deposit insurance application for the U.S. branch or depository 
institution subsidiary of the foreign bank. In addition, the FDIC may 
consider any additional assurances or commitments provided by the 
foreign bank, including that it will cooperate and assist the FDIC, 
without limitation, by seeking to obtain waivers and exemptions from 
applicable confidentiality or secrecy restrictions or requirements to 
enable the foreign bank or its affiliates to make information about the 
foreign bank and its affiliates located outside of the United States 
available to the FDIC for review.
    (c) The foreign bank's commitments, consent to U.S. jurisdiction, 
and designation of agent for service shall be signed by an officer of 
the foreign bank who has been so authorized by the foreign bank's board 
of directors and in all instances will be executed in a manner 
acceptable to the FDIC and shall be included with the branch or 
depository institution application for insurance. Any documents that are 
not in English shall be accompanied by an English translation.

[[Page 476]]



Sec. 347.205  Record maintenance.

    The records of each insured branch shall be kept as though it were a 
separate entity, with its assets and liabilities separate from the other 
operations of the head office, other branches or agencies of the foreign 
bank and its subsidiaries or affiliates. Each insured branch must keep a 
set of accounts and records in the words and figures of the English 
language that accurately reflects the business transactions of the 
insured branch on a daily basis. A foreign bank that has more than one 
insured branch in a state may treat such insured branches as one entity 
for record-keeping purposes and may designate one branch to maintain 
records for all the branches in the state.



Sec. 347.206  Domestic retail deposit activity requiring deposit insurance by 

U.S. branch of a foreign bank.

    (a) Domestic retail deposit activity. To initiate or conduct 
domestic retail deposit activity requiring deposit insurance protection 
in any state after December 19, 1991, a foreign bank must establish one 
or more insured U.S. bank subsidiaries for that purpose.
    (b) Exception. Paragraph (a) of this section does not apply to any 
bank organized under the laws of any territory of the United States, 
Puerto Rico, Guam, American Samoa, or the Virgin Islands the deposits of 
which are insured by the FDIC pursuant to the Federal Deposit Insurance 
Act.
    (c) Grandfathered insured branches. Domestic retail deposit accounts 
with balances of less than $100,000 that require deposit insurance 
protection may be accepted or maintained in an insured branch of a 
foreign bank only if such branch was an insured branch on December 19, 
1991.
    (d) Change in ownership of grandfathered insured branch. The 
grandfathered status of an insured branch may not be transferred, except 
in certain merger and acquisition transactions that the FDIC determines 
are not designed, or motivated by the desire, to avoid compliance with 
section 6(d)(1) of the International Banking Act (12 U.S.C. 3104(d)(1)).



Sec. 347.207  Disclosure of supervisory information to foreign supervisors.

    (a) Disclosure by the FDIC. The FDIC may disclose information 
obtained in the course of exercising its supervisory or examination 
authority to a foreign bank regulatory or supervisory authority, if the 
FDIC determines that disclosure is appropriate for bank supervisory or 
regulatory purposes and will not prejudice the interests of the United 
States.
    (b) Confidentiality. Before making any disclosure of information 
pursuant to paragraph (a) of this section, the FDIC will obtain, to the 
extent necessary, the agreement of the foreign bank regulatory or 
supervisory authority to maintain the confidentiality of such 
information to the extent possible under applicable law. The disclosure 
or transfer of information to a foreign bank regulatory or supervisory 
authority under this section will not waive any privilege applicable to 
the information that is disclosed or transferred.



Sec. 347.208  Assessment base deductions by insured branch.

    Deposits in an insured branch to the credit of the foreign bank or 
any of its offices, branches, agencies, or wholly owned subsidiaries may 
be deducted from the assessment base of the insured branch.



Sec. 347.209  Pledge of assets.

    (a) Purpose. A foreign bank that has an insured branch must pledge 
assets for the benefit of the FDIC or its designee(s). Whenever the FDIC 
is obligated under section 11(f) of the Federal Deposit Insurance Act 
(12 U.S.C. 1821(f)) to pay the insured deposits of an insured branch, 
the assets pledged under this section must become the property of the 
FDIC and be used to the extent necessary to protect the Deposit 
Insurance Fund.
    (b) Amount of assets to be pledged. (1) For a newly insured branch, 
a foreign bank must pledge assets equal to at least 5 percent of the 
liabilities of the branch, based on the branch's projection of its 
liabilities at the end of each of the first three years of operations. 
For all other insured branches, a foreign bank must pledge assets

[[Page 477]]

equal to the appropriate percentage applicable to the insured branch, as 
determined by reference to the risk-based assessment schedule contained 
in this paragraph, of the insured branch's average liabilities for the 
last 30 days of the most recent calendar quarter.\4\
---------------------------------------------------------------------------

    \4\ This average must be computed by using the sum of the close of 
business figures for the 30 calendar days of the most recent calendar 
quarter, ending with and including the last day of the calendar quarter, 
divided by 30. For days on which the branch is closed, however, balances 
from the previous business day are to be used in determining its average 
liabilities. In determining its average liabilities, the insured branch 
may exclude liabilities to other offices, agencies, branches, and wholly 
owned subsidiaries of the foreign bank. The value of the pledged assets 
must be computed based on the lesser of the principal amount (par value) 
or market value of such assets at the time of the original pledge and 
thereafter as of the last day of the most recent calendar quarter.
---------------------------------------------------------------------------

    (2) Risk-based assessment schedule. The risk-based asset pledge 
required by paragraph (b)(1) will be determined by utilizing the 
following risk-based assessment schedule:

------------------------------------------------------------------------
                                         Supervisory risk subgroup
     Asset maintenance level      --------------------------------------
                                      A (%)        B (%)        C (%)
------------------------------------------------------------------------
Equal to or greater than 108%....            2            3            4
Equal to or greater than 106%....            4            5            6
Less than 106%...................            6            7            8
------------------------------------------------------------------------

    The appropriate asset pledge percentage will be determined based on 
the supervisory risk subgroup and asset maintenance level applicable to 
the insured branch.
    (3) Supervisory risk factors. For purposes of this section, within 
each asset maintenance group, each institution will be assigned to one 
of three subgroups based on consideration by the FDIC of supervisory 
evaluations provided by the primary federal regulator for the insured 
branch. The supervisory evaluations include the results of examination 
findings by the primary federal regulator, as well as other information 
the primary federal regulator determines to be relevant. In addition, 
the FDIC will take into consideration such other information (such as 
state examination findings, if appropriate) as it determines to be 
relevant to the financial condition and the risk posed to the Deposit 
Insurance Fund. The three supervisory subgroups are:
    (i) Subgroup ``A''. This subgroup consists of financially sound 
institutions with only a few minor weaknesses;
    (ii) Subgroup ``B''. This subgroup consists of institutions that 
demonstrate weaknesses which, if not corrected, could result in 
significant deterioration of the institution and increased risk of loss 
to the deposit insurance fund; and
    (iii) Subgroup ``C''. This subgroup consists of institutions that 
pose a substantial probability of loss to the deposit insurance fund.
    (4) The FDIC may require a foreign bank to pledge additional assets 
or to compute its pledge on a daily basis whenever the FDIC determines 
that the condition of the foreign bank or the insured branch is such 
that the assets pledged under this section will not adequately protect 
the deposit insurance fund. In requiring a foreign bank to pledge 
additional assets, the FDIC will consult with the primary regulator for 
the insured branch. Among the factors to be considered in imposing these 
requirements are the concentration of risk to any one borrower or group 
of related borrowers, the concentration of transfer risk related to any 
one country, including the country in which the foreign bank's head 
office is located or any other factor the FDIC determines is relevant.
    (5) Each insured branch must separately comply with the requirements 
of this section. A foreign bank which has more than one insured branch 
in a state may, however, treat all of its insured branches in the same 
state as one entity and will designate one insured

[[Page 478]]

branch to be responsible for compliance with this section.
    (c) Depository. A foreign bank must place pledged assets for 
safekeeping at any depository which is located in any state. However, a 
depository may not be an affiliate of the foreign bank whose insured 
branch is seeking to use the depository. A foreign bank must obtain the 
FDIC's prior written approval of the depository selected, and such 
approval may be revoked and dismissal of the depository required 
whenever the depository does not fulfill any one of its obligations 
under the pledge agreement. A foreign bank shall appoint and constitute 
the depository as its attorney in fact for the sole purpose of 
transferring title to pledged assets to the FDIC as may be required to 
effectuate the provisions of paragraph (a) of this section.
    (d) Assets that may be pledged. Subject to the right of the FDIC to 
require substitution, a foreign bank may pledge any of the kinds of 
assets listed in this paragraph (d); such assets must be denominated in 
United States dollars. A foreign bank shall be deemed to have pledged 
any such assets for the benefit of the FDIC or its designee at such time 
as any such asset is placed with the depository, as follows:
    (1)(i) Negotiable certificates of deposit that are payable in the 
United States and that are issued by any state bank, national bank, 
state or federal savings association, or branch of a foreign bank which 
has executed a valid waiver of offset agreement or similar debt 
instruments that are payable in the United States and that are issued by 
any agency of a foreign bank which has executed a valid waiver of offset 
agreement; provided, that the maturity of any certificate or issuance is 
not greater than one year; and provided further, that the issuing branch 
or agency of a foreign bank is not an affiliate of the pledging bank or 
from the same country as the pledging bank's domicile;
    (ii) Non-negotiable certificates of deposit, subject to the terms 
specified in paragraph (d)(1)(i) of this section other than the 
requirement of negotiability, that were pledged as collateral to the 
FDIC on March 18, 2005, until maturity according to the original terms 
of the existing deposit agreement.
    (2) Treasury bills, interest bearing bonds, notes, debentures, or 
other direct obligations of or obligations fully guaranteed as to 
principal and interest by the United States or any agency or 
instrumentality thereof;
    (3) Commercial paper that is rated P-1 or P-2, or their equivalent 
by a nationally recognized rating service; provided, that any conflict 
in a rating shall be resolved in favor of the lower rating;
    (4) Banker's acceptances that are payable in the United States and 
that are issued by any state bank, national bank, state or federal 
savings association, or branch or agency of a foreign bank; provided, 
that the maturity of any acceptance is not greater than 180 days; and 
provided further, that the branch or agency issuing the acceptance is 
not an affiliate of the pledging bank or from the same country as the 
pledging bank's domicile;
    (5) General obligations of any state of the United States, or any 
county or municipality of any state of the United States, or any agency, 
instrumentality, or political subdivision of the foregoing or any 
obligation guaranteed by a state of the United States or any county or 
municipality of any state of the United States; provided, that such 
obligations have a credit rating within the top two rating bands of a 
nationally recognized rating service (with any conflict in a rating 
resolved in favor of the lower rating);
    (6) Obligations of the African Development Bank, Asian Development 
Bank, Inter-American Development Bank, and the International Bank for 
Reconstruction and Development;
    (7) Notes issued by bank and thrift holding companies, banks, or 
savings associations organized under the laws of the United States or 
any state thereof or notes issued by United States branches or agencies 
of foreign banks, provided, that the notes have a credit rating within 
the top two rating bands of a nationally recognized rating service (with 
any conflict in a rating resolved in favor of the lower rating) and that 
they are payable in the United States, and provided further, that the

[[Page 479]]

issuer is not an affiliate of the foreign bank pledging the note; or
    (8) Any other asset determined by the FDIC to be acceptable.
    (e) Pledge agreement. A foreign bank shall not pledge any assets 
unless a pledge agreement in form and substance satisfactory to the FDIC 
has been executed by the foreign bank and the depository. The agreement, 
in addition to other terms not inconsistent with this paragraph (e), 
shall give effect to the following terms:
    (1) Original pledge. The foreign bank shall place with the 
depository assets of the kind described in paragraph (d) of this 
section, having an aggregate value in the amount as required pursuant to 
paragraph (b) of this section.
    (2) Additional assets required to be pledged. Whenever the foreign 
bank is required to pledge additional assets for the benefit of the FDIC 
or its designees pursuant to paragraph (b)(4) of this section, it shall 
deliver (within two business days after the last day of the most recent 
calendar quarter, unless otherwise ordered) additional assets of the 
kind described in paragraph (d) of this section, having an aggregate 
value in the amount required by the FDIC.
    (3) Substitution of assets. The foreign bank, at any time, may 
substitute any assets for pledged assets, and, upon such substitution, 
the depository shall promptly release any such assets to the foreign 
bank; provided, that:
    (i) The foreign bank pledges assets of the kind described in 
paragraph (d) of this section having an aggregate value not less than 
the value of the pledged assets for which they are substituted and 
certified as such by the foreign bank; and
    (ii) The FDIC has not by written notification to the foreign bank, a 
copy of which shall be provided to the depository, suspended or 
terminated the foreign bank's right of substitution.
    (4) Delivery of other documents. Concurrently with the pledge of any 
assets, the foreign bank will deliver to the depository all documents 
and instruments necessary or advisable to effectuate the transfer of 
title to any such assets and thereafter, from time to time, at the 
request of the FDIC, deliver to the depository any such additional 
documents or instruments. The foreign bank shall provide copies of all 
such documents described in this paragraph (e)(4) to the appropriate 
regional director concurrently with their delivery to the depository.
    (5) Acceptance and safekeeping responsibilities of the depository. 
(i) The depository will accept and hold any assets pledged by the 
foreign bank pursuant to the pledge agreement for safekeeping free and 
clear of any lien, charge, right of offset, credit, or preference in 
connection with any claim the depository may assert against the foreign 
bank and shall designate any such assets as a special pledge for the 
benefit of the FDIC or its designee. The depository shall not accept the 
pledge of any such assets unless, concurrently with such pledge, the 
foreign bank delivers to the depository the documents and instruments 
necessary for the transfer of title thereto as provided in this part.
    (ii) The depository shall hold any such assets separate from all 
other assets of the foreign bank or the depository. Such assets may be 
held in book-entry form but must at all times be segregated on the 
records of the depository and clearly identified as assets subject to 
the pledge agreement.
    (6) Reporting requirements of the insured branch and the depository. 
(i) Initial reports. Upon the original pledge of assets as provided in 
paragraph (e)(1) of this section:
    (A) The depository shall provide to the foreign bank and to the 
appropriate FDIC regional director a written report in the form of a 
receipt identifying each asset pledged and specifying in reasonable 
detail with respect to each such asset the complete title, interest 
rate, series, serial number (if any), principal amount (par value), 
maturity date and call date; and
    (B) The foreign bank shall provide to the appropriate regional 
director a written report certified as correct by the foreign bank which 
sets forth the value of each pledged asset and the aggregate value of 
all such assets, and which states that the aggregate value of all such 
assets is at least equal to the amount required pursuant to paragraph 
(b) of this section and that all such assets are of the kind described 
in paragraph (d) of this section.

[[Page 480]]

    (ii) Quarterly reports. Within ten calendar days after the end of 
the most recent calendar quarter:
    (A) The depository shall provide to the appropriate regional 
director a written report specifying in reasonable detail with respect 
to each asset currently pledged (including any asset pledged to satisfy 
the requirements of paragraph (b)(4) of this section and identified as 
such), as of two business days after the end of the most recent calendar 
quarter, the complete title, interest rate, series, serial number (if 
any), principal amount (par value), maturity date, and call date, 
provided, that if no substitution of any asset has occurred during the 
reporting period, the reporting need only specify that no substitution 
of assets has occurred; and
    (B) The foreign bank shall provide as of two business days after the 
end of the most recent calendar quarter to the appropriate regional 
director a written report certified as correct by the foreign bank which 
sets forth the value of each pledged asset and the aggregate value of 
all such assets, which states that the aggregate value of all such 
assets is at least equal to the amount required pursuant to paragraph 
(b) of this section and that all such assets are of the kind described 
in paragraph (d) of this section, and which states the average of the 
liabilities of each insured branch of the foreign bank computed in the 
manner and for the period prescribed in paragraph (b) of this section.
    (iii) Additional reports. The foreign bank shall, from time to time, 
as may be required, provide to the appropriate regional director a 
written report in the form specified containing the information 
requested with respect to any asset then currently pledged.
    (7) Access to assets. With respect to any asset pledged pursuant to 
the pledge agreement, the depository will provide representatives of the 
FDIC or the foreign bank with access (during regular business hours of 
the depository and at the location where any such asset is held, without 
other limitation or qualification) to all original instruments, 
documents, books, and records evidencing or pertaining to any such 
asset.
    (8) Release upon the order of the FDIC. The depository shall release 
to the foreign bank any pledged assets, as specified in a written 
notification of the appropriate regional director, upon the terms and 
conditions provided in such notification, including without limitation 
the waiver of any requirement that any assets be pledged by the foreign 
bank in substitution of any released assets.
    (9) Release to the FDIC. Whenever the FDIC is obligated under 
section 11(f) of the Federal Deposit Insurance Act to pay insured 
deposits of an insured branch, the FDIC by written certification shall 
so inform the depository; and the depository, upon receipt of such 
certification, shall thereupon promptly release and transfer title to 
any pledged assets to the FDIC or release such assets to the foreign 
bank, as specified in the certification. Upon release and transfer of 
title to all pledged assets specified in the certification, the 
depository shall be discharged from any further obligation under the 
pledge agreement.
    (10) Interest earned on assets. The foreign bank may retain any 
interest earned with respect to the assets currently pledged unless the 
FDIC by written notice prohibits retention of interest by the foreign 
bank, in which case the notice shall specify the disposition of any such 
interest.
    (11) Expenses of agreement. The FDIC shall not be required to pay 
any fees, costs, or expenses for services provided by the depository to 
the foreign bank pursuant to, or in connection with, the pledge 
agreement.
    (12) Substitution of depository. The depository may resign, or the 
foreign bank may discharge the depository, from its duties and 
obligations under the pledge agreement by giving at least 60 days' 
written notice thereof to the other party and to the appropriate 
regional director. The FDIC, upon 30 days' written notice to the foreign 
bank and the depository, may require the foreign bank to dismiss the 
depository if the FDIC in its discretion determines that the depository 
is in breach of the pledge agreement. The depository shall continue to 
function as such until the appointment of a successor depository becomes 
effective and the

[[Page 481]]

depository has released to the successor depository the pledged assets 
and documents and instruments to effectuate transfer of title in 
accordance with the written instructions of the foreign bank as approved 
by the FDIC. The appointment by the foreign bank of a successor 
depository shall not be effective until:
    (i) The FDIC has approved in writing the successor depository; and
    (ii) A pledge agreement in form and substance satisfactory to the 
FDIC has been executed.
    (13) Waiver of terms. The FDIC may by written order waive compliance 
by the foreign bank or the depository with any term or condition of the 
pledge agreement.

[70 FR 17560, Apr. 6, 2005; 70 FR 20704, April 21, 2005, as amended at 
71 FR 20527, Apr. 21, 2006]



Sec. 347.210  Asset maintenance.

    (a) An insured branch of a foreign bank shall maintain on a daily 
basis eligible assets in an amount not less than 106 percent of the 
preceding quarter's average book value of the insured branch's 
liabilities or, in the case of a newly-established insured branch, the 
estimated book value of its liabilities at the end of the first full 
quarter of operation, exclusive of liabilities due to the foreign bank's 
head office, other branches, agencies, offices, or wholly owned 
subsidiaries. The Director of the Division of Supervision and Consumer 
Protection or his designee may impose a computation of total liabilities 
on a daily basis in those instances where it is found necessary for 
supervisory purposes. The FDIC Board of Directors, after consulting with 
the insured branch's primary regulator, may require that a higher ratio 
of eligible assets be maintained if the financial condition of the 
insured branch warrants such action. Among the factors which will be 
considered in requiring a higher ratio of eligible assets are the 
concentration of risk to any one borrower or group of related borrowers, 
the concentration of transfer risk to any one country, including the 
country in which the foreign bank's head office is located or any other 
factor the FDIC determines is relevant. Eligible assets shall be payable 
in United States dollars.
    (b) In determining eligible assets for the purposes of compliance 
with paragraph (a) of this section, the insured branch shall exclude the 
following:
    (1) Any asset due from the foreign bank's head office, or its other 
branches, agencies, offices or affiliates;
    (2) Any asset classified ``Value Impaired,'' to the extent of the 
required Allocated Transfer Risk Reserves or equivalent write down, or 
``Loss'' in the most recent state or federal examination report;
    (3) Any deposit of the insured branch in a bank unless the bank has 
executed a valid waiver of offset agreement;
    (4) Any asset not supported by sufficient credit information to 
allow a review of the asset's credit quality, as determined at the most 
recent state or federal examination, as follows:
    (i) Whether an asset has sufficient credit information will be a 
function of the size of the borrower and the location within the foreign 
bank of the responsibility for authorizing and monitoring extensions of 
credit to the borrower. For large, well known companies, when credit 
responsibility is located in an office of the foreign bank outside the 
insured branch, the insured branch must have adequate documentation to 
show that the asset is of good quality and is being supervised 
adequately by the foreign bank. In such cases, copies of periodic 
memoranda that include an analysis of the borrower's recent financial 
statements and a report on recent developments in the borrower's 
operations and borrowing relationships with the foreign bank generally 
would constitute sufficient information. For other borrowers, periodic 
memoranda must be supplemented by information such as copies of recent 
financial statements, recent correspondence concerning the borrower's 
financial condition and repayment history, credit terms and collateral, 
data on any guarantors, and where necessary, the status of any 
corrective measures being employed;
    (ii) Subsequent to the determination that an asset lacks sufficient 
credit information, an insured branch may not include the amount of that 
asset among eligible assets until the FDIC

[[Page 482]]

determines that sufficient documentation exists. Such a determination 
may be made either at the next federal examination, or upon request of 
the insured branch, by the appropriate regional director;
    (5) Any asset not in the insured branch's actual possession unless 
the insured branch holds title to such asset and the insured branch 
maintains records sufficient to enable independent verification of the 
insured branch's ownership of the asset, as determined at the most 
recent state or federal examination;
    (6) Any intangible asset;
    (7) Any other asset not considered bankable by the FDIC.
    (c) A foreign bank which has more than one insured branch in a state 
may treat all of its insured branches in the same state as one entity 
for purposes of compliance with paragraph (a) of this section and shall 
designate one insured branch to be responsible for maintaining the 
records of the insured branches' compliance with this section.
    (d) The average book value of the insured branch's liabilities for a 
quarter shall be, at the insured branch's option, either an average of 
the balances as of the close of business for each day of the quarter or 
an average of the balances as of the close of business on each Wednesday 
during the quarter. Quarters end on March 31, June 30, September 30, and 
December 31 of any given year. For days on which the insured branch is 
closed, balances from the previous business day are to be used. 
Calculations of the average book value of the insured branch's 
liabilities for a quarter shall be retained by the insured branch until 
the next federal examination.



Sec. 347.211  Examination of branches of foreign banks.

    (a) Frequency of on-site examination. Each branch or agency of a 
foreign bank shall be examined on-site at least once during each 12-
month period (beginning on the date the most recent examination of the 
office ended) by:
    (1) The FRB;
    (2) The FDIC, if an insured branch;
    (3) The OCC, if the branch or agency of the foreign bank is licensed 
by the OCC; or
    (4) The state supervisor, if the office of the foreign bank is 
licensed or chartered by the state.
    (b) 18-month cycle for certain small institutions. (1) Mandatory 
standards. The FDIC may conduct a full-scope, on-site examination at 
least once during each 18-month period, rather than each 12-month period 
as provided in paragraph (a) of this section, if the insured branch:
    (i) Has total assets of less than $500 million;
    (ii) Has received a composite ROCA supervisory rating (which rates 
risk management, operational controls, compliance, and asset quality) of 
1 or 2 at its most recent examination;
    (iii) Satisfies the requirement of either the following paragraph 
(b)(iii)(A) or (B):
    (A) The foreign bank's most recently reported capital adequacy 
position consists of, or is equivalent to, Tier 1 and total risk-based 
capital ratios of at least 6 percent and 10 percent, respectively, on a 
consolidated basis; or
    (B) The insured branch has maintained on a daily basis, over the 
past three quarters, eligible assets in an amount not less than 108 
percent of the preceding quarter's average third party liabilities 
(determined consistent with applicable federal and state law) and 
sufficient liquidity is currently available to meet its obligations to 
third parties;
    (iv) Is not subject to a formal enforcement action or order by the 
FRB, FDIC, or the OCC; and
    (v) Has not experienced a change in control during the preceding 12-
month period in which a full-scope, on-site examination would have been 
required but for this section.
    (2) Discretionary standards. In determining whether an insured 
branch that meets the standards of paragraph (b)(1) of this section 
should not be eligible for an 18-month examination cycle pursuant to 
this paragraph (b), the FDIC may consider additional factors, including 
whether:
    (i) Any of the individual components of the ROCA supervisory rating 
of an insured branch is rated ``3'' or worse;
    (ii) The results of any off-site monitoring indicate a deterioration 
in the condition of the insured branch;

[[Page 483]]

    (iii) The size, relative importance, and role of a particular 
insured branch when reviewed in the context of the foreign bank's entire 
U.S. operations otherwise necessitate an annual examination; and
    (iv) The condition of the parent foreign bank gives rise to such a 
need.
    (c) Authority to conduct more frequent examinations. Nothing in 
paragraphs (a) and (b) of this section limits the authority of the FDIC 
to examine any insured branch as frequently as it deems necessary.

[70 FR 17560, Apr. 6, 2005; 70 FR 20704, April 21, 2005, as amended at 
72 FR 17803, Apr. 10, 2007]



Sec. 347.212  FDIC approval to conduct activities that are not permissible for 

federal branches.

    (a) Scope. A foreign bank operating an insured state branch which 
desires to engage in or continue to engage in any type of activity that 
is not permissible for a federal branch, pursuant to the National Bank 
Act (12 U.S.C. 21 et seq.) or any other federal statute, regulation, 
official bulletin or circular, written order or interpretation, or 
decision of a court of competent jurisdiction, must file a written 
application for permission to conduct such activity with the FDIC.
    (b) Exceptions. If the FDIC has already determined, pursuant to part 
362 of this chapter, ``Activities and Investment of Insured State 
Banks,'' that an activity does not present a significant risk to the 
Deposit Insurance Fund, no application is required under paragraph (a) 
of this section for a foreign bank operating an insured branch to engage 
or continue to engage in the same activity.
    (c) Agency activities. A foreign bank operating an insured state 
branch is not required to submit an application pursuant to paragraph 
(a) of this section to engage in or continue engaging in an activity 
conducted as agent if the activity is:
    (1) permissible agency activity for a state-chartered bank located 
in the state which the state-licensed insured branch of the foreign bank 
is located;
    (2) permissible agency activity for a state-licensed branch of a 
foreign bank located in that state; and
    (3) permissible pursuant to any other applicable federal law or 
regulation.
    (d) Conditions of approval. (1) Approval of such an application 
required by paragraph (a) of this section may be conditioned on the 
agreement by the foreign bank and its insured state branch to conduct 
the activity subject to specific limitations, which may include pledging 
of assets in excess of the asset pledge and asset maintenance 
requirements contained in Sec. Sec. 347.209 and 347.210.
    (2) In the case of an application to initially engage in an 
activity, as opposed to an application to continue to conduct an 
activity, the insured state branch shall not commence the activity until 
it has been approved in writing by the FDIC pursuant to this part and 
the FRB, and any and all conditions imposed in such approvals have been 
satisfied.
    (e) Divestiture or cessation. (1) If an application for permission 
to continue to conduct an activity is not approved by the FDIC or the 
FRB, the applicant shall submit a plan of divestiture or cessation of 
the activity to the appropriate regional director.
    (2) A foreign bank operating an insured state branch which elects 
not to apply to the FDIC for permission to continue to conduct an 
activity which is rendered impermissible by any change in statute, 
regulation, official bulletin or circular, written order or 
interpretation, or decision of a court of competent jurisdiction shall 
submit a plan of divestiture or cessation to the appropriate regional 
director.
    (3) All plans of divestitures or cessation required by this 
paragraph must be completed within one year from the date of the 
disapproval, or within such shorter period as the FDIC may direct.
    (f) Procedures. Procedures for applications under this section are 
set out in section 303.187.

[70 FR 17560, Apr. 6, 2005; 70 FR 20704, April 21, 2005, as amended at 
71 FR 20527, Apr. 21, 2006]



Sec. 347.213  Establishment or operation of noninsured foreign branch.

    (a) A foreign bank may establish or operate a state branch, as 
provided by state law, without federal deposit insurance whenever:

[[Page 484]]

    (1) The branch only accepts initial deposits in an amount of 
$100,000 or greater; or
    (2) The branch meets the criteria set forth in Sec. Sec. 347.214 or 
347.215.
    (b) [Reserved]



Sec. 347.214  Branch established under section 5 of the International Banking 

Act.

    A foreign bank may operate any state branch as a noninsured branch 
whenever the foreign bank has entered into an agreement with the FRB to 
accept at that branch only those deposits as would be permissible for a 
corporation organized under section 25(a) of the Federal Reserve Act (12 
U.S.C. 611 et seq.) and implementing rules and regulations administered 
by the FRB (12 CFR 211).



Sec. 347.215  Exemptions from deposit insurance requirement.

    (a) Deposit activities not requiring insurance. A state branch will 
not be considered to be engaged in domestic retail deposit activity that 
requires the foreign bank parent to establish an insured U.S. bank 
subsidiary if the state branch accepts initial deposits only in an 
amount of less than $100,000 that are derived solely from the following:
    (1) Individuals who are not citizens or residents of the United 
States at the time of the initial deposit;
    (2) Individuals who:
    (i) Are not citizens of the United States;
    (ii) Are residents of the United States; and
    (iii) Are employed by a foreign bank, foreign business, foreign 
government, or recognized international organization;
    (3) Persons (including immediate family members of natural persons) 
to whom the branch or foreign bank (including any affiliate thereof) has 
extended credit or provided other nondeposit banking services within the 
past twelve months or has entered into a written agreement to provide 
such services within the next twelve months;
    (4) Foreign businesses, large United States businesses, and persons 
from whom an Edge or agreement corporation may accept deposits under 12 
CFR 211.6(a)(1);
    (5) Any governmental unit, including the United States government, 
any state government, any foreign government and any political 
subdivision or agency of any of the foregoing, and recognized 
international organizations;
    (6) Persons who are depositing funds in connection with the issuance 
of a financial instrument by the branch for the transmission of funds or 
the transmission of such funds by any electronic means; and
    (7) Any other depositor, but only if:
    (i) The branch's average deposits under this paragraph (a)(7) do not 
exceed one percent of the branch's average total deposits, as calculated 
under paragraph (a)(7)(ii) if this section (de minimis exception).
    (ii) For purposes of calculating this exception:
    (A) The branch's average deposits under this paragraph and the 
average total deposits must be computed by summing the close of business 
figures for each of the last 30 calendar days, ending with and including 
the last day of the calendar quarter, and dividing the resulting sum by 
30;
    (B) For days on which the branch is closed, balances from the last 
previous business day are to be used;
    (C) The branch may exclude deposits in the branch of other offices, 
branches, agencies or wholly owned subsidiaries of the bank to determine 
its average deposits;
    (D) The branch must not solicit deposits from the general public by 
advertising, display of signs, or similar activity designed to attract 
the attention of the general public; and
    (E) A foreign bank that has more than one state branch in the same 
state may aggregate deposits in such branches (excluding deposits of 
other branches, agencies or wholly owned subsidiaries of the bank) for 
the purpose of this paragraph (a)(7).
    (b) Application for an exemption. (1) Whenever a foreign bank 
proposes to accept at a state branch initial deposits of less than 
$100,000 and such deposits are not otherwise exempted under paragraph 
(a) of this section, the foreign bank may apply to the FDIC for

[[Page 485]]

consent to operate the branch as a noninsured branch. The Board of 
Directors may exempt the branch from the insurance requirement if the 
branch is not engaged in domestic retail deposit activities requiring 
insurance protection. The Board of Directors will consider the size and 
nature of depositors and deposit accounts, the importance of maintaining 
and improving the availability of credit to all sectors of the United 
States economy, including the international trade finance sector of the 
United States economy, whether the exemption would give the foreign bank 
an unfair competitive advantage over United States banking 
organizations, and any other relevant factors in making this 
determination.
    (2) Procedures for applications under this section are set out in 
Sec. 303.186.
    (c) Transition period. A noninsured state branch may maintain a 
retail deposit lawfully accepted prior to April 1, 1996 pursuant to 
regulations in effect prior to July 1, 1998:
    (1) If the deposit qualifies pursuant to paragraph (a) or (b) of 
this section; or
    (2) If the deposit does not qualify pursuant to paragraph (a) or (b) 
of this section, in the case of a time deposit, no later than the first 
maturity date of the time deposit after April 1, 1996.



Sec. 347.216  Depositor notification.

    Any state branch that is exempt from the insurance requirement 
pursuant to Sec. 347.215 shall:
    (a) Display conspicuously at each window or place where deposits are 
usually accepted a sign stating that deposits are not insured by the 
FDIC; and
    (b) Include in bold face conspicuous type on each signature card, 
passbook, and instrument evidencing a deposit the statement ``This 
deposit is not insured by the FDIC''; or require each depositor to 
execute a statement which acknowledges that the initial deposit and all 
future deposits at the branch are not insured by the FDIC. This 
acknowledgment shall be retained by the branch so long as the depositor 
maintains any deposit with the branch. This provision applies to any 
negotiable certificates of deposit made in a branch on or after July 6, 
1989, as well as to any renewals of such deposits which become effective 
on or after July 6, 1989.



                     Subpart C_International Lending



Sec. 347.301  Purpose, authority, and scope.

    Under the International Lending Supervision Act of 1983 (Title IX, 
Pub. L. 98-181, 97 Stat. 1153) (12 U.S.C. 3901 et seq.) (ILSA), the 
Federal Deposit Insurance Corporation prescribes the regulations in this 
subpart relating to international lending activities of banks.



Sec. 347.302  Definitions.

    For the purposes of this subpart:
    (a) Administrative cost means those costs which are specifically 
identified with negotiating, processing and consummating the loan. These 
costs include, but are not necessarily limited to: legal fees; costs of 
preparing and processing loan documents; and an allocable portion of 
salaries and related benefits of employees engaged in the international 
lending function. No portion of supervisory and administrative expenses 
or other indirect expenses such as occupancy and other similar overhead 
costs shall be included.
    (b) Banking institution means an insured state nonmember bank.
    (c) Federal banking agencies means the Board of Governors of the 
Federal Reserve System, the Office of the Comptroller of the Currency, 
and the Federal Deposit Insurance Corporation.
    (d) International assets means those assets required to be included 
in banking institutions' ``Country Exposure Report'' form (FFIEC No. 
009).
    (e) International loan means a loan as defined in the instructions 
to the ``Report of Condition and Income'' for the respective banking 
institution (FFIEC Nos. 031, 032, 033 and 034) and made to a foreign 
government, or to an individual, a corporation, or other entity not a 
citizen of, resident in, or organized or incorporated in the United 
States.
    (f) Restructured international loan means a loan that meets the 
following criteria:
    (1) The borrower is unable to service the existing loan according to 
its terms and is a resident of a foreign country in which there is a 
generalized inability

[[Page 486]]

of public and private sector obligors to meet their external debt 
obligations on a timely basis because of a lack of, or restraints on the 
availability of, needed foreign exchange in the country; and
    (2) Either:
    (i) The terms of the existing loan are amended to reduce stated 
interest or extend the schedule of payments; or
    (ii) A new loan is made to, or for the benefit of, the borrower, 
enabling the borrower to service or refinance the existing debt.
    (g) Transfer risk means the possibility that an asset cannot be 
serviced in the currency of payment because of a lack of, or restraints 
on the availability of, needed foreign exchange in the country of the 
obligor.



Sec. 347.303  Allocated transfer risk reserve.

    (a) Establishment of Allocated Transfer Risk Reserve. A banking 
institution shall establish an allocated transfer risk reserve (ATRR) 
for specified international assets when required by the FDIC in 
accordance with this section.
    (b) Procedures and standards--(1) Joint agency determination. At 
least annually, the federal banking agencies shall determine jointly, 
based on the standards set forth in paragraph (b)(2) of this section, 
the following:
    (i) Which international assets subject to transfer risk warrant 
establishment of an ATRR;
    (ii) The amount of the ATRR for the specified assets; and
    (iii) Whether an ATRR established for specified assets may be 
reduced.
    (2) Standards for requiring ATRR--(i) Evaluation of assets. The 
federal banking agencies shall apply the following criteria in 
determining whether an ATRR is required for particular international 
assets:
    (A) Whether the quality of a banking institution's assets has been 
impaired by a protracted inability of public or private obligors in a 
foreign country to make payments on their external indebtedness as 
indicated by such factors, among others, as whether:
    (1) Such obligors have failed to make full interest payments on 
external indebtedness; or
    (2) Such obligors have failed to comply with the terms of any 
restructured indebtedness; or
    (3) A foreign country has failed to comply with any International 
Monetary Fund or other suitable adjustment program; or
    (B) Whether no definite prospects exist for the orderly restoration 
of debt service.
    (ii) Determination of amount of ATRR. (A) In determining the amount 
of the ATRR, the federal banking agencies shall consider:
    (1) The length of time the quality of the asset has been impaired;
    (2) Recent actions taken to restore debt service capability;
    (3) Prospects for restored asset quality; and
    (4) Such other factors as the federal banking agencies may consider 
relevant to the quality of the asset.
    (B) The initial year's provision for the ATRR shall be ten percent 
of the principal amount of each specified international asset, or such 
greater or lesser percentage determined by the federal banking agencies. 
Additional provision, if any, for the ATRR in subsequent years shall be 
fifteen percent of the principal amount of each specified international 
asset, or such greater or lesser percentage determined by the federal 
banking agencies.
    (3) FDIC notification. Based on the joint agency determinations 
under paragraph (b)(1) of this section, the FDIC shall notify each 
banking institution holding assets subject to an ATRR:
    (i) Of the amount of the ATRR to be established by the institution 
for specified international assets; and
    (ii) That an ATRR established for specified assets may be reduced.
    (c) Accounting treatment of ATRR--(1) Charge to current income. A 
banking institution shall establish an ATRR by a charge to current 
income and the amounts so charged shall not be included in the banking 
institution's capital or surplus.
    (2) Separate accounting. A banking institution shall account for an 
ATRR separately from the Allowance for Loan and Lease Losses, and shall 
deduct the ATRR from ``gross loans and leases'' to arrive at ``net loans 
and

[[Page 487]]

leases.'' The ATRR must be established for each asset subject to the 
ATRR in the percentage amount specified.
    (3) Consolidation. A banking institution shall establish an ATRR, as 
required, on a consolidated basis. For banks, consolidation should be in 
accordance with the procedures and tests of significance set forth in 
the instructions for preparation of Consolidated Reports of Condition 
and Income (FFIEC Nos. 031, 032, 033 and 034).
    (4) Alternative accounting treatment. A banking institution need not 
establish an ATRR if it writes down in the period in which the ATRR is 
required, or has written down in prior periods, the value of the 
specified international assets in the requisite amount for each such 
asset. For purposes of this paragraph (c)(4), international assets may 
be written down by a charge to the Allowance for Loan and Lease Losses 
or a reduction in the principal amount of the asset by application of 
interest payments or other collections on the asset; provided, that only 
those international assets that may be charged to the Allowance for Loan 
and Lease Losses pursuant to generally accepted accounting principles 
may be written down by a charge to the Allowance for Loan and Lease 
Losses. However, the Allowance for Loan and Lease Losses must be 
replenished in such amount necessary to restore it to a level which 
adequately provides for the estimated losses inherent in the banking 
institution's loan and lease portfolio.
    (5) Reduction of ATRR. A banking institution may reduce an ATRR when 
notified by the FDIC or, at any time, by writing down such amount of the 
international asset for which the ATRR was established.



Sec. 347.304  Accounting for fees on international loans.

    (a) Restrictions on fees for restructured international loans. No 
banking institution shall charge, in connection with the restructuring 
of an international loan, any fee exceeding the administrative cost of 
the restructuring unless it amortizes the amount of the fee exceeding 
the administrative cost over the effective life of the loan.
    (b) Accounting treatment. Subject to paragraph (a) of this section, 
banking institutions shall account for fees on international loans in 
accordance with generally accepted accounting principles.



Sec. 347.305  Reporting and disclosure of international assets.

    (a) Requirements. (1) Pursuant to section 907(a) of ILSA, a banking 
institution shall submit to the FDIC, at least quarterly, information 
regarding the amounts and composition of its holdings of international 
assets.
    (2) Pursuant to section 907(b) of ILSA, a banking institution shall 
submit to the FDIC information regarding concentrations in its holdings 
of international assets that are material in relation to total assets 
and to capital of the institution, such information to be made publicly 
available by the FDIC on request.
    (b) Procedures. The format, content and reporting and filing dates 
of the reports required under paragraph (a) of this section shall be 
determined jointly by the federal banking agencies. The requirements to 
be prescribed by the federal banking agencies may include changes to 
existing forms (such as revisions to the Country Exposure Report, Form 
FFIEC No. 009) or such other requirements as the federal banking 
agencies deem appropriate. The federal banking agencies also may 
determine to exempt from the requirements of paragraph (a) of this 
section banking institutions that, in the federal banking agencies' 
judgment, have de minimis holdings of international assets.
    (c) Reservation of Authority. Nothing contained in this subpart 
shall preclude the FDIC from requiring from a banking institution such 
additional or more frequent information on the institution's holdings of 
international assets as the agency may consider necessary.



PART 348_MANAGEMENT OFFICIAL INTERLOCKS--Table of Contents




Sec.
348.1 Authority, purpose, and scope.
348.2 Definitions.
348.3 Prohibitions.
348.4 Interlocking relationships permitted by statute.
348.5 Small market share exemption.
348.6 General exemption.

[[Page 488]]

348.7 Change in circumstances.
348.8 Enforcement.

    Authority: 12 U.S.C. 3207, 12 U.S.C. 1823(k).

    Source: 61 FR 40305, Aug. 2, 1996, unless otherwise noted.



Sec. 348.1  Authority, purpose, and scope.

    (a) Authority. This part is issued under the provisions of the 
Depository Institution Management Interlocks Act (Interlocks Act) (12 
U.S.C. 3201 et seq.), as amended.
    (b) Purpose. The purpose of the Interlocks Act and this part is to 
foster competition by generally prohibiting a management official from 
serving two nonaffiliated depository organizations in situations where 
the management interlock likely would have an anticompetitive effect.
    (c) Scope. This part applies to management officials of insured 
nonmember banks and their affiliates.



Sec. 348.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Affiliate. (1) The term affiliate has the meaning given in 
section 202 of the Interlocks Act (12 U.S.C. 3201). For purposes of 
section 202, shares held by an individual include shares held by members 
of his or her immediate family. ``Immediate family'' means spouse, 
mother, father, child, grandchild, sister, brother or any of their 
spouses, whether or not any of their shares are held in trust.
    (2) For purposes of section 202(3)(B) of the Interlocks Act (12 
U.S.C. 3201(3)(B)), an affiliate relationship involving an insured 
nonmember bank based on common ownership does not exist if the FDIC 
determines, after giving the affected persons the opportunity to 
respond, that the asserted affiliation was established in order to avoid 
the prohibitions of the Interlocks Act and does not represent a true 
commonality of interest between the depository organizations. In making 
this determination, the FDIC considers, among other things, whether a 
person, including members of his or her immediate family whose shares 
are necessary to constitute the group, owns a nominal percentage of the 
shares of one of the organizations and the percentage is substantially 
disproportionate to that person's ownership of shares in the other 
organization.
    (b) Area median income means:
    (1) The median family income for the metropolitan statistical area 
(MSA), if a depository organization is located in an MSA; or
    (2) The statewide nonmetropolitan median family income, if a 
depository organization is located outside an MSA.
    (c) Community means a city, town, or village, and contiguous or 
adjacent cities, towns, or villages.
    (d) Contiguous or adjacent cities, towns, or villages means cities, 
towns, or villages whose borders touch each other or whose borders are 
within 10 road miles of each other at their closest points. The property 
line of an office located in an unincorporated city, town, or village is 
the boundary line of that city, town, or village for the purpose of this 
definition.
    (e) Depository holding company means a bank holding company or a 
savings and loan holding company (as more fully defined in section 202 
of the Interlocks Act (12 U.S.C. 3201)) having its principal office 
located in the United States.
    (f) Depository institution means a commercial bank (including a 
private bank), a savings bank, a trust company, a savings and loan 
association, a building and loan association, a homestead association, a 
cooperative bank, an industrial bank, or a credit union, chartered under 
the laws of the United States and having a principal office located in 
the United States. Additionally, a United States office, including a 
branch or agency, of a foreign commercial bank is a depository 
institution.
    (g) Depository institution affiliate means a depository institution 
that is an affiliate of a depository organization.
    (h) Depository organization means a depository institution or a 
depository holding company.
    (i) Low- and moderate-income areas means census tracts (or, if an 
area is not in a census tract, block numbering areas delineated by the 
United States Bureau of the Census) where the median family income is 
less than 100 percent of the area median income.

[[Page 489]]

    (j) Management official. (1) The term management official means:
    (i) A director;
    (ii) An advisory or honorary director of a depository institution 
with total assets of $100 million or more;
    (iii) A senior executive officer as that term is defined in 12 CFR 
303.101(b).
    (iv) A branch manager;
    (v) A trustee of a depository organization under the control of 
trustees; and
    (vi) Any person who has a representative or nominee serving in any 
of the capacities in this paragraph (j)(1).
    (2) The term management official does not include:
    (i) A person whose management functions relate exclusively to the 
business of retail merchandising or manufacturing;
    (ii) A person whose management functions relate principally to the 
business outside the United States of a foreign commercial bank; or
    (iii) A person described in the provisos of section 202(4) of the 
Interlocks Act (12 U.S.C. 3201(4)) (referring to an officer of a State-
chartered savings bank, cooperative bank, or trust company that neither 
makes real estate mortgage loans nor accepts savings).
    (k) Office means a principal or branch office of a depository 
institution located in the United States. Office does not include a 
representative office of a foreign commercial bank, an electronic 
terminal, or a loan production office.
    (l) Person means a natural person, corporation, or other business 
entity.
    (m) Relevant metropolitan statistical area (RMSA) means an MSA, a 
primary MSA, or a consolidated MSA that is not comprised of designated 
Primary MSAs to the extent that these terms are defined and applied by 
the Office of Management and Budget.
    (n) Representative or nominee means a natural person who serves as a 
management official and has an obligation to act on behalf of another 
person with respect to management responsibilities. The FDIC will find 
that a person has an obligation to act on behalf of another person only 
if the first person has an agreement, express or implied, to act on 
behalf of the second person with respect to management responsibilities. 
The FDIC will determine, after giving the affected persons an 
opportunity to respond, whether a person is a representative or nominee.
    (o) Total assets. (1) The term total assets includes assets measured 
on a consolidated basis and reported in the most recent fiscal year-end 
Consolidated Report of Condition and Income.
    (2) The term total assets does not include:
    (i) Assets of a diversified savings and loan holding company as 
defined by section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) other than the assets of its depository institution 
affiliate;
    (ii) Assets of a bank holding company that are exempt from the 
prohibitions of section 4 of the Bank Holding Company Act of 1956 
pursuant to an order issued under section 4(d) of that Act (12 U.S.C. 
1843(d)) other than the assets of its depository institution affiliate; 
or
    (iii) Assets of offices of a foreign commercial bank other than the 
assets of its United States branch or agency.
    (p) United States means the United States of America, any State or 
territory of the United States of America, the District of Columbia, 
Puerto Rico, Guam, American Samoa, and the Virgin Islands.

[61 FR 40305, Aug. 2, 1996, as amended at 64 FR 51679, Sept. 24, 1999; 
68 FR 50461, Aug. 21, 2003; 72 FR 1276, Jan. 11, 2007]



Sec. 348.3  Prohibitions.

    (a) Community. A management official of a depository organization 
may not serve at the same time as a management official of an 
unaffiliated depository organization if the depository organizations in 
question (or a depository institution affiliate thereof) have offices in 
the same community.
    (b) RMSA. A management official of a depository organization may not 
serve at the same time as a management official of an unaffiliated 
depository organization if the depository organizations in question (or 
a depository institution affiliate thereof) have offices in the same 
RMSA and each depository organization has total assets of $50 million or 
more.
    (c) Major assets. A management official of a depository organization 
with total assets exceeding $2.5 billion (or any affiliate of such an 
organization)

[[Page 490]]

may not serve at the same time as a management official of an 
unaffiliated depository organization with total assets exceeding $1.5 
billion (or any affiliate of such an organization), regardless of the 
location of the two depository organizations. The FDIC will adjust these 
thresholds, as necessary, based on the year-to-year change in the 
average of the Consumer Price Index for the Urban Wage Earners and 
Clerical Workers, not seasonally adjusted, with rounding to the nearest 
$100 million. The FDIC will announce the revised thresholds by 
publishing a final rule without notice and comment in the Federal 
Register.

[61 FR 40305, Aug. 2, 1996, as amended at 64 FR 51679, Sept. 24, 1999; 
72 FR 1276, Jan. 11, 2007]



Sec. 348.4  Interlocking relationships permitted by statute.

    The prohibitions of Sec. 348.3 do not apply in the case of any one 
or more of the following organizations or to a subsidiary thereof:
    (a) A depository organization that has been placed formally in 
liquidation, or which is in the hands of a receiver, conservator, or 
other official exercising a similar function;
    (b) A corporation operating under section 25 or section 25A of the 
Federal Reserve Act (12 U.S.C. 601 et seq. and 12 U.S.C. 611 et seq., 
respectively) (Edge Corporations and Agreement Corporations);
    (c) A credit union being served by a management official of another 
credit union;
    (d) A depository organization that does not do business within the 
United States except as an incident to its activities outside the United 
States;
    (e) A State-chartered savings and loan guaranty corporation;
    (f) A Federal Home Loan bank or any other bank organized solely to 
serve depository institutions (a bankers' bank) or solely for the 
purpose of providing securities clearing services and services related 
thereto for depository institutions and securities companies;
    (g) A depository organization that is closed or is in danger of 
closing as determined by the appropriate Federal depository institutions 
regulatory agency and is acquired by another depository organization. 
This exemption lasts for five years, beginning on the date the 
depository organization is acquired;
    (h) A savings association whose acquisition has been authorized on 
an emergency basis in accordance with section 13(k) of the Federal 
Deposit Insurance Act (12 U.S.C. 1823(k)) with resulting dual service by 
a management official that would otherwise be prohibited under the 
Interlocks Act which may continue for up to 10 years from the date of 
the acquisition provided that the FDIC has given its approval for the 
continuation of such service; and
    (i)(1) A diversified savings and loan holding company (as defined in 
section 10(a)(1)(F) of the Home Owners' Loan Act (12 U.S.C. 
1467a(a)(1)(F)) with respect to the service of a director of such 
company who is also a director of an unaffiliated depository 
organization if:
    (i) Both the diversified savings and loan holding company and the 
unaffiliated depository organization notify their appropriate Federal 
depository institutions regulatory agency at least 60 days before the 
dual service is proposed to begin; and
    (ii) The appropriate regulatory agency does not disapprove the dual 
service before the end of the 60-day period.
    (2) The FDIC may disapprove a notice of proposed service if it finds 
that:
    (i) The service cannot be structured or limited so as to preclude an 
anticompetitive effect in financial services in any part of the United 
States;
    (ii) The service would lead to substantial conflicts of interest or 
unsafe or unsound practices; or
    (iii) The notificant failed to furnish all the information required 
by the FDIC.
    (3) The FDIC may require that any interlock permitted under this 
paragraph (h) be terminated if a change in circumstances occurs with 
respect to one of the interlocked depository organizations that would 
have provided a basis for disapproval of the interlock during the notice 
period.

[[Page 491]]



Sec. 348.5  Small market share exemption.

    (a) Exemption. A management interlock that is prohibited by Sec. 
348.3 is permissible, if:
    (1) The interlock is not prohibited by Sec. 348.3(c); and
    (2) The depository organizations (and their depository institution 
affiliates) hold, in the aggregate, no more than 20 percent of the 
deposits in each RMSA or community in which both depository 
organizations (or their depository institution affiliates) have offices. 
The amount of deposits shall be determined by reference to the most 
recent annual Summary of Deposits published by the FDIC for the RMSA or 
community.
    (b) Confirmation and records. Each depository organization must 
maintain records sufficient to support its determination of eligibility 
for the exemption under paragraph (a) of this section, and must 
reconfirm that determination on an annual basis.

[64 FR 51680, Sept. 24, 1999]



Sec. 348.6  General exemption.

    (a) Exemption. The FDIC may by agency order exempt an interlock from 
the prohibitions in Sec. 348.3 if the FDIC finds that the interlock 
would not result in a monopoly or substantial lessening of competition 
and would not present safety and soundness concerns.
    (b) Presumptions. In reviewing an application for an exemption under 
this section, the FDIC will apply a rebuttable presumption that an 
interlock will not result in a monopoly or substantial lessening of 
competition if the depository organization seeking to add a management 
official:
    (1) Primarily serves low-and moderate-income areas;
    (2) Is controlled or managed by persons who are members of a 
minority group, or women;
    (3) Is a depository institution that has been chartered for less 
than two years; or
    (4) Is deemed to be in ``troubled condition'' as defined in Sec. 
303.101(c).
    (c) Duration. Unless a shorter expiration period is provided in the 
FDIC approval, an exemption permitted by paragraph (a) of this section 
may continue so long as it does not result in a monopoly or substantial 
lessening of competition, or is unsafe or unsound. If the FDIC grants an 
interlock exemption in reliance upon a presumption under paragraph (b) 
of this section, the interlock may continue for three years, unless 
otherwise provided by the FDIC in writing.
    (d) Procedures. Procedures for applying for an exemption under this 
section are set forth in 12 CFR 303.249.

[64 FR 51680, Sept. 24, 1999, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 348.7  Change in circumstances.

    (a) Termination. A management official shall terminate his or her 
service or apply for an exemption if a change in circumstances causes 
the service to become prohibited. A change in circumstances may include 
an increase in asset size of an organization, a change in the 
delineation of the RMSA or community, the establishment of an office, an 
increase in the aggregate deposits of the depository organization, or an 
acquisition, merger, consolidation, or reorganization of the ownership 
structure of a depository organization that causes a previously 
permissible interlock to become prohibited.
    (b) Transition period. A management official described in paragraph 
(a) of this section may continue to serve the insured nonmember bank 
involved in the interlock for 15 months following the date of the change 
in circumstances. The FDIC may shorten this period under appropriate 
circumstances.

[61 FR 40305, Aug. 2, 1996, as amended at 64 FR 51680, Sept. 24, 1999]



Sec. 348.8  Enforcement.

    Except as provided in this section, the FDIC administers and 
enforces the Interlocks Act with respect to insured nonmember banks and 
their affiliates and may refer any case of a prohibited interlocking 
relationship involving these entities to the Attorney General of the 
United States to enforce compliance with the Interlocks Act and this 
part. If an affiliate of an insured nonmember bank is subject to the 
primary regulation of another federal depository organization 
supervisory agency, then the FDIC does not administer and

[[Page 492]]

enforce the Interlocks Act with respect to that affiliate.

                           PART 349 [RESERVED]



PART 350_DISCLOSURE OF FINANCIAL AND OTHER INFORMATION BY FDIC-INSURED STATE 

NONMEMBER BANKS--Table of Contents




Sec.
350.1 Scope.
350.2 Definitions.
350.3 Requirement for annual disclosure statement.
350.4 Contents of annual disclosure statement.
350.5 Alternative annual disclosure statements.
350.6 Signature and attestation.
350.7 Notice and availability.
350.8 Delivery.
350.9 Disclosure of examination reports.
350.10 Prohibited conduct and penalties.
350.11 Safe harbor provision.
350.12 Disclosure required by applicable banking or securities law or 
          regulations.

    Authority: 12 U.S.C. 1817(a)(1), 1819 ``Seventh'' and ``Tenth''.

    Source: 52 FR 49379, Dec. 31, 1987, unless otherwise noted.



Sec. 350.1  Scope.

    This part applies to FDIC-insured state-chartered banks that are not 
members of the Federal Reserve System, and to FDIC-Insured state-
licensed branches of foreign banks.



Sec. 350.2  Definitions.

    (a) Bank. For purposes of this part, the term bank means an FDIC-
insured state-chartered organization that is not a member of the Federal 
Reserve System, and an FDIC-insured state-licensed branch of a foreign 
bank.
    (b) Call Report. For purposes of this part, the term Call Report 
means the report filed by a bank pursuant to 12 U.S.C. 1817(a)(1).



Sec. 350.3  Requirement for annual disclosure statement.

    (a) Contents. Each bank shall prepare as of December 31 and make 
available on request an annual disclosure statement. The statement shall 
contain information required by Sec. 350.4(a) and (b) and may include 
other information that bank management believes appropriate, as provided 
in Sec. 350.4(c).
    (b) Availability. A bank shall make its annual disclosure statement 
available to the public beginning not later than the following March 31 
or, if the bank mails an annual report to its shareholders, beginning 
not later than five days after the mailing of such reports, whichever 
occurs first. A bank shall make a disclosure statement available 
continuously until the disclosure statement for the succeeding year 
becomes available.

[62 FR 10200, Mar. 6, 1997]



Sec. 350.4  Contents of annual disclosure statement.

    (a) Financial reports. The annual disclosure statement for any year 
shall reflect a fair presentation of the bank's financial condition at 
the end of that year and the preceding year and, except for state-
licensed branches of foreign banks, the results of operations for each 
such year. The annual disclosure statement may, at the option of bank 
management, consist of the bank's entire Call Report, or applicable 
portions thereof, for the relevant dates and periods. At a minimum, the 
statement must contain information comparable to that provided in the 
following Call Report schedules:
    (1) For insured state-chartered organizations that are not members 
of the Federal Reserve System:
    (i) Schedule RC (Balance Sheet);
    (ii) Schedule RC-N (Past Due and Nonaccrual, Loans, Leases, and 
Other Assets--column A covering financial instruments past due 30 
through 89 days and still accruing and Memorandum item 1 need not be 
included);
    (iii) Schedule RI (Income Statement);
    (iv) Schedule RI-A (Changes in Equity Capital); and
    (v) Schedule RI-B, Part II (Changes in Allowance for Loan and Lease 
Losses).
    (2) For insured state-licensed branches of foreign banks:
    (i) Schedule RAL (Assets and Liabilities);
    (ii) Schedule E (Deposit Liabilities and Credit Balances); and
    (iii) Schedule P (Other Borrowed Money).

[[Page 493]]

    (b) Other required information. The annual disclosure statement 
shall include such other information as the FDIC may require of a 
particular bank. This could include disclosure of enforcement actions 
where the FDIC deems it in the public interest to do so.
    (c) Optional information. A bank may, at its option, provide 
additional information that bank management considers important to an 
evaluation of the overall condition of the bank. This information could 
include, but is not limited to, a discussion of the financial data; 
information relating to mergers and acquisitions; the existence of and 
facts relating to regulatory enforcement actions; business plans; and 
material changes in balance sheet and income statement items.
    (d) Disclaimer. The following legend shall be included in every 
annual disclosure statement to advise the public that the FDIC has not 
reviewed the information contained therein: ``This statement has not 
been reviewed, or confirmed for accuracy or relevance, by the Federal 
Deposit Insurance Corporation.''

[62 FR 10200, Mar. 6, 1997]



Sec. 350.5  Alternative annual disclosure statements.

    The requirements of Sec. 350.4(a) may be satisfied:
    (a) In the case of a bank having a class of securities registered 
pursuant to section 12 of the Securities Exchange Act of 1934, by the 
bank's annual report to security holders for meetings at which directors 
are to be elected or the bank's annual report (see 12 CFR part 335);
    (b) In the case of a bank with independently audited financial 
statements, by copies of the audited financial statements and the 
certificate or report of the independent accountant to the extent that 
such statements contain information comparable to that specified in 
Sec. 350.4(a); and
    (c) In the case of a bank subsidiary of a one-bank holding company, 
by an annual report of the one-bank holding company prepared in 
conformity with the regulations of the Securities and Exchange 
Commission or by sections in the holding company's consolidated 
financial statements on Form FR Y-9C pursuant to Regulation Y of the 
Federal Reserve Board (12 CFR part 225) that are comparable to the Call 
Report schedules enumerated in Sec. 350.4(a)(1), provided that in 
either case not less than 95 percent of the holding company's 
consolidated total assets and total liabilities are assets and 
liabilities of the bank and the bank's consolidated subsidiaries.
    (d) In the case of a bank covered by 12 CFR part 363, by an annual 
report prepared pursuant to 12 CFR 363.4. However, if the annual report 
is for a bank subsidiary of a holding company which provides only the 
consolidated financial statements of the holding company, this annual 
report may be used to satisfy the requirements of this part only if it 
is the report of a one-bank holding company and provided that not less 
than 95 percent of the holding company's consolidated total assets and 
total liabilities are assets and liabilities of the bank and the bank's 
consolidated subsidiaries.

[62 FR 10200, Mar. 6, 1997]



Sec. 350.6  Signature and attestation.

    An authorized officer of the bank shall sign the annual disclosure 
statement. The officer shall also attest to the correctness of the 
information contained in the statement if the financial reports are not 
accompanied by a certificate or report of an independent accountant.

[62 FR 10200, Mar. 6, 1997]



Sec. 350.7  Notice and availability.

    (a) Shareholders. If the bank provides written notice of the annual 
meeting of shareholders, the bank shall include with, or as part of, 
that notice an announcement that the bank's annual disclosure statement 
will be sent to the shareholder either automatically or upon request. 
For disclosure statements available on request, the announcement shall 
indicate at a minimum an address and telephone number to which requests 
may be directed. The first copy of the annual disclosure statement shall 
be provided to a shareholder without charge.
    (b) Customers and the general public. In the lobby of its main 
office and each

[[Page 494]]

branch, the bank shall at all times display a notice that the annual 
disclosure statement may be obtained from the bank. The notice shall 
include at a minimum an address and telephone number of which requests 
should be directed. The first copy of the annual disclosure statement 
shall be provided to a requester free of charge.



Sec. 350.8  Delivery.

    Each bank shall, after receiving a request for an annual disclosure 
statement, promptly mail or otherwise furnish a statement to the 
requester.



Sec. 350.9  Disclosure of examination reports.

    Except as permitted under specific provisions of the FDIC's 
regulations (12 CFR part 309), a bank may not disclose any report of 
examination or report of supervisory activity or any portion thereof 
prepared by the FDIC. The bank also shall not make any representation 
concerning such report or the findings therein.



Sec. 350.10  Prohibited conduct and penalties.

    (a) Misrepresentations. No officer, director, employee, agent, or 
other person participating in the affairs of a bank, shall, directly or 
indirectly:
    (1) Disclose or cause to be disclosed false or misleading 
information in the annual disclosure statement, or omit or cause the 
omission of pertinent or required information in the annual disclosure 
statement; or
    (2) Represent that the FDIC, or any employee thereof, has reviewed, 
or confirmed the accuracy or relevance of the disclosure statement.
    (b) Participating persons. For purposes of this part, a person 
participating in the affairs of a bank shall include (but not be limited 
to) any person who provides information contained in, or directly or 
indirectly assists in the preparation of, the annual disclosure 
statement.
    (c) Enforcement actions. Conduct that violates paragraph (a) of this 
section may constitute an unsafe or unsound banking practice or 
otherwise serve as a basis for an enforcement action by the FDIC.



Sec. 350.11  Safe harbor provision.

    The provisions of Sec. 350.10 shall not apply unless it is shown 
that the information disclosed was included without a reasonable basis 
or other than in good faith.



Sec. 350.12  Disclosure required by applicable banking or securities law or 

regulations.

    The requirements of this part are not intended to replace or waive 
any disclosure required to be made under applicable banking or 
securities law or regulations.

[62 FR 10201, Mar. 6, 1997]

                           PART 351 [RESERVED]



PART 352_NONDISCRIMINATION ON THE BASIS OF DISABILITY--Table of Contents




Sec.
352.1 Purpose.
352.2 Application.
352.3 Definitions.
352.4 Nondiscrimination in any program or activity conducted by the 
          FDIC.
352.5 Accessibility to electronic and information technology.
352.6 Employment.
352.7 Accessibility of programs, and activities: Existing facilities.
352.8 Program accessibility: New construction and alterations.
352.9 Communications.
352.10 Compliance procedures.
352.11 Notice.

    Authority: 12 U.S.C. 1819(a); 29 U.S.C. 794d.

    Source: 69 FR 26492, May 13, 2004, unless otherwise noted.



Sec. 352.1  Purpose.

    (a) One purpose of this part is to implement the spirit of section 
504 of the Rehabilitation Act of 1973 (the Rehabilitation Act) as 
amended by section 119 of the Rehabilitation, Comprehensive Services, 
and Developmental Disabilities Amendments of 1978 and the Workforce 
Investment Act of 1998. Section 504 prohibits discrimination on the 
basis of disability in programs and activities conducted by a federal 
executive agency. Although the FDIC does not believe that Congress 
contemplated coverage of non-appropriated, independent regulatory 
agencies such as

[[Page 495]]

the FDIC, the FDIC has chosen to promulgate this final regulation to 
ensure that, to the extent practicable, persons with disabilities are 
provided with equal access to FDIC programs and activities.
    (b) This part is also intended to implement section 508 of the 
Rehabilitation Act as amended. Section 508 requires each federal agency 
or department to ensure that the electronic and information technology 
they procure allows individuals with disabilities access to that 
technology comparable to the access of those who are not disabled, 
unless the agency would incur an undue burden.



Sec. 352.2  Application.

    (a) This part applies to all programs, activities, and electronic 
and information technology developed, procured, maintained, used or 
conducted by the FDIC. The following programs and activities involve the 
direct provision of benefits and services to, or participation by, 
members of the public:
    (1) Attending Board of Directors meetings open to the public and all 
other public meetings;
    (2) Making inquiries or filing complaints at the FDIC Office of 
Legislative Affairs and Office of Public Affairs;
    (3) Using the FDIC library in Washington, DC;
    (4) Using the FDIC Web site on the Internet;
    (5) Visiting an insured bank at which they conducted business (or an 
alternative liquidation site selected by the FDIC) and which has become 
insolvent, or been purchased by another bank under FDIC supervision, for 
the purpose of:
    (i) Collecting FDIC checks for the insured amount of their deposits 
previously held in such bank; and/or
    (ii) Discussing with FDIC representatives matters related to the 
repayment of debts which they previously owed to such bank, prior to its 
failure or purchase by another bank under FDIC supervision;
    (6) Seeking employment with the FDIC;
    (b) This regulation governs the conduct of FDIC personnel in their 
interaction with employees of insured banks and employees of other state 
or federal agencies while discharging the FDIC's statutory obligations 
as insurer and/or receiver of financial institutions. It does not apply 
to financial institutions insured by the FDIC.
    (c) Although application for employment and employment with the FDIC 
are programs and activities of the FDIC for purposes of this regulation, 
they shall be governed only by the standards set forth in Sec. 352.6 of 
this part.



Sec. 352.3  Definitions.

    For purposes of this part, the term--
    (a) ``Auxiliary aids'' means services or devices that enable persons 
with impaired sensory, manual, or speaking skills to have an equal 
opportunity to participate in, and enjoy the benefits of, the FDIC 
programs or activities, and Electronic and Information Technology set 
forth in Sec. 352.2.
    (b) ``Electronic and Information Technology'' (``EIT'') has the same 
meaning as ``information technology'' except EIT also includes any 
equipment or interconnected system or subsystem of equipment that is 
used in the creation, conversion, or duplication of data or information. 
The term EIT includes, but is not limited to, telecommunication products 
(such as telephones), information kiosks and transaction machines, 
worldwide web sites, multimedia, and office equipment (such as copiers 
and fax machines).
    (c) ``Facility'' means all or any portion of buildings, structures, 
equipment, roads, walks, parking lots and other real or personal 
property. As used in this definition, ``personal property'' means only 
furniture, carpeting and similar features not considered to be real 
property.
    (d) ``Individual with a disability'' means any person who has a 
physical or mental impairment that substantially limits one or more 
major life activities, has a record of such an impairment, or is 
regarded as having such an impairment.
    (e) ``Qualified individual with a disability'' means--
    (1) With respect to any FDIC program or activity in which a person 
is required to perform services or to achieve a level of accomplishment, 
an

[[Page 496]]

individual with a disability who meets the essential eligibility 
requirements and can achieve the purpose of the program or activity 
without modifications in the program or activity that the FDIC can 
determine on the basis of a written record would result in a fundamental 
alteration in its nature;
    (2) With respect to any other program or activity, an individual 
with a disability who meets the essential eligibility requirements for 
participation in, or receipt of benefits from, that program or activity;
    (3) With respect to employment, an individual with a disability as 
defined in 29 CFR 1630.2(g), which is made applicable to this part by 
Sec. 352.6.
    (f) ``Sections 504 and 508'' mean sections 504 and 508 of the 
Rehabilitation Act of 1973 (Pub. L. 93-112, 87 Stat. 394 (29 U.S.C. 794 
and 794d)), as amended by the Rehabilitation Act Amendments of 1974 
(Pub. L. 93-516, 88 Stat. 1617), the Rehabilitation, Comprehensive 
Services, and Developmental Disabilities Amendments of 1978 (Pub. L. 95-
602, 92 Stat. 2955), and the Workforce Investment Act of 1998 (Pub. L. 
105-220, 112 Stat. 936). As used in this regulation, sections 504 and 
508 shall be applied only to the programs, activities, and EIT conducted 
by the FDIC as set forth in Sec. Sec. 352.2 and 352.3(b) of this 
regulation.



Sec. 352.4  Nondiscrimination in any program or activity conducted by the 

FDIC.

    In accordance with section 504 of the Rehabilitation Act, no 
qualified individual with a disability shall, solely by reason of his or 
her disability, be excluded from participation in, be denied the 
benefits of, or be subjected to discrimination in any program or 
activity conducted by the FDIC.



Sec. 352.5  Accessibility to electronic and information technology.

    (a) In accordance with section 508 of the Rehabilitation Act, the 
FDIC shall ensure, absent an undue burden, that the electronic and 
information technology the agency develops, procures, maintains or 
allows:
    (1) Individuals with disabilities who are FDIC employees or 
applicants to have access to and use of information and data that is 
comparable to the access to and use of information and data by FDIC 
employees or applicants who are not individuals with disabilities; and
    (2) Individuals with disabilities who are members of the public 
seeking information or services from the FDIC to have access to and use 
of information and data that is comparable to the access to and use of 
information and data by members of the public who are not individuals 
with disabilities.
    (b) When development or procurement of electronic and information 
technology that meets the standards published by the Architectural and 
Transportation Barriers Compliance Board, 36 CFR 1194, would pose an 
undue burden, the FDIC shall provide individuals with disabilities 
covered by paragraph (a) of this section with the information and data 
by an alternative means of access that allows the individuals to use the 
information and data.



Sec. 352.6  Employment.

    No qualified individual with a disability shall, on the basis of 
that disability, be subjected to discrimination in employment in any 
program or activity conducted by the FDIC. The definitions, 
requirements, and procedures (including those pertaining to employment 
discrimination complaints) of sections 501 of the Rehabilitation Act of 
1973, as established in 29 CFR parts 1614 and 1630, shall apply to 
employment in the FDIC.



Sec. 352.7  Accessibility of programs and activities: Existing facilities.

    The FDIC shall operate each of the programs or activities set forth 
in Sec. 352.2 of this part so that when viewed in its entirety, the 
program or activity is readily accessible to and usable by individuals 
with disabilities.



Sec. 352.8  Program accessibility: New construction and alterations.

    Each building or part of a building, whether newly constructed, or 
substantially altered, in which FDIC programs or activities will be 
conducted, shall be designed, constructed or altered so as to be readily 
accessible to, and usable by, individuals with disabilities.

[[Page 497]]



Sec. 352.9  Communications.

    (a) The FDIC shall take appropriate steps to ensure effective 
communication with participants in FDIC programs, activities and EIT.
    (1) The FDIC shall furnish appropriate auxiliary aids where 
necessary to afford an individual with a disability an equal opportunity 
to participate in, and enjoy the benefits of, the FDIC programs or 
activities.
    (i) In determining what type of auxiliary aid is necessary, the FDIC 
shall give primary consideration to any reasonable requests of the 
individual with a disability.
    (ii) The FDIC need not provide individually prescribed devices, 
readers for personal use or study, or other devices of a personal 
nature.
    (2) Where the FDIC communicates by telephone, it shall use 
telecommunications devices for deaf persons (TDD's) or equally effective 
telecommunication systems with hearing impaired participants and 
beneficiaries.
    (b) The FDIC shall ensure that interested persons, including persons 
with impaired vision or hearing, can obtain information as to the 
existence and location of accessible services, activities, facilities 
and EIT. Interested persons may obtain such information by calling, 
writing or visiting the FDIC Office of Diversity and Economic 
Opportunity (ODEO), located at 3501 Fairfax Drive, Arlington, VA 22226. 
The FDIC telephone number is (877) 275-3342 or (703) 562-2473 (TTY).
    (c) The FDIC shall provide information at a primary entrance to each 
of its facilities where programs or activities are conducted, directing 
users to a location at which they can obtain information about 
accessible facilities. The international symbol for accessibility shall 
be used at each primary entrance of an accessible facility.

[69 FR 26492, May 13, 2004, as amended at 73 FR 45857, Aug. 7, 2008]



Sec. 352.10  Compliance procedures.

    (a) Applicability. Paragraph (b) of this section applies to 
employment complaints. The remaining sections concern complaints 
alleging disability discrimination in FDIC programs or activities and 
denial of technology access.
    (b) Employment complaints. The FDIC shall process complaints 
alleging employment discrimination on the basis of disability according 
to the procedures established by the Equal Employment Opportunity 
Commission in 29 CFR parts 1614 and 1630 pursuant to section 501 of the 
Rehabilitation Act of 1973 (29 U.S.C. 791).
    (c) Informal process. A complainant shall first exhaust informal 
administrative procedures before filing a formal complaint alleging 
disability discrimination in FDIC programs or activities, or a denial of 
technology access. The FDIC's Office of Diversity and Economic 
Opportunity shall be responsible for coordinating implementation of this 
section. An aggrieved individual initiates the process by filing an 
informal complaint with ODEO within 180 calendar days from the date of 
the alleged disability discrimination or denial of access to electronic 
information technology. An informal complaint with respect to any FDIC 
program or activity must include a written statement containing the 
individual's name and address which describes the FDIC's action in 
sufficient detail to inform the FDIC of the nature and date of the 
alleged violation of these regulations. An informal complaint for denial 
of technology access must clearly identify the individual and the manner 
in which the EIT was inaccessible. All informal complaints shall be 
signed by the complainant or one authorized to do so on his or her 
behalf. Informal complaints filed on behalf of third parties shall 
describe or identify (by name if possible) the alleged victim of 
discrimination or denial of technology access. During the informal 
resolution process, ODEO has 30 days to attempt a resolution of the 
matter. If the aggrieved individual elects to participate in mediation, 
the period for attempting informal resolution will be extended for an 
additional 60 calendar days. If the matter is not resolved informally, 
the individual will be provided written notice of the right to file a 
formal complaint. All complaints should be sent to the FDIC's Office of 
Diversity and Economic Opportunity, 3501 Fairfax Drive, Arlington, VA 
22226.

[[Page 498]]

    (d) If the FDIC receives a complaint over which it does not have 
jurisdiction, it shall promptly notify the complainant and shall make 
reasonable efforts to refer the complainant to the appropriate 
government entity.
    (e) Formal complaints. The individual must file a written formal 
complaint within 15 calendar days after receiving the notice of a right 
to file a formal complaint. Formal complaints must be filed with the 
FDIC Chairman or the ODEO Director. Within 120 days of the receipt of 
such a complaint for which it has jurisdiction, the FDIC shall notify 
the complainant of the results of the investigation in a letter 
containing--
    (1) A finding regarding the alleged violations;
    (2) A description of a remedy for each violation found; and
    (3) A notice of the right to appeal.
    (f) Appeals of the findings or remedies must be filed by the 
complainant within 30 days of receipt from the FDIC of the letter 
required by Sec. 352.10 (e). The FDIC may extend this time for good 
cause.
    (g) Timely appeals shall be accepted and processed by the FDIC 
Chairman or ODEO Director.
    (h) The FDIC Chairman or ODEO Director shall notify the complainant 
of the results of the appeal within 60 days of the receipt of the 
request. If the FDIC Chairman or ODEO Director determines that 
additional information is needed from the complainant, he or she shall 
have 60 days from the date of receipt of the additional information to 
make a determination on the appeal.
    (i) The time limits set forth in (e) and (h) above may be extended 
for an individual case when the FDIC Chairman or ODEO Director 
determines that there is good cause, based on the particular 
circumstances of that case.
    (j) The FDIC may delegate its authority for conducting complaint 
investigations to other federal agencies or independent contractors, 
except that the authority for making the final determination may not be 
delegated.

[69 FR 26492, May 13, 2004, as amended at 73 FR 45857, Aug. 7, 2008]



Sec. 352.11  Notice.

    The FDIC shall make available to employees, applicants, 
participants, beneficiaries, and other interested persons such 
information regarding the provisions of this part and its applicability 
to the programs or activities conducted by the FDIC, and make such 
information available to them in such manner as the Chairman or designee 
finds necessary to apprise such persons of the protections against 
discrimination under section 504 or technology access provided under 
section 508 and this regulation.



PART 353_SUSPICIOUS ACTIVITY REPORTS--Table of Contents




Sec.
353.1 Purpose and scope.
353.2 Definitions.
353.3 Reports and records.

    Authority: 12 U.S.C. 1818, 1819; 31 U.S.C. 5318.

    Source: 61 FR 6099, Feb. 16, 1996, unless otherwise noted.



Sec. 353.1  Purpose and scope.

    The purpose of this part is to ensure that an insured state 
nonmember bank files a Suspicious Activity Report when it detects a 
known or suspected criminal violation of federal law or a suspicious 
transaction related to a money laundering activity or a violation of the 
Bank Secrecy Act. This part applies to all insured state nonmember banks 
as well as any insured, state-licensed branches of foreign banks.



Sec. 353.2  Definitions.

    For the purposes of this part:
    (a) FinCEN means the Financial Crimes Enforcement Network of the 
Department of the Treasury.
    (b) Institution-affiliated party means any institution-affiliated 
party as that term is defined in sections 3(u) and 8(b)(5) of the 
Federal Deposit Insurance Act (12 U.S.C. 1813(u) and 1818(b)(5)).



Sec. 353.3  Reports and records.

    (a) Suspicious activity reports required. A bank shall file a 
suspicious activity report with the appropriate federal law enforcement 
agencies and the Department of the Treasury, in accordance

[[Page 499]]

with the form's instructions, by sending a completed suspicious activity 
report to FinCEN in the following circumstances:
    (1) Insider abuse involving any amount. Whenever the bank detects 
any known or suspected federal criminal violation, or pattern of 
criminal violations, committed or attempted against the bank or 
involving a transaction or transactions conducted through the bank, 
where the bank believes it was either an actual or potential victim of a 
criminal violation, or series of criminal violations, or that the bank 
was used to facilitate a criminal transaction, and the bank has a 
substantial basis for identifying one of the bank's directors, officers, 
employees, agents, or other institution-affiliated parties as having 
committed or aided in the commission of the criminal violation, 
regardless of the amount involved in the violation;
    (2) Transactions aggregating $5,000 or more where a suspect can be 
identified. Whenever the bank detects any known or suspected federal 
criminal violation, or pattern of criminal violations, committed or 
attempted against the bank or involving a transaction or transactions 
conducted through the bank, and involving or aggregating $5,000 or more 
in funds or other assets, where the bank believes it was either an 
actual or potential victim of a criminal violation, or series of 
criminal violations, or that the bank was used to facilitate a criminal 
transaction, and the bank has a substantial basis for identifying a 
possible suspect or group of suspects. If it is determined prior to 
filing this report that the identified suspect or group of suspects has 
used an ``alias'', then information regarding the true identity of the 
suspect or group of suspects, as well as alias identifiers, such as 
driver's license or social security numbers, addresses and telephone 
numbers, must be reported;
    (3) Transactions aggregating $25,000 or more regardless of potential 
suspects. Whenever the bank detects any known or suspected federal 
criminal violation, or pattern of criminal violations, committed or 
attempted against the bank or involving a transaction or transactions 
conducted through the bank, involving or aggregating $25,000 or more in 
funds or other assets, where the bank believes it was either an actual 
or potential victim of a criminal violation, or series of criminal 
violations, or that the bank was used to facilitate a criminal 
transaction, even though the bank has no substantial basis for 
identifying a possible suspect or group of suspects; or
    (4) Transactions aggregating $5,000 or more that involve potential 
money laundering or violations of the Bank Secrecy Act. Any transaction 
(which for purposes of this paragraph (a)(4) means a deposit, 
withdrawal, transfer between accounts, exchange of currency, loan, 
extension of credit, purchase or sale of any stock, bond, certificate of 
deposit, or other monetary instrument or investment security, or any 
other payment, transfer, or delivery by, through, or to a financial 
institution, by whatever means effected) conducted or attempted by, at 
or through the bank and involving or aggregating $5,000 or more in funds 
or other assets, if the bank knows, suspects, or has reason to suspect 
that:
    (i) The transaction involves funds derived from illegal activities 
or is intended or conducted in order to hide or disguise funds or assets 
derived from illegal activities (including, without limitation, the 
ownership, nature, source, location, or control of such funds or assets) 
as part of a plan to violate or evade any federal law or regulation or 
to avoid any transaction reporting requirement under federal law;
    (ii) The transaction is designed to evade any regulations 
promulgated under the Bank Secrecy Act; or
    (iii) The transaction has no business or apparent lawful purpose or 
is not the sort of transaction in which the particular customer would 
normally be expected to engage, and the bank knows of no reasonable 
explanation for the transaction after examining the available facts, 
including the background and possible purpose of the transaction.
    (b) Time for reporting. (1) A bank shall file the suspicious 
activity report no later than 30 calendar days after the date of initial 
detection of facts that may constitute a basis for filing a suspicious 
activity report. If no suspect was identified on the date of detection

[[Page 500]]

of the incident requiring the filing, a bank may delay filing a 
suspicious activity report for an additional 30 calendar days to 
identify a suspect. In no case shall reporting be delayed more than 60 
calendar days after the date of initial detection of a reportable 
transaction.
    (2) In situations involving violations requiring immediate 
attention, such as when a reportable violation is ongoing, the bank 
shall immediately notify, by telephone, an appropriate law enforcement 
authority and the appropriate FDIC regional office (Division of 
Supervision and Consumer Protection (DSC)) in addition to filing a 
timely report.
    (c) Reports to state and local authorities. A bank is encouraged to 
file a copy of the suspicious activity report with state and local law 
enforcement agencies where appropriate.
    (d) Exemptions. (1) A bank need not file a suspicious activity 
report for a robbery or burglary committed or attempted, that is 
reported to appropriate law enforcement authorities.
    (2) A bank need not file a suspicious activity report for lost, 
missing, counterfeit, or stolen securities if it files a report pursuant 
to the reporting requirements of 17 CFR 240.17f-1.
    (e) Retention of records. A bank shall maintain a copy of any 
suspicious activity report filed and the original or business record 
equivalent of any supporting documentation for a period of five years 
from the date of filing the suspicious activity report. Supporting 
documentation shall be identified and maintained by the bank as such, 
and shall be deemed to have been filed with the suspicious activity 
report. A bank must make all supporting documentation available to 
appropriate law enforcement authorities upon request.
    (f) Notification to board of directors. The management of a bank 
shall promptly notify its board of directors, or a committee thereof, of 
any report filed pursuant to this section. The term ``board of 
directors'' includes the managing official of an insured state-licensed 
branch of a foreign bank for purposes of this part.
    (g) Confidentiality of suspicious activity reports. Suspicious 
activity reports are confidential. Any bank subpoenaed or otherwise 
requested to disclose a suspicious activity report or the information 
contained in a suspicious activity report shall decline to produce the 
suspicious activity report or to provide any information that would 
disclose that a suspicious activity report has been prepared or filed 
citing this part, applicable law (e.g., 31 U.S.C. 5318(g)), or both, and 
notify the appropriate FDIC regional office (Division of Supervision and 
Consumer Protection (DSC)).
    (h) Safe harbor. The safe harbor provisions of 31 U.S.C. 5318(g), 
which exempts any bank that makes a disclosure of any possible violation 
of law or regulation from liability under any law or regulation of the 
United States, or any constitution, law or regulation of any state or 
political subdivision, cover all reports of suspected or known criminal 
violations and suspicious activities to law enforcement and financial 
institution supervisory authorities, including supporting documentation, 
regardless of whether such reports are filed pursuant to this part or 
are filed on a voluntary basis.



PART 357_DETERMINATION OF ECONOMICALLY DEPRESSED REGIONS--Table of Contents




    Authority: 12 U.S.C. 1819, 1823(k)(5).



Sec. 357.1  Economically depressed regions.

    (a) Purpose. Section 13(k)(5) of the Federal Deposit Insurance Act 
(12 U.S.C. 1823(k)(5)) provides that the FDIC shall consider proposals 
for financial assistance for eligible insured savings associations 
before grounds exist for appointment of a conservator or receiver for 
such member. One of the criteria for eligibility is that an 
institution's offices are located in an economically depressed region as 
determined by the FDIC.
    (b) Economically depressed regions. (1) For the purpose of 
determining ``economically depressed regions'', the FDIC will determine 
whether an institution qualifies as being located in an ``economically 
depressed region'' on a case-by-case basis. That determination will be 
based on four criteria:

[[Page 501]]

    (i) High unemployment rates;
    (ii) Significant declines in non-farm employment;
    (iii) High delinquency rates of real estate assets at insured 
depository institutions; and
    (iv) Evidence indicating declining real estate values.
    (2) In addition, the FDIC will also consider relevant information 
from institutions regarding their geographic market area, as well as 
information on whether that market is ``economically depressed''.

[55 FR 11161, Mar. 27, 1990, as amended at 63 FR 10295, Mar. 3, 1998; 71 
FR 20527, Apr. 21, 2006]



PART 359_GOLDEN PARACHUTE AND INDEMNIFICATION PAYMENTS--Table of Contents




Sec.
359.0 Scope.
359.1 Definitions.
359.2 Golden parachute payments prohibited.
359.3 Prohibited indemnification payments.
359.4 Permissible golden parachute payments.
359.5 Permissible indemnification payments.
359.6 Filing instructions.
359.7 Applicability in the event of receivership.

    Authority: 12 U.S.C. 1828(k).

    Source: 61 FR 5930, Feb. 15, 1996, unless otherwise noted.



Sec. 359.0  Scope.

    (a) This part limits and/or prohibits, in certain circumstances, the 
ability of insured depository institutions, their subsidiaries and 
affiliated depository institution holding companies to enter into 
contracts to pay and to make golden parachute and indemnification 
payments to institution-affiliated parties (IAPs).
    (b) The limitations on golden parachute payments apply to troubled 
insured depository institutions which seek to enter into contracts to 
pay or to make golden parachute payments to their IAPs. The limitations 
also apply to depository institution holding companies which are 
troubled and seek to enter into contracts to pay or to make golden 
parachute payments to their IAPs as well as healthy holding companies 
which seek to enter into contracts to pay or to make golden parachute 
payments to IAPs of a troubled insured depository institution 
subsidiary. A ``golden parachute payment'' is generally considered to be 
any payment to an IAP which is contingent on the termination of that 
person's employment and is received when the insured depository 
institution making the payment is troubled or, if the payment is being 
made by an affiliated holding company, either the holding company itself 
or the insured depository institution employing the IAP, is troubled. 
The definition of golden parachute payment does not include payments 
pursuant to qualified retirement plans, nonqualified bona fide deferred 
compensation plans, nondiscriminatory severance pay plans, other types 
of common benefit plans, state statutes and death benefits. Certain 
limited exceptions to the golden parachute payment prohibition are 
provided for in cases involving the hiring of a white knight and 
unassisted changes in control. A procedure is also set forth whereby an 
institution or IAP can request permission to make what would otherwise 
be a prohibited golden parachute payment.
    (c) The limitations on indemnification payments apply to all insured 
depository institutions, their subsidiaries and affiliated depository 
institution holding companies regardless of their financial health. 
Generally, this part prohibits insured depository institutions, their 
subsidiaries and affiliated holding companies from indemnifying an IAP 
for that portion of the costs sustained with regard to an administrative 
or civil enforcement action commenced by any federal banking agency 
which results in a final order or settlement pursuant to which the IAP 
is assessed a civil money penalty, removed from office, prohibited from 
participating in the affairs of an insured depository institution or 
required to cease and desist from or take an affirmative action 
described in section 8(b) (12 U.S.C. 1818(b)) of the Federal Deposit 
Insurance Act (FDI Act). However, there are exceptions to this general 
prohibition. First, an institution or holding company may purchase

[[Page 502]]

commercial insurance to cover such expenses, except judgments and 
penalties. Second, the institution or holding company may advance legal 
and other professional expenses to an IAP directly (except for judgments 
and penalties) if its board of directors makes certain specific findings 
and the IAP agrees in writing to reimburse the institution if it is 
ultimately determined that the IAP violated a law, regulation or other 
fiduciary duty.



Sec. 359.1  Definitions.

    (a) Act means the Federal Deposit Insurance Act, as amended (12 
U.S.C. 1811, et seq.).
    (b) Appropriate federal banking agency, bank holding company, 
depository institution holding company and savings and loan holding 
company have the meanings given to such terms in section 3 of the Act.
    (c) Benefit plan means any plan, contract, agreement or other 
arrangement which is an ``employee welfare benefit plan'' as that term 
is defined in section 3(1) of the Employee Retirement Income Security 
Act of 1974, as amended (29 U.S.C. 1002(1)), or other usual and 
customary plans such as dependent care, tuition reimbursement, group 
legal services or cafeteria plans; provided however, that such term 
shall not include any plan intended to be subject to paragraphs (f)(2) 
(iii) and (v) of this section.
    (d) Bona fide deferred compensation plan or arrangement means any 
plan, contract, agreement or other arrangement whereby:
    (1) An IAP voluntarily elects to defer all or a portion of the 
reasonable compensation, wages or fees paid for services rendered which 
otherwise would have been paid to such party at the time the services 
were rendered (including a plan that provides for the crediting of a 
reasonable investment return on such elective deferrals) and the insured 
depository institution or depository institution holding company either:
    (i) Recognizes compensation expense and accrues a liability for the 
benefit payments according to generally accepted accounting principles 
(GAAP); or
    (ii) Segregates or otherwise sets aside assets in a trust which may 
only be used to pay plan and other benefits, except that the assets of 
such trust may be available to satisfy claims of the institution's or 
holding company's creditors in the case of insolvency; or
    (2) An insured depository institution or depository institution 
holding company establishes a nonqualified deferred compensation or 
supplemental retirement plan, other than an elective deferral plan 
described in paragraph (e)(1) of this section:
    (i) Primarily for the purpose of providing benefits for certain IAPs 
in excess of the limitations on contributions and benefits imposed by 
sections 415, 401(a)(17), 402(g) or any other applicable provision of 
the Internal Revenue Code of 1986 (26 U.S.C. 415, 401(a)(17), 402(g)); 
or
    (ii) Primarily for the purpose of providing supplemental retirement 
benefits or other deferred compensation for a select group of directors, 
management or highly compensated employees (excluding severance payments 
described in paragraph (f)(2)(v) of this section and permissible golden 
parachute payments described in Sec. 359.4); and
    (3) In the case of any nonqualified deferred compensation or 
supplemental retirement plans as described in paragraphs (d) (1) and (2) 
of this section, the following requirements shall apply:
    (i) The plan was in effect at least one year prior to any of the 
events described in paragraph (f)(1)(ii) of this section;
    (ii) Any payment made pursuant to such plan is made in accordance 
with the terms of the plan as in effect no later than one year prior to 
any of the events described in paragraph (f)(1)(ii) of this section and 
in accordance with any amendments to such plan during such one year 
period that do not increase the benefits payable thereunder;
    (iii) The IAP has a vested right, as defined under the applicable 
plan document, at the time of termination of employment to payments 
under such plan;
    (iv) Benefits under such plan are accrued each period only for 
current or prior service rendered to the employer (except that an 
allowance may be made

[[Page 503]]

for service with a predecessor employer);
    (v) Any payment made pursuant to such plan is not based on any 
discretionary acceleration of vesting or accrual of benefits which 
occurs at any time later than one year prior to any of the events 
described in paragraph (f)(1)(ii) of this section;
    (vi) The insured depository institution or depository institution 
holding company has previously recognized compensation expense and 
accrued a liability for the benefit payments according to GAAP or 
segregated or otherwise set aside assets in a trust which may only be 
used to pay plan benefits, except that the assets of such trust may be 
available to satisfy claims of the institution's or holding company's 
creditors in the case of insolvency; and
    (vii) Payments pursuant to such plans shall not be in excess of the 
accrued liability computed in accordance with GAAP.
    (e) Corporation means the Federal Deposit Insurance Corporation, in 
its corporate capacity.
    (f) Golden parachute payment. (1) The term golden parachute payment 
means any payment (or any agreement to make any payment) in the nature 
of compensation by any insured depository institution or an affiliated 
depository institution holding company for the benefit of any current or 
former IAP pursuant to an obligation of such institution or holding 
company that:
    (i) Is contingent on, or by its terms is payable on or after, the 
termination of such party's primary employment or affiliation with the 
institution or holding company; and
    (ii) Is received on or after, or is made in contemplation of, any of 
the following events:
    (A) The insolvency (or similar event) of the insured depository 
institution which is making the payment or bankruptcy or insolvency (or 
similar event) of the depository institution holding company which is 
making the payment; or
    (B) The appointment of any conservator or receiver for such insured 
depository institution; or
    (C) A determination by the insured depository institution's or 
depository institution holding company's appropriate federal banking 
agency, respectively, that the insured depository institution or 
depository institution holding company is in a troubled condition, as 
defined in the applicable regulations of the appropriate federal banking 
agency (Sec. 303.101(c) of this chapter); or
    (D) The insured depository institution is assigned a composite 
rating of 4 or 5 by the appropriate federal banking agency or informed 
in writing by the Corporation that it is rated a 4 or 5 under the 
Uniform Financial Institutions Rating System of the Federal Financial 
Institutions Examination Council, or the depository institution holding 
company is assigned a composite rating of 4 or 5 or unsatisfactory by 
its appropriate federal banking agency; or
    (E) The insured depository institution is subject to a proceeding to 
terminate or suspend deposit insurance for such institution; and
    (iii)(A) Is payable to an IAP whose employment by or affiliation 
with an insured depository institution is terminated at a time when the 
insured depository institution by which the IAP is employed or with 
which the IAP is affiliated satisfies any of the conditions enumerated 
in paragraphs (f)(1)(ii) (A) through (E) of this section, or in 
contemplation of any of these conditions; or
    (B) Is payable to an IAP whose employment by or affiliation with an 
insured depository institution holding company is terminated at a time 
when the insured depository institution holding company by which the IAP 
is employed or with which the IAP is affiliated satisfies any of the 
conditions enumerated in paragraphs (f)(1)(ii)(A), (C) or (D) of this 
section, or in contemplation of any of these conditions.
    (2) Exceptions. The term golden parachute payment shall not include:
    (i) Any payment made pursuant to a pension or retirement plan which 
is qualified (or is intended within a reasonable period of time to be 
qualified) under section 401 of the Internal Revenue Code of 1986 (26 
U.S.C. 401) or pursuant to a pension or other retirement plan which is 
governed by the laws of any foreign country; or

[[Page 504]]

    (ii) Any payment made pursuant to a benefit plan as that term is 
defined in paragraph (c) of this section; or
    (iii) Any payment made pursuant to a bona fide deferred compensation 
plan or arrangement as defined in paragraph (d) of this section; or
    (iv) Any payment made by reason of death or by reason of termination 
caused by the disability of an institution-affiliated party; or
    (v) Any payment made pursuant to a nondiscriminatory severance pay 
plan or arrangement which provides for payment of severance benefits to 
all eligible employees upon involuntary termination other than for 
cause, voluntary resignation, or early retirement; provided, however, 
that no employee shall receive any such payment which exceeds the base 
compensation paid to such employee during the twelve months (or such 
longer period or greater benefit as the Corporation shall consent to) 
immediately preceding termination of employment, resignation or early 
retirement, and such severance pay plan or arrangement shall not have 
been adopted or modified to increase the amount or scope of severance 
benefits at a time when the insured depository institution or depository 
institution holding company was in a condition specified in paragraph 
(f)(1)(ii) of this section or in contemplation of such a condition 
without the prior written consent of the appropriate federal banking 
agency; or
    (vi) Any severance or similar payment which is required to be made 
pursuant to a state statute or foreign law which is applicable to all 
employers within the appropriate jurisdiction (with the exception of 
employers that may be exempt due to their small number of employees or 
other similar criteria); or
    (vii) Any other payment which the Corporation determines to be 
permissible in accordance with Sec. 359.4.
    (g) Insured depository institution means any bank or savings 
association the deposits of which are insured by the Corporation 
pursuant to the Act, or any subsidiary thereof.
    (h) Institution-affiliated party (IAP) means:
    (1) Any director, officer, employee, or controlling stockholder 
(other than a depository institution holding company) of, or agent for, 
an insured depository institution or depository institution holding 
company;
    (2) Any other person who has filed or is required to file a change-
in-control notice with the appropriate federal banking agency under 
section 7(j) of the Act (12 U.S.C. 1817(j));
    (3) Any shareholder (other than a depository institution holding 
company), consultant, joint venture partner, and any other person as 
determined by the appropriate federal banking agency (by regulation or 
case-by-case) who participates in the conduct of the affairs of an 
insured depository institution or depository institution holding 
company; and
    (4) Any independent contractor (including any attorney, appraiser, 
or accountant) who knowingly or recklessly participates in: Any 
violation of any law or regulation, any breach of fiduciary duty, or any 
unsafe or unsound practice, which caused or is likely to cause more than 
a minimal financial loss to, or a significant adverse effect on, the 
insured depository institution or depository institution holding 
company.
    (i) Liability or legal expense means:
    (1) Any legal or other professional fees and expenses incurred in 
connection with any claim, proceeding, or action;
    (2) The amount of, and any cost incurred in connection with, any 
settlement of any claim, proceeding, or action; and
    (3) The amount of, and any cost incurred in connection with, any 
judgment or penalty imposed with respect to any claim, proceeding, or 
action.
    (j) Nondiscriminatory means that the plan, contract or arrangement 
in question applies to all employees of an insured depository 
institution or depository institution holding company who meet 
reasonable and customary eligibility requirements applicable to all 
employees, such as minimum length of service requirements. A 
nondiscriminatory plan, contract or arrangement may provide different 
benefits based only on objective criteria such as salary, total 
compensation, length of service, job grade or classification, which are 
applied on a proportionate

[[Page 505]]

basis (with a variance in severance benefits relating to any criterion 
of plus or minus ten percent) to groups of employees consisting of not 
less than the lesser of 33 percent of employees or 1,000 employees.
    (k) Payment means:
    (1) Any direct or indirect transfer of any funds or any asset;
    (2) Any forgiveness of any debt or other obligation;
    (3) The conferring of any benefit, including but not limited to 
stock options and stock appreciation rights; and
    (4) Any segregation of any funds or assets, the establishment or 
funding of any trust or the purchase of or arrangement for any letter of 
credit or other instrument, for the purpose of making, or pursuant to 
any agreement to make, any payment on or after the date on which such 
funds or assets are segregated, or at the time of or after such trust is 
established or letter of credit or other instrument is made available, 
without regard to whether the obligation to make such payment is 
contingent on:
    (i) The determination, after such date, of the liability for the 
payment of such amount; or
    (ii) The liquidation, after such date, of the amount of such 
payment.
    (l) Prohibited indemnification payment. (1) The term prohibited 
indemnification payment means any payment (or any agreement or 
arrangement to make any payment) by any insured depository institution 
or an affiliated depository institution holding company for the benefit 
of any person who is or was an IAP of such insured depository 
institution or holding company, to pay or reimburse such person for any 
civil money penalty or judgment resulting from any administrative or 
civil action instituted by any federal banking agency, or any other 
liability or legal expense with regard to any administrative proceeding 
or civil action instituted by any federal banking agency which results 
in a final order or settlement pursuant to which such person:
    (i) Is assessed a civil money penalty;
    (ii) Is removed from office or prohibited from participating in the 
conduct of the affairs of the insured depository institution; or
    (iii) Is required to cease and desist from or take any affirmative 
action described in section 8(b) of the Act with respect to such 
institution.
    (2) Exceptions. (i) The term prohibited indemnification payment 
shall not include any reasonable payment by an insured depository 
institution or depository institution holding company which is used to 
purchase any commercial insurance policy or fidelity bond, provided that 
such insurance policy or bond shall not be used to pay or reimburse an 
IAP for the cost of any judgment or civil money penalty assessed against 
such person in an administrative proceeding or civil action commenced by 
any federal banking agency, but may pay any legal or professional 
expenses incurred in connection with such proceeding or action or the 
amount of any restitution to the insured depository institution, 
depository institution holding company or receiver.
    (ii) The term prohibited indemnification payment shall not include 
any reasonable payment by an insured depository institution or 
depository institution holding company that represents partial 
indemnification for legal or professional expenses specifically 
attributable to particular charges for which there has been a formal and 
final adjudication or finding in connection with a settlement that the 
IAP has not violated certain banking laws or regulations or has not 
engaged in certain unsafe or unsound banking practices or breaches of 
fiduciary duty, unless the administrative action or civil proceeding has 
resulted in a final prohibition order against the IAP.

[61 FR 5930, Feb. 15, 1996, as amended at 68 FR 50461, Aug. 21, 2003]



Sec. 359.2  Golden parachute payments prohibited.

    No insured depository institution or depository institution holding 
company shall make or agree to make any golden parachute payment, except 
as provided in this part.



Sec. 359.3  Prohibited indemnification payments.

    No insured depository institution or depository institution holding 
company shall make or agree to make any

[[Page 506]]

prohibited indemnification payment, except as provided in this part.



Sec. 359.4  Permissible golden parachute payments.

    (a) An insured depository institution or depository institution 
holding company may agree to make or may make a golden parachute payment 
if and to the extent that:
    (1) The appropriate federal banking agency, with the written 
concurrence of the Corporation, determines that such a payment or 
agreement is permissible; or
    (2) Such an agreement is made in order to hire a person to become an 
IAP either at a time when the insured depository institution or 
depository institution holding company satisfies or in an effort to 
prevent it from imminently satisfying any of the criteria set forth in 
Sec. 359.1(f)(1)(ii), and the institution's appropriate federal banking 
agency and the Corporation consent in writing to the amount and terms of 
the golden parachute payment. Such consent by the FDIC and the 
institution's appropriate federal banking agency shall not improve the 
IAP's position in the event of the insolvency of the institution since 
such consent can neither bind a receiver nor affect the provability of 
receivership claims. In the event that the institution is placed into 
receivership or conservatorship, the FDIC and/or the institution's 
appropriate federal banking agency shall not be obligated to pay the 
promised golden parachute and the IAP shall not be accorded preferential 
treatment on the basis of such prior approval; or
    (3) Such a payment is made pursuant to an agreement which provides 
for a reasonable severance payment, not to exceed twelve months salary, 
to an IAP in the event of a change in control of the insured depository 
institution; provided, however, that an insured depository institution 
or depository institution holding company shall obtain the consent of 
the appropriate federal banking agency prior to making such a payment 
and this paragraph (a)(3) shall not apply to any change in control of an 
insured depository institution which results from an assisted 
transaction as described in section 13 of the Act (12 U.S.C. 1823) or 
the insured depository institution being placed into conservatorship or 
receivership; and
    (4) An insured depository institution, depository institution 
holding company or IAP making a request pursuant to paragraphs (a)(1) 
through (3) of this section shall demonstrate that it does not possess 
and is not aware of any information, evidence, documents or other 
materials which would indicate that there is a reasonable basis to 
believe, at the time such payment is proposed to be made, that:
    (i) The IAP has committed any fraudulent act or omission, breach of 
trust or fiduciary duty, or insider abuse with regard to the depository 
institution or depository institution holding company that has had or is 
likely to have a material adverse effect on the institution or holding 
company;
    (ii) The IAP is substantially responsible for the insolvency of, the 
appointment of a conservator or receiver for, or the troubled condition, 
as defined by applicable regulations of the appropriate federal banking 
agency, of the insured depository institution, depository institution 
holding company or any insured depository institution subsidiary of such 
holding company;
    (iii) The IAP has materially violated any applicable federal or 
state banking law or regulation that has had or is likely to have a 
material effect on the insured depository institution or depository 
institution holding company; and
    (iv) The IAP has violated or conspired to violate section 215, 656, 
657, 1005, 1006, 1007, 1014, 1032, or 1344 of title 18 of the United 
States Code, or section 1341 or 1343 of such title affecting a federally 
insured financial institution as defined in title 18 of the United 
States Code.
    (b) In making a determination under paragraphs (a) (1) through (3) 
of this section, the appropriate federal banking agency and the 
Corporation may consider:
    (1) Whether, and to what degree, the IAP was in a position of 
managerial or fiduciary responsibility;
    (2) The length of time the IAP was affiliated with the insured 
depository institution or depository institution holding company, and 
the degree to which the proposed payment represents

[[Page 507]]

a reasonable payment for services rendered over the period of 
employment; and
    (3) Any other factors or circumstances which would indicate that the 
proposed payment would be contrary to the intent of section 18(k) of the 
Act or this part.



Sec. 359.5  Permissible indemnification payments.

    (a) An insured depository institution or depository institution 
holding company may make or agree to make reasonable indemnification 
payments to an IAP with respect to an administrative proceeding or civil 
action initiated by any federal banking agency if:
    (1) The insured depository institution's or depository institution 
holding company's board of directors, in good faith, determines in 
writing after due investigation and consideration that the institution-
affiliated party acted in good faith and in a manner he/she believed to 
be in the best interests of the institution;
    (2) The insured depository institution's or depository institution 
holding company's board of directors, respectively, in good faith, 
determines in writing after due investigation and consideration that the 
payment of such expenses will not materially adversely affect the 
institution's or holding company's safety and soundness;
    (3) The indemnification payments do not constitute prohibited 
indemnification payments as that term is defined in Sec. 359.1(l); and
    (4) The IAP agrees in writing to reimburse the insured depository 
institution or depository institution holding company, to the extent not 
covered by payments from insurance or bonds purchased pursuant to Sec. 
359.1(l)(2), for that portion of the advanced indemnification payments 
which subsequently become prohibited indemnification payments, as 
defined in Sec. 359.1(l)
    (b) An IAP requesting indemnification payments shall not participate 
in any way in the board's discussion and approval of such payments; 
provided, however, that such IAP may present his/her request to the 
board and respond to any inquiries from the board concerning his/her 
involvement in the circumstances giving rise to the administrative 
proceeding or civil action.
    (c) In the event that a majority of the members of the board of 
directors are named as respondents in an administrative proceeding or 
civil action and request indemnification, the remaining members of the 
board may authorize independent legal counsel to review the 
indemnification request and provide the remaining members of the board 
with a written opinion of counsel as to whether the conditions 
delineated in paragraph (a) of this section have been met. If 
independent legal counsel opines that said conditions have been met, the 
remaining members of the board of directors may rely on such opinion in 
authorizing the requested indemnification.
    (d) In the event that all of the members of the board of directors 
are named as respondents in an administrative proceeding or civil action 
and request indemnification, the board shall authorize independent legal 
counsel to review the indemnification request and provide the board with 
a written opinion of counsel as to whether the conditions delineated in 
paragraph (a) of this section have been met. If independent legal 
counsel opines that said conditions have been met, the board of 
directors may rely on such opinion in authorizing the requested 
indemnification.



Sec. 359.6  Filing instructions.

    Requests to make excess nondiscriminatory severance plan payments 
pursuant to Sec. 359.1(f)(2)(v) and golden parachute payments permitted 
by Sec. 359.4 shall be submitted in writing to the appropriate regional 
director (DSC). For filing requirements, consult 12 CFR 303.244. In the 
event that the consent of the institution's primary federal regulator is 
required in addition to that of the FDIC, the requesting party shall 
submit a copy of its letter to the FDIC to the institution's primary 
federal regulator. In the case of national banks, such written requests 
shall be submitted to the OCC. In the case of state member banks and 
bank holding companies, such written requests shall be submitted to the 
Federal Reserve district bank where the institution or

[[Page 508]]

holding company, respectively, is located. In the case of savings 
associations and savings association holding companies, such written 
requests shall be submitted to the OTS regional office where the 
institution or holding company, respectively, is located. In cases where 
only the prior consent of the institution's primary federal regulator is 
required and that agency is not the FDIC, a written request satisfying 
the requirements of this section shall be submitted to the primary 
federal regulator as described in this section.

[63 FR 44751, Aug. 20, 1998]



Sec. 359.7  Applicability in the event of receivership.

    The provisions of this part, or any consent or approval granted 
under the provisions of this part by the FDIC (in its corporate 
capacity), shall not in any way bind any receiver of a failed insured 
depository institution. Any consent or approval granted under the 
provisions of this part by the FDIC or any other federal banking agency 
shall not in any way obligate such agency or receiver to pay any claim 
or obligation pursuant to any golden parachute, severance, 
indemnification or other agreement. Claims for employee welfare benefits 
or other benefits which are contingent, even if otherwise vested, when 
the FDIC is appointed as receiver for any depository institution, 
including any contingency for termination of employment, are not 
provable claims or actual, direct compensatory damage claims against 
such receiver. Nothing in this part may be construed to permit the 
payment of salary or any liability or legal expense of any IAP contrary 
to 12 U.S.C. 1828(k)(3).



PART 360_RESOLUTION AND RECEIVERSHIP RULES--Table of Contents




Sec.
360.1 Least-cost resolution.
360.2 Federal Home Loan banks as secured creditors.
360.3 Priorities.
360.4 Administrative expenses.
360.5 Definition of qualified financial contracts.
360.6 Treatment by the Federal Deposit Insurance Corporation as 
          conservator or receiver of financial assets transferred in 
          connection with a securitization or participation.
360.7 Post-insolvency interest.
360.8 Method for determining deposit and other liability account 
          balances at a failed insured depository institution.
360.9 Large-bank deposit insurance determination modernization.

Appendix A to Part 360--Non-Monetary Transaction File Structure
Appendix B to Part 360--Debit/Credit File Structure
Appendix C to Part 360--Deposit File Structure
Appendix D to Part 360--Sweep/Automated Credit Account File Structure
Appendix E to Part 360--Hold File Structure
Appendix F to Part 360--Customer File Structure
Appendix G to Part 360--Deposit-Customer Join File Structure
Appendix H to Part 360--Possible File Combinations for Deposit data

    Authority: 12 U.S.C. 1821(d)(1), 1821(d)(10)(C), 1821(d)(11), 
1821(e)(1), 1821(e)(8)(D)(i), 1823(c)(4), 1823(e)(2); Sec. 401(h), 
Pub.L. 101-73, 103 Stat. 357.



Sec. 360.1  Least-cost resolution.

    (a) General rule. Except as provided in section 13(c)(4)(G) of the 
FDI Act (12 U.S.C. 1823 (c)(4)(G)), the FDIC shall not take any action, 
directly or indirectly, under sections 13(c), 13(d), 13(f), 13(h) or 
13(k) of the FDI Act (12 U.S.C. 1823 (c), (d), (f), (h) or (k)) with 
respect to any insured depository institution that would have the effect 
of increasing losses to any insurance fund by protecting:
    (1) Depositors for more than the insured portion of their deposits 
(determined without regard to whether such institution is liquidated); 
or
    (2) Creditors other than depositors.
    (b) Purchase and assumption transactions. Subject to the requirement 
of section 13(c)(4)(A) of the FDI Act (12 U.S.C. 1823(c)(4)(A)), 
paragraph (a) of this section shall not be construed as prohibiting the 
FDIC from allowing any person who acquires any assets or assumes any 
liabilities of any insured depository institution, for which the FDIC 
has been appointed conservator or receiver, to acquire uninsured deposit 
liabilities of such institution as long as the applicable insurance fund 
does not incur any loss with respect to such uninsured deposit 
liabilities in an amount greater than the loss which

[[Page 509]]

would have been incurred with respect to such liabilities if the 
institution had been liquidated.

[58 FR 67664, Dec. 22, 1993, as amended at 63 FR 37761, July 14, 1998]



Sec. 360.2  Federal Home Loan banks as secured creditors.

    (a) Notwithstanding any other provisions of federal or state law or 
any other provisions of these regulations, the receiver of a borrower 
from a Federal Home Loan Bank shall recognize the priority of any 
security interest granted to a Federal Home Loan Bank by any member of 
any Federal Home Loan Bank or any affiliate of any such member, whether 
such security interest is in specifically designated assets or a blanket 
interest in all assets or categories of assets, over the claims and 
rights of any other party (including any receiver, conservator, trustee 
or similar party having rights of a lien creditor) other than claims and 
rights that
    (1) Would be entitled to priority under otherwise applicable law; 
and
    (2) Are held by actual bona fide purchasers for value or by actual 
secured parties that are secured by actual perfected security interests.
    (b) If the receiver rather than the Bank shall have possession of 
any collateral consisting of notes, securities, other instruments, 
chattel paper or cash securing advances of the Bank, the receiver shall, 
upon request by the Bank, promptly deliver possession of such collateral 
to the Bank or its designee.
    (c) In the event that a receiver is appointed for any member of a 
Federal Home Loan Bank, the following procedures shall apply:
    (1) The receiver and the Bank shall immediately seek and develop a 
mutually agreeable plan for the payment of any advances made by the Bank 
to such borrower or for the servicing, foreclosure upon and liquidation 
of the collateral securing any such advances, taking into account the 
nature and amount of such collateral, the markets in which such 
collateral is normally traded or sold and other relevant factors.
    (2) In the event that the receiver and the Bank shall not, in good 
faith, be able to develop such a mutually agreeable plan, or, in the 
interim, the Bank in good faith reasonably concludes that the value of 
such collateral is decreasing, because of interest rate or other market 
changes, at such a rate that to delay liquidation or other exercise of 
the Bank's rights as a secured party for the development of a mutually 
agreeable plan could reasonably cause the value of such collateral to 
decrease to an amount that is insufficient to satisfy the Bank's claim 
in full, the Bank may, at any time thereafter if permitted to do so by 
the terms of the advances or other security agreement with such borrower 
or otherwise by applicable law, proceed to foreclose upon, sell, lease 
or otherwise dispose of such collateral (or any portion thereof), or 
otherwise exercise its rights as a secured party, provided that the Bank 
acts in good faith and in a commercially reasonable manner and otherwise 
in accordance with applicable law.
    (3) The foregoing provisions of this paragraph (c) shall not apply 
in the event that a purchase and assumption transaction is entered into 
regarding any such member.
    (d) The Bank's rights pursuant to the second sentence of section 
10(d) of the Federal Home Loan Bank Act shall not be affected or 
diminished by any provisions of state law that may be applicable to a 
security interest in property of the member.
    (e) The receiver for a borrower from a Federal Home Loan Bank shall 
allow a claim for a prepayment fee by the Bank if, and only if:
    (1) The claim is made pursuant to a written contract that provides 
for a prepayment fee, provided, however, that such prepayment fee 
allowed by the receiver shall not exceed the present value of the loss 
attributable to the difference between the contract rate of the secured 
borrowing and the reinvestment rate then available to the Bank; and
    (2) The indebtedness owed to the Bank by such borrower is secured by 
sufficient collateral in which a perfected security interest in favor of 
the Bank exists or as to which the Bank's security interest is entitled 
to priority under section 306(d) of the Competitive Equality Banking Act 
of 1987 (CEBA)

[[Page 510]]

(12 U.S.C. 1430(e), footnote (1), or otherwise so that the aggregate of 
the outstanding principal on the advances secured by such collateral, 
the accrued but unpaid interest thereon and the prepayment fee 
applicable to such advances can be paid in full from the amounts 
realized from such collateral. For purposes of this paragraph (e)(2), 
the adequacy of such collateral shall be determined as of the date such 
prepayment fees shall be due and payable under the terms of the written 
contract providing therefor.

[54 FR 19156, May 4, 1989. Redesignated at 54 FR 42801, Oct. 18, 1989, 
and further redesignated at 55 FR 46496, Nov. 5, 1990. Redesignated at 
58 FR 67664, Dec. 22, 1993, as amended at 63 FR 37761, July 14, 1998]



Sec. 360.3  Priorities.

    (a) Unsecured claims against an association or the receiver that are 
proved to the satisfaction of the receiver shall have priority in the 
following order:
    (1) Administrative expenses of the receiver, including the costs, 
expenses, and debts of the receiver;
    (2) Administrative expenses of the association, provided that such 
expenses were incurred within thirty (30) days prior to the receiver's 
taking possession, and that such expenses shall be limited to reasonable 
expenses incurred for services actually provided by accountants, 
attorneys, appraisers, examiners, or management companies, or reasonable 
expenses incurred by employees which were authorized and reimbursable 
under a pre-existing expense reimbursement policy, that, in the opinion 
of the receiver, are of benefit to the receivership, and shall not 
include wages or salaries of employees of the association;
    (3) Claims for wages and salaries, including vacation and sick leave 
pay and contributions to employee benefit plans, earned prior to the 
appointment of the receiver by an employee of the association whom the 
receiver determines it is in the best interests of the receivership to 
engage or retain for a reasonable period of time;
    (4) If authorized by the receiver, claims for wages and salaries, 
including vacation and sick leave pay and contributions to employee 
benefits plans, earned prior to the appointment of the receiver, up to a 
maximum of three thousand dollars ($3,000) per person, by an employee of 
the association not engaged or retained pursuant to a determination by 
the receiver pursuant to the third category above;
    (5) Claims of governmental units for unpaid taxes, other than 
Federal income taxes, except to the extent subordinated pursuant to 
applicable law; but no other claim of a governmental unit shall have a 
priority higher than that of a general creditor under paragraph (a)(6) 
of this section;
    (6) Claims for withdrawable accounts, including those of the 
Corporation as subrogee or transferee, and all other claims which have 
accrued and become unconditionally fixed on or before the date of 
default, whether liquidated or unliquidated, except as provided in 
paragraphs (a)(1) through (a)(5) of this section, provided, however, 
that if the association is chartered and was operated under the laws of 
a state that provided a priority for holders of withdrawable accounts 
over such other claims or general creditors, such priority within this 
paragraph (a)(6) shall be observed by the receiver; and provided 
further, that if deposits of a Federal association are booked or 
registered at an office of such association that is located in a State 
that provides such priority with respect to State-chartered 
associations, such deposits in a Federal association shall have priority 
over such other claims or general creditors, which shall be observed by 
the receiver;
    (7) Claims other than those that have accrued and become 
unconditionally fixed on or before the date of default, including claims 
for interest after the date of default on claims under paragraph (a)(6) 
of this section, Provided that any claim based on an agreement for 
accelerated, stipulated, or liquidated damages, which claim did not 
accrue prior to the date of default, shall be considered as not having 
accrued and become unconditionally fixed on or before the date of 
default;
    (8) Claims of the United States for unpaid Federal income taxes;
    (9) Claims that have been subordinated in whole or in part to 
general creditor claims, which shall be given

[[Page 511]]

the priority specified in the written instruments that evidence such 
claims; and
    (10) Claims by holders of nonwithdrawable accounts, including stock, 
which shall have priority within this paragraph (a)(10) in accordance 
with the terms of the written instruments that evidence such claims.
    (b) Interest after the date of default on claims under paragraph 
(a)(6) of this section shall be at a rate or rates adjusted monthly to 
reflect the average rate for U.S. Treasury bills with maturities of not 
more than ninety-one (91) days during the preceding three (3) months.
    (c) [Reserved]
    (d) All unsecured claims of any category or class or priority 
described in paragraphs (a)(1) through (a)(10) of this section shall be 
paid in full, or provision made for such payment, before any claims of 
lesser priority are paid. If there are insufficient funds to pay all 
claims of a category or class in full, distribution to claimants in such 
category or class shall be made pro rata. Notwithstanding anything to 
the contrary herein, the receiver may, at any time, and from time to 
time, prior to the payment in full of all claims of a category or class 
with higher priority, make such distributions to claimants in priority 
classes outlined in paragraphs (a)(1) through (a)(6) of this section as 
the receiver believes are reasonably necessary to conduct the 
receivership,
    Provided that the receiver determines that adequate funds exist or 
will be recovered during the receivership to pay in full all claims of 
any higher priority.
    (e) If the association is in mutual form, and a surplus remains 
after making distribution in full of allowed claims as set forth in 
paragraphs (a) and (b) of this section, such surplus shall be 
distributed to the depositors in proportion to their accounts as of the 
date of default.
    (f) Under the provisions of section 11(d)(11) of the Act (12 U.S.C. 
1821(d)(11)), the provisions of this Sec. 360.3 do not apply to any 
receivership established and liquidation or other resolution occurring 
after August 10, 1993.

[53 FR 25132, July 5, 1988, as amended at 53 FR 30667, Aug. 15, 1988. 
Redesignated and amended at 54 FR 42801, Oct. 18, 1989, and further 
redesignated and amended at 55 FR 46496, Nov. 5, 1990; 58 FR 43070, Aug. 
13, 1993. Redesignated at 58 FR 67664, Dec. 22, 1993; 60 FR 35488, July 
10, 1995]



Sec. 360.4  Administrative expenses.

    The priority for administrative expenses of the receiver, as that 
term is used in section 11(d)(11) of the Act (12 U.S.C. 1821(d)(11), 
shall include those necessary expenses incurred by the receiver in 
liquidating or otherwise resolving the affairs of a failed insured 
depository institution. Such expenses shall include pre-failure and 
post-failure obligations that the receiver determines are necessary and 
appropriate to facilitate the smooth and orderly liquidation or other 
resolution of the institution.

[60 FR 35488, July 10, 1995]



Sec. 360.5  Definition of qualified financial contracts.

    (a) Authority and purpose. Sections 11(e) (8) through (10) of the 
Federal Deposit Insurance Act, 12 U.S.C. 1821(e) (8) through (10), 
provide special rules for the treatment of qualified financial contracts 
of an insured depository institution for which the FDIC is appointed 
conservator or receiver, including rules describing the manner in which 
qualified financial contracts may be transferred or closed out. Section 
11(e)(8)(D)(i) of the Federal Deposit Insurance Act, 12 U.S.C. 
1821(e)(8)(D)(i), grants the Corporation authority to determine by 
regulation whether any agreement, other than those identified within 
section 11(e)(8)(D), should be recognized as qualified financial 
contracts under the statute. The purpose of this section is to identify 
additional agreements which the Corporation has determined to be 
qualified financial contracts.
    (b) Repurchase agreements. The following agreements shall be deemed 
``repurchase agreements'' under section 11(e)(8)(D)(v) of the Federal 
Deposit Insurance Act, as amended (12 U.S.C. 1821(e)(8)(D)(v)): A 
repurchase agreement on qualified foreign government

[[Page 512]]

securities is an agreement or combination of agreements (including 
master agreements) which provides for the transfer of securities that 
are direct obligations of, or that are fully guaranteed by, the central 
governments (as set forth at 12 CFR part 325, appendix A, section II.C, 
n. 17, as may be amended from time to time) of the OECD-based group of 
countries (as set forth at 12 CFR part 325, appendix A, section II.B.2., 
note 12 as may be amended from time to time) against the transfer of 
funds by the transferee of such securities with a simultaneous agreement 
by such transferee to transfer to the transferor thereof securities as 
described above, at a date certain not later than one year after such 
transfers or on demand, against the transfer of funds.
    (c) Swap agreements. The following agreements shall be deemed ``swap 
agreements'' under section 11(e)(8)(D)(vi) of the Federal Deposit 
Insurance Act, as amended (12 U.S.C. 1821(e)(8)(D)(vi)): A spot foreign 
exchange agreement is any agreement providing for or effecting the 
purchase or sale of one currency in exchange for another currency (or a 
unit of account established by an intergovernmental organization such as 
the European Currency Unit) with a maturity date of two days or less 
after the agreement has been entered into, and includes short-dated 
transactions such as tomorrow/next day and same day/tomorrow 
transactions.
    (d) Nothing in this section shall be construed as limiting or 
changing a party's obligation to comply with all reasonable trading 
practices and requirements, non-insolvency law requirements and any 
other requirements imposed by other provisions of the FDI Act. This 
section in no way limits the authority of the Corporation to take 
supervisory or enforcement actions, or to otherwise manage the affairs 
of a financial institution for which the Corporation has been appointed 
conservator or receiver.

[60 FR 66865, Dec. 27, 1995]



Sec. 360.6  Treatment by the Federal Deposit Insurance Corporation as 

conservator or receiver of financial assets transferred in connection with a 

          securitization or participation.

    (a) Definitions--(1) Beneficial interest means debt or equity (or 
mixed) interests or obligations of any type issued by a special purpose 
entity that entitle their holders to receive payments that depend 
primarily on the cash flow from financial assets owned by the special 
purpose entity.
    (2) Financial asset means cash or a contract or instrument that 
conveys to one entity a contractual right to receive cash or another 
financial instrument from another entity.
    (3) Participation means the transfer or assignment of an undivided 
interest in all or part of a loan or a lease from a seller, known as the 
``lead'', to a buyer, known as the ``participant'', without recourse to 
the lead, pursuant to an agreement between the lead and the participant. 
Without recourse means that the participation is not subject to any 
agreement that requires the lead to repurchase the participant's 
interest or to otherwise compensate the participant due to a default on 
the underlying obligation.
    (4) Securitization means the issuance by a special purpose entity of 
beneficial interests:
    (i) The most senior class of which at time of issuance is rated in 
one of the four highest categories assigned to long-term debt or in an 
equivalent short-term category (within either of which there may be sub-
categories or gradations indicating relative standing) by one or more 
nationally recognized statistical rating organizations, or
    (ii) Which are sold in transactions by an issuer not involving any 
public offering for purposes of section 4 of the Securities Act of 1933 
(15 U.S.C. 77d), as amended, or in transactions exempt from registration 
under such Act pursuant to Regulation S thereunder (or any successor 
regulation).
    (5) Special purpose entity means a trust, corporation, or other 
entity demonstrably distinct from the insured depository institution 
that is primarily engaged in acquiring and holding (or transferring to 
another special purpose

[[Page 513]]

entity) financial assets, and in activities related or incidental 
thereto, in connection with the issuance by such special purpose entity 
(or by another special purpose entity that acquires financial assets 
directly or indirectly from such special purpose entity) of beneficial 
interests.
    (b) The FDIC shall not, by exercise of its authority to disaffirm or 
repudiate contracts under 12 U.S.C. 1821(e), reclaim, recover, or 
recharacterize as property of the institution or the receivership any 
financial assets transferred by an insured depository institution in 
connection with a securitization or participation, provided that such 
transfer meets all conditions for sale accounting treatment under 
generally accepted accounting principles, other than the ``legal 
isolation'' condition as it applies to institutions for which the FDIC 
may be appointed as conservator or receiver, which is addressed by this 
section.
    (c) Paragraph (b) of this section shall not apply unless the insured 
depository institution received adequate consideration for the transfer 
of financial assets at the time of the transfer, and the documentation 
effecting the transfer of financial assets reflects the intent of the 
parties to treat the transaction as a sale, and not as a secured 
borrowing, for accounting purposes.
    (d) Paragraph (b) of this section shall not be construed as waiving, 
limiting, or otherwise affecting the power of the FDIC, as conservator 
or receiver, to disaffirm or repudiate any agreement imposing continuing 
obligations or duties upon the insured depository institution in 
conservatorship or receivership.
    (e) Paragraph (b) of this section shall not be construed as waiving, 
limiting or otherwise affecting the rights or powers of the FDIC to take 
any action or to exercise any power not specifically limited by this 
section, including, but not limited to, any rights, powers or remedies 
of the FDIC regarding transfers taken in contemplation of the 
institution's insolvency or with the intent to hinder, delay, or defraud 
the institution or the creditors of such institution, or that is a 
fraudulent transfer under applicable law.
    (f) The FDIC shall not seek to avoid an otherwise legally 
enforceable securitization agreement or participation agreement executed 
by an insured depository institution solely because such agreement does 
not meet the ``contemporaneous'' requirement of sections 11(d)(9), 
11(n)(4)(I), and 13(e) of the Federal Deposit Insurance Act (12 U.S.C. 
1821(d)(9), (n)(4)(I), 1823(e).
    (g) This section may be repealed or amended by the FDIC upon 30 days 
notice and opportunity for comment provided in the Federal Register, but 
any such repeal or amendment shall not apply to any transfers of 
financial assets made in connection with a securitization or 
participation that was in effect before such repeal or modification.

[65 FR 49191, Aug. 11, 2000]



Sec. 360.7  Post-insolvency interest.

    (a) Purpose and scope. This section establishes rules governing the 
calculation and distribution of post-insolvency interest to creditors 
with proven claims in all FDIC-administered receiverships established 
after June 13, 2002.
    (b) Definitions--(1) Equityholder. The owner of an equity interest 
in a failed depository institution, whether such ownership is 
represented by stock, membership in a mutual association, or otherwise.
    (2) Post-insolvency interest. Interest calculated from the date the 
receivership is established on proven creditor claims in receiverships 
with surplus funds.
    (3) Post-insolvency interest rate. For any calendar quarter, the 
coupon equivalent yield of the average discount rate set on the three-
month Treasury bill at the last auction held by the United States 
Treasury Department during the preceding calendar quarter, and adjusted 
each quarter thereafter.
    (4) Principal amount. The proven claim amount and any interest 
accrued thereon as of the date the receivership is established.
    (5) Proven claim. A claim that is allowed by a receiver or upon 
which a final non-appealable judgment has been entered in favor of a 
claimant against a receivership by a court with jurisdiction to 
adjudicate the claim.

[[Page 514]]

    (c) Post-insolvency interest distributions. (1) Post-insolvency 
interest shall only be distributed following satisfaction by the 
receiver of the principal amount of all creditor claims.
    (2) The receiver shall distribute post-insolvency interest at the 
post-insolvency interest rate prior to making any distribution to 
equityholders. Post-insolvency interest distributions shall be made in 
the order of priority set forth in section 11(d)(11)(A) of the Federal 
Deposit Insurance Act, 12 U.S.C. 1821(d)(11)(A).
    (3) Post-insolvency interest distributions shall be made at such 
time as the receiver determines that such distributions are appropriate 
and only to the extent of funds available in the receivership estate. 
Post-insolvency interest shall be calculated on the outstanding balance 
of a proven claim, as reduced from time to time by any interim dividend 
distributions, from the date the receivership is established until the 
principal amount of a proven claim has been fully distributed but not 
thereafter. Post-insolvency interest shall be calculated on a contingent 
claim from the date such claim becomes proven.
    (4) Post-insolvency interest shall be determined using a simple 
interest method of calculation.

[67 FR 34386, May 14, 2002]



Sec. 360.8  Method for determining deposit and other liability account 

balances at a failed insured depository institution.

    (a) Purpose. The purpose of this section is to describe the process 
the FDIC will use to determine deposit and other liability account 
balances for insurance coverage and receivership purposes at a failed 
insured depository institution.
    (b) Definitions. (1) The FDIC cutoff point means the point in time 
established by the FDIC after it has been appointed receiver of a failed 
insured depository institution and takes control of the failed 
institution.
    (2) The applicable cutoff time for a specific type of deposit 
account transaction means the earlier of either the failed institution's 
normal cutoff time for that specific type of transaction or the FDIC 
cutoff point.
    (3) Close-of-business account balance means the closing end-of-day 
ledger balance of a deposit or other liability account on the day of 
failure of an insured depository institution determined by using the 
applicable cutoff times. This balance may be adjusted to reflect steps 
taken by the receiver to ensure that funds are not received by or 
removed from the institution after the FDIC cutoff point.
    (c) Principles. (1) In making deposit insurance determinations and 
in determining the value and nature of claims against the receivership 
on the institution's date of failure the FDIC, as insurer and receiver, 
will treat deposits and other liabilities of the failed institution 
according to the ownership and nature of the underlying obligations 
based on end-of-day ledger balances for each account using, except as 
expressly provided otherwise in this section, the depository 
institution's normal posting procedures.
    (2) In its role as receiver of a failed insured depository 
institution, in order to ensure the proper distribution of the failed 
institution's assets under the FDI Act (12 U.S.C. 1821(d)(11)) as of the 
FDIC Cutoff Point, the FDIC will use its best efforts to take all steps 
necessary to stop the generation, via transactions or transfers coming 
from or going outside the institution, of new liabilities or 
extinguishing existing liabilities for the depository institution.
    (3) End-of-day ledger balances are subject to corrections for posted 
transactions that are inconsistent with the above principles.
    (d) Determining closing day balances. (1) In determining account 
balances for insurance coverage and receivership purposes at a failed 
insured depository institution, the FDIC will use close-of-business 
account balances as may be adjusted for funds that are received by or 
removed from the institution after the FDIC cutoff point.
    (2) A check posted to the close-of-business account balance but not 
collected by the depository institution will be included as part of the 
balance, subject to the correction of errors and omissions and 
adjustments for uncollectible items that the FDIC may make in its role 
as receiver of the failed depository institution.

[[Page 515]]

    (3) In determining close-of-business account balances, the FDIC will 
recognize contractual, automated transfers (or sweeps) of funds from a 
deposit account to a non-deposit account or investment vehicle at the 
institution scheduled to take place before the final calculation of the 
institution's end-of-day ledger balances for that day.
    (4) For deposit insurance and receivership purposes in connection 
with the failure of an insured depository institution, a depositor's and 
other liability-holder's rights will be determined as of the point the 
close-of-business account balance is calculated. These rights may be 
adjusted as necessary to account for funds that are received by or 
removed from the institution after the FDIC cutoff point.
    (e) Effective July 1, 2009, in all sweep account contracts and 
account statements reflecting sweep account balances, institutions must 
prominently disclose whether swept funds are deposits within the meaning 
of 12 U.S.C. 1813(l). If the funds are not deposits, the institution 
must further disclose the status such funds would have if the 
institution failed--for example, general creditor status or secured 
creditor status. Such disclosures must be consistent with how the 
institution reports such funds on its Call Reports or Thrift Financial 
Reports.

[73 FR 41179, July 17, 2008]

    Effective Date Note: At 73 FR 41179, July 17, 2008, Sec. 360.8 was 
added, effective Aug. 18, 2008, except for paragraph (e), which will 
become effective July 1, 2009.



Sec. 360.9  Large-bank deposit insurance determination modernization.

    (a) Purpose and scope. This section is intended to allow the deposit 
and other operations of a large insured depository institution (defined 
as a ``Covered Institution'') to continue functioning on the day 
following failure. It also is intended to permit the FDIC to fulfill its 
legal mandates regarding the resolution of failed insured institutions 
to provide liquidity to depositors promptly, enhance market discipline, 
ensure equitable treatment of depositors at different institutions and 
reduce the FDIC's costs by preserving the franchise value of a failed 
institution.
    (b) Definitions. (1) A covered Institution means an insured 
depository institution which, based on items as defined in Reports of 
Income and Condition or Thrift Financial Reports filed with the 
applicable federal regulator, has at least $2 billion in deposits and at 
least either:
    (i) 250,000 deposit accounts; or
    (ii) $20 billion in total assets, regardless of the number of 
deposit accounts.
    (2) Deposits, number of deposit accounts and total assets are as 
defined in the instructions for the filing of Reports of Income and 
Condition and Thrift Financial Reports, as applicable to the insured 
depository institution for determining whether it qualifies as a covered 
institution. A foreign deposit means an uninsured deposit liability 
maintained in a foreign branch of an insured depository institution. An 
international banking facility deposit is as defined by the Board of 
Governors of the Federal Reserve System in Regulation D (12 CFR Sec. 
204.8(a)(2)). A demand deposit account, NOW account, money market 
deposit account, savings deposit account and time deposit account are as 
defined in the instructions for the filing of Reports of Income and 
Condition and Thrift Financial Reports.
    (3) Sweep account arrangements consist of a deposit account linked 
to an interest-bearing investment vehicle whereby funds are swept to and 
from the deposit account according to prearranged rules, usually on a 
daily basis, where the sweep investment vehicle is not a deposit and is 
reflected on the books and records of the Covered Institution.
    (4) Automated credit account arrangements consist of a deposit 
account into which funds are automatically credited from an interest-
bearing investment vehicle where the funds in the interest-bearing 
investment vehicle were not invested by prearranged rules.
    (5) Non-covered institution means an insured depository institution 
that does not meet the definition of a covered institution.
    (6) Provisional hold means an effective restriction on access to 
some or all of a deposit or other liability account after the failure of 
an insured depository institution.

[[Page 516]]

    (c) Posting and removing provisional holds. (1) A covered 
institution shall have in place an automated process for implementing a 
provisional hold on deposit accounts, foreign deposit accounts and sweep 
and automated credit account arrangements immediately following the 
determination of the close-of-business account balances, as defined in 
Sec. 360.8(b)(3), at the failed covered institution.
    (2) The system requirements under paragraph (c)(1) must have the 
capability of placing the provisional holds prescribed under that 
provision no later than 9 a.m. local time the day following the FDIC 
cutoff point, as defined in Sec. 360.8(b)(1).
    (3) Pursuant to instructions to be provided by the FDIC, a covered 
institution must notify the FDIC of the person(s) responsible for 
producing the standard data download and administering provisional 
holds, both while the functionality is being constructed and on an on-
going basis.
    (4) For deposit accounts held in domestic offices of an insured 
depository institution, the provisional hold algorithm must be designed 
to exempt accounts below a specific account balance threshold, as 
determined by the FDIC. The account balance threshold could be any 
amount, including zero. For accounts above the account balance threshold 
determined by the FDIC, the algorithm must be designed to calculate and 
place a hold equal to the dollar amount of funds in excess of the 
account balance threshold multiplied by the provisional hold percentage 
determined by the FDIC. The provisional hold percentage could be any 
amount, from zero to one hundred percent. The account balance threshold 
as well as the provisional hold percentage could vary for the following 
four categories, as the covered institution customarily defines consumer 
accounts:
    (i) Consumer demand deposit, NOW and money market deposit accounts;
    (ii) Other consumer deposit accounts (time deposit and savings 
accounts, excluding NOW and money market deposit accounts);
    (iii) Non-consumer demand deposit, NOW and money market deposit 
accounts; and
    (iv) Other non-consumer deposit accounts (time deposit and savings 
accounts, excluding NOW and money market deposit accounts).
    (5) For deposit accounts held in foreign offices of an insured 
depository institution, other than those connected to a sweep or 
automated credit arrangement, the provisional hold algorithm will apply 
a provisional hold percentage to the entire account balance. For deposit 
accounts held in foreign offices the provisional hold percentage may 
differ from that applied to deposit accounts. Also, the provisional hold 
percentage would not vary by account category (i.e., consumer versus 
non-consumer and transaction versus non-transaction) as is the case with 
deposit accounts.
    (6) For international banking facility deposits, other than those 
connected to a sweep or automated credit arrangements, the provisional 
hold algorithm will apply a provisional hold percentage to the entire 
account balance. For IBF deposits the provisional hold percentage may 
differ from that applied to deposit or foreign deposit accounts. Also, 
the provisional hold percentage would not vary by account category 
(i.e., consumer versus non-consumer, and transaction versus non-
transaction) as is the case with deposit accounts.
    (7) For the interest-bearing investment vehicle of a sweep 
arrangement, the provisional hold algorithm must be designed with the 
capability to place a provisional hold on the interest-bearing 
investment vehicle with possibly a different account balance threshold 
and a different hold percentage according to the type of interest-
bearing investment vehicle.
    (8) For the interest-bearing investment vehicle of an automated 
credit account arrangement, the provisional hold algorithm must be 
designed with the capability to place a provisional hold on the 
interest-bearing investment vehicle with possibly a different account 
balance threshold and a different hold percentage according to the type 
of interest-bearing investment vehicle.
    (9) A covered institution may submit a request to the FDIC, using 
the address indicated in Sec. 360.9(g): to develop

[[Page 517]]

a provisional hold process involving memo holds or alternative account 
mechanisms; or to exempt from the provisional hold requirements of this 
section those account systems servicing a relatively small number of 
accounts where the manual application of provisional holds is feasible. 
Such requests may be in the form of a letter and must include a 
justification for the request and address the relative effectiveness of 
the alternative for posting provisional holds in the event of failure. 
The FDIC will consider such requests on a case-by-case basis in light of 
the objectives of this section.
    (10) The automated process for provisional holds required by 
paragraph (c)(1) of this section must include the capability of removing 
provisional holds in batch mode and, during the same processing cycle, 
applying debits, credits or additional holds on the deposit or other 
accounts from which the provisional holds were removed, as determined by 
the FDIC. The FDIC will provide files listing the accounts subject to: 
removal of provisional holds or additional holds (file format as 
specified in appendix A); application of debits or credits (file format 
as specified in appendix B); and application of additional holds (file 
format as specified in appendix A). In addition to the batch process 
used to remove provisional holds, the Covered Institution is required to 
have in place a mechanism for manual removal of provisional holds on a 
case-by-case basis.
    (d) Providing a standard data format for generating deposit account 
and customer data. (1) A covered institution must have in place 
practices and procedures for providing the FDIC in a standard format 
upon the close of any day's business with required depositor and 
customer data for all deposit accounts held in domestic and foreign 
offices and interest-bearing investment accounts connected with sweep 
and automated credit arrangements. Such standard data files are to be 
created through a mapping of pre-existing data elements and internal 
institution codes into standard data formats. Deposit account and 
customer data provided must be current as of the close of business for 
that day.
    (2) The requirements of paragraph (d)(1) of this section shall be 
provided in five separate files, as indicated in the appendices C 
through G to this part 360.
    (3) Upon request by the FDIC, a covered institution must submit the 
data required by paragraph (d)(1) of this section to the FDIC, in a 
manner prescribed by the FDIC.
    (4) In providing the data required under paragraph (d)(1) of this 
section to the FDIC, the Covered Institution must be able to reconcile 
the total deposit balances and the number of deposit accounts to the 
institution's subsidiary system control totals.
    (e) Implementation requirements. (1) A covered institution must 
comply with the requirements of this section no later than February 18, 
2010.
    (2) An insured depository institution not within the definition of a 
covered institution on the effective date of this section must comply 
with the requirements of this section no later than eighteen months 
following the end of the second calendar quarter for which it meets the 
criteria for a covered institution.
    (3) Upon the merger of two or more non-covered institutions, if the 
resulting institution meets the criteria for a covered institution, that 
covered institution must comply with the requirements of this section no 
later than eighteen months after the effective date of the merger.
    (4) Upon the merger of two or more covered institutions, the merged 
institution must comply with the requirements of this section within 
eighteen months following the effective date of the merger. This 
provision, however, does not supplant any preexisting implementation 
date requirement, in place prior to the date of the merger, for the 
individual covered institution(s) involved in the merger.
    (5) Upon the merger of one or more covered institutions with one or 
more non-covered institutions, the merged institution(s) must comply 
with the requirements of this section within eighteen months following 
the effective date of the merger. This provision,

[[Page 518]]

however, does not supplant any preexisting implementation date 
requirement for the individual covered institution(s) involved in the 
merger.
    (6) Notwithstanding the general requirements of this paragraph (e), 
on a case-by-case basis, the FDIC may accelerate, upon notice, the 
implementation timeframe of all or part of the requirements of this 
section for a covered institution that: Has a composite rating of 3, 4, 
or 5 under the Uniform Financial Institution's Rating System, or in the 
case of an insured branch of a foreign bank, an equivalent rating; is 
undercapitalized, as defined under the prompt corrective action 
provisions of 12 CFR part 325; or is determined by the appropriate 
Federal banking agency or the FDIC in consultation with the appropriate 
Federal banking agency to be experiencing a significant deterioration of 
capital or significant funding difficulties or liquidity stress, 
notwithstanding the composite rating of the institution by its 
appropriate Federal banking agency in its most recent report of 
examination. In implementing this paragraph (e)(6), the FDIC must 
consult with the covered institution's primary federal regulator and 
consider the: Complexity of the institution's deposit systems and 
operations, extent of the institution's asset quality difficulties, 
volatility of the institution's funding sources, expected near-term 
changes in the institution's capital levels, and other relevant factors 
appropriate for the FDIC to consider in its roles as insurer and 
possible receiver of the institution.
    (7) Notwithstanding the general requirements of this paragraph (e), 
a covered institution may request, by letter, that the FDIC extend the 
deadline for complying with the requirements of this section. A request 
for such an extension is subject to the FDIC's rules of general 
applicability under 12 CFR. 303.251.
    (f) A covered institution may apply to the FDIC for an exemption 
from the requirements of this Sec. 360.9 if it has a high concentration 
of deposits incidental to credit card operations. The FDIC will consider 
such applications on a case-by-case basis in light of the objectives of 
this section.
    (g) Requests for exemptions from the requirements of this section, 
for flexibility in the use of provisional holds or for extensions of the 
implementation requirements of this section and the submission of point-
of-contact information should be submitted in writing to: Office of the 
Director, Division of Resolutions and Receiverships, Federal Deposit 
Insurance Corporation, 550 17th Street, NW., Washington, DC 20429-0002.
    (h) Testing requirements. Covered institutions must provide 
appropriate assistance to the FDIC in its testing of the systems 
required by this section. The FDIC will provide testing details to 
covered institutions through the issuance of subsequent procedures and/
or guidelines.

[73 FR 41195, July 17, 2008]



  Sec. Appendix A to Part 360--Non-Monetary Transaction File Structure

    This is the structure of the data file the FDIC will provide to 
remove or add a FDIC hold for an individual account or sub-account. The 
file will be in a tab- or pipe-delimited ASCII format and provided 
through FDICconnect or Direct Connect. The file will be encrypted using 
an FDIC-supplied algorithm.

----------------------------------------------------------------------------------------------------------------
             Field name                  Field description            Comments                   Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier.............  Account Identifier.....  The Account Identifier  Character (25).
                                      The primary field used    may be composed of
                                       to identify the          more than one
                                       account. This field      physical data
                                       may be the Account       element. If multiple
                                       Number..                 fields are required
                                                                to identify the
                                                                account, data should
                                                                be placed in separate
                                                                fields and the FDIC
                                                                instructed how these
                                                                fields are combined
                                                                to uniquely identify
                                                                the account.
2. DP--Acct--Identifier--2..........  Account Identifier--2..  Character (25)........
                                      If necessary, the
                                       second element used to
                                       identify the account.
3. DP--Acct--Identifier--3..........  Account Identifier--3..  Character (25)........
                                      If necessary, the third
                                       element used to
                                       identify the account.

[[Page 519]]

 
4. DP--Acct--Identifier--4..........  Account Identifier--4..  Character (25)........
                                      If necessary, the
                                       fourth element used to
                                       identify the account.
5. DP --Acct--Identifier--5.........  Account Identifier--5..  Character (25)........
                                      If necessary, the fifth
                                       element used to
                                       identify the account.
6. DP--Sub--Acct--Identifier........  Sub-Account Identifier.  The Sub-Account         Character (25).
                                      If available, the Sub-    Identifier may
                                       Account identifier for   identify separate
                                       the account..            deposits tied to this
                                                                account where there
                                                                are different
                                                                processing parameters
                                                                such as interest
                                                                rates or maturity
                                                                dates, but all owners
                                                                are the same.
7. PH--Hold--Action.................  Hold Action............  Character (1).........
                                      The requested hold
                                       action to be taken for
                                       this account or sub-
                                       account..
                                      Possible values are:
                                       R =
                                       Remove.
                                       A =
                                       Add.
8. PH--Hold--Amt....................  Hold Amount............  Decimal (14,2)........
                                      Dollar amount of the
                                       FDIC hold to be
                                       removed or added.
9. PH--Hold--Desc...................  Hold Description.......  Character (225).......
                                      FDIC hold to be removed
                                       or added.
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]

           Appendix B to Part 360--Debit/Credit File Structure

    This is the structure of the data file the FDIC will provide to 
apply debits and credits to an individual account or sub-account after 
the removal of FDIC holds. The file will be in a tab- or pipe-delimited 
ASCII format and provided through FDICconnect or Direct Connect. The 
file will be encrypted using an FDIC-supplied algorithm.

----------------------------------------------------------------------------------------------------------------
              Field name                   Field description             Comments                  Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier..............  Account Identifier......  The Account Identifier    Character (25).
                                       The primary field used     may be composed of more
                                        to identify the           than one physical data
                                        account. This field may   element. If multiple
                                        the Account Number..      fields are required to
                                                                  identify the account,
                                                                  data should be placed
                                                                  in separate fields and
                                                                  the FDIC instructed how
                                                                  these fields are
                                                                  combined to uniquely
                                                                  identify the account.
2. DP --Acct--Identifier--2..........  Account Identifier--2...  Character (25)..........
                                       If necessary, the second
                                        element used to
                                        identify the account.
3. DP--Acct--Identifier--3...........  Account Identifier--3...  Character (25)..........
                                       If necessary, the third
                                        element used to
                                        identify the account.
4. DP --Acct--Identifier--4..........  Account Identifier--4...  Character (25)..........
                                       If necessary, the fourth
                                        element used to
                                        identify the account.
5. DP --Acct--Identifier--5..........  Account Identifier--5...  Character (25)..........
                                       If necessary, the fifth
                                        element used to
                                        identify the account.
6. DP--Sub--Acct--Identifier.........  Sub-Account Identifier..  The Sub-Account           Character (25).
                                       If available, the sub-     Identifier may identify
                                        account identifier for    separate deposits tied
                                        the account..             to this account where
                                                                  there are different
                                                                  processing parameters
                                                                  such as interest rates
                                                                  or maturity dates, but
                                                                  all owners are the same.
7. DC --Debit--Amt...................  Debit Amount............  Decimal (14,2)..........
                                       Dollar amount of the
                                        debit to be applied to
                                        the account or sub-
                                        account.
8. DC--Credit--Amt...................  Credit Amount...........  Decimal (14,2)..........
                                       Dollar amount of the
                                        credit to be applied to
                                        the account or sub-
                                        account.
9. DC--Transaction--Desc.............  Debit/Credit Description  Character (225).........

[[Page 520]]

 
                                       FDIC message associated
                                        with the debit or
                                        credit transaction.
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]



           Sec. Appendix C to Part 360--Deposit File Structure

    This is the structure for the data file to provide deposit data to 
the FDIC. If data or information are not maintained or do not apply, a 
null value in the appropriate field should be indicated. The file will 
be in a tab-or pipe-delimited ASCII format. Each file name will contain 
the institution's FDIC Certificate Number, an indication that it is a 
deposit file type and the date of the extract. The files will be 
encrypted using an FDIC-supplied algorithm. The FDIC will transmit to 
the covered institution the encryption algorithm over FDICconnect.
    The total deposit balances and the number of deposit accounts in 
each deposit file must be reconciled to the subsidiary system control 
totals.
    The FDIC intends to fully utilize a covered institution's 
understanding of its customers and the data maintained around deposit 
accounts. Should additional information be available to the covered 
institution to help the FDIC more quickly complete its insurance 
determination process, it may add this information to the end of this 
data file. Should additional data elements be provided, a complete data 
dictionary for these elements must be supplied along with a description 
of how this information could be best used to establish account 
ownership or insurance category.
    The deposit data elements provide information specific to deposit 
account balances and account data. The sequencing of these elements, 
their physical data structures and the field data format and field 
length must be provided to the FDIC along with the data structures 
identified below.
    A header record will also be required at the beginning of this file. 
This record will contain the number of accounts to be included in this 
file, the maximum number of characters contained in largest account 
title field maintained within the deposit file and the maximum number of 
characters contained in largest address field maintained within the 
deposit file.
    Note: Each record must contain the account title/name and current 
account statement mailing address. Fields 17-33 relate to the account 
name and address information. Some systems provide for separate fields 
for account title/name, street address, city, state, ZIP, and country, 
all of which are parsed out. Others systems may simply provide multiple 
lines for name, street address, city, state, ZIP, with no distinction. 
Populate fields that best fit the system's data, either fields 17-27 or 
fields 28-33.

----------------------------------------------------------------------------------------------------------------
              Field name                   Field description             Comments                  Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier..............  Account Identifier......  The Account Identifier    Character (25).
                                       The primary field used     may be composed of more
                                        to identify the           than one physical data
                                        account. This field may   element. If multiple
                                        be the Account Number..   fields are required to
                                                                  identify the account,
                                                                  data should be placed
                                                                  in separate fields and
                                                                  the FDIC instructed how
                                                                  these fields are
                                                                  combined to uniquely
                                                                  identify the account.
2. DP--Acct--Identifier--2...........  Account Identifier--2...  ........................  Character (25).
                                       If necessary, the second
                                        element used to
                                        identify the account..
3. DP--Acct--Identifier--3...........  Account Identifier--3...  ........................  Character (25).
                                       If necessary, the third
                                        element used to
                                        identify the account..
4. DP--Acct--Identifier--4...........  Account Identifier--4...  ........................  Character (25).
                                       If necessary, the fourth
                                        element used to
                                        identify the account..
5. DP--Acct--Identifier--5...........  Account Identifier--5...  ........................  Character (25).
                                       If necessary, the fifth
                                        element used to
                                        identify the account..
6. DP--Sub--Acct--Identifier.........  Sub-Account Identifier..  The Sub-Account           Character (25).
                                       If available, the sub-     Identifier may identify
                                        account identifier for    separate deposits tied
                                        the account..             to this account where
                                                                  there are different
                                                                  processing parameters
                                                                  such as interest rates
                                                                  or maturity dates, but
                                                                  all owners are the
                                                                  same.

[[Page 521]]

 
7. DP--Bank--No......................  Bank Number.............  ........................  Character (15).
                                       The bank number assigned
                                        to the deposit account..
8. DP--Tax--ID.......................  Tax ID..................  For consumer accounts,    Character (15).
                                       The tax identification     typically, this would
                                        number maintained on      be the primary account
                                        the account..             holder's social
                                                                  security number
                                                                  (``SSN''). For business
                                                                  accounts it would be
                                                                  the federal tax
                                                                  identification number
                                                                  (``TIN''). Hyphens are
                                                                  optional in this field.
9. DP--Tax--Code.....................  Tax ID Code.............  Generally deposit         Character (1).
                                       The type of the tax        systems have flags or
                                        identification number.    indicators set to
                                        Possible values are:.     indicate whether the
                                        S =     number is an SSN or
                                        Social Security Number..  TIN.
                                        T =
                                        Federal Tax
                                        Identification Number..
                                        O =
                                        Other..
10. DP--Branch.......................  Branch Number...........  In lieu of a branch       Character (15).
                                       The branch or office       number this field may
                                        associated with the       represent a specialty
                                        account..                 department or division.
11. DP--Cost--Center.................  Cost Center or G/L Code.  This field ties to the    Character (20).
                                       The identifier used for    general ledger
                                        organization reporting    accounts.
                                        or ownership of the
                                        account. Insert null
                                        value if the cost
                                        center is not carried
                                        in the deposit record..
12. DP--Dep--Type....................  Deposit Type Indicator..  A deposit--also called a  Character (1).
                                       The type of deposit by     ``domestic deposit''--
                                        office location.          includes only deposit
                                        Possible values are:.     liabilities payable in
                                        D =     the United States,
                                        Deposit (Domestic)..      typically those
                                        F =     deposits maintained in
                                        Foreign Deposit..         a domestic office of an
                                                                  insured depository
                                                                  institution, as defined
                                                                  in section 3(l) of the
                                                                  Federal Deposit
                                                                  Insurance Act (12
                                                                  U.S.C. 1813(l)). A
                                                                  foreign deposit is a
                                                                  deposit liability in a
                                                                  foreign branch payable
                                                                  solely at a foreign
                                                                  branch or branches.
13. DP--Currency--Type...............  Currency Type...........  ........................  Character (3).
                                       The ISO 4217 currency
                                        code..
14. DP--Ownership--Ind...............  Customer Ownership        Single: Accounts owned    Character (2).
                                        Indicator.                by an individual and
                                       The type of ownership at   those accounts held as
                                        the account level.        Minor Accounts, Estate
                                        Possible values are:.     Accounts, Non-Minor
                                        S =     Custodian/Guardian
                                        Single..                  Accounts, Attorney in
                                        J =     Fact Accounts and Sole
                                        Joint Account..           Proprietorships.
                                        P =    Joint Account: Accounts
                                        Partnership account..     owned by two or more
                                        C =     individuals, but does
                                        Corporation..             not include the
                                        B =     ownership of a Payable
                                        Brokered Deposits..       on Death Account or
                                        I =     Trust Account..
                                        IRA Accounts..           Partnership Account:
                                        U =     Accounts owned by a
                                        Unincorporated            Partnership.
                                        Association..            Corporation: Accounts
                                        R =     owned by a Corporation
                                        Revocable Trust..         (e.g. Inc., L.L.C., or
                                        IR =    P.C.)..
                                        Irrevocable Trust..      Brokered Deposits:
                                        G =     Accounts placed by a
                                        Government Accounts..     deposit broker who acts
                                        E =     as an intermediary for
                                        Employee Benefit Plan     the actual owner or sub-
                                        Accounts..                broker..
                                        O =    IRA Accounts: Accounts
                                        Other..                   for which the owner has
                                                                  the right to direct how
                                                                  the funds are invested
                                                                  including Keoghs and
                                                                  other Self-Directed
                                                                  Retirement Accounts..
                                                                 Unincorporated
                                                                  Association: An account
                                                                  owned by an association
                                                                  of two or more persons
                                                                  formed for some
                                                                  religious, educational,
                                                                  charitable, social or
                                                                  other non-commercial
                                                                  purpose.

[[Page 522]]

 
                                                                 Revocable Trusts:
                                                                  Including PODs and
                                                                  formal revocable trusts
                                                                  (e.g. Living Trusts,
                                                                  Intervivos Trusts or
                                                                  Family Trusts).
                                                                 Irrevocable Trusts:
                                                                  Accounts held by a
                                                                  trust established by
                                                                  statute or written
                                                                  trust in which the
                                                                  grantor relinquishes
                                                                  all power to revoke the
                                                                  trust.
                                                                 Government Accounts:
                                                                  Accounts owned by a
                                                                  government entity (e.g.
                                                                  City, State, County or
                                                                  Federal government
                                                                  entities and their sub-
                                                                  divisions).
                                                                 Employee Benefit Plan:
                                                                  Accounts established by
                                                                  the administrator of an
                                                                  Employee Benefit Plan
                                                                  including defined
                                                                  contribution, defined
                                                                  benefit and employee
                                                                  welfare plans.
                                                                 Other Accounts: Accounts
                                                                  owned by an entity not
                                                                  described above.
15. DP--Prod--Cat....................  Product Category........  Product Category is       Character (3).
                                       The product                sometimes referred to
                                        classification.           as ``application type''
                                        Possible values are:.     or ``system type''.
                                        DDA =
                                        Non-Interest Bearing
                                        Checking accounts.
                                        NOW =
                                        Interest Bearing
                                        Checking accounts.
                                        MMA =
                                        Money Market Deposit
                                        Accounts.
                                        SAV =
                                        Other savings accounts.
                                        CDS =
                                        Time Deposit accounts
                                        and Certificate of
                                        Deposit accounts,
                                        including any accounts
                                        with specified maturity
                                        dates that may or may
                                        not be renewable.
16. DP--Stat--Code...................  Status Code.............                            Character (1).
                                       Status or condition of
                                        the account. Possible
                                        values are:.
                                        O =
                                        Open.
                                        D =
                                        Dormant.
                                        I =
                                        Inactive.
                                        E =
                                        Escheatment.
                                        A =
                                        Abandoned.
                                        C =
                                        Closing.
                                        R =
                                        Restricted/Frozen/
                                        Blocked.
17. DP--Acct--Title--1...............  Account Title Line 1....  These data will be used   Character (100).
                                       Account styling or         to identify the owners
                                        titling of the account..  and beneficiaries of
                                                                  the account.
18. DP--Acct--Title--2...............  Account Title Line 2....  ........................  Character (100).
                                       If available, the second
                                        account title line..
19. DP--Acct--Title--3...............  Account Title Line 3....  ........................  Character (100).
                                       If available, the third
                                        account title line..
20. DP--Acct--Title--4...............  Account Title Line 4....  ........................  Character (100).
                                       If available, the fourth
                                        account title line..
21. DP--Street--Add--Ln--1...........  Street Address Line 1...  ........................  Character (100).
                                       The current account
                                        statement mailing
                                        address of record..
22. DP--Street--Add--Ln--2...........  Street Address Line 2...  ........................  Character (100).
                                       If available, the second
                                        mailing address line..
23. DP--Street--Add--Ln--3...........  Street Address Line 3...  ........................  Character (100).
                                       If available, the third
                                        mailing address line..
24. DP--City.........................  City....................  ........................  Character (50).
                                       The city associated with
                                        the mailing address..
25. DP--State........................  State...................  Use a two-character       Character (2).
                                       The state abbreviation     state code (official
                                        associated with the       U.S. Postal Service
                                        mailing address..         abbreviations).

[[Page 523]]

 
26. DP--ZIP..........................  ZIP.....................  If the ``+4'' code is     Character (10).
                                       The ZIP + 4 code           not available provide
                                        associated with the       only the 5-digit ZIP
                                        mailing address..         code. Hyphens are
                                                                  optional in this field.
27. DP--Country......................  Country.................  Provide the country name  Character (10).
                                       The country associated     or the standard IRS
                                        with the mailing          country code.
                                        address..
28. DP--NA--Line--1..................  Name/Address Line 1.....  Fields 28-33 are to be    Character (100).
                                       Alternate name/address     used if address data
                                        format for the current    are not parsed to
                                        account statement         populate Fields 17-27.
                                        mailing address of
                                        record, first line..
29. DP--NA--Line--2..................  Name/Address Line 2.....  ........................  Character (100).
                                       Alternate name/address
                                        format, second line..
30. DP--NA--Line--3..................  Name/Address Line 3.....  ........................  Character (100).
                                       Alternate name/address
                                        format, third line..
31. DP--NA--Line--4..................  Name/Address Line 4.....  ........................  Character (100).
                                       Alternate name/address
                                        format, fourth line..
32. DP--NA--Line--5..................  Name/Address Line 5.....  ........................  Character (100).
                                       Alternate name/address
                                        format, fifth line..
33. DP--NA--Line--6..................  Name/Address Line 6.....  ........................  Character (100).
                                       Alternate name/address
                                        format, sixth line..
34. DP--Cur--Bal.....................  Current Balance.........  This balance should not   Decimal (14,2).
                                       The current balance in     be reduced by float or
                                        the account at the end    holds. For CDs and time
                                        of business on the        deposits, the balance
                                        effective date of this    should reflect the
                                        file..                    principal balance plus
                                                                  any interest paid and
                                                                  available for
                                                                  withdrawal not already
                                                                  included in the
                                                                  principal (do not
                                                                  include accrued
                                                                  interest). The total of
                                                                  all current balances in
                                                                  this file should
                                                                  reconcile to the total
                                                                  deposit trial balance
                                                                  totals or other summary
                                                                  reconciliation of
                                                                  deposits performed by
                                                                  the institution.
35. DP--Int--Rate....................  Interest Rate...........  Interest rate should be   Decimal (10,9).
                                       The current interest       expressed in decimal
                                        rate in effect for        format, i.e., 2.0%
                                        interest bearing          should be represented
                                        accounts..                as 0.020000000.
36. DP--Acc--Int.....................  Accrued Interest........  ........................  Decimal (14,2).
                                       The amount of interest
                                        that has been earned
                                        but not yet paid to the
                                        account as of the date
                                        of the file..
37. DP--Lst--Int--Pd.................  Date Last Interest Paid.  ........................  Date (YYYYMMDD).
                                       The date through which
                                        interest was last paid
                                        to the account..
38. DP--Lst--Deposit.................  Date Last Deposit.......  For example, a deposit    Date (YYYYMMDD).
                                       The date of the last       that included checks
                                        deposit transaction       and/or cash.
                                        posted to the account..
39. DP--Int--Term--No................  Interest Term Number....  ........................  Decimal (3,0).
                                       The number of months in
                                        the current interest
                                        term..
40. DP--Nxt--Mat.....................  Date of Next Maturity...  For non-renewing CDs      Date (YYYYMMDD).
                                       For CD and time deposit    that have matured and
                                        accounts, the next date   are waiting to be
                                        the account is to         redeemed this date may
                                        mature..                  be in the past.
41. DP--Open--DT.....................  Account Open Date.......  If the account had        Date (YYYYMMDD).
                                       The date the account was   previously been closed
                                        opened..                  and re-opened, this
                                                                  should reflect the most
                                                                  recent re-opened date.
42. DP--Sweep--Code..................  Sweep Code..............  ........................  Character (1).
                                       Indicates if the account
                                        is a sweep account.
                                        Possible values are:
                                        Y =
                                        Yes.
                                        N =
                                        No.
43. DP--Hold--To--Post...............  Full Hold on the          ........................  Character (1).
                                        account: Indicator if
                                        all postings to this
                                        account are restricted.
                                        Possible values are:
                                        Y =
                                        Yes.
                                        N =
                                        No.

[[Page 524]]

 
44. DP--Issue--Val--Amt..............  Issued Value Amount.....  For CDs only.             Decimal (14,2).
                                       The value of the current
                                        CD when issued..
45. DP--Int--CD--Cde.................  Type of Interest for CD.  For CDs only.             Character (1).
                                       Possible values are:
                                        C =
                                        Rate Change Allowed.
                                        N =
                                        Rate Change Not
                                        Allowed.
                                        R =
                                        Change Rate to Default
                                        at Renewal.
                                        T =
                                        Rate Change Allowed
                                        Only During the Term.
46. DP--IRA--Cde.....................  IRA Code................  Optional code field to    Character (1).
                                       The type of IRA.           be used if available to
                                        Possible values are:.     help further identify
                                        C =     the types of IRA
                                        Corporate Retirement.     accounts.
                                        E =
                                        Educational IRA..
                                        I =
                                        IRA Account..
                                        K =
                                        Keogh Account..
                                        R =
                                        Roth IRA Account..
                                        S =
                                        SEP Account..
                                        T =
                                        Transitional Roth IRA..
                                        V =
                                        Versa Account..
                                        H =
                                        Health Savings Account..
47. DP--Deposit--Class--Type.........  Deposit Class Type......  The institution may also  Character (10).
                                       The deposit class.         use more or fewer class
                                        Possible values are:.     types.
                                        RTL =
                                        Retail.
                                        FED =
                                        Federal government.
                                        STATE
                                        = State government.
                                        COMM
                                        = Commercial.
                                        CORP
                                        = Corporate.
                                        BANK
                                        = Bank Owned.
                                        DUE
                                        TO = Other Banks.
48. DP--Product--Class--Cde..........  Deposit Class Codes.....  These Product Class       Character (2).
                                       The deposit class codes.   codes are used in
                                        Possible values are:.     conjunction with the
                                       RTL.....................   Deposit Class Types in
                                        1 =     field 51. This field is
                                        Payable on Death..        to be used in concert
                                        2 =     with fields 12 and 13
                                        Individual..              identified above to
                                        3 =     enable the financial
                                        Living Trust--            institution to capture
                                        Intervivos or Family..    more detailed
                                        4 =     information concerning
                                        Irrevocable Trust         account types. It is
                                        (includes Educational     the intent of the FDIC
                                        IRAs)..                   to have the financial
                                        5 =     institution map its
                                        Estate..                  detailed account types
                                        6 =     to the codes identified
                                        Attorney in Fact..        in this field. The
                                        7 =     institution may also
                                        Minor--(includes all      use additional codes,
                                        variations of Uniform     but in this event the
                                        Gifts to Minor            institution must supply
                                        Accounts)..               the detailed
                                        8 =     description and code
                                        Bankruptcy Personal..     value for each
                                        9 =     additional code used.
                                        Pre-Need Burial..         If no additional
                                        10 =    account product type
                                        Escrow..                  detail is available
                                        11 =    then this field should
                                        Representative Payee/     be left blank.
                                        Beneficiary..
                                        12 =
                                        Sole Proprietorship..
                                        13 =
                                        Joint..
                                        14 =
                                        Non-Minor Custodian/
                                        Guardian..
                                        15 =
                                        Other Retail..

[[Page 525]]

 
                                       FED
                                        16 =
                                        FHA..
                                        17 =
                                        Federal Government..
                                       STATE...................
                                        18 =
                                        City..
                                        19 =
                                        State..
                                        20 =
                                        County, Clerk of Court..
                                        21 =
                                        Other State..
                                       COMMERCIAL..............
                                        22 =
                                        Business Escrow..
                                        23 =
                                        Bankruptcy..
                                        24 =
                                        Club..
                                        25 =
                                        Church..
                                        26 =
                                        Unincorporated
                                        Association..
                                        27 =
                                        Unincorporated Non-
                                        Profit..
                                       
                                         28 =
                                        Other Commercial..
                                       CORPORATION.............
                                        29 =
                                        Business Trust..
                                        30 =
                                        Business Agent..
                                        31 =
                                        Business Guardian..
                                        32 =
                                        Incorporated
                                        Association..
                                        33 =
                                        Incorporated Non-
                                        Profit..
                                        33 =
                                        Incorporated Non-
                                        Profit..
                                        34 =
                                        Corporation..
                                        35 =
                                        Corporate Partnership..
                                        36 =
                                        Corporate Partnership
                                        Trust..
                                        37 =
                                        Corporate Agent..
                                        38 =
                                        Corporate Guardian..
                                        39 =
                                        Pre-Need Funeral Trust..
                                        40 =
                                        Limited Liability
                                        Incorporation..
                                        41 =
                                        LLC partnership..
                                        42 =
                                        Lawyer Trust..
                                        43 =
                                        Realtor Trust..
                                        44 =
                                        Other Corporation..
                                       BANK....................
                                        45 =
                                        Certified & Official
                                        Checks, Money Orders,
                                        Loan Disbursements
                                        Checks, and Expense
                                        Checks..
                                        46 =
                                        ATM Settlement..
                                        47 =
                                        Other Bank Owned
                                        Accounts..
                                       DUE TO (Other Banks)....
                                        48 =
                                        Due to U.S. Banks..
                                        49 =
                                        Due to U.S. Branches of
                                        Foreign Banks..
                                        50 =
                                        Due to Other Depository
                                        Institutions..
                                        51 =
                                        Due to Foreign Banks..
                                        52 =
                                        Due to Foreign Branches
                                        of U.S. banks..
                                        53 =
                                        Due to Foreign
                                        Governments and
                                        Official Institutions..
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]



    Sec. Appendix D to Part 360--Sweep/Automated Credit Account File 
                                Structure

    This is the structure of the data file to provide information to the 
FDIC on funds residing in investment vehicles linked to each non-closed 
deposit account or sub-account: (1) Involved in sweep activity where the 
sweep investment vehicle is not a deposit and is reflected on the books 
and records of the covered institution or (2) which accepts automated 
credits. A single record should be used for each instance where funds 
affiliated with the deposit account are held in an alternative 
investment vehicle. For any alternative investment vehicle, a separate 
account may or may not exist. If an account exists for the investment 
vehicle, it should be noted in the record. If no account exists, then a 
null value for the Sweep/Automated Credit Account Identifiers should be 
provided, but the remainder of the data fields defined below should be 
populated.
    For data provided in the Sweep/Automated Credit Account File, the 
total account balances and the number of accounts must be reconciled to 
subsidiary system control totals. The file will be in a tab- or pipe-
delimited ASCII format. The files will be

[[Page 526]]

encrypted using an FDIC-supplied algorithm. The FDIC will transmit the 
encryption algorithm over FDICconnect.

----------------------------------------------------------------------------------------------------------------
              Field name                   Field description             Comments                  Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier..............  Account Identifier......  The Account Identifier    Character (25).
                                       The primary field used     may be composed of more
                                        to identify the account   than one physical data
                                        from which funds are      element. If multiple
                                        swept or debited. The     fields are required to
                                        field may be the          identify the account,
                                        Account number..          data should be placed
                                                                  in separate fields and
                                                                  the FDIC instructed how
                                                                  these fields are
                                                                  combined to uniquely
                                                                  identify the account.
2. DP--Acct--Identifier--2...........  Account Identifier--2...  ........................  Character (25).
                                       If necessary, the second
                                        element used to
                                        identify the account
                                        from which funds are
                                        swept or debited..
3. DP--Acct--Identifier--3...........  Account Identifier--3...  ........................  Character (25).
                                       If necessary, the third
                                        element used to
                                        identify the account
                                        from which funds are
                                        swept or debited..
4. DP--Acct--Identifier--4...........  Account Identifier--4...  ........................  Character (25).
                                       If necessary, the fourth
                                        element used to
                                        identify the account
                                        from which funds are
                                        swept or debited..
5. DP --Acct--Identifier--5..........  Account Identifier--5...  ........................  Character (25).
                                       If necessary, the fifth
                                        element used to
                                        identify the account
                                        from which funds are
                                        swept or debited..
6. DP--Sub--Acct--Identifier.........  Sub-Account Identifier..  The Sub-Account           Character (25).
                                       If available, the sub-     Identifier may identify
                                        account identifier for    separate deposits tied
                                        the account..             to this account where
                                                                  there are different
                                                                  processing parameters
                                                                  such as interest rates
                                                                  or maturity dates, but
                                                                  all owners are the same.
7. SW--Acct--Identifier..............  Sweep/Automated Credit    Funds may be swept into   Character (25).
                                        Account Identifier.       an investment vehicle
                                       The primary field used     not represented as an
                                        to identify the account   account. In this case
                                        into which funds are      this field should be a
                                        swept or credited. This   null value.
                                        field may be the         The Sweep/Automated
                                        Account Number..          Credit Account
                                                                  Identifier may be
                                                                  composed of more than
                                                                  one physical data
                                                                  element. If multiple
                                                                  fields are required to
                                                                  identify the account,
                                                                  data should be placed
                                                                  in separate fields and
                                                                  the FDIC instructed how
                                                                  these fields are
                                                                  combined to uniquely
                                                                  identify the account..
8. SW--Acct--Identifier--2...........  Sweep/Automated Credit    ........................  Character (25).
                                        Account Identifier--2.
                                       If necessary, the second
                                        element of the account
                                        identifier used to
                                        identify the account
                                        into which funds are
                                        swept or credited..
9. SW--Acct--Identifier--3...........  Sweep/Automated Credit    ........................  Character (25).
                                        Account Identifier--3.
                                       If necessary, the third
                                        element of the account
                                        identifier used to
                                        identify the account
                                        into which funds are
                                        swept or credited..
10. SW--Acct--Identifier--4..........  Sweep/Automated Credit    ........................  Character (25).
                                        Account Identifier--4.
                                       If necessary, the fourth
                                        element of the account
                                        identifier used to
                                        identify the account
                                        into which funds are
                                        swept or credited..
11. SW --Acct--Identifier--5.........  Sweep/Automated Credit    ........................  Character (25).
                                        Account Identifier-5.
                                       If necessary, the fifth
                                        element of the account
                                        identifier used to
                                        identify the account
                                        into which funds are
                                        swept or credited..

[[Page 527]]

 
12. SW--Sub--Acct--Identifier........  Sweep/Automated Credit    ........................  Character (25).
                                        Sub-Account Identifier.
                                       If available, the sub-
                                        account identifier for
                                        the account.
13. SW--Type.........................  Sweep/Automated Credit    The investment vehicle.   Character (3).
                                        Type.                     Possible values are:
                                                                  RE =
                                                                  Repurchase Agreement..
                                                                  DD =
                                                                  Deposit Held in a
                                                                  Domestic Office..
                                                                  DF =
                                                                  Deposit Held in a
                                                                  Foreign Office..
                                                                  IBF =
                                                                  Deposit Held in an
                                                                  International Banking
                                                                  Facility..
                                                                  AI =
                                                                  Deposit Held in an
                                                                  affiliated depository
                                                                  institution..
                                                                  FF =
                                                                  Federal Funds..
                                                                  CP =
                                                                  Commercial Paper..
                                                                  OT =
                                                                  Other..
14. SW--Inv--Amount..................  Fund Balance in Sweep/    Decimal (14,2)..........
                                        Automated Credit
                                        Investment Vehicle.
                                       Dollar amount residing
                                        in the investment
                                        vehicle..
15. SW--Currency--Type...............  Currency Type...........  ........................  Character (3).
                                       The ISO 4217 currency
                                        code..
16. SW--Hold--Amount.................  FDIC Hold Amount........  ........................  Decimal (14,2).
                                       Amount of FDIC hold on
                                        funds residing in the
                                        investment vehicle..
17. SW--Sweep--Interval..............  Sweep/Investment          ........................  Character (2).
                                        Frequency.
                                       The frequency with which
                                        the sweep or investment
                                        occurs. Possible values
                                        are:.
                                        D =
                                        Daily..
                                        W =
                                        Weekly..
                                        BW =
                                        Bi-Weekly..
                                        M =
                                        Monthly..
                                        BM =
                                        Bi-Monthly..
                                        Q =
                                        Quarterly..
                                        O =
                                        Other..
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]



            Sec. Appendix E to Part 360--Hold File Structure

    This is the structure of the data file to provide information to the 
FDIC for each legal or collateral hold placed on a deposit account or 
sub-account. If data or information are not maintained or do not apply, 
a null value in the appropriate field should be indicated. The file will 
be in a tab-or pipe-delimited ASCII format. Each file name will contain 
the institution's FDIC Certificate Number, an indication that it is a 
hold data file type and the date of the extract. The files will be 
encrypted using an FDIC-supplied algorithm. The FDIC will transmit the 
encryption algorithm over FDICconnect.

----------------------------------------------------------------------------------------------------------------
              Field name                   Field description             Comments                  Format
----------------------------------------------------------------------------------------------------------------
1. DP--Acct--Identifier..............  Account Identifier......  The Account Identifier    Character (25).
                                       The primary field used     may be composed of more
                                        to identify the           than one physical data
                                        account. This field may   element. If multiple
                                        be the Account Number..   fields are required to
                                                                  identify the account,
                                                                  data should be placed
                                                                  in separate fields and
                                                                  the FDIC instructed how
                                                                  these fields are
                                                                  combined to uniquely
                                                                  identify the account.
2. DP--Acct--Identifier--2...........  Account Identifier--2...  Character (25)..........
                                       If necessary, the second
                                        element used to
                                        identify the account.
3. DP--Acct--Identifier--3...........  Account Identifier--3...  Character (25)..........
                                       If necessary, the third
                                        element used to
                                        identify the account.
4. DP--Acct--Identifier--4...........  Account Identifier--4...  Character (25)..........
                                       If necessary, the fourth
                                        element used to
                                        identify the account.
5. DP --Acct--Identifier--5..........  Account Identifier--5...  Character (25)..........

[[Page 528]]

 
                                       If necessary, the fifth
                                        element used to
                                        identify the account.
6. DP--Sub--Acct--Identifier.........  Sub-Account Identifier..  The Sub-Account           Character (25).
                                       If available, the sub-     Identifier may identify
                                        account identifier for    separate deposits tied
                                        the account..             to this account where
                                                                  there are different
                                                                  processing parameters
                                                                  such as interest rates
                                                                  or maturity dates, but
                                                                  all owners are the
                                                                  same.
7. HD--Hold--Amt.....................  Hold Amount.............  Decimal (14,2)..........
                                       Dollar amount of the
                                        hold.
8. HD--Hold--Reason..................  Hold Reason.............  Character (2)...........
                                       Reason for the hold.
                                        Possible values are:.
                                        LN =
                                        Loan Collateral Hold.
                                        LG =
                                        Court Order Hold.
                                        FD =
                                        FDIC hold.
                                        OT =
                                        Other (do not include
                                        daily operational type
                                        holds).
9. HD--Hold--Desc....................  Hold Description........  Character (255).........
                                       Description of the hold
                                        available on the system.
10. HD--Hold--Start--Dt..............  Hold Start Date.........  Date (YYYYMMDD).........
                                       The date the hold was
                                        initiated..
11. HD--Hold--Exp--Dt................  Hold Expiration Date....  Date (YYYYMMDD).........
                                       The date the hold is to
                                        expire..
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]



          Sec. Appendix F to Part 360--Customer File Structure

    This is the structure of the data file to provide to the FDIC 
information related to each customer who has an account or sub-account 
reported in the deposit data or sweep/automated credit account file. If 
data or information are not maintained or do not apply, a null value in 
the appropriate field should be indicated. The file will be in a tab-or 
pipe-delimited ASCII format. Each file name will contain the 
institution's FDIC Certificate Number, an indication that it is a 
customer file type and the date of the extract. The files will be 
encrypted using an FDIC-supplied algorithm. The FDIC will transmit the 
encryption algorithm over FDICconnect.
    Note: Each record must contain the customer's name and permanent 
legal address. Fields 4-12 relate to the customer name for individuals 
only. Fields 13-14 relate to the customer name for entities other than 
individuals. Some systems provide for separate fields for name, street 
address, city, state, ZIP, and country, all of which are parsed out. 
Others systems may simply provide multiple lines for name, street 
address, city, state, ZIP, with no distinction. In this case, certain 
name and address data elements must be parsed and provided in the 
appropriate fields.

 
----------------------------------------------------------------------------------------------------------------
              Field name                   Field description             Comments                  Format
----------------------------------------------------------------------------------------------------------------
1. CS--Cust--Identifier..............  Customer Identifier.....  Character (25)..........
                                       The unique field used by
                                        the institution to
                                        identify the customer.
2. CS--Tax--ID.......................  Customer Tax ID Number..  Hyphens are optional in   Character (11).
                                                                  this field.
                                       The tax identification
                                        number on record for
                                        the customer.
3. CS--Tax--Code.....................  Customer Tax ID Code....  Character (1)...........
                                       The type of the tax
                                        identification number
                                        of the customer.
                                        Possible values are:
                                        S =
                                        Social Security Number.
                                        T =
                                        Federal Tax
                                        Identification Number.
                                        O =
                                        Other.
4. CS--Name--Line--1.................  Individual Customer Name  Character (100).........
                                        Line 1.
                                       If available, the free-
                                        form name narrative of
                                        the customer, first
                                        line.
5. CS--Name--Line--2.................  Individual Customer Name  Character (100).........
                                        Line 2.

[[Page 529]]

 
                                       If available, the free-
                                        form name narrative of
                                        the customer, second
                                        line.
6. CS--Last--Name....................  Individual Customer Last  This field is required    Character (50).
                                        Name.                     if the data element is
                                       For individuals, the       in the institution's
                                        customer's last name..    records. If necessary,
                                                                  data should be parsed
                                                                  from fields 4 or 5 to
                                                                  obtain this element.
7. CS--First--Name...................  Individual Customer       This field is required    Character (50).
                                        First Name.               if the data element is
                                       For individuals, the       in the institution's
                                        customer's first name..   records. If necessary,
                                                                  data should be parsed
                                                                  from fields 4 or 5 to
                                                                  obtain this element.
8. CS--Middle--Name..................  Individual Customer       This field is required    Character (50).
                                        Middle Name.              if the data element is
                                       For individuals, the       in the institution's
                                        customer's middle name..  records. If necessary,
                                                                  data should be parsed
                                                                  from fields 4 or 5 to
                                                                  obtain this element.
9. CS--Suffix........................  Individual Professional   This field is required    Character (20).
                                        Suffix.                   if the data element is
                                       For individuals, the       in the institution's
                                        suffix designating        records. If necessary,
                                        customer's academic,      data should be parsed
                                        professional or           from fields 4 or 5 to
                                        honorary status, such     obtain this element.
                                        as Esq., Ph.D., M.D.,
                                        and D.D.S..
10. CS--Generation...................  Individual Generational   This field is required    Character (10).
                                        Suffix.                   if the data element is
                                       For individuals, the       in the institution's
                                        suffix designating the    records. If necessary,
                                        customer's generational   data should be parsed
                                        status, such as Jr.,      from fields 4 or 5 to
                                        Sr. or III..              obtain this element.
11. CS--Prefix.......................  Individual Customer       This field is required    Character (10).
                                        Prefix.                   if the data element is
                                       For individuals, the       in the institution's
                                        prefix of the customer,   records. If necessary,
                                        such as Rev., Dr.,        data should be parsed
                                        Mrs., Mr. or Ms..         from fields 4 or 5 to
                                                                  obtain this element.
12. CS--Birth--Dt....................  Individual Customer       Date (YYYYMMDD).........
                                        Birth Date.
                                       For individuals, the
                                        customer's birth date.
13. CS--Ent--Name--Line--1...........  Entity Name Line 1......  Character (100).........
                                       For entities other than
                                        individuals, the free-
                                        form name narrative of
                                        the customer, first
                                        line.
14. CS--Ent--Name--Line--2...........  Entity Name Line 2......  Character (100).........
                                       If available for
                                        entities other than
                                        individuals, the free-
                                        form name narrative of
                                        the customer, second
                                        line.
15. CS--Nar--Addr--Line--1...........  Customer Address Line 1.  Character (100).........
                                       If available, the free-
                                        form permanent legal
                                        address narrative for
                                        the customer, line one.
16. CS--Nar--Addr--Line--2...........  Customer Address Line 2.  Character (100).........
                                       If available, the free-
                                        form permanent legal
                                        address narrative of
                                        the customer, line two.
17. CS--Nar--Addr--Line--3...........  Customer Address Line 3.  Character (100).........
                                       If available, the free-
                                        form permanent legal
                                        address narrative of
                                        the customer, line
                                        three.
18. CS--Street--Address--1...........  Street Address Line 1...  This field is required.   Character (100).
                                       The permanent legal        If necessary, data
                                        address of the            should be parsed from
                                        customer, line one..      fields 16 or 17 to
                                                                  obtain this element.
19. CS--Street--Address--2...........  Street Address Line 2...  This field is required.   Character (100).
                                       The permanent legal        If necessary, data
                                        address of the            should be parsed from
                                        customer, line two..      fields 16 or 17 to
                                                                  obtain this element.
20. CS--City.........................  City....................  This field is required.   Character (25).
                                       The city associated with   If necessary, data
                                        the permanent legal       should be parsed from
                                        address..                 fields 16 or 17 to
                                                                  obtain this element.
21. CS--State........................  State...................  This field is required.   Character (2).
                                       The state abbreviation     If necessary, data
                                        associated with the       should be parsed from
                                        permanent legal           fields 16 or 17 to
                                        address..                 obtain this element.
                                                                  Use a two-character
                                                                  state code (official
                                                                  U.S. Postal Service
                                                                  abbreviations).

[[Page 530]]

 
22. CS--ZIP..........................  ZIP.....................  This field is required.   Character (10).
                                       The ZIP + 4 code           If necessary, data
                                        associated with the       should be parsed from
                                        permanent legal           fields 16 or 17 to
                                        address..                 obtain this element. If
                                                                  the ``+4'' code is not
                                                                  available, provide only
                                                                  the 5-digit ZIP code.
                                                                  Hyphens are optional in
                                                                  this field.
23. CS--Country......................  Country.................  This field is required.   Character (10).
                                       The country associated     If necessary, data
                                        with the permanent        should be parsed from
                                        legal address..           fields 16 or 17 to
                                                                  obtain this element.
                                                                  Provide the name of the
                                                                  country or the standard
                                                                  IRS country code.
24. CS--Telephone....................  Customer Telephone        Character (20)..........
                                        Number.
                                       The telephone number on
                                        record for the customer.
25. CS--Email........................  Customer Email Address..  Character (150).........
                                       The e-mail address on
                                        record for the customer.
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]



    Sec. Appendix G to Part 360--Deposit-Customer Join File Structure

    This is the structure of the data file to provide to the FDIC 
information necessary to link the records in the deposit and customer 
files. If data or information are not maintained or do not apply, a null 
value in the appropriate field should be indicated. The file will be in 
a tab- or pipe-delimited ASCII format. Each file name will contain the 
institution's FDIC Certificate Number, an indication that it is a join 
file type and the date of the extract. The files will be encrypted using 
an FDIC-supplied algorithm. The FDIC will transmit the encryption 
algorithm over FDICconnect.
    The deposit-customer join file will have one or more records for 
each deposit account, depending on the number of relationships to each 
account. A simple individual account, for example, will be associated 
with only one record in the deposit-customer join file indicating the 
owner of the account. A joint account with two owners will be associated 
with two records in the deposit-customer join file, one for each owner. 
The deposit-customer join file will contain other records associated 
with a deposit account to designate, among other things, beneficiaries, 
custodians, trustees and agents. This methodology allows the FDIC to 
know all of the possible relationships for an individual account and 
also whether a single customer is involved in many accounts.

----------------------------------------------------------------------------------------------------------------
              Field name                FDIC field description           Comments                  Format
----------------------------------------------------------------------------------------------------------------
1. CS--Cust--Identifier..............  Customer Identifier.....  Character (25)..........
                                       The unique field used by
                                        the institution to
                                        identify the customer.
2. DP--Acct--Identifier..............  Account Identifier......  The Account Identifier    Character (25).
                                       The primary field used     may be composed of more
                                        to identify the           than one physical data
                                        account. This field may   element. If multiple
                                        be the Account Number..   fields are required to
                                                                  identify the account,
                                                                  the data should be
                                                                  placed in separate
                                                                  fields and the FDIC
                                                                  instructed how these
                                                                  fields are combined to
                                                                  uniquely identify the
                                                                  account.
3. DP--Acct--Identifier--2...........  Account Identifier--2...  Character (25)..........
                                       If necessary, the second
                                        element used to
                                        identify the account.
4. DP--Acct--Identifier--3...........  Account Identifier--3...  Character (25)..........
                                       If necessary, the third
                                        element used to
                                        identify the account.
5. DP--Acct--Identifier--4...........  Account Identifier--4...  Character (25)..........
                                       If necessary, the fourth
                                        element used to
                                        identify the account.
6. DP--Acct--Identifier--5...........  Account Identifier--5...  Character (25)..........
                                       If necessary, the fifth
                                        element used to
                                        identify the account.

[[Page 531]]

 
7. DP--Sub--Acct--Identifier.........  Sub-Account Identifier..  The Sub-Account           Character (25).
                                       If available, the sub-     Identifier may identify
                                        account identifier for    separate deposits tied
                                        the account..             to this account where
                                                                  there are different
                                                                  processing parameters
                                                                  such as interest rates
                                                                  or maturity dates, but
                                                                  all owners are the same.
8. CS--Rel--Code.....................  Relationship Code.......  Institutions must map     Character (5).
                                       The code indicating how    their relationship
                                        the customer is related   codes to the codes in
                                        to the account.           the list to the left.
                                        Possible values are:.     If the institution
                                        ADM =   maintains more
                                        Administrator..           relationships they must
                                        AGT =   supply the additional
                                        Agent/Representative..    relationship codes
                                        ATF =   being utilized along
                                        Attorney For..            with the code
                                        AUT =   definition.
                                        Authorized Signer..
                                        BNF =
                                        Beneficiary.
                                        CSV =
                                        Conservator.
                                        CUS =
                                        Custodian.
                                        DBA =
                                        Doing Business As.
                                        EXC =
                                        Executor.
                                        GDN =
                                        Guardian.
                                        MIN =
                                        Minor.
                                        PRI =
                                        Primary Owner.
                                        SEC =
                                        Secondary Owner(s).
                                        TTE =
                                        Trustee.
9. CS--Bene--Code....................  Beneficiary Type Code...  This includes             Character (1).
                                       If the customer is         beneficiaries on
                                        considered a              retirement accounts,
                                        beneficiary, the type     trust accounts, minor
                                        of account associated     accounts, and payable-
                                        with this customer.       on-death accounts.
                                        Possible values are:.
                                        I =
                                        IRA.
                                        T =
                                        Trust--Irrevocable.
                                        R =
                                        Trust--Revocable.
                                        M =
                                        Uniform Gift to Minor.
                                        P =
                                        Payable on Death.
                                        O =
                                        Other.
----------------------------------------------------------------------------------------------------------------


[73 FR 41197, July 17, 2008]



Sec. Appendix H to Part 360--Possible File Combinations for Deposit Data

    A covered institution must provide deposit data using separate 
deposit, sweep/automated credit, hold, customer, and deposit-customer 
join files. The simplest file structure involves providing one of each 
file. This basic file format is shown in Figure 1.

[[Page 532]]

[GRAPHIC] [TIFF OMITTED] TR17JY08.000

    Multiple combinations of deposit, sweep/automated credit, hold, 
customer, and deposit-customer join files are permissible, but only in 
the following circumstances:
    1. Each separate deposit file must have companion sweep/automated 
credit and hold files covering the same deposit accounts.
    2. A single customer file may be submitted covering customers 
affiliated with deposit accounts in one or more deposit files as long as 
the customer file contains information on all of the customers 
affiliated with the deposit files.
    3. Several customer files may be submitted as long as each separate 
customer file contains information on all of the customers affiliated 
with the associated deposit files.
    Figure 2 shows a permissible file configuration using a single 
Customer File affiliated with Deposit File A and Deposit File B. As 
required, Deposit File A has a companion Sweep/Automated Credit File A 
and Hold File A. The same is true for Deposit File B.
    Another permissible combination of files is shown in Figure 3, which 
is a variation of the basic data file structure shown in Figure 1.

[[Page 533]]

[GRAPHIC] [TIFF OMITTED] TR17JY08.001


[[Page 534]]


[GRAPHIC] [TIFF OMITTED] TR17JY08.002


[73 FR 41197, July 17, 2008]



PART 361_MINORITY AND WOMEN OUTREACH PROGRAM CONTRACTING--Table of Contents




Sec.
361.1 Why do minority- and women-owned businesses need this outreach 
          regulation?
361.2 Why does the FDIC have this outreach program?
361.3 Who may participate in this outreach program?
361.4 What contracts are eligible for this outreach program?
361.5 What are the FDIC's oversight and monitoring responsibilities in 
          administering this program?

[[Page 535]]

361.6 What outreach efforts are included in this program?

    Authority: 12 U.S.C. 1833e.

    Source: 65 FR 31253, May 17, 2000, unless otherwise noted.



Sec. 361.1  Why do minority- and women-owned businesses need this outreach 

regulation?

    The purpose of the FDIC Minority and Women Outreach Program (MWOP) 
is to ensure that minority- and women-owned businesses (MWOBs) are given 
the opportunity to participate fully in all contracts entered into by 
the FDIC.



Sec. 361.2  Why does the FDIC have this outreach program?

    It is the policy of the FDIC that minorities and women, and 
businesses owned by them have the maximum practicable opportunity to 
participate in contracts awarded by the FDIC.



Sec. 361.3  Who may participate in this outreach program?

    For purposes of this part:
    (a) Minority has the same meaning as defined by the Small Business 
Administration at 13 CFR 124.103(b).
    (b) Legal Services means all services provided by attorneys or law 
firms (including services of support staff).



Sec. 361.4  What contracts are eligible for this outreach program?

    The FDIC outreach program applies to all contracts entered into by 
the FDIC. The outreach program is incorporated into FDIC policies and 
guidelines governing contracting and the retention of legal services.



Sec. 361.5  What are the FDIC's oversight and monitoring responsibilities in 

administering this program?

    (a) The FDIC Office of Diversity and Economic Opportunity (ODEO) has 
overall responsibility for nationwide outreach oversight, which 
includes, but is not limited to, the monitoring, review and 
interpretation of relevant regulations. In addition, the ODEO is 
responsible for providing the FDIC with technical assistance and 
guidance to facilitate the identification, registration, and 
solicitation of MWOBs.
    (b) Each FDIC office that performs contracting or outreach 
activities will submit information to the ODEO on a quarterly basis, or 
upon request. Quarterly submissions will include, at a minimum, 
statistical information on contract awards and solicitations by 
designated demographic categories.



Sec. 361.6  What outreach efforts are included in this program?

    (a) Each office engaged in contracting with the private sector will 
designate one or more MWOP coordinators. The coordinators will perform 
outreach activities for MWOP and act as liaison between the FDIC and the 
public on MWOP issues. On a quarterly basis, or as requested by the 
ODEO, the coordinators will report to the ODEO on their implementation 
of the outreach program.
    (b) Outreach includes the identification and registration of MWOBs 
who can provide goods and services utilized by the FDIC. This includes 
distributing information concerning the MWOP.
    (c) The identification of MWOBs for the provision of legal and non-
legal services will primarily be accomplished by:
    (1) Obtaining various lists and directories of MWOBs maintained by 
other federal, state, and local governmental agencies;
    (2) Participating in conventions, seminars and professional meetings 
comprised of, or attended predominately by, MWOBs;
    (3) Conducting seminars, meetings, workshops and other various 
functions to promote the identification and registration of MWOBs;
    (4) Placing MWOP promotional advertisements indicating opportunities 
with the FDIC in minority- and women-owned media; and
    (5) Monitoring to assure that FDIC staff interfacing with the 
contracting community are knowledgeable of, and actively promoting, the 
MWOP.



PART 362_ACTIVITIES OF INSURED STATE BANKS AND INSURED SAVINGS ASSOCIATIONS--

Table of Contents




               Subpart A_Activities of Insured State Banks

Sec.
362.1 Purpose and scope.

[[Page 536]]

362.2 Definitions.
362.3 Activities of insured State banks.
362.4 Subsidiaries of insured State banks.
362.5 Approvals previously granted.

 Subpart B_Safety and Soundness Rules Governing Insured State Nonmember 
                                  Banks

362.6 Purpose and scope.
362.7 Definitions.
362.8 Restrictions on activities of insured State nonmember banks 
          affiliated with certain securities companies.

       Subpart C_Activities of Insured State Savings Associations

362.9 Purpose and scope.
362.10 Definitions.
362.11 Activities of insured State savings associations.
362.12 Service corporations of insured State savings associations.
362.13 Approvals previously granted.

Subpart D_Acquiring, Establishing, or Conducting New Activities Through 
             a Subsidiary by an Insured Savings Association

362.14 Purpose and scope.
362.15 Acquiring or establishing a subsidiary; conducting new activities 
          through a subsidiary.

    Subpart E_Financial Subsidiaries of Insured State Nonmember Banks

362.16 Purpose and scope.
362.17 Definitions.
362.18 Financial subsidiaries of insured state nonmember banks.

    Authority: 12 U.S.C. 1816, 1818, 1819(a)(Tenth), 1828(j), 1828(m), 
1828a, 1831a, 1831e, 1831w, 1843(l).

    Source: 63 FR 66326, Dec. 1, 1998, unless otherwise noted.



               Subpart A_Activities of Insured State Banks



Sec. 362.1  Purpose and scope.

    (a) This subpart, along with the notice and application procedures 
in subpart G of part 303 of this chapter, implements the provisions of 
section 24 of the Federal Deposit Insurance Act (12 U.S.C. 1831a) that 
restrict and prohibit insured State banks and their subsidiaries from 
engaging in activities and investments that are not permissible for 
national banks and their subsidiaries. The phrase ``activity permissible 
for a national bank'' means any activity authorized for national banks 
under any statute including the National Bank Act (12 U.S.C. 21 et 
seq.), as well as activities recognized as permissible for a national 
bank in regulations, official circulars, bulletins, orders or written 
interpretations issued by the Office of the Comptroller of the Currency 
(OCC).
    (b) This subpart does not cover the following activities:
    (1) Activities conducted other than ``as principal,'' defined for 
purposes of this subpart as activities conducted as agent for a 
customer, conducted in a brokerage, custodial, advisory, or 
administrative capacity, or conducted as trustee, or in any 
substantially similar capacity. For example, this subpart does not cover 
acting solely as agent for the sale of insurance, securities, real 
estate, or travel services; nor does it cover acting as trustee, 
providing personal financial planning advice, or safekeeping services;
    (2) Interests in real estate in which the real property is used or 
intended in good faith to be used within a reasonable time by an insured 
State bank or its subsidiaries as offices or related facilities for the 
conduct of its business or future expansion of its business or used as 
public welfare investments of a type permissible for national banks; and
    (3) Equity investments acquired in connection with debts previously 
contracted (DPC) if the insured State bank does not hold the property 
for speculation and takes only such actions as would be permissible for 
a national bank's DPC. The bank must dispose of the property within the 
shorter of the period set by Federal law for national banks or the 
period allowed under State law. For real estate, national banks may not 
hold DPC for more than 10 years. For equity securities, national banks 
must generally divest DPC as soon as possible consistent with obtaining 
a reasonable return.
    (c) A subsidiary of an insured state bank may not engage in real 
estate investment activities that are not permissible for a subsidiary 
of a national bank unless the bank does so through a

[[Page 537]]

subsidiary of which the bank is a majority owner, is in compliance with 
applicable capital standards, and the FDIC has determined that the 
activity poses no significant risk to the appropriate deposit insurance 
fund. This subpart provides standards for majority-owned subsidiaries of 
insured state banks engaging in real estate investment activities that 
are not permissible for a subsidiary of a national bank.
    (d) The FDIC intends to allow insured State banks and their 
subsidiaries to undertake only safe and sound activities and investments 
that do not present significant risks to the Deposit Insurance Fund and 
that are consistent with the purposes of Federal deposit insurance and 
other applicable law. This subpart does not authorize any insured State 
bank to make investments or to conduct activities that are not 
authorized or that are prohibited by either State or Federal law.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1028, Jan. 5, 2001; 71 
FR 20527, Apr. 21, 2006]



Sec. 362.2  Definitions.

    For the purposes of this subpart, the following definitions will 
apply:
    (a) Bank, State bank, savings association, State savings 
association, depository institution, insured depository institution, 
insured State bank, Federal savings association, and insured State 
nonmember bank shall each have the same respective meaning contained in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813).
    (b) Activity means the conduct of business by a state-chartered 
depository institution, including acquiring or retaining an equity 
investment or other investment.
    (c) Change in control means any transaction:
    (1) By a State bank or its holding company for which a notice is 
required to be filed with the FDIC, or the Board of Governors of the 
Federal Reserve System (FRB), pursuant to section 7(j) of the Federal 
Deposit Insurance Act (12 U.S.C. 1817(j)) except a transaction that is 
presumed to be an acquisition of control under the FDIC's or FRB's 
regulations implementing section 7(j);
    (2) As a result of which a State bank eligible for the exception 
described in Sec. 362.3(a)(2)(iii) is acquired by or merged into a 
depository institution that is not eligible for the exception, or as a 
result of which its holding company is acquired by or merged into a 
holding company which controls one or more bank subsidiaries not 
eligible for the exception; or
    (3) In which control of the State bank is acquired by a bank holding 
company in a transaction requiring FRB approval under section 3 of the 
Bank Holding Company Act (12 U.S.C. 1842), other than a one bank holding 
company formation in which all or substantially all of the shares of the 
holding company will be owned by persons who were shareholders of the 
bank.
    (d) Company means any corporation, partnership, limited liability 
company, business trust, association, joint venture, pool, syndicate or 
other similar business organization.
    (e) Control means the power to vote, directly or indirectly, 25 
percent or more of any class of the voting securities of a company, the 
ability to control in any manner the election of a majority of a 
company's directors or trustees, or the ability to exercise a 
controlling influence over the management and policies of a company.
    (f) Convert its charter means an insured State bank undergoes any 
transaction that causes the bank to operate under a different form of 
charter than it had as of December 19, 1991, except a change from mutual 
to stock form shall not be considered a charter conversion.
    (g) Equity investment means an ownership interest in any company; 
any membership interest that includes a voting right in any company; any 
interest in real estate; any transaction which in substance falls into 
any of these categories even though it may be structured as some other 
form of business transaction; and includes an equity security. The term 
``equity investment'' does not include any of the foregoing if the 
interest is taken as security for a loan.
    (h) Equity security means any stock (other than adjustable rate 
preferred stock, money market (auction rate)

[[Page 538]]

preferred stock, or other newly developed instrument determined by the 
FDIC to have the character of debt securities), certificate of interest 
or participation in any profit-sharing agreement, collateral-trust 
certificate, preorganization certificate or subscription, transferable 
share, investment contract, or voting-trust certificate; any security 
immediately convertible at the option of the holder without payment of 
substantial additional consideration into such a security; any security 
carrying any warrant or right to subscribe to or purchase any such 
security; and any certificate of interest or participation in, temporary 
or interim certificate for, or receipt for any of the foregoing.
    (i) Extension of credit, executive officer, director, principal 
shareholder, and related interest each has the same respective meaning 
as is applicable for the purposes of section 22(h) of the Federal 
Reserve Act (12 U.S.C. 375b) and Sec. 337.3 of this chapter.
    (j) Institution shall have the same meaning as ``state-chartered 
depository institution.''
    (k) Majority-owned subsidiary means any corporation in which the 
parent insured State bank owns a majority of the outstanding voting 
stock.
    (l) National securities exchange means a securities exchange that is 
registered as a national securities exchange by the Securities and 
Exchange Commission pursuant to section 6 of the Securities Exchange Act 
of 1934 (15 U.S.C. 78f) and the National Market System, i.e., the top 
tier of the National Association of Securities Dealers Automated 
Quotation System.
    (m) Real estate investment activity means any interest in real 
estate (other than as security for a loan) held directly or indirectly 
that is not permissible for a national bank.
    (n) Residents of the state includes individuals living in the State, 
individuals employed in the State, any person to whom the company 
provided insurance as principal without interruption since such person 
resided in or was employed in the State, and companies or partnerships 
incorporated in, organized under the laws of, licensed to do business 
in, or having an office in the State.
    (o) Security has the same meaning as it has in part 344 of this 
chapter.
    (p) Significant risk to the Deposit Insurance Fund shall be 
understood to be present whenever the FDIC determines there is a high 
probability that the Deposit Insurance Fund administered by the FDIC may 
suffer a loss. Such risk may be present either when an activity 
contributes or may contribute to the decline in condition of a 
particular state-chartered depository institution or when a type of 
activity is found by the FDIC to contribute or potentially contribute to 
the deterioration of the overall condition of the banking system.
    (q) State-chartered depository institution means any State bank or 
State savings association insured by the FDIC.
    (r) Subsidiary means any company that is owned or controlled 
directly or indirectly by one or more insured depository institutions.
    (s) Tier one capital has the same meaning as set forth in part 325 
of this chapter for an insured State nonmember bank. For other state-
chartered depository institutions, the term ``tier one capital'' has the 
same meaning as set forth in the capital regulations adopted by the 
appropriate Federal banking agency.
    (t) Well-capitalized has the same meaning set forth in part 325 of 
this chapter for an insured State nonmember bank. For other state-
chartered depository institutions, the term ``well-capitalized'' has the 
same meaning as set forth in the capital regulations adopted by the 
appropriate Federal banking agency.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1028, Jan. 5, 2001; 71 
FR 20527, Apr. 21, 2006]



Sec. 362.3  Activities of insured State banks.

    (a) Equity investments--(1) Prohibited equity investments. No 
insured State bank may directly or indirectly acquire or retain as 
principal any equity investment of a type that is not permissible for a 
national bank unless one of the exceptions in paragraph (a)(2) of this 
section applies.
    (2) Exceptions. (i) Equity investment in majority-owned 
subsidiaries. An insured

[[Page 539]]

State bank may acquire or retain an equity investment in a subsidiary of 
which the bank is a majority owner, provided that the subsidiary is 
engaging in activities that are allowed pursuant to the provisions of or 
by application under Sec. 362.4(b).
    (ii) Investments in qualified housing projects. An insured State 
bank may invest as a limited partner in a partnership, or as a 
noncontrolling interest holder of a limited liability company, the sole 
purpose of which is to invest in the acquisition, rehabilitation, or new 
construction of a qualified housing project, provided that the bank's 
aggregate investment (including legally binding commitments) does not 
exceed, when made, 2 percent of total assets as of the date of the 
bank's most recent consolidated report of condition prior to making the 
investment. For the purposes of this paragraph (a)(2)(ii), Aggregate 
investment means the total book value of the bank's investment in the 
real estate calculated in accordance with the instructions for the 
preparation of the consolidated report of condition. Qualified housing 
project means residential real estate intended to primarily benefit 
lower income persons throughout the period of the bank's investment 
including any project that has received an award of low income housing 
tax credits under section 42 of the Internal Revenue Code (26 U.S.C. 42) 
(such as a reservation or allocation of credits) from a State or local 
housing credit agency. A residential real estate project that does not 
qualify for the tax credit under section 42 of the Internal Revenue Code 
will qualify under this exception if 50 percent or more of the housing 
units are to be occupied by lower income persons. A project will be 
considered residential despite the fact that some portion of the total 
square footage of the project is utilized for commercial purposes, 
provided that such commercial use is not the primary purpose of the 
project. Lower income has the same meaning as ``low income'' and 
``moderate income'' as defined for the purposes of Sec. 345.12(n) (1) 
and (2) of this chapter.
    (iii) Grandfathered investments in common or preferred stock; shares 
of investment companies. (A) General. An insured State bank that is 
located in a State which as of September 30, 1991, authorized investment 
in:
    (1)(i) Common or preferred stock listed on a national securities 
exchange (listed stock); or
    (ii) Shares of an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1 et seq.) (registered shares); and
    (2) Which during the period beginning on September 30, 1990, and 
ending on November 26, 1991, made or maintained an investment in listed 
stock or registered shares, may retain whatever lawfully acquired listed 
stock or registered shares it held and may continue to acquire listed 
stock and/or registered shares, provided that the bank files a notice in 
accordance with section 24(f)(6) of the Federal Deposit Insurance Act in 
compliance with Sec. 303.121 of this chapter and the FDIC processes the 
notice without objection under Sec. 303.122 of this chapter. Approval 
will be granted only if the FDIC determines that acquiring or retaining 
the stock or shares does not pose a significant risk to the Deposit 
Insurance Fund. Approval may be subject to whatever conditions or 
restrictions the FDIC determines are necessary or appropriate.
    (B) Loss of grandfather exception. The exception for grandfathered 
investments under paragraph (a)(2)(iii)(A) of this section shall no 
longer apply if the bank converts its charter or the bank or its parent 
holding company undergoes a change in control. If any of these events 
occur, the bank may retain its existing investments unless directed by 
the FDIC or other applicable authority to divest the listed stock or 
registered shares.
    (C) Maximum permissible investment. A bank's aggregate investment in 
listed stock and registered shares under paragraph (a)(2)(iii)(A) of 
this section shall in no event exceed, when made, 100 percent of the 
bank's tier one capital as measured on the bank's most recent 
consolidated report of condition (call report) prior to making any such 
investment. The lower of the bank's cost as determined in accordance 
with call report instructions or the market value of the listed stock 
and shares shall be used to determine compliance. The FDIC may determine 
when acting

[[Page 540]]

upon a notice filed in accordance with paragraph (a)(2)(iii)(A)(2) of 
this section that the permissible limit for any particular insured State 
bank is something less than 100 percent of tier one capital.
    (iv) Stock investment in insured depository institutions owned 
exclusively by other banks and savings associations. An insured State 
bank may acquire or retain the stock of an insured depository 
institution if the insured depository institution engages only in 
activities permissible for national banks; the insured depository 
institution is subject to examination and regulation by a State bank 
supervisor; the voting stock is owned by 20 or more insured depository 
institutions, but no one institution owns more than 15 percent of the 
voting stock; and the insured depository institution's stock (other than 
directors' qualifying shares or shares held under or acquired through a 
plan established for the benefit of the officers and employees) is owned 
only by insured depository institutions.
    (v) Stock investment in insurance companies--(A) Stock of director 
and officer liability insurance company. An insured State bank may 
acquire and retain up to 10 percent of the outstanding stock of a 
corporation that solely provides or reinsures directors', trustees', and 
officers' liability insurance coverage or bankers' blanket bond group 
insurance coverage for insured depository institutions.
    (B) Stock of savings bank life insurance company. An insured State 
bank located in Massachusetts, New York, or Connecticut may own stock in 
a savings bank life insurance company, provided that the savings bank 
life insurance company provides written disclosures to purchasers or 
potential purchasers of life insurance policies, other insurance 
products, and annuities that are consistent with the disclosures 
described in the Interagency Statement on the Retail Sale of Nondeposit 
Investment Products (FIL-9-94,\1\ February 17, 1994) or any successor 
requirement which indicates that the policies, products, and annuities 
are not FDIC insured deposits, are not guaranteed by the bank and are 
subject to investment risks, including possible loss of the principal 
amount invested.
---------------------------------------------------------------------------

    \1\ Financial institution letters (FILs) are available in the FDIC 
Public Information Center, room 100, 801 17th Street, N.W., Washington, 
D.C. 20429.
---------------------------------------------------------------------------

    (b) Activities other than equity investments--(1) Prohibited 
activities. An insured State bank may not directly or indirectly engage 
as principal in any activity, that is not an equity investment, and is 
of a type not permissible for a national bank unless one of the 
exceptions in paragraph (b)(2) of this section applies.
    (2) Exceptions--(i) Consent obtained through application. An insured 
State bank that meets and continues to meet the applicable capital 
standards set by the appropriate Federal banking agency may conduct 
activities prohibited by paragraph (b)(1) of this section if the bank 
obtains the FDIC's prior written consent. Consent will be given only if 
the FDIC determines that the activity poses no significant risk to the 
Deposit Insurance Fund. Applications for consent should be filed in 
accordance with Sec. 303.121 of this chapter and will be processed 
under Sec. 303.122(b) of this chapter. Approvals granted under Sec. 
303.122(b) of this chapter may be made subject to any conditions or 
restrictions found by the FDIC to be necessary to protect the Deposit 
Insurance Fund from risk, to prevent unsafe or unsound banking 
practices, and/or to ensure that the activity is consistent with the 
purposes of Federal deposit insurance and other applicable law.
    (ii) Insurance underwriting--(A) Savings bank life insurance. An 
insured State bank that is located in Massachusetts, New York or 
Connecticut may provide as principal savings bank life insurance through 
a department of the bank, provided that the department meets the core 
standards of paragraph (c) of this section or submits an application in 
compliance with Sec. 303.121 of this chapter and the FDIC grants its 
consent under the procedures in Sec. 303.122(b) of this chapter, and 
the department provides purchasers or potential purchasers of life 
insurance policies, other insurance products and annuities written 
disclosures that are consistent with the disclosures described in the 
Interagency Statement

[[Page 541]]

on the Retail Sale of Nondeposit Investment Products (FIL-9-94, February 
17, 1994) and any successor requirement which indicates that the 
policies, products and annuities are not FDIC insured deposits, are not 
guaranteed by the bank, and are subject to investment risks, including 
the possible loss of the principal amount invested.
    (B) Federal crop insurance. Any insured State bank that was 
providing insurance as principal on or before September 30, 1991, which 
was reinsured in whole or in part by the Federal Crop Insurance 
Corporation, may continue to do so.
    (C) Grandfathered insurance underwriting. A well-capitalized insured 
State bank that on November 21, 1991, was lawfully providing insurance 
as principal through a department of the bank may continue to provide 
the same types of insurance as principal to the residents of the State 
or States in which the bank did so on such date provided that the bank's 
department meets the core standards of paragraph (c) of this section, or 
submits an application in compliance with Sec. 303.121 of this chapter 
and the FDIC grants its consent under the procedures in Sec. 303.122(b) 
of this chapter.
    (iii) Acquiring and retaining adjustable rate and money market 
preferred stock. (A) An insured State bank's investment of up to 15 
percent of the bank's tier one capital in adjustable rate preferred 
stock or money market (auction rate) preferred stock does not represent 
a significant risk to the Deposit Insurance Fund. An insured State bank 
may conduct this activity without first obtaining the FDIC's consent, 
provided that the bank meets and continues to meet the applicable 
capital standards as prescribed by the appropriate Federal banking 
agency. The fact that prior consent is not required by this subpart does 
not preclude the FDIC from taking any appropriate action with respect to 
the activities if the facts and circumstances warrant such action.
    (B) An insured State bank may acquire or retain other instruments of 
a type determined by the FDIC to have the character of debt securities 
and not to represent a significant risk to the Deposit Insurance Fund. 
Such instruments shall be included in the 15 percent of tier one capital 
limit imposed in paragraph (b)(2)(iii)(A) of this section. An insured 
State bank may conduct this activity without first obtaining the FDIC's 
consent, provided that the bank meets and continues to meet the 
applicable capital standards as prescribed by the appropriate Federal 
banking agency. The fact that prior consent is not required by this 
subpart does not preclude the FDIC from taking any appropriate action 
with respect to the activities if the facts and circumstances warrant 
such action.
    (c) Core standards. For any insured State bank to be eligible to 
conduct insurance activities listed in paragraph (b)(2)(ii)(A) or (C) of 
this section, the bank must conduct the activities in a department that 
meets the following core separation and operating standards:
    (1) The department is physically distinct from the remainder of the 
bank;
    (2) The department maintains separate accounting and other records;
    (3) The department has assets, liabilities, obligations and expenses 
that are separate and distinct from those of the remainder of the bank;
    (4) The department is subject to State statute that requires its 
obligations, liabilities and expenses be satisfied only with the assets 
of the department; and
    (5) The department informs its customers that only the assets of the 
department may be used to satisfy the obligations of the department.

[63 FR 66326, Dec. 1, 1998, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 362.4  Subsidiaries of insured State banks.

    (a) Prohibition. A subsidiary of an insured State bank may not 
engage as principal in any activity that is not of a type permissible 
for a subsidiary of a national bank, unless it meets one of the 
exceptions in paragraph (b) of this section.
    (b) Exceptions--(1) Consent obtained through application. A 
subsidiary of an insured State bank may conduct otherwise prohibited 
activities if the bank obtains the FDIC's prior written consent and the 
insured State bank meets and continues to meet the applicable

[[Page 542]]

capital standards set by the appropriate Federal banking agency. Consent 
will be given only if the FDIC determines that the activity poses no 
significant risk to the Deposit Insurance Fund. Applications for consent 
should be filed in accordance with Sec. 303.121 of this chapter and 
will be processed under Sec. 303.122(b) of this chapter. Approvals 
granted under Sec. 303.122(b) of this chapter may be made subject to 
any conditions or restrictions found by the FDIC to be necessary to 
protect the Deposit Insurance Fund from risk, to prevent unsafe or 
unsound banking practices, and/or to ensure that the activity is 
consistent with the purposes of Federal deposit insurance and other 
applicable law.
    (2) Grandfathered insurance underwriting subsidiaries. A subsidiary 
of an insured State bank may:
    (i) Engage in grandfathered insurance underwriting if the insured 
State bank or its subsidiary on November 21, 1991, was lawfully 
providing insurance as principal. The subsidiary may continue to provide 
the same types of insurance as principal to the residents of the State 
or states in which the bank or subsidiary did so on such date provided 
that:
    (A)(1) The bank meets the capital requirements of paragraph (e) of 
this section; and
    (2) The subsidiary is an ``eligible subsidiary'' as described in 
paragraph (c)(2) of this section; or
    (B) The bank submits an application in compliance with Sec. 303.121 
of this chapter and the FDIC grants its consent under the procedures in 
Sec. 303.122(b) of this chapter.
    (ii) Continue to provide as principal title insurance, provided the 
bank was required before June 1, 1991, to provide title insurance as a 
condition of the bank's initial chartering under State law and neither 
the bank nor its parent holding company undergoes a change in control.
    (iii) May continue to provide as principal insurance which is 
reinsured in whole or in part by the Federal Crop Insurance Corporation 
if the subsidiary was engaged in the activity on or before September 30, 
1991.
    (3) Majority-owned subsidiaries' ownership of equity investments 
that represent a control interest in a company. The FDIC has determined 
that investment in the following by a majority-owned subsidiary of an 
insured State bank does not represent a significant risk to the Deposit 
Insurance Fund:
    (i) Equity investment in a company engaged in real estate or 
securities activities authorized in paragraph (b)(5) of this section if 
the bank complies with the following restrictions and files a notice in 
compliance with Sec. 303.121 of this chapter and the FDIC processes the 
notice without objection under Sec. 303.122(a) of this chapter. The 
FDIC is not precluded from taking any appropriate action or imposing 
additional requirements with respect to the activity if the facts and 
circumstances warrant such action. If changes to the management or 
business plan of the company at any time result in material changes to 
the nature of the company's business or the manner in which its business 
is conducted, the insured State bank shall advise the appropriate 
regional director (DSC) in writing within 10 business days after such 
change. Investment under this paragraph is authorized if:
    (A) The majority-owned subsidiary controls the company;
    (B) The bank meets the core eligibility criteria of paragraph (c)(1) 
of this section;
    (C) The majority-owned subsidiary meets the core eligibility 
criteria of paragraph (c)(2) of this section (including any 
modifications thereof applicable under paragraph (b)(5)(i) of this 
section), or the company is a corporation meeting such criteria;
    (D) The bank's transactions with the majority-owned subsidiary, and 
the bank's transactions with the company, comply with the investment and 
transaction limits of paragraph (d) of this section;
    (E) The bank complies with the capital requirements of paragraph (e) 
of this section with respect to the majority-owned subsidiary and the 
company; and
    (F) To the extent the company is engaged in securities activities 
authorized by paragraph (b)(5)(ii) of this section, the bank and the 
company comply with the additional requirements

[[Page 543]]

therein as if the company were a majority-owned subsidiary.
    (ii) Equity securities of a company engaged in the following 
activities, if the majority-owned subsidiary controls the company or the 
company is controlled by insured depository institutions, and the bank 
meets and continues to meet the applicable capital standards as 
prescribed by the appropriate Federal banking agency. The FDIC consents 
that a majority-owned subsidiary may conduct such activity without first 
obtaining the FDIC's consent. The fact that prior consent is not 
required by this subpart does not preclude the FDIC from taking any 
appropriate action with respect to the activity if the facts and 
circumstances warrant such action:
    (A) Any activity that is permissible for a national bank, including 
such permissible activities that may require the company to register as 
a securities broker;
    (B) Acting as an insurance agency;
    (C) Engaging in any activity permissible for an insured State bank 
under Sec. 362.3(b)(2)(iii) to the same extent permissible for the 
insured bank thereunder, so long as instruments held under this 
paragraph (b)(3)(ii)(C), paragraph (b)(7) of this section, and Sec. 
362.3(b)(2)(iii) in the aggregate do not exceed the limit set by Sec. 
362.3(b)(2)(iii);
    (D) Engaging in any activity permissible for a majority-owned 
subsidiary of an insured State bank under paragraph (b)(6) of this 
section to the same extent and manner permissible for the majority-owned 
subsidiary thereunder; and
    (4) Majority-owned subsidiary's ownership of certain securities that 
do not represent a control interest--(i) Grandfathered investments in 
common or preferred stock and shares of investment companies. Any 
insured State bank that has received approval to invest in common or 
preferred stock or shares of an investment company pursuant to Sec. 
362.3(a)(2)(iii) may conduct the approved investment activities through 
a majority-owned subsidiary of the bank without any additional approval 
from the FDIC provided that any conditions or restrictions imposed with 
regard to the approval granted under Sec. 362.3(a)(2)(iii) are met.
    (ii) Bank stock. An insured State bank may indirectly through a 
majority-owned subsidiary organized for such purpose invest in up to ten 
percent of the outstanding stock of another insured bank.
    (5) Majority-owned subsidiaries conducting real estate investment 
activities and securities underwriting. The FDIC has determined that the 
following activities do not represent a significant risk to the Deposit 
Insurance Fund, provided that the activities are conducted by a 
majority-owned subsidiary of an insured State bank in compliance with 
the core eligibility requirements listed in paragraph (c) of this 
section; any additional requirements listed in paragraph (b)(5) (i) or 
(ii) of this section; the bank complies with the investment and 
transaction limitations of paragraph (d) of this section; and the bank 
meets the capital requirements of paragraph (e) of this section. The 
FDIC consents that these listed activities may be conducted by a 
majority-owned subsidiary of an insured State bank if the bank files a 
notice in compliance with Sec. 303.121 of this chapter and the FDIC 
processes the notice without objection under Sec. 303.122(a) of this 
chapter. The FDIC is not precluded from taking any appropriate action or 
imposing additional requirements with respect to the activities if the 
facts and circumstances warrant such action. If changes to the 
management or business plan of the majority-owned subsidiary at any time 
result in material changes to the nature of the majority-owned 
subsidiary's business or the manner in which its business is conducted, 
the insured State bank shall advise the appropriate regional director 
(DSC) in writing within 10 business days after such change. Such a 
majority-owned subsidiary may:
    (i) Real estate investment activities. Engage in real estate 
investment activities. However, the requirements of paragraph (c)(2) 
(ii), (v), (vi), and (xi) of this section need not be met if the bank's 
investment in the equity securities of the subsidiary does not exceed 2 
percent of the bank's tier one capital; the bank has only one subsidiary 
engaging in real estate investment activities; and the bank's total 
investment in the subsidiary does not include

[[Page 544]]

any extensions of credit from the bank to the subsidiary, any debt 
instruments issued by the subsidiary, or any other transaction 
originated by the bank that is used to benefit the subsidiary.
    (ii) Securities activities. Engage in the public sale, distribution 
or underwriting of securities that are not permissible for a national 
bank under section 16 of the Banking Act of 1933 (12 U.S.C. 24 Seventh), 
provided that the insured state nonmember bank lawfully controlled or 
acquired the subsidiary and had an approved notice or order from the 
FDIC prior to November 12, 1999 and provided that the following 
additional conditions are, and continue to be, met:
    (A) The state-chartered depository institution adopts policies and 
procedures, including appropriate limits on exposure, to govern the 
institution's participation in financing transactions underwritten or 
arranged by an underwriting majority-owned subsidiary;
    (B) The state-chartered depository institution may not express an 
opinion on the value or the advisability of the purchase or sale of 
securities underwritten or dealt in by a majority-owned subsidiary 
unless the state-chartered depository institution notifies the customer 
that the majority-owned subsidiary is underwriting or distributing the 
security;
    (C) The majority-owned subsidiary is registered with the Securities 
and Exchange Commission, is a member in good standing with the 
appropriate self-regulatory organization, and promptly informs the 
appropriate regional director (DSC) in writing of any material actions 
taken against the majority-owned subsidiary or any of its employees by 
the State, the appropriate self-regulatory organizations or the 
Securities and Exchange Commission; and
    (D) The state-chartered depository institution does not knowingly 
purchase as principal or fiduciary during the existence of any 
underwriting or selling syndicate any securities underwritten by the 
majority-owned subsidiary unless the purchase is approved by the state-
chartered depository institution's board of directors before the 
securities are initially offered for sale to the public.
    (6) Real estate leasing. A majority-owned subsidiary of an insured 
State bank acting as lessor under a real property lease which is the 
equivalent of a financing transaction, meeting the lease criteria of 
paragraph (b)(6)(i) of this section and the underlying real estate 
requirements of paragraph (b)(6)(ii) of this section, does not represent 
a significant risk to the Deposit Insurance Fund. A majority-owned 
subsidiary may conduct this activity without first obtaining the FDIC's 
consent, provided that the bank meets and continues to meet the 
applicable capital standards as prescribed by the appropriate Federal 
banking agency. The fact that prior consent is not required by this 
subpart does not preclude the FDIC from taking any appropriate action 
with respect to the activity if the facts and circumstances warrant such 
action.
    (i) Lease criteria--(A) Capital lease. The lease must qualify as a 
capital lease as to the lessor under generally accepted accounting 
principles.
    (B) Nonoperating basis. The bank and the majority-owned subsidiary 
shall not, directly or indirectly, provide or be obligated to provide 
servicing, repair, or maintenance to the property, except that the lease 
may include provisions permitting the subsidiary to protect the value of 
the leased property in the event of a change in circumstances that 
increases the subsidiary's exposure to loss, or the subsidiary may take 
reasonable and appropriate action to salvage or protect the value of the 
leased property in such circumstances.
    (ii) Underlying real property requirements--(A) Acquisition. The 
majority-owned subsidiary may acquire specific real estate to be leased 
only after the subsidiary has entered into:
    (1) A lease meeting the requirements of paragraph (b)(6)(i) of this 
section;
    (2) A legally binding written commitment to enter into such a lease; 
or
    (3) A legally binding written agreement that indemnifies the 
subsidiary against loss in connection with its acquisition of the 
property.
    (B) Improvements. Any expenditures by the majority-owned subsidiary 
to

[[Page 545]]

make reasonable repairs, renovations, and improvements necessary to 
render the property suitable to the lessee shall not exceed 25 percent 
of the majority-owned subsidiary's full investment in the real estate.
    (C) Divestiture. At the expiration of the initial lease (including 
any renewals or extensions thereof), the majority-owned subsidiary 
shall, as soon as practicable but in any event no less than two years, 
either:
    (1) Re-lease the property under a lease meeting the requirement of 
paragraph (b)(6)(i)(B) of this section; or
    (2) Divest itself of all interest in the property.
    (7) Acquiring and retaining adjustable rate and money market 
preferred stock and similar instruments. The FDIC has determined it does 
not present a significant risk to the Deposit Insurance Fund for a 
majority-owned subsidiary of an insured State bank to engage in any 
activity permissible for an insured State bank under Sec. 
362.3(b)(2)(iii), so long as instruments held under this paragraph, 
paragraph (b)(3)(ii)(C) of this section, and Sec. 362.3(b)(2)(iii) in 
the aggregate do not exceed the limit set by Sec. 362.3(b)(2)(iii). A 
majority-owned subsidiary may conduct this activity without first 
obtaining the FDIC's consent, provided that the bank meets and continues 
to meet the applicable capital standards as prescribed by the 
appropriate Federal banking agency. The fact that prior consent is not 
required by this subpart does not preclude the FDIC from taking any 
appropriate action with respect to the activity if the facts and 
circumstances warrant such action.
    (c) Core eligibility requirements. If specifically required by this 
part or by FDIC order, any state-chartered depository institution that 
wishes to be eligible and continue to be eligible to conduct as 
principal activities through a subsidiary that are not permissible for a 
subsidiary of a national bank must be an ``eligible depository 
institution'' and the subsidiary must be an ``eligible subsidiary''.
    (1) A state-chartered depository institution is an ``eligible 
depository institution'' if it:
    (i) Has been chartered and operating for three or more years, unless 
the appropriate regional director (DSC) finds that the state-chartered 
depository institution is owned by an established, well-capitalized, 
well-managed holding company or is managed by seasoned management;
    (ii) Has an FDIC-assigned composite rating of 1 or 2 assigned under 
the Uniform Financial Institutions Rating System (UFIRS) (or such other 
comparable rating system as may be adopted in the future) as a result of 
its most recent Federal or State examination for which the FDIC assigned 
a rating;
    (iii) Received a rating of 1 or 2 under the ``management'' component 
of the UFIRS as assigned by the institution's appropriate Federal 
banking agency;
    (iv) Has a satisfactory or better Community Reinvestment Act rating 
at its most recent examination conducted by the institution's 
appropriate Federal banking agency;
    (v) Has a compliance rating of 1 or 2 at its most recent examination 
conducted by the institution's appropriate Federal banking agency; and
    (vi) Is not subject to a cease and desist order, consent order, 
prompt corrective action directive, formal or informal written 
agreement, or other administrative agreement with its appropriate 
Federal banking agency or chartering authority.
    (2) A subsidiary of a state-chartered depository institution is an 
``eligible subsidiary'' if it:
    (i) Meets applicable statutory or regulatory capital requirements 
and has sufficient operating capital in light of the normal obligations 
that are reasonably foreseeable for a business of its size and character 
within the industry;
    (ii) Is physically separate and distinct in its operations from the 
operations of the state-chartered depository institution, provided that 
this requirement shall not be construed to prohibit the state-chartered 
depository institution and its subsidiary from sharing the same facility 
if the area where the subsidiary conducts business with the public is 
clearly distinct from the area where customers of the state-chartered 
depository institution conduct business with the institution. The extent 
of the separation will vary according to the type and frequency of 
customer contact;

[[Page 546]]

    (iii) Maintains separate accounting and other business records;
    (iv) Observes separate business entity formalities such as separate 
board of directors' meetings;
    (v) Has a chief executive officer of the subsidiary who is not an 
employee of the institution;
    (vi) Has a majority of its board of directors who are neither 
directors nor executive officers of the state-chartered depository 
institution;
    (vii) Conducts business pursuant to independent policies and 
procedures designed to inform customers and prospective customers of the 
subsidiary that the subsidiary is a separate organization from the 
state-chartered depository institution and that the state-chartered 
depository institution is not responsible for and does not guarantee the 
obligations of the subsidiary;
    (viii) Has only one business purpose within the types described in 
paragraphs (b)(2) and (b)(5) of this section;
    (ix) Has a current written business plan that is appropriate to the 
type and scope of business conducted by the subsidiary;
    (x) Has qualified management and employees for the type of activity 
contemplated, including all required licenses and memberships, and 
complies with industry standards; and
    (xi) Establishes policies and procedures to ensure adequate 
computer, audit and accounting systems, internal risk management 
controls, and has necessary operational and managerial infrastructure to 
implement the business plan.
    (d) Investment and transaction limits--(1) General. If specifically 
required by this part or FDIC order, the following conditions and 
restrictions apply to an insured State bank and its subsidiaries that 
engage in and wish to continue to engage in activities which are not 
permissible for a national bank subsidiary.
    (2) Investment limits--(i) Aggregate investment in subsidiaries. An 
insured state bank's aggregate investment in all subsidiaries conducting 
activities subject to this paragraph (d) shall not exceed 20 percent of 
the insured State bank's tier one capital.
    (ii) Definition of investment. (A) For purposes of this paragraph 
(d), the term ``investment'' means:
    (1) Any extension of credit to the subsidiary by the insured State 
bank;
    (2) Any debt securities, as such term is defined in part 344 of this 
chapter, issued by the subsidiary held by the insured State bank;
    (3) The acceptance by the insured State bank of securities issued by 
the subsidiary as collateral for an extension of credit to any person or 
company; and
    (4) Any extensions of credit by the insured State bank to any third 
party for the purpose of making a direct investment in the subsidiary, 
making any investment in which the subsidiary has an interest, or which 
is used for the benefit of, or transferred to, the subsidiary.
    (B) For the purposes of this paragraph (d), the term ``investment'' 
does not include:
    (1) Extensions of credit by the insured State bank to finance sales 
of assets by the subsidiary which do not involve more than the normal 
degree of risk of repayment and are extended on terms that are 
substantially similar to those prevailing at the time for comparable 
transactions with or involving unaffiliated persons or companies;
    (2) An extension of credit by the insured State bank to the 
subsidiary that is fully collateralized by government securities, as 
such term is defined in Sec. 344.3 of this chapter; or
    (3) An extension of credit by the insured State bank to the 
subsidiary that is fully collateralized by a segregated deposit in the 
insured State bank.
    (3) Transaction requirements--(i) Arm's length transaction 
requirement. With the exception of giving the subsidiary immediate 
credit for uncollected items received in the ordinary course of 
business, an insured State bank may not carry out any of the following 
transactions with a subsidiary subject to this paragraph (d) unless the 
transaction is on terms and conditions that are substantially the same 
as those prevailing at the time for comparable transactions with 
unaffiliated parties:
    (A) Make an investment in the subsidiary;

[[Page 547]]

    (B) Purchase from or sell to the subsidiary any assets (including 
securities);
    (C) Enter into a contract, lease, or other type of agreement with 
the subsidiary;
    (D) Pay compensation to a majority-owned subsidiary or any person or 
company who has an interest in the subsidiary; or
    (E) Engage in any such transaction in which the proceeds thereof are 
used for the benefit of, or are transferred to, the subsidiary.
    (ii) Prohibition on purchase of low quality assets. An insured State 
bank is prohibited from purchasing a low quality asset from a subsidiary 
subject to this paragraph (d). For purposes of this subsection, ``low 
quality asset'' means:
    (A) An asset classified as ``substandard'', ``doubtful'', or 
``loss'' or treated as ``other assets especially mentioned'' in the most 
recent report of examination of the bank;
    (B) An asset in a nonaccrual status;
    (C) An asset on which principal or interest payments are more than 
30 days past due; or
    (D) An asset whose terms have been renegotiated or compromised due 
to the deteriorating financial condition of the obligor.
    (iii) Insider transaction restriction. Neither the insured State 
bank nor the subsidiary subject to this paragraph (d) may enter into any 
transaction (exclusive of those covered by Sec. 337.3 of this chapter) 
with the bank's executive officers, directors, principal shareholders or 
related interests of such persons which relate to the subsidiary's 
activities unless:
    (A) The transactions are on terms and conditions that are 
substantially the same as those prevailing at the time for comparable 
transactions with persons not affiliated with the insured State bank; or
    (B) The transactions are pursuant to a benefit or compensation 
program that is widely available to employees of the bank, and that does 
not give preference to the bank's executive officers, directors, 
principal shareholders or related interests of such persons over other 
bank employees.
    (iv) Anti-tying restriction. Neither the insured State bank nor the 
majority-owned subsidiary may require a customer to either buy any 
product or use any service from the other as a condition of entering 
into a transaction.
    (4) Collateralization requirements. (i) An insured State bank is 
prohibited from making an investment in a subsidiary subject to this 
paragraph (d) unless such transaction is fully-collateralized at the 
time the transaction is entered into. No insured State bank may accept a 
low quality asset as collateral. An extension of credit is fully 
collateralized if it is secured at the time of the transaction by 
collateral having a market value equal to at least:
    (A) 100 percent of the amount of the transaction if the collateral 
is composed of:
    (1) Obligations of the United States or its agencies;
    (2) Obligations fully guaranteed by the United States or its 
agencies as to principal and interest;
    (3) Notes, drafts, bills of exchange or bankers acceptances that are 
eligible for rediscount or purchase by the Federal Reserve Bank; or
    (4) A segregated, earmarked deposit account with the insured State 
bank;
    (B) 110 percent of the amount of the transaction if the collateral 
is composed of obligations of any State or political subdivision of any 
State;
    (C) 120 percent of the amount of the transaction if the collateral 
is composed of other debt instruments, including receivables; or
    (D) 130 percent of the amount of the transaction if the collateral 
is composed of stock, leases, or other real or personal property.
    (ii) An insured State bank may not release collateral prior to 
proportional payment of the extension of credit; however, collateral may 
be substituted if there is no diminution of collateral coverage.
    (5) Investment and transaction limits extended to insured State bank 
subsidiaries. For purposes of applying paragraphs (d)(2) through (d)(4) 
of this section, any reference to ``insured State bank'' means the 
insured State bank and any subsidiaries of the insured State bank which 
are not themselves subject under this part or FDIC order

[[Page 548]]

to the restrictions of this paragraph (d).
    (e) Capital requirements. If specifically required by this part or 
by FDIC order, any insured State bank that wishes to conduct or continue 
to conduct as principal activities through a subsidiary that are not 
permissible for a subsidiary of a national bank must:
    (1) Be well-capitalized after deducting from its tier one capital 
the investment in equity securities of the subsidiary as well as the 
bank's pro rata share of any retained earnings of the subsidiary;
    (2) Reflect this deduction on the appropriate schedule of the bank's 
consolidated report of income and condition; and
    (3) Use such regulatory capital amount for the purposes of the 
bank's assessment risk classification under part 327 of this chapter and 
its categorization as a ``well-capitalized'', an ``adequately 
capitalized'', an ``undercapitalized'', or a ``significantly 
undercapitalized'' institution as defined in Sec. 325.103(b) of this 
chapter, provided that the capital deduction shall not be used for 
purposes of determining whether the bank is ``critically 
undercapitalized'' under part 325 of this chapter.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1028, Jan. 5, 2001; 71 
FR 20527, Apr. 21, 2006]



Sec. 362.5  Approvals previously granted.

    (a) FDIC consent by order or notice. An insured State bank that 
previously filed an application or notice under part 362 in effect prior 
to January 1, 1999 (see 12 CFR part 362 revised as of January 1, 1998), 
and obtained the FDIC's consent to engage in an activity or to acquire 
or retain a majority-owned subsidiary engaging as principal in an 
activity or acquiring and retaining any investment that is prohibited 
under this subpart may continue that activity or retain that investment 
without seeking the FDIC's consent, provided that the insured State bank 
and its subsidiary, if applicable, continue to meet the conditions and 
restrictions of the approval. An insured State bank which was granted 
approval based on conditions which differ from the requirements of Sec. 
362.4(c)(2), (d) and (e) will be considered to meet the conditions and 
restrictions of the approval relating to being an eligible subsidiary, 
meeting investment and transactions limits, and meeting capital 
requirements if the insured State bank and subsidiary meet the 
requirements of Sec. 362.4(c)(2), (d) and (e). If the majority-owned 
subsidiary is engaged in real estate investment activities not exceeding 
2 percent of the tier one capital of a bank and meeting the other 
conditions of Sec. 362.4(b)(5)(i), the majority-owned subsidiary's 
compliance with Sec. 362.4(c)(2) under the preceding sentence may be 
pursuant to the modifications authorized by Sec. 362.4(b)(5)(i). Once 
an insured State bank elects to comply with Sec. 362.4 (c)(2), (d), and 
(e), it may not revert to the corresponding provisions of the approval 
order.
    (b) Approvals by regulation--
    (1)-(5) [Reserved]
    (6) Adjustable rate or money market preferred stock. An insured 
State bank owning adjustable rate or money market (auction rate) 
preferred stock pursuant to Sec. 362.4(c)(3)(v) in effect prior to 
January 1, 1999 (see 12 CFR part 362 revised as of January 1, 1998), in 
excess of the amount limit in Sec. 362.3(b)(2)(iii) may continue to 
hold any overlimit shares of such stock acquired before January 1, 1999, 
until redeemed or repurchased by the issuer, but such stock shall be 
included as part of the amount limit in Sec. 362.3(b)(2)(iii) when 
determining whether the bank may acquire new stock thereunder.
    (c) Charter conversions. (1) An insured State bank that has 
converted its charter from an insured state savings association may 
continue activities through a majority-owned subsidiary that were 
permissible prior to the time it converted its charter only if the 
insured State bank receives the FDIC's consent. Except as provided in 
paragraph (c)(2) of this section, the insured State bank should apply 
under Sec. 362.4(b)(1), submit any notice required under Sec. 362.4(b) 
(4) or (5), or comply with the provisions of Sec. 362.4(b) (3), (6), or 
(7) if applicable, to continue the activity.
    (2) Exception for prior consent. If the FDIC had granted consent to 
the savings association under section 28 of the Federal Deposit 
Insurance Act (12

[[Page 549]]

U.S.C. 1831(e)) prior to the time the savings association converted its 
charter, the insured State bank may continue the activities without 
providing notice or making application to the FDIC, provided that the 
bank and its subsidiary as applicable are in compliance with:
    (i) The terms of the FDIC approval order; and
    (ii) The provisions of Sec. 362.4(c)(2), (d), and (e) regarding 
operating as an ``eligible subsidiary'', ``investment and transaction 
limits'', and ``capital requirements'.
    (3) Divestiture. An insured State bank that does not receive FDIC 
consent shall divest of the nonconforming investment as soon as 
practical but in no event later than two years from the date of charter 
conversion.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1028, Jan. 5, 2001]



 Subpart B_Safety and Soundness Rules Governing Insured State Nonmember 
                                  Banks



Sec. 362.6  Purpose and scope.

    This subpart, along with the notice and application procedures in 
subpart G of part 303 of this chapter apply to certain banking practices 
that may have adverse effects on the safety and soundness of insured 
state nonmember banks. This subpart contains the required prudential 
separations between certain securities underwriting affiliates and 
insured state nonmember banks. The standards only will apply to 
affiliates of insured state nonmember banks that are not controlled by 
an entity that is supervised by a federal banking agency.

[66 FR 1028, Jan. 5, 2001]



Sec. 362.7  Definitions.

    For the purposes of this subpart, the following definitions apply:
    (a) Affiliate has the same meaning contained in section 3 of the 
Federal Deposit Insurance Act (12 U.S.C. 1813).
    (b) Activity, company, control, equity security, insured state 
nonmember bank, security and subsidiary have the same meaning as 
provided in subpart A of this part.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1028, Jan. 5, 2001]



Sec. 362.8  Restrictions on activities of insured state nonmember banks 

affiliated with certain securities companies.

    (a) The FDIC has found that an unrestricted affiliation between an 
insured state nonmember bank and certain companies may have adverse 
effects on the safety and soundness of insured state nonmember banks.
    (b) An insured state nonmember bank is prohibited from becoming or 
remaining affiliated with any securities underwriting affiliate company 
that directly engages in the public sale, distribution or underwriting 
of stocks, bonds, debentures, notes, or other securities activity, of a 
type not permissible for a national bank directly, unless the company is 
controlled by an entity that is supervised by a federal banking agency 
or the state nonmember bank submits an application in compliance with 
Sec. 303.121 of this chapter and the FDIC grants its consent under the 
procedure in Sec. 303.122(b) of this chapter, or the state nonmember 
bank and the securities underwriting affiliate company comply with the 
following requirements:
    (1) The securities business of the affiliate is physically separate 
and distinct in its operations from the operations of the bank, provided 
that this requirement shall not be construed to prohibit the bank and 
its affiliate from sharing the same facility if the area where the 
affiliate conducts retail sales activity with the public is physically 
distinct from the routine deposit taking area of the bank;
    (2) The affiliate conducts business pursuant to independent policies 
and procedures designed to inform customers and prospective customers of 
the affiliate that the affiliate is a separate organization from the 
bank and the state-chartered depository institution is not responsible 
for and does not guarantee the obligations of the affiliate;
    (3) The bank adopts policies and procedures, including appropriate 
limits on exposure, to govern its participation

[[Page 550]]

in financing transactions underwritten by an underwriting affiliate;
    (4) The bank does not express an opinion on the value or the 
advisability of the purchase or sale of securities underwritten or dealt 
in by an affiliate unless it notifies the customer that the entity 
underwriting, making a market, distributing or dealing in the securities 
is an affiliate of the bank; and
    (5) The bank complies with the investment and transaction 
limitations in sections 23A and 23B of the Federal Reserve Act (12 
U.S.C. 371c and 371c-1) with respect to the affiliate.

[66 FR 1028, Jan. 5, 2001]



       Subpart C_Activities of Insured State Savings Associations



Sec. 362.9  Purpose and scope.

    (a) This subpart, along with the notice and application procedures 
in subpart H of part 303 of this chapter, implements the provisions of 
section 28 of the Federal Deposit Insurance Act (12 U.S.C. 1831e) that 
restrict and prohibit insured state savings associations and their 
service corporations from engaging in activities and investments of a 
type that are not permissible for Federal savings associations and their 
service corporations. The phrase ``activity permissible for a Federal 
savings association'' means any activity authorized for Federal savings 
associations under any statute including the Home Owners' Loan Act 
(HOLA, 12 U.S.C. 1464 et seq.), as well as activities recognized as 
permissible for a Federal savings association in regulations, official 
thrift bulletins, orders or written interpretations issued by the Office 
of Thrift Supervision (OTS), or its predecessor, the Federal Home Loan 
Bank Board.
    (b) This subpart does not cover the following activities:
    (1) Activities conducted by the insured state savings association 
other than ``as principal'', defined for purposes of this subpart as 
activities conducted as agent for a customer, conducted in a brokerage, 
custodial, advisory, or administrative capacity, or conducted as 
trustee, or in any substantially similar capacity. For example, this 
subpart does not cover acting solely as agent for the sale of insurance, 
securities, real estate, or travel services; nor does it cover acting as 
trustee, providing personal financial planning advice, or safekeeping 
services.
    (2) Interests in real estate in which the real property is used or 
intended in good faith to be used within a reasonable time by an insured 
savings association or its service corporations as offices or related 
facilities for the conduct of its business or future expansion of its 
business or used as public welfare investments of a type and in an 
amount permissible for Federal savings associations.
    (3) Equity investments acquired in connection with debts previously 
contracted (DPC) if the insured savings association or its service 
corporation takes only such actions as would be permissible for a 
Federal savings association's or its service corporation's DPC holdings.
    (c) The FDIC intends to allow insured state savings associations and 
their service corporations to undertake only safe and sound activities 
and investments that do not present significant risks to the Deposit 
Insurance Fund and that are consistent with the purposes of Federal 
deposit insurance and other applicable law. This subpart does not 
authorize any insured state savings association to make investments or 
conduct activities that are not authorized or that are prohibited by 
either Federal or state law.

[63 FR 66326, Dec. 1, 1998, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 362.10  Definitions.

    For the purposes of this subpart, the definitions provided in Sec. 
362.2 apply. Additionally, the following definitions apply to this 
subpart:
    (a) Affiliate has the same meaning as provided in subpart B of this 
part.
    (b) Corporate debt securities not of investment grade means any 
corporate debt security that when acquired was not rated among the four 
highest rating categories by at least one nationally recognized 
statistical rating organization. The term shall not include any 
obligation issued or guaranteed by a corporation that may be held by a 
Federal savings association without

[[Page 551]]

limitation as to percentage of assets under subparagraphs (D), (E), or 
(F) of section 5(c)(1) of HOLA (12 U.S.C. 1464(c)(1) (D), (E), (F)).
    (c) Insured state savings association means any state-chartered 
savings association insured by the FDIC.
    (d) Qualified affiliate means, in the case of a stock insured state 
savings association, an affiliate other than a subsidiary or an insured 
depository institution. In the case of a mutual savings association, 
``qualified affiliate'' means a subsidiary other than an insured 
depository institution provided that all of the savings association's 
investments in, and extensions of credit to, the subsidiary are deducted 
from the savings association's capital.
    (e) Service corporation means any corporation the capital stock of 
which is available for purchase by savings associations.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1029, Jan. 5, 2001]



Sec. 362.11  Activities of insured State savings associations.

    (a) Equity investments--(1) Prohibited investments. No insured state 
savings association may directly acquire or retain as principal any 
equity investment of a type, or in an amount, that is not permissible 
for a Federal savings association unless the exception in paragraph 
(a)(2) of this section applies.
    (2) Exception: Equity investment in service corporations. An insured 
state savings association that is and continues to be in compliance with 
the applicable capital standards as prescribed by the appropriate 
Federal banking agency may acquire or retain an equity investment in a 
service corporation:
    (i) Not permissible for a Federal savings association to the extent 
the service corporation is engaging in activities that are allowed 
pursuant to the provisions of or an application under Sec. 362.12(b); 
or
    (ii) Of a type permissible for a Federal savings association, but in 
an amount exceeding the investment limits applicable to Federal savings 
associations, if the insured state savings association obtains the 
FDIC's prior consent. Consent will be given only if the FDIC determines 
that the amount of the investment in a service corporation engaged in 
such activities does not present a significant risk to the Deposit 
Insurance Fund. Applications should be filed in accordance with Sec. 
303.141 of this chapter and will be processed under Sec. 303.142(b) of 
this chapter. Approvals granted under Sec. 303.142(b) of this chapter 
may be made subject to any conditions or restrictions found by the FDIC 
to be necessary to protect the Deposit Insurance Fund from significant 
risk, to prevent unsafe or unsound practices, and/or to ensure that the 
activity is consistent with the purposes of Federal deposit insurance 
and other applicable law.
    (b) Activities other than equity investments--(1) Prohibited 
activities. An insured state savings association may not directly engage 
as principal in any activity, that is not an equity investment, of a 
type not permissible for a Federal savings association, and an insured 
state savings association shall not make nonresidential real property 
loans in an amount exceeding that described in section 5(c)(2)(B) of 
HOLA (12 U.S.C. 1464(c)(2)(B)), unless one of the exceptions in 
paragraph (b)(2) of this section applies. This section shall not be read 
to require the divestiture of any asset (including a nonresidential real 
estate loan), if the asset was acquired prior to August 9, 1989; 
however, any activity conducted with such asset must be conducted in 
accordance with this subpart. After August 9, 1989, an insured state 
savings association directly or through a subsidiary (other than, in the 
case of a mutual savings association, a subsidiary that is a qualified 
affiliate), may not acquire or retain any corporate debt securities not 
of investment grade.
    (2) Exceptions--(i) Consent obtained through application. An insured 
state savings association that meets and continues to meet the 
applicable capital standards set by the appropriate Federal banking 
agency may directly conduct activities prohibited by paragraph (b)(1) of 
this section if the savings association obtains the FDIC's prior 
consent. Consent will be given only if the FDIC determines that 
conducting the activity designated poses no significant risk to the 
Deposit Insurance Fund. Applications should be filed in accordance with 
Sec. 303.141 of this

[[Page 552]]

chapter and will be processed under Sec. 303.142(b) of this chapter. 
Approvals granted under Sec. 303.142(b) of this chapter may be made 
subject to any conditions or restrictions found by the FDIC to be 
necessary to protect the Deposit Insurance Fund from significant risk, 
to prevent unsafe or unsound practices, and/or to ensure that the 
activity is consistent with the purposes of Federal deposit insurance 
and other applicable law.
    (ii) Nonresidential realty loans permissible for a Federal savings 
association conducted in an amount not permissible. An insured state 
savings association that meets and continues to meet the applicable 
capital standards set by the appropriate Federal banking agency may make 
nonresidential real property loans in an amount exceeding the amount 
described in section 5(c)(2)(B) of HOLA, if the savings association 
files a notice in compliance with Sec. 303.141 of this chapter and the 
FDIC processes the notice without objection under Sec. 303.142(a) of 
this chapter. Consent will be given only if the FDIC determines that 
engaging in such lending in the amount designated poses no significant 
risk to the Deposit Insurance Fund.
    (iii) Acquiring and retaining adjustable rate and money market 
preferred stock. (A) An insured state savings association's investment 
of up to 15 percent of the association's tier one capital in adjustable 
rate preferred stock or money market (auction rate) preferred stock does 
not represent a significant risk to the Deposit Insurance Fund. An 
insured state savings association may conduct this activity without 
first obtaining the FDIC's consent, provided that the association meets 
and continues to meet the applicable capital standards as prescribed by 
the appropriate Federal banking agency. The fact that prior consent is 
not required by this subpart does not preclude the FDIC from taking any 
appropriate action with respect to the activities if the facts and 
circumstances warrant such action.
    (B) An insured state savings association may acquire or retain other 
instruments of a type determined by the FDIC to have the character of 
debt securities and not to represent a significant risk to the Deposit 
Insurance Fund. Such instruments shall be included in the 15 percent of 
tier one capital limit imposed in paragraph (b)(2)(iii)(A) of this 
section. An insured state savings association may conduct this activity 
without first obtaining the FDIC's consent, provided that the 
association meets and continues to meet the applicable capital standards 
as prescribed by the appropriate Federal banking agency. The fact that 
prior consent is not required by this subpart does not preclude the FDIC 
from taking any appropriate action with respect to the activities if the 
facts and circumstances warrant such action.
    (3) Activities permissible for a Federal savings association 
conducted in an amount not permissible. Except as provided in paragraph 
(b)(2)(ii) of this section, an insured state savings association may 
engage as principal in any activity, which is not an equity investment 
of a type permissible for a Federal savings association, in an amount in 
excess of that permissible for a Federal savings association, if the 
savings association meets and continues to meet the applicable capital 
standards set by the appropriate Federal banking agency, the institution 
has advised the appropriate regional director (DSC) under the procedure 
in Sec. 303.142(c) of this chapter within thirty days before engaging 
in the activity, and the FDIC has not advised the insured state savings 
association that conducting the activity in the amount indicated poses a 
significant risk to the Deposit Insurance Fund. This section shall not 
be read to require the divestiture of any asset if the asset was 
acquired prior to August 9, 1989; however, any activity conducted with 
such asset must be conducted in accordance with this subpart.

[63 FR 66326, Dec. 1, 1998, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 362.12  Service corporations of insured State savings associations.

    (a) Prohibition. A service corporation of an insured state savings 
association may not engage in any activity that is not permissible for a 
service corporation of a Federal savings association, unless it meets 
one of the exceptions in paragraph (b) of this section.

[[Page 553]]

    (b) Exceptions--(1) Consent obtained through application. A service 
corporation of an insured state savings association may conduct 
activities prohibited by paragraph (a) of this section if the savings 
association obtains the FDIC's prior written consent and the insured 
state savings association meets and continues to meet the applicable 
capital standards set by the appropriate Federal banking agency. Consent 
will be given only if the FDIC determines that the activity poses no 
significant risk to the Deposit Insurance Fund. Applications for consent 
should be filed in accordance with Sec. 303.141 of this chapter and 
will be processed under Sec. 303.142(b) of this chapter. Approvals 
granted under Sec. 303.142(b) of this chapter may be made subject to 
any conditions or restrictions found by the FDIC to be necessary to 
protect the Deposit Insurance Fund from risk, to prevent unsafe or 
unsound banking practices, and/or to ensure that the activity is 
consistent with the purposes of Federal deposit insurance and other 
applicable law. The activities covered by this paragraph may include, 
but are not limited to, acquiring and retaining equity securities of a 
company engaged in the public sale distribution or underwriting of 
securities.
    (2) Service corporations conducting unrestricted activities. The 
FDIC has determined that the following activities do not represent a 
significant risk to the Deposit Insurance Fund:
    (i) [Reserved]
    (ii) A service corporation of an insured state savings association 
may acquire and retain equity securities of a company engaged in the 
following activities, if the service corporation controls the company or 
the company is controlled by insured depository institutions, and the 
association continues to meet the applicable capital standards as 
prescribed by the appropriate Federal banking agency. The FDIC consents 
that such activity may be conducted by a service corporation of an 
insured state savings association without first obtaining the FDIC's 
consent. The fact that prior consent is not required by this subpart 
does not preclude the FDIC from taking any appropriate action with 
respect to the activities if the facts and circumstances warrant such 
action.
    (A) Equity securities of a company that engages in permissible 
activities. A service corporation may own the equity securities of a 
company that engages in any activity permissible for a Federal savings 
association.
    (B) Equity securities of a company that acquires and retains 
adjustable-rate and money market preferred stock. A service corporation 
may own the equity securities of a company that engages in any activity 
permissible for an insured state savings association under Sec. 
362.11(b)(2)(iii) so long as instruments held under this paragraph 
(b)(2)(ii)(B), paragraph (b)(2)(iv) of this section, and Sec. 
362.11(b)(2)(iii) in the aggregate do not exceed the limit set by Sec. 
362.11(b)(2)(iii).
    (C) Equity securities of a company acting as an insurance agency. A 
service corporation may own the equity securities of a company that acts 
as an insurance agency.
    (iii) Activities that are not conducted ``as principal''. A service 
corporation controlled by the insured state savings association may 
engage in activities which are not conducted ``as principal'' such as 
acting as an agent for a customer, acting in a brokerage, custodial, 
advisory, or administrative capacity, or acting as trustee, or in any 
substantially similar capacity.
    (iv) Acquiring and retaining adjustable-rate and money market 
preferred stock. A service corporation may engage in any activity 
permissible for an insured state savings association under Sec. 
362.11(b)(2)(iii) so long as instruments held under this paragraph 
(b)(2)(iv), paragraph (b)(2)(ii)(B) of this section, and Sec. 
362.11(b)(2)(iii) in the aggregate do not exceed the limit set by Sec. 
362.11(b)(2)(iii).
    (3)-(4) [Reserved]
    (c) Investment and transaction limits. The restrictions detailed in 
Sec. 362.4(d) apply to transactions between an insured state savings 
association and any service corporation engaging in activities which are 
not permissible for a service corporation of a Federal savings 
association if specifically required by this part or FDIC order. For 
purposes of applying the investment limits in Sec. 362.4(d)(2), the 
term ``investment'' includes only those items described in

[[Page 554]]

Sec. 362.4(d)(2)(ii)(A) (3) and (4). For purposes of applying Sec. 
362.4(d) (2), (3), and (4) to this paragraph (c), references to the 
terms ``insured State bank'' and ``subsidiary'' in Sec. 362.4(d)(2), 
(3), and (4), shall be deemed to refer, respectively, to the insured 
state savings association and the service corporation. For purposes of 
applying Sec. 362.4(d)(5), references to the terms ``insured State 
bank'' and ``subsidiary'' in Sec. 362.4(d)(5) shall be deemed to refer, 
respectively, to the insured state savings association and the service 
corporations or subsidiaries.
    (d) Capital requirements. If specifically required by this part or 
by FDIC order, an insured state savings association that wishes to 
conduct as principal activities through a service corporation which are 
not permissible for a service corporation of a Federal savings 
association must:
    (1) Be well-capitalized after deducting from its capital any 
investment in the service corporation, both equity and debt.
    (2) Use such regulatory capital amount for the purposes of the 
insured state savings association's assessment risk classification under 
part 327 of this chapter.

[63 FR 66326, Dec. 1, 1998, as amended at 66 FR 1029, Jan. 5, 2001; 71 
FR 20527, Apr. 21, 2006]]



Sec. 362.13  Approvals previously granted.

    FDIC consent by order or notice. An insured state savings 
association that previously filed an application and obtained the FDIC's 
consent to engage in an activity or to acquire or retain an investment 
in a service corporation engaging as principal in an activity or 
acquiring and retaining any investment that is prohibited under this 
subpart may continue that activity or retain that investment without 
seeking the FDIC's consent, provided the insured state savings 
association and the service corporation, if applicable, continue to meet 
the conditions and restrictions of approval. An insured state savings 
association which was granted approval based on conditions which differ 
from the requirements of Sec. Sec. 362.4(c)(2) and 362.12 (c) and (d) 
will be considered to meet the conditions and restrictions of the 
approval if the insured state savings association and any applicable 
service corporation meet the requirements of Sec. Sec. 362.4(c)(2) and 
362.12 (c) and (d). For the purposes of applying Sec. 362.4(c)(2), 
references to the terms ``eligible subsidiary'' and ``subsidiary'' in 
Sec. 362.4(c)(2) shall be deemed to refer, respectively, to the 
eligible service corporation and the service corporation.



Subpart D_Acquiring, Establishing, or Conducting New Activities Through 
             a Subsidiary by an Insured Savings Association



Sec. 362.14  Purpose and scope.

    This subpart implements section 18(m) of the Federal Deposit 
Insurance Act (12 U.S.C. 1828(m)) which requires that prior notice be 
given the FDIC when an insured savings association establishes or 
acquires a subsidiary or engages in any new activity in a subsidiary. 
For the purposes of this subpart, the term ``subsidiary'' does not 
include any insured depository institution as that term is defined in 
the Federal Deposit Insurance Act. Unless otherwise indicated, the 
definitions provided in Sec. 362.2 apply to this subpart.



Sec. 362.15  Acquiring or establishing a subsidiary; conducting new activities 

through a subsidiary.

    No state or Federal insured savings association may establish or 
acquire a subsidiary, or conduct any new activity through a subsidiary, 
unless it files a notice in compliance with Sec. 303.142(c) of this 
chapter at least 30 days prior to establishment of the subsidiary or 
commencement of the activity and the FDIC does not object to the notice. 
This requirement does not apply to any Federal savings bank that was 
chartered prior to October 15, 1982, as a savings bank under State law 
or any savings association that acquired its principal assets from such 
an institution.



    Subpart E_Financial Subsidiaries of Insured State Nonmember Banks

    Source: 66 FR 1029, Jan. 5, 2001, unless otherwise noted.

[[Page 555]]



Sec. 362.16  Purpose and scope.

    (a) This subpart, along with the notice and application procedures 
in subpart G of part 303 of this chapter, implements section 46 of the 
Federal Deposit Insurance Act (12 U.S.C. 1831w) and requires that an 
insured state nonmember bank certify certain facts and file a notice 
with the FDIC before the insured state nonmember bank may control or 
hold an interest in a financial subsidiary under section 46(a) of the 
Federal Deposit Insurance Act. This subpart also implements the 
statutory Community Reinvestment Act (CRA) (12 U.S.C. 2901 et seq.) 
requirement set forth in subsection (4)(l)(2) of the Bank Holding 
Company Act (12 U.S.C. 1843(l)(2)), which is applicable to state 
nonmember banks that commence new activities through a financial 
subsidiary or directly or indirectly acquire control of a company 
engaged in an activity under section 46(a).
    (b) This subpart does not cover activities conducted other than ``as 
principal''. For purposes of this subpart, activities conducted other 
than ``as principal'' are defined as activities conducted as agent for a 
customer, conducted in a brokerage, custodial, advisory, or 
administrative capacity, or conducted as trustee, or in any 
substantially similar capacity. For example, this subpart does not cover 
acting solely as agent for the sale of insurance, securities, real 
estate, or travel services; nor does it cover acting as trustee, 
providing personal financial planning advice, or safekeeping services.



Sec. 362.17  Definitions.

    For the purposes of this subpart, the following definitions will 
apply:
    (a) Activity, company, control, insured depository institution, 
insured state bank, insured state nonmember bank and subsidiary have the 
same meaning as provided in subpart A of this part.
    (b) Affiliate has the same meaning provided in subpart B of this 
part.
    (c) Financial subsidiary means any company that is controlled by one 
or more insured depository institutions other than:
    (1) A subsidiary that only engages in activities that the state 
nonmember bank is permitted to engage in directly and that are conducted 
on the same terms and conditions that govern the conduct of the 
activities by the state nonmember bank; or
    (2) A subsidiary that the state nonmember bank is specifically 
authorized to control by the express terms of a federal statute (other 
than section 46(a) of the Federal Deposit Insurance Act (12 U.S.C. 
1831w)), and not by implication or interpretation, such as the Bank 
Service Company Act (12 U.S.C. 1861 et seq.).
    (d) Tangible equity and Tier 2 capital have the same meaning as set 
forth in part 325 of this chapter.
    (e) Well-managed means:
    (1) Unless otherwise determined in writing by the appropriate 
federal banking agency, the institution has received a composite rating 
of 1 or 2 under the Uniform Financial Institutions Rating System (or an 
equivalent rating under an equivalent rating system) in connection with 
the most recent state or federal examination or subsequent review of the 
depository institution and at least a rating of 2 for management, if 
such a rating is given; or
    (2) In the case of any depository institution that has not been 
examined by its appropriate federal banking agency, the existence and 
use of managerial resources that the appropriate federal banking agency 
determines are satisfactory.



Sec. 362.18  Financial subsidiaries of insured state nonmember banks.

    (a) ``As principal'' activities. An insured state nonmember bank may 
not obtain control of or hold an interest in a financial subsidiary that 
engages in activities as principal or commence any such new activity 
pursuant to section 46(a) of the Federal Deposit Insurance Act (12 
U.S.C. 1831w) unless the insured state nonmember bank files a notice 
containing the information required in Sec. 303.121(b) of this chapter 
and certifies that:
    (1) The insured state nonmember bank is well-managed;
    (2) The insured state nonmember bank and all of its insured 
depository

[[Page 556]]

institution affiliates are well-capitalized as defined in the 
appropriate capital regulation and guidance of each institution's 
primary federal regulator; and
    (3) The insured state nonmember bank will deduct the aggregate 
amount of its outstanding equity investment, including retained 
earnings, in all financial subsidiaries that engage in activities as 
principal pursuant to section 46(a) of the Federal Deposit Insurance Act 
(12 U.S.C. 1831w), from the bank's total assets and tangible equity and 
deduct such investment from its total risk-based capital (this deduction 
shall be made equally from Tier 1 and Tier 2 capital).
    (b) Community Reinvestment Act (CRA). An insured state nonmember 
bank may not commence any new activity subject to section 46(a) of the 
Federal Deposit Insurance Act (12 U.S.C. 1831w) or directly or 
indirectly acquire control of a company engaged in any such activity 
pursuant to Sec. 362.18(a)(1), if the bank or any of its insured 
depository institution affiliates received a CRA rating of less than 
``satisfactory record of meeting community credit needs'' in its most 
recent CRA examination.
    (c) Other requirements. An insured state nonmember bank controlling 
or holding an interest in a financial subsidiary under section 46(a) of 
the Federal Deposit Insurance Act (12 U.S.C. 1831w) must meet and 
continue to meet the requirements set forth in paragraph (a) of this 
section as long as the insured state nonmember bank holds the financial 
subsidiary and:
    (1) Disclose and continue to disclose the capital separation 
required in paragraph (a)(3) in any published financial statements;
    (2) Comply and continue to comply with sections 23A and 23B of the 
Federal Reserve Act (12 U.S.C. 371c and 371c-1) as if the subsidiary 
were a financial subsidiary of a national bank; and
    (3) Comply and continue to comply with the financial and operational 
standards provided by section 5136A(d) of the Revised Statutes of the 
United States (12 U.S.C. 24A(d)), unless otherwise determined by the 
FDIC.
    (d) Securities underwriting. If the financial subsidiary of the 
insured state nonmember bank will engage in the public sale, 
distribution or underwriting of stocks, bonds, debentures, notes, or 
other securities activity of a type permissible for a national bank only 
through a financial subsidiary, then the state nonmember bank and the 
financial subsidiary also must comply and continue to comply with the 
following additional requirements:
    (1) The securities business of the financial subsidiary must be 
physically separate and distinct in its operations from the operations 
of the bank, provided that this requirement shall not be construed to 
prohibit the bank and its financial subsidiary from sharing the same 
facility if the area where the financial subsidiary conducts securities 
business with the public is physically distinct from the routine deposit 
taking area of the bank;
    (2) The financial subsidiary must conduct its securities business 
pursuant to independent policies and procedures designed to inform 
customers and prospective customers of the financial subsidiary that the 
financial subsidiary is a separate organization from the insured state 
nonmember bank and that the insured state nonmember bank is not 
responsible for and does not guarantee the obligations of the financial 
subsidiary;
    (3) The bank must adopt policies and procedures, including 
appropriate limits on exposure, to govern its participation in financing 
transactions underwritten by its financial subsidiary; and
    (4) The bank must not express an opinion on the value or the 
advisability of the purchase or sale of securities underwritten or dealt 
in by its financial subsidiary unless the bank notifies the customer 
that the entity underwriting, making a market, distributing or dealing 
in the securities is a financial subsidiary of the bank.
    (e) Applications for exceptions to certain requirements. Any insured 
state nonmember bank that is unable to comply with the well-managed 
requirement of Sec. 362.18(a)(1) and (c)(1), any state nonmember bank 
that has appropriate reasons for not meeting the financial and 
operational standards applicable to a financial subsidiary of a

[[Page 557]]

national bank conducting the same activities as provided in Sec. 
362.18(c)(3) or any state nonmember bank and its financial subsidiary 
subject to the securities underwriting activities requirements in Sec. 
362.18(d) that is unable to meet such requirements may submit an 
application in compliance with Sec. 303.121 of this chapter to seek a 
waiver or modification of such requirements under the procedure in Sec. 
303.122(b) of this chapter. The FDIC may impose additional prudential 
safeguards as are necessary as a condition of its consent.
    (f) Failure to meet requirements--(1) Notification by FDIC. The FDIC 
will notify the insured state nonmember bank in writing and identify the 
areas of noncompliance, if:
    (i) The FDIC finds that an insured state nonmember bank or any of 
its insured depository institution affiliates is not in compliance with 
the CRA requirement of Sec. 362.18(b) at the time any new activity is 
commenced or control of the financial subsidiary is acquired;
    (ii) The FDIC finds that the facts to which an insured state 
nonmember bank certified under Sec. 362.18(a) are not accurate in whole 
or in part; or
    (iii) The FDIC finds that the insured state nonmember bank or any of 
its insured depository institution affiliates or the financial 
subsidiary fails to meet or continue to comply with the requirements of 
Sec. 362.18(c) and (d), if applicable, and the FDIC has not granted an 
exception under the procedures set forth in Sec. 362.18(e) and in Sec. 
303.122(b) of this chapter.
    (2) Notification by state nonmember bank. An insured state nonmember 
bank that controls or holds an interest in a financial subsidiary must 
promptly notify the FDIC if the bank becomes aware that any depository 
institution affiliate of the bank has ceased to be well-capitalized.
    (3) Subsequent action by FDIC. The FDIC may take any appropriate 
action or impose any limitations, including requiring that the insured 
state nonmember bank to divest control of any such financial subsidiary, 
on the conduct or activities of the insured state nonmember bank or any 
financial subsidiary of the insured state bank that fails to:
    (i) Meet the requirements listed in Sec. 362.18(a) and (b) at the 
time that any new section 46 activity is commenced or control of a 
financial subsidiary is acquired by an insured state nonmember bank; or
    (ii) Meet and continue to meet the requirements listed in Sec. 
362.18(c) and (d), as applicable.
    (g) Coordination with section 24 of the Federal Deposit Insurance 
Act--(1) Continuing authority under section 24. Notwithstanding Sec. 
362.18(a) through (f), an insured state bank may retain its interest in 
any subsidiary:
    (i) That was conducting a financial activity with authorization in 
accordance with section 24 of the Federal Deposit Insurance Act (12 
U.S.C. 1831a) and the applicable implementing regulation found in 
subpart A of this part 362 before the date on which any such activity 
became for the first time permissible for a financial subsidiary of a 
national bank; and
    (ii) Which insured state nonmember bank and its subsidiary continue 
to meet the conditions and restrictions of the section 24 order or 
regulation approving the activity as well as other applicable law.
    (2) Continuing authority under section 24(f) of the Federal Deposit 
Insurance Act. Notwithstanding Sec. 362.18(a) through (f), an insured 
state bank with authority under section 24(f) of the Federal Deposit 
Insurance Act (12 U.S.C. 1831a(f)) to hold equity securities may 
continue to establish new subsidiaries to engage in that investment 
activity.
    (3) Relief from conditions. Any state nonmember bank that meets the 
requirements of paragraph (g)(1) of this section or that is subject to 
section 46(b) of the Federal Deposit Insurance Act (12 U.S.C. 1831w(b)) 
may submit an application in compliance with Sec. 303.121 of this 
chapter and seek the consent of the FDIC under the procedure in Sec. 
303.122(b) of this chapter for modification of any conditions or 
restrictions the FDIC previously imposed in connection with a section 24 
order or regulation approving the activity.
    (4) New financial subsidiaries. Notwithstanding subpart A of this 
part 362, an insured state bank may not, on or after November 12, 1999, 
acquire control of, or acquire an interest in, a financial

[[Page 558]]

subsidiary that engages in activities as principal or commences any new 
activity under section 46(a) of the Federal Deposit Insurance Act (12 
U.S.C. 1831w) other than as provided in this section.



PART 363_ANNUAL INDEPENDENT AUDITS AND REPORTING REQUIREMENTS--Table of 

Contents




Sec.
363.0 OMB control number.
363.1 Scope.
363.2 Annual reporting requirements.
363.3 Independent public accountant.
363.4 Filing and notice requirements.
363.5 Audit committees.

Appendix A to Part 363--Guidelines and Interpretations

    Authority: 12 U.S.C. 1831m.

    Source: 58 FR 31335, June 2, 1993, unless otherwise noted.



Sec. 363.0  OMB control number.

    The collecting of information requirements in this part have been 
approved by the Office of Management and Budget under OMB control number 
3064-0113.



Sec. 363.1  Scope.

    (a) Applicability. This part applies with respect to fiscal years of 
insured depository institutions which begin after December 31, 1992. 
This part does not apply with respect to any fiscal year of any insured 
depository institution, the total assets of which, at the beginning of 
such fiscal year, are less than $500 million.
    (b) Compliance by subsidiaries of holding companies. (1) The audited 
financial statements requirement of Sec. 363.2(a) may be satisfied for 
an insured depository institution that is a subsidiary of a holding 
company by audited financial statements of the consolidated holding 
company.
    (2) The other requirements of this part for an insured depository 
institution that is a subsidiary of a holding company may be satisfied 
by the holding company if:
    (i) The services and functions comparable to those required of the 
insured depository institution by this part are provided at the holding 
company level; and
    (ii) The insured depository institution has as of the beginning of 
its fiscal year:
    (A) Total assets of less than $5 billion; or
    (B) Total assets of $5 billion or more and a composite CAMELS rating 
of 1 or 2.
    (3) The appropriate federal banking agency may revoke the exception 
in paragraph (b)(2) of this section for any institution with total 
assets in excess of $9 billion for any period of time during which the 
appropriate federal banking agency determines that the institution's 
exemption would create a significant risk to the Deposit Insurance Fund.

[58 FR 31335, June 2, 1993, as amended at 61 FR 6493, Feb. 21, 1996; 70 
FR 71232, Nov. 28, 2005; 71 FR 20527, Apr. 21, 2006]



Sec. 363.2  Annual reporting requirements.

    (a) Audited financial statements. Each insured depository 
institution shall prepare annual financial statements in accordance with 
generally accepted accounting principles which shall be audited by an 
independent public accountant.
    (b) Management report. Each insured depository institution annually 
shall prepare, as of the end of the institution's most recent fiscal 
year, a management report signed by its chief executive officer and 
chief accounting or chief financial officer which contains:
    (1) A statement of management's responsibilities for preparing the 
institution's annual financial statements, for establishing and 
maintaining an adequate internal control structure and procedures for 
financial reporting, and for complying with laws and regulations 
relating to safety and soundness which are designated by the FDIC and 
the appropriate federal banking agency; and
    (2) An assessment by management of the institution's compliance with 
such laws and regulations during such fiscal year; and
    (3) For an institution with total assets of $1 billion or more at 
the beginning of such fiscal year, an assessment by management of the 
effectiveness of such internal control structure and

[[Page 559]]

procedures as of the end of such fiscal year.

[58 FR 31335, June 2, 1993, as amended at 70 FR 71232, Nov. 28, 2005]



Sec. 363.3  Independent public accountant.

    (a) Annual audit of financial statements. Each insured depository 
institution shall engage an independent public accountant to audit and 
report on its annual financial statements in accordance with generally 
accepted auditing standards and section 37 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831n). The scope of the audit engagement shall 
be sufficient to permit such accountant to determine and report whether 
the financial statements are presented fairly and in accordance with 
generally accepted accounting principles.
    (b) Additional reports. For each insured depository institution with 
total assets of $1 billion or more at the beginning of the institution's 
fiscal year, such independent public accountant shall examine, attest 
to, and report separately on, the assertion of management concerning the 
institution's internal control structure and procedures for financial 
reporting. The attestation shall be made in accordance with generally 
accepted standards for attestation engagements.
    (c) Notice by accountant of termination of services. An independent 
public accountant performing an audit under this part who ceases to be 
the accountant for an insured depository institution shall notify the 
FDIC and the appropriate federal banking agency in writing of such 
termination within 15 days after the occurrence of such event, and set 
forth in reasonable detail the reasons for such termination.

[58 FR 31335, June 2, 1993, as amended at 62 FR 63257, Nov. 28, 1997; 70 
FR 71232, Nov. 28, 2005]



Sec. 363.4  Filing and notice requirements.

    (a) Annual reporting. Within 90 days after the end of its fiscal 
year, each insured depository institution shall file with each of the 
FDIC, the appropriate federal banking agency, and any appropriate state 
bank supervisor, two copies of an annual report containing audited 
annual financial statements, the independent public accountant's report 
thereon, management's statements and assessments, and the independent 
public accountant's attestation report concerning the institution's 
internal control structure and procedures for financial reporting as 
required by Sec. Sec. 363.2(a), 363.3(a), 363.2(b), and 363.3(b), 
respectively.
    (b) Public availability. The annual report in paragraph (a) of this 
section shall be available for public inspection.
    (c) Independent accountant's reports. Each insured depository 
institution shall file with the FDIC, the appropriate federal banking 
agency, and any appropriate state bank supervisor, a copy of any 
management letter, qualification, or other report issued by its 
independent public accountant with respect to such institution and the 
services provided by such accountant pursuant to this part within 15 
days after receipt.
    (d) Notice of engagement or change of accountants. Each insured 
depository institution shall provide, within 15 days after the 
occurrence of any such event, written notice to the FDIC, the 
appropriate federal banking agency, and any appropriate state bank 
supervisor of the engagement of an independent public accountant, or the 
resignation or dismissal of the independent public accountant previously 
engaged. The notice shall include a statement of the reasons for any 
such event in reasonable detail.

[58 FR 31335, June 2, 1993, as amended at 61 FR 6493, Feb. 21, 1996; 62 
FR 63257, Nov. 28, 1997]



Sec. 363.5  Audit committees.

    (a) Composition and duties. Each insured depository institution 
shall establish an audit committee of its board of directors, the 
composition of which complies with paragraphs (a)(1), (2), and (3) of 
this section, and the duties of which shall include reviewing with 
management and the independent public accountant the basis for the 
reports issued under this part.
    (1) Each insured depository institution with total assets of $1 
billion or more as of the beginning of its fiscal year shall establish 
an independent audit committee of its board of directors, the members of 
which shall be

[[Page 560]]

outside directors who are independent of management of the institution.
    (2) Each insured depository institution with total assets of $500 
million or more but less than $1 billion as of the beginning of its 
fiscal year shall establish an audit committee of its board of 
directors, the members of which shall be outside directors, the majority 
of whom shall be independent of management of the institution. The 
appropriate Federal banking agency may, by order or regulation, permit 
the audit committee of such an insured depository institution to be made 
up of less than a majority of outside directors who are independent of 
management, if the agency determines that the institution has 
encountered hardships in retaining and recruiting a sufficient number of 
competent outside directors to serve on the audit committee of the 
institution.
    (3) An outside director is a director who is not, and within the 
preceding fiscal year has not been, an officer or employee of the 
institution or any affiliate of the institution.
    (b) Committees of large institutions. The audit committee of any 
insured depository institution that has total assets of more than $3 
billion, measured as of the beginning of each fiscal year, shall include 
members with banking or related financial management expertise, have 
access to its own outside counsel, and not include any large customers 
of the institution. If a large institution is a subsidiary of a holding 
company and relies on the audit committee of the holding company to 
comply with this rule, the holding company audit committee shall not 
include any members who are large customers of the subsidiary 
institution.

[58 FR 31335, June 2, 1993, as amended at 61 FR 6493, Feb. 21, 1996; 70 
FR 71232, Nov. 28, 2005]



       Sec. Appendix A to Part 363--Guidelines and Interpretations

                            Table of Contents

                              Introduction

                       Scope of Rule (Sec. 363.1)

1. Measuring Total Asset
2. Insured Branches of Foreign Banks
3. Compliance by Holding Company Subsidiaries
4. Comparable Services and Functions

               Annual Reporting Requirements (Sec. 363.2)

5. Annual Financial Statements
6. Holding Company Statements
7. Insured Branches of Foreign Banks
8. Management Report
9. Safeguarding of Assets
10. Standards for Internal Controls
11. Service Organizations
12. Compliance with Laws and Regulations

           Role of Independent Public Accountant (Sec. 363.3)

13. General Qualifications
14. Independence
15. Peer Reviews
16. Filing Peer Review Reports
17. Information to Independent Public Accountant
18. Attestation Report
19. Reviews with Audit Committee and Management
20. Notice of Termination
21. Reliance on Internal Auditors

              Filing and Notice Requirements (Sec. 363.4)

22. Place for Filing
23. Relief From Filing Deadlines
24. Public Availability
25. Independent Public Accountant's Reports
26. Notices Concerning Accountants

                     Audit Committees (Sec. 363.5)

27. Composition
28. ``Independent of Management'' Considerations
29. Lack of Independence
30. Holding Company Audit Committees
31. Duties
32. Banking or Related Financial Management Expertise
33. Large Customers
34. Access to Counsel
35. Forming and Restructuring Audit Committees

                                  Other

36. Modifications of Guidelines

    Schedule A to Appendix A--Agreed Upon Procedures for Determining 
                     Compliance With Designated Laws

                              Introduction

    Congress added section 36, ``Early Identification of Needed 
Improvements in Financial Management'' (section 36), to the Federal 
Deposit Insurance Act (FDI Act) in 1991.
    The FDIC Board of Directors adopted 12 CFR part 363 of its rules and 
regulations (the Rule) to implement those provisions of section 36 that 
require rulemaking. The FDIC also approved these ``Guidelines and 
Interpretations'' (the Guidelines) and directed

[[Page 561]]

that they be published with the Rule to facilitate a better 
understanding of, and full compliance with, the provisions of section 
36.
    Although not contained in the Rule itself, some of the guidance 
offered restates or refers to statutory requirements of section 36 and 
is therefore mandatory. If that is the case, the statutory provision is 
cited.
    Furthermore, upon adopting the Rule, the FDIC reiterated its belief 
that every insured depository institution, regardless of its size or 
charter, should have an annual audit of its financial statements 
performed by an independent public accountant, and should establish an 
audit committee comprised entirely of outside directors.
    The following Guidelines reflect the views of the FDIC concerning 
the interpretation of section 36. The Guidelines are intended to assist 
insured depository institutions (institutions), their boards of 
directors, and their advisors, including their independent public 
accountants and legal counsel, and to clarify section 36 and the Rule. 
It is recognized that reliance on the Guidelines may result in 
compliance with section 36 and the Rule which may vary from institution 
to institution. Terms which are not explained in the Guidelines have the 
meanings given them in the Rule, the FDI Act, or professional accounting 
and auditing literature.

                       Scope of Rule (Sec. 363.1)

    1. Measuring Total Assets. To determine whether this part applies, 
an institution should use total assets as reported on its most recent 
Report of Condition (Call Report) or Thrift Financial Report (TFR), the 
date of which coincides with the end of its preceding fiscal year. If 
its fiscal year ends on a date other than the end of a calendar quarter, 
it should use its Call Report or TFR for the quarter end immediately 
preceding the end of its fiscal year.
    2. Insured Branches of Foreign Banks. Unlike other institutions, 
insured branches of foreign banks are not separately incorporated or 
capitalized. To determine whether this part applies, an insured branch 
should measure claims on non-related parties reported on its Report of 
Assets and Liabilities of U.S. Branches and Agencies of Foreign Banks 
(form FFIEC 002).
    3. Compliance by Holding Company Subsidiaries. Audited consolidated 
financial statements and other reports or notices required by this part 
which are submitted by a holding company for any subsidiary institution, 
should be accompanied by a cover letter identifying all subsidiary 
institutions to which they pertain. An institution filing holding 
company consolidated financial statements as permitted by Sec. 363.1(b) 
also may report on changes in its independent public accountant on a 
holding company basis. An institution that does not meet the criteria in 
section 36(i) must satisfy the remaining provisions of the statute and 
this part on an individual institution basis, and maintain its own audit 
committee. Multi-tiered holding companies may satisfy all requirements 
of this part at any level.
    4. Comparable Services and Functions. Services and functions will be 
considered ``comparable'' to those required by this part if the holding 
company:
    (a) Prepares reports used by the subsidiary institution to meet the 
requirements of this part;
    (b) Has an audit committee that meets the requirements of this part 
appropriate to its largest subsidiary institution; and
    (c) Prepares and submits the management assessments of the 
effectiveness of the internal control structure and procedures for 
financial reporting (internal controls), and compliance with the 
Designated Laws defined in guideline 12 based on information concerning 
the relevant activities and operations of those subsidiary institutions 
within the scope of the rule.

               Annual Reporting Requirements (Sec. 363.2)

    5. Annual Financial Statements. Each institution should prepare 
comparative annual consolidated financial statements (balance sheets, 
statements of income, changes in equity capital, and cash flows, with 
accompanying footnote disclosures) in accordance with generally accepted 
accounting principles (GAAP) for each of its two most recent fiscal 
years. Statements for the earlier year may be presented on an unaudited 
basis if the institution was not subject to this part for that year and 
audited statements were not prepared.
    6. Holding Company Statements. Subsidiary institutions may file 
copies of their holding company's audited financial statements filed 
with the Securities and Exchange Commission (SEC) or prepared for their 
FR Y-6 Annual Report under the Bank Holding Company Act of 1956.
    7. Insured Branches of Foreign Banks. An insured branch of a foreign 
bank should satisfy the financial statements requirement by filing one 
of the following for the two preceding fiscal years:
    (a) Audited balance sheets, disclosing information about financial 
instruments with off-balance-sheet risk;
    (b) Schedules RAL and L of form FFIEC 002, prepared and audited on 
the basis of the instructions for its preparation; or
    (c) With written approval of the appropriate federal banking agency, 
consolidated financial statements of the parent bank.
    8. Management Report. Management should perform its own 
investigation and review of the effectiveness of internal controls and 
compliance with the Designated Laws defined in Guideline 12. Management 
also should maintain records of its determinations and assessments until 
the next federal

[[Page 562]]

safety and soundness examination, or such later date as specified by the 
FDIC or appropriate federal banking agency. Management should provide in 
its assessment of the effectiveness of internal controls, or 
supplementally, sufficient information to enable the accountant to 
report on its assertion. The management report of an insured branch of a 
foreign bank should be signed by the branch's managing official if the 
branch does not have a chief executive or financial officer.
    9. Safeguarding of Assets. ``Safeguarding of assets'', as the term 
relates to internal control policies and procedures regarding financial 
reporting, and which has precedent in accounting literature, should be 
encompassed in the management report and the independent public 
accountant's attestation discussed in guideline 18. Testing the 
existence of and compliance with internal controls on the management of 
assets, including loan underwriting and documentation, represents a 
reasonable implementation of section 36. The FDIC expects such internal 
controls to be encompassed by the assertion in the management report, 
but the term ``safeguarding of assets'' need not be specifically stated. 
The FDIC does not require the accountant to attest to the adequacy of 
safeguards, but does require the accountant to determine whether 
safeguarding policies exist.\1\
---------------------------------------------------------------------------

    \1\ It is management's responsibility to establish policies 
concerning underwriting and asset management and to make credit 
decisions. The auditor's role is to test compliance with management's 
policies relating to financial reporting.
---------------------------------------------------------------------------

    10. Standards for Internal Controls. Each institution should 
determine its own standards for establishing, maintaining, and assessing 
the effectiveness of its internal controls.\2\
---------------------------------------------------------------------------

    \2\ In considering what information is needed on safeguarding of 
assets and standards for internal controls, management may review 
guidelines provided by its primary federal regulator; the FDIC's 
Division of Supervision and Consumer Protection (DSC) Risk Management 
Manual of Examination Policies; the Federal Reserve Board's Commercial 
Bank Examination Manual and other relevant regulations; the Office of 
Thrift Supervision's Thrift Activities Handbook; the Comptroller of the 
Currency's Handbook for National Bank Examiners; and standards published 
by professional accounting organizations, such as the American Institute 
of Certified Public Accountants' (AICPA) Statement on Auditing Standards 
No. 55, ``Consideration of the Internal Control Structure in a Financial 
Statement Audit,'' as amended by Statement of Auditing Standards No. 78; 
the Committee of Sponsoring Organizations (COSO) of the Treadway 
Commission's Internal Control--Integrated Framework, including its 
addendum on safeguarding of assets; and other internal control standards 
published by the AICPA, other accounting or auditing professional 
associations, and financial institution trade associations.
---------------------------------------------------------------------------

    11. Service Organizations. Although service organizations should be 
considered in determining if internal controls are adequate, an 
institution's independent public accountant, its management, and its 
audit committee should exercise independent judgment concerning that 
determination. On-site reviews of service organizations may not be 
necessary to prepare the reports required by the Rule, and the FDIC does 
not intend that the Rule establish any such requirement.
    12. Compliance with Laws and Regulations. The designated laws and 
regulations are the federal laws and regulations concerning loans to 
insiders and the federal and state laws and regulations concerning 
dividend restrictions (the Designated Laws). Table 1 to this Appendix A 
lists the designated federal laws and regulations pertaining to insider 
loans and dividend restrictions that are applicable to each type of 
institution.

           Role of Independent Public Accountant (Sec. 363.3)

    13. General Qualifications. To provide audit and attest services to 
insured depository institutions, an independent public accountant should 
be registered or licensed to practice as a public accountant, and be in 
good standing, under the laws of the state or other political 
subdivision of the United States in which the home office of the 
institution (or the insured branch of a foreign bank) is located. As 
required by section 36(g)(3)(A)(i), the accountant must agree to provide 
copies of any workpapers, policies, and procedures relating to services 
performed under this part.
    14. Independence. The independent public accountant also should be 
in compliance with the AICPA's Code of Professional Conduct and meet the 
independence requirements and interpretations of the SEC and its staff.
    15. Peer Reviews. As required by section 36(g)(3)(A)(ii), the 
independent public accountant must have received, or be enrolled in, a 
peer review that meets acceptable guidelines. The following peer review 
guidelines are acceptable:
    (a) The external peer review should be conducted by an organization 
independent of the accountant or firm being reviewed, as frequently as 
is consistent with professional accounting practices;

[[Page 563]]

    (b) The peer review should be generally consistent with AICPA 
standards \3\ and
---------------------------------------------------------------------------

    \3\ These would include Standards for Performing and Reporting on 
Peer Reviews, codified in the SEC Practice Section Reference Manual, and 
Standards for Performing and Reporting on Peer Reviews, contained in 
Volume 2 of the AICPA's Professional Standards.
---------------------------------------------------------------------------

    (c) The review should include, if available, at least one audit of 
an insured depository institution or consolidated financial holding 
company. Peer review working papers are to be retained for 120 days 
after the peer review report is filed with the FDIC, and be made 
available to the FDIC upon request, in a form consistent with the SEC's 
agreement with the accounting profession.
    16. Filing Peer Review Reports. Within 15 days of receiving 
notification that the peer review has been accepted, or before 
commencing any audit under the Rule, whichever is earlier, two copies of 
the most recent peer review report, accompanied by any letter of 
comments and letter of response, should be filed by the independent 
public accountant (if not already on file) with the FDIC, Accounting and 
Securities Disclosure Section, 550 17th Street, NW., Washington, DC 
20429, where they will be available for public inspection. All 
corrective action required under any qualified peer review report should 
have been taken before commencing services under this Rule.
    17. Information to Independent Public Accountant. Attention is 
directed to section 36(h) which requires institutions to provide 
specified information to their accountants. An institution also should 
provide its accountant with copies of any notice that the institution's 
capital category is being changed or reclassified under section 38 of 
the FDI Act, and any correspondence from the appropriate federal banking 
agency concerning compliance with this part.
    18. Attestation Report. The independent public accountant should 
provide the institution with an internal controls attestation report and 
any management letter at the conclusion of the audit as required by 
section 36(c)(1). If a holding company subsidiary relies on its holding 
company management report, the accountant may attest to and report on 
management's assertions in one report, without reporting separately on 
each subsidiary covered by the Rule. The FDIC has determined that 
management letters are exempt from public disclosure.
    19. Reviews with Audit Committee and Management. The independent 
public accountant should meet with the institution's audit committee to 
review the accountant's reports required by this part before they are 
filed. It also may be appropriate for the accountant to review its 
findings with the institution's board of directors and management.
    20. Notice of Termination. The notice required by Sec. 363.3(c) 
should state whether the independent public accountant agrees with the 
assertions contained in any notice filed by the institution under Sec. 
363.4(d), and whether the institution's notice discloses all relevant 
reasons.
    21. Reliance on Internal Auditors. Nothing in this part or this 
appendix is intended to preclude the ability of the independent public 
accountant to rely on the work of an institution's internal auditor.

              Filing and Notice Requirements (Sec. 363.4)

    22. Place for Filing. Except for peer review reports filed pursuant 
to Guideline 16, all reports and notices required by, and other 
communications or requests made pursuant to, the Rule should be filed as 
follows:
    (a) FDIC: Appropriate FDIC Regional or Area Office (Supervision and 
Consumer Protection), i.e., the FDIC regional or area office in the FDIC 
region or area that is responsible for monitoring the institution or, in 
the case of a subsidiary institution of a holding company, the 
consolidated company. A filing made on behalf of several covered 
institutions owned by the same parent holding company should be 
accompanied by a transmittal letter identifying all of the institutions 
covered.
    (b) Office of the Comptroller of the Currency (OCC): Appropriate OCC 
Supervisory Office.
    (c) Federal Reserve: Appropriate Federal Reserve Bank.
    (d) Office of Thrift Supervision (OTS): Appropriate OTS District 
Office.
    (e) State bank supervisor: The filing office of the appropriate 
State bank supervisor.
    23. Relief from Filing Deadlines. Although the reasonable deadlines 
for filings and other notices established by this part are specified, 
some institutions may occasionally be confronted with extraordinary 
circumstances beyond their reasonable control that may justify 
extensions of a deadline. In that event, upon written application from 
an insured depository institution, setting forth the reasons for a 
requested extension, the FDIC or appropriate federal banking agency may, 
for good cause, extend a deadline in this part for a period not to 
exceed 30 days.
    24. Public Availability. Each institution's annual report should be 
available for public inspection at its main and branch offices no later 
than 15 days after it is filed with the FDIC. Alternatively, an 
institution may elect to mail one copy of its annual report to any 
person who requests it. The annual report should remain available to the 
public until the annual report for the next year is available. An 
institution may use its annual report under this part to meet the annual 
disclosure statement required by 12 CFR

[[Page 564]]

350.3, if the institution satisfies all other requirements of 12 CFR 
part 350.
    25. Independent Public Accountant's Reports. Section 36(h)(2)(A) 
requires that, within 15 days of receipt by an institution of any 
management letter or other report, such letter or other report shall be 
filed with the FDIC, any appropriate federal banking agency, and any 
appropriate state bank supervisor. Institutions and their accountants 
are encouraged to coordinate preparation and delivery of audit and 
attestation reports and filing the annual report, to avoid duplicate 
filings.
    26. Notices Concerning Accountants. Institutions should review and 
satisfy themselves as to compliance with the required qualifications set 
forth in guidelines 13-15 before engaging an independent public 
accountant. With respect to any selection, change or termination of an 
accountant, institutions should be familiar with the notice requirements 
in guideline 21, and should send a copy of any notice under Sec. 
363.4(d) to the accountant when it is filed with the FDIC. An 
institution which files reports with its appropriate federal banking 
agency under, or is a subsidiary of a holding company which files 
reports with the SEC pursuant to, the Securities Exchange Act of 1934 
may use its current report (e.g. SEC Form 8-K) concerning a change in 
accountant to satisfy the similar notice requirements of this part.

                     Audit Committees (Sec. 363.5)

    27. Composition. The board of directors of each institution should 
determine if outside directors meet the requirements of section 36 and 
this part. At least annually, the board of an institution with $1 
billion or more in total assets at the beginning of its fiscal year 
should determine whether all existing and potential audit committee 
members are ``independent of management of the institution'' and the 
board of an institution with total assets of $500 million or more but 
less than $1 billion as of the beginning of its fiscal year should 
determine whether the majority of all existing and potential audit 
committee members are ``independent of management of the institution. 
Because an insured branch of a foreign bank does not have a separate 
board of directors, the FDIC will not apply the audit committee 
requirements to such branch. However, any such branch is encouraged to 
make a reasonable good faith effort to see that similar duties are 
performed by persons whose experience is generally consistent with the 
Rule's requirements for an institution the size of the insured branch.
    28. ``Independent of Management'' Considerations. In determining 
whether an outside director is independent of management, the board 
should consider all relevant information. This would include considering 
whether the director:
    (a) Has previously been an officer of the institution or any 
affiliate of the institution;
    (b) Serves or served as a consultant, advisor, promoter, 
underwriter, legal counsel, or trustee of or to the institution or its 
affiliates;
    (c) Is a relative of an officer or other employee of the institution 
or its affiliates;
    (d) Holds or controls, or has held or controlled, a direct or 
indirect financial interest in the institution or its affiliates; and
    (e) Has outstanding extensions of credit from the institution or its 
affiliates.
    29. Lack of independence. An outside director should not be 
considered independent of management if such director owns or controls, 
or has owned or controlled within the preceding fiscal year, assets 
representing 10 percent or more of any outstanding class of voting 
securities of the institution.
    30. Holding Company Audit Committees. When an insured depository 
institution subsidiary fails to meet the requirements for the holding 
company exception in Sec. 363.1(b)(2) or maintains its own separate 
audit committee to satisfy the requirements of this part, members of the 
independent audit committee of the holding company may serve as the 
audit committee of the subsidiary institution if they are otherwise 
independent of management of the subsidiary, and, if applicable, meet 
any other requirements for a large subsidiary institution covered by 
this part. However, this does not permit officers or employees of a 
holding company to serve on the audit committee of its subsidiary 
institutions. When the subsidiary institution satisfies the requirements 
for the holding company exception in Sec. 363.1(b)(2), members of the 
audit committee of the holding company should meet all the membership 
requirements applicable to the largest subsidiary depository institution 
and may perform all the duties of the audit committee of a subsidiary 
institution, even though such holding company directors are not 
directors of the institution.
    31. Duties. The audit committee should perform all duties determined 
by the institution's board of directors. The duties should be 
appropriate to the size of the institution and the complexity of its 
operations, and include reviewing with management and the independent 
public accountant the basis for their respective reports issued under 
Sec. Sec. 363.2(a) and (b) and 363.3(a) and (b). Appropriate additional 
duties could include:
    (a) Reviewing with management and the independent public accountant 
the scope of services required by the audit, significant accounting 
policies, and audit conclusions regarding significant accounting 
estimates;
    (b) Reviewing with management and the accountant their assessments 
of the adequacy of internal controls, and the resolution of identified 
material weaknesses and reportable conditions in internal controls,

[[Page 565]]

including the prevention or detection of management override or 
compromise of the internal control system;
    (c) Reviewing with management and the accountant the institution's 
compliance with laws and regulations;
    (d) Discussing with management the selection and termination of the 
accountant and any significant disagreements between the accountant and 
management; and
    (e) Overseeing the internal audit function.
    It is recommended that audit committees maintain minutes and other 
relevant records of their meetings and decisions.
    32. Banking or Related Financial Management Expertise. At least two 
members of the audit committee of a large institution shall have 
``banking or related financial management expertise'' as required by 
section 36(g)(1)(C)(i). This determination is to be made by the board of 
directors of the insured depository institution. A person will be 
considered to have such required expertise if the person has significant 
executive, professional, educational, or regulatory experience in 
financial, auditing, accounting, or banking matters as determined by the 
board of directors. Significant experience as an officer or member of 
the board of directors or audit committee of a financial services 
company would satisfy these criteria.
    33. Large Customers. Any individual or entity (including a 
controlling person of any such entity) which, in the determination of 
the board of directors, has such significant direct or indirect credit 
or other relationships with the institution, the termination of which 
likely would materially and adversely affect the institution's financial 
condition or results of operations, should be considered a ``large 
customer'' for purposes of Sec. 363.5(b).
    34. Access to Counsel. The audit committee should be able to retain 
counsel at its discretion without prior permission of the institution's 
board of directors or its management. Section 36 does not preclude 
advice from the institution's internal counsel or regular outside 
counsel. It also does not require retaining or consulting counsel, but 
if the committee elects to do either, it also may elect to consider 
issues affecting the counsel's independence. Such issues would include 
whether to retain or consult only counsel not concurrently representing 
the institution or any affiliate, and whether to place limitations on 
any counsel representing the institution concerning matters in which 
such counsel previously participated personally and substantially as 
outside counsel to the committee.
    35. Forming and Restructuring Audit Committees. Audit committees 
should be formed within four months of the effective date of this part. 
Some institutions may have to restructure existing audit committees to 
comply with this part. No regulatory action will be taken if 
institutions restructure their audit committees by the earlier of their 
next annual meeting of stockholders, or one year from the effective date 
of this part.

                                  Other

    36. Modifications of guidelines. The FDIC's Board of Directors has 
delegated to the Director of the FDIC's Division of Supervision and 
Consumer Protection (DSC) authority to make and publish in the Federal 
Register minor technical amendments to the Guidelines in this appendix, 
in consultation with the other appropriate federal banking agencies, to 
reflect the practical experience gained from implementation of this 
part. It is not anticipated any such modification would be effective 
until affected institutions have been given reasonable advance notice of 
the modification. Any material modification or amendment will be subject 
to review and approval of the FDIC Board of Directors.

                                              Table 1 to Appendix A
----------------------------------------------------------------------------------------------------------------
                              Designated Federal Laws and Regulations Applicable to
-----------------------------------------------------------------------------------------------------------------
                                                                                          State
                                                            National    State member    nonmember      Savings
                                                              banks         banks         banks     associations
----------------------------------------------------------------------------------------------------------------
                   Insider Loans--Parts and/or Sections of Title 12 of the United States Code
----------------------------------------------------------------------------------------------------------------
375a.......................  Loans to Executive Officers     [bcheck]      [bcheck]         (\1\)         (\1\)
                              of Banks.
375b.......................  Prohibitions Respecting         [bcheck]      [bcheck]         (\1\)         (\1\)
                              Loans and Extensions of
                              Credit to Executive
                              Officers and Directors of
                              Banks, Political Campaign,
                              Committees, etc.
1468(b)....................  Extensions of Credit to      ............  ............  ............     [bcheck]
                              Executive Officers,
                              Directors, and Principal
                              Shareholders.
1828(j)(2).................  Provisions Relating to       ............  ............     [bcheck]   ............
                              Loans, Extensions of
                              Credit, and Other Dealings
                              Between Member Banks and
                              Their Affiliates,
                              Executive Officers,
                              Directors, etc.

[[Page 566]]

 
1828(j)(3)(B)..............  Extensions of Credit               (\2\)   ............        (\3\)
                              Applicability of
                              Provisions Relating to
                              Loans, Extensions of
                              Credit, and Other Dealings
                              Between Insured Branches
                              of Foreign Banks and Their
                              Insiders.
----------------------------------------------------------------------------------------------------------------
                      Parts and/or Sections of Title 12 of the Code of Federal Regulations
----------------------------------------------------------------------------------------------------------------
23.5.......................  Application of Legal            [bcheck]   ............  ............  ............
                              Lending Limits;
                              Restrictions on
                              Transactions With
                              Affiliates.
31.........................  Extensions of Credit to         [bcheck]   ............  ............  ............
                              National Bank Insiders.
215........................  Subpart A--Loans by Member      [bcheck]      [bcheck]         (\4\)         (\5\)
                              Banks to Their Executive
                              Officers, Directors, and
                              Principal Shareholders.
                             Subpart B--Reports of           [bcheck]      [bcheck]         (\4\)         (\5\)
                              Indebtedness of Executive
                              Officers and Principal
                              Shareholders of Insured
                              Nonmember Banks.
337.3......................  Limits on Extensions of      ............  ............     [bcheck]   ............
                              Credit to Executive
                              Officers, Directors, and
                              Principal Shareholders of
                              Insured Nonmember Banks.
349.3......................  Reports by Executive         ............  ............     [bcheck]   ............
                              Officers and Principal
                              Shareholders.
563.43.....................  Loans by Savings             ............  ............  ............     [bcheck]
                              Associations to Their
                              Executive Officers,
                              Directors, and Principal
                              Shareholders.
----------------------------------------------------------------------------------------------------------------
               Dividend Restrictions--Parts and/or Sections of Title 12 of the United States Code
----------------------------------------------------------------------------------------------------------------
56.........................  Prohibition on Withdrawal       [bcheck]      [bcheck]   ............  ............
                              of Capital and Unearned
                              Dividends.
60.........................  Dividends and Surplus Funds     [bcheck]      [bcheck]   ............  ............
1467a(f)...................  Declaration of Dividends...  ............  ............  ............     [bcheck]
1831o......................  Prompt Corrective Action--      [bcheck]      [bcheck]      [bcheck]      [bcheck]
                              Dividend Restrictions.
----------------------------------------------------------------------------------------------------------------
                      Parts and/or Sections of Title 12 of the Code of Federal Regulations
----------------------------------------------------------------------------------------------------------------
5.61.......................  Payment of dividends;           [bcheck]   ............  ............  ............
                              capital limitation.
5.62.......................  Payment of dividends;           [bcheck]   ............  ............  ............
                              earnings limitation.
6.6........................  Prompt Corrective Action--      [bcheck]   ............  ............  ............
                              Dividend Restrictions.
7.6120.....................  Dividends Payable in            [bcheck]   ............  ............  ............
                              Property Other Than Cash.
208.19.....................  Payments of Dividends......  ............     [bcheck]   ............  ............
208.35.....................  Prompt Corrective Action...  ............     [bcheck]   ............  ............
325.105....................  Prompt Corrective Action...  ............  ............     [bcheck]   ............
563.134....................  Capital Distributions......  ............  ............  ............     [bcheck]
565........................  Prompt Corrective Action...  ............  ............  ............     [bcheck]
----------------------------------------------------------------------------------------------------------------
\1\ Subsections (g) and (h) only.
\2\ Applies only to insured federal branches of foreign banks.
\3\ Applies only to insured state branches of foreign banks.
\4\ See 12 CFR parts 337.3 and 349.3.
\5\ See 12 CFR part 563.43.


[58 FR 31335, June 2, 1993, as amended at 61 FR 6494, Feb. 21, 1996; 62 
FR 63258, Nov. 28, 1997; 70 FR 71232, Nov. 28, 2005]



PART 364_STANDARDS FOR SAFETY AND SOUNDNESS--Table of Contents




Sec.
364.100 Purpose.
364.101 Standards for safety and soundness.

Appendix A to Part 364--Interagency Guidelines Establishing Standards 
          for Safety and Soundness
Appendix B to Part 364--Interagency Guidelines Establishing Information 
          Security Standards


[[Page 567]]


    Authority: 12 U.S.C. 1818 and 1819 (Tenth), 1831p-1; 15 U.S.C. 
1681b, 1681s, 1681w, 6801(b), 6805(b)(1).

    Source: 60 FR 35685, July 10, 1995, unless outherwise noted.



Sec. 364.100  Purpose.

    Section 39 of the Federal Deposit Insurance Act requires the Federal 
Deposit Insurance Corporation to establish safety and soundness 
standards. Pursuant to section 39, this part establishes safety and 
soundness standards by guideline.



Sec. 364.101  Standards for safety and soundness.

    (a) General standards. The Interagency Guidelines Establishing 
Standards for Safety and Soundness prescribed pursuant to section 39 of 
the Federal Deposit Insurance Act (12 U.S.C. 1831p-1), as set forth as 
appendix A to this part, apply to all insured state nonmember banks and 
to state-licensed insured branches of foreign banks, that are subject to 
the provisions of section 39 of the Federal Deposit Insurance Act.
    (b) Interagency Guidelines Establishing Information Security 
Standards. The Interagency Guidelines Establishing Information Security 
Standards prescribed pursuant to section 39 of the Federal Deposit 
Insurance Act (12 U.S.C. 1831p-1), and sections 501 and 505(b) of the 
Gramm-Leach-Bliley Act (15 U.S.C. 6801, 6805(b)), and with respect to 
the proper disposal of consumer information requirements pursuant to 
section 628 of the Fair Credit Reporting Act (15 U.S.C. 1681w), as set 
forth in appendix B to this part, apply to all insured state nonmember 
banks, insured state licensed branches of foreign banks, and any 
subsidiaries of such entities (except brokers, dealers, persons 
providing insurance, investment companies, and investment advisers). The 
interagency regulations and guidelines on identity theft detection, 
prevention, and mitigation prescribed pursuant to section 114 of the 
Fair and Accurate Credit Transactions Act of 2003, 15 U.S.C. 1681m(e), 
are set forth in Sec. Sec. 334.90, 334.91, and Appendix J of part 334.

[63 FR 55488, Oct. 15, 1998, as amended at 66 FR 8638, Feb. 1, 2001; 69 
FR 77619, Dec. 28, 2004; 72 FR 63764, Nov. 9, 2007]



    Sec. Appendix A to Part 364--Interagency Guidelines Establishing 
                   Standards for Safety and Soundness

                            Table of Contents

                             I. Introduction

    A. Preservation of existing authority.
    B. Definitions.

                II. Operational and Managerial Standards

    A. Internal controls and information systems.
    B. Internal audit system.
    C. Loan documentation.
    D. Credit underwriting.
    E. Interest rate exposure.
    F. Asset growth.
    G. Asset quality.
    H. Earnings.
    I. Compensation, fees and benefits.

III. Prohibition on Compensation That Constitutes an Unsafe and Unsound 
                                Practice

    A. Excessive compensation.
    B. Compensation leading to material financial loss.

                             I. Introduction

    i. Section 39 of the Federal Deposit Insurance Act \1\ (FDI Act) 
requires each Federal banking agency (collectively, the agencies) to 
establish certain safety and soundness standards by regulation or by 
guideline for all insured depository institutions. Under section 39, the 
agencies must establish three types of standards: (1) Operational and 
managerial standards; (2) compensation standards; and (3) such standards 
relating to asset quality, earnings, and stock valuation as they 
determine to be appropriate.
---------------------------------------------------------------------------

    \1\ Section 39 of the Federal Deposit Insurance Act (12 U.S.C. 
1831p-1) was added by section 132 of the Federal Deposit Insurance 
Corporation Improvement Act of 1991 (FDICIA), Pub. L. 102-242, 105 Stat. 
2236 (1991), and amended by section 956 of the Housing and Community 
Development Act of 1992, Pub. L. 102-550, 106 Stat. 3895 (1992) and 
section 318 of the Riegle Community Development and Regulatory 
Improvement Act of 1994, Pub. L. 103-325, 108 Stat. 2160 (1994).
---------------------------------------------------------------------------

    ii. Section 39(a) requires the agencies to establish operational and 
managerial standards relating to: (1) Internal controls, information 
systems and internal audit systems, in accordance with section 36 of the 
FDI Act (12 U.S.C. 1831m); (2) loan documentation; (3)

[[Page 568]]

credit underwriting; (4) interest rate exposure; (5) asset growth; and 
(6) compensation, fees, and benefits, in accordance with subsection (c) 
of section 39. Section 39(b) requires the agencies to establish 
standards relating to asset quality, earnings, and stock valuation that 
the agencies determine to be appropriate.
    iii. Section 39(c) requires the agencies to establish standards 
prohibiting as an unsafe and unsound practice any compensatory 
arrangement that would provide any executive officer, employee, 
director, or principal shareholder of the institution with excessive 
compensation, fees or benefits and any compensatory arrangement that 
could lead to material financial loss to an institution. Section 39(c) 
also requires that the agencies establish standards that specify when 
compensation is excessive.
    iv. If an agency determines that an institution fails to meet any 
standard established by guideline under subsection (a) or (b) of section 
39, the agency may require the institution to submit to the agency an 
acceptable plan to achieve compliance with the standard. In the event 
that an institution fails to submit an acceptable plan within the time 
allowed by the agency or fails in any material respect to implement an 
accepted plan, the agency must, by order, require the institution to 
correct the deficiency. The agency may, and in some cases must, take 
other supervisory actions until the deficiency has been corrected.
    v. The agencies have adopted amendments to their rules and 
regulations to establish deadlines for submission and review of 
compliance plans.\2\
---------------------------------------------------------------------------

    \2\ For the Office of the Comptroller of the Currency, these 
regulations appear at 12 CFR Part 30; for the Board of Governors of the 
Federal Reserve System, these regulations appear at 12 CFR Part 263; for 
the Federal Deposit Insurance Corporation, these regulations appear at 
12 CFR Part 308, subpart R, and for the Office of Thrift Supervision, 
these regulations appear at 12 CFR Part 570.
---------------------------------------------------------------------------

    vi. The following Guidelines set out the safety and soundness 
standards that the agencies use to identify and address problems at 
insured depository institutions before capital becomes impaired. The 
agencies believe that the standards adopted in these Guidelines serve 
this end without dictating how institutions must be managed and 
operated. These standards are designed to identify potential safety and 
soundness concerns and ensure that action is taken to address those 
concerns before they pose a risk to the Deposit Insurance Fund.

                  A. Preservation of Existing Authority

    Neither section 39 nor these Guidelines in any way limits the 
authority of the agencies to address unsafe or unsound practices, 
violations of law, unsafe or unsound conditions, or other practices. 
Action under section 39 and these Guidelines may be taken independently 
of, in conjunction with, or in addition to any other enforcement action 
available to the agencies. Nothing in these Guidelines limits the 
authority of the FDIC pursuant to section 38(i)(2)(F) of the FDI Act (12 
U.S.C. 1831(o)) and Part 325 of Title 12 of the Code of Federal 
Regulations.

                             B. Definitions

    1. In general. For purposes of these Guidelines, except as modified 
in the Guidelines or unless the context otherwise requires, the terms 
used have the same meanings as set forth in sections 3 and 39 of the FDI 
Act (12 U.S.C. 1813 and 1831p-1).
    2. Board of directors, in the case of a state-licensed insured 
branch of a foreign bank and in the case of a federal branch of a 
foreign bank, means the managing official in charge of the insured 
foreign branch.
    3. Compensation means all direct and indirect payments or benefits, 
both cash and non-cash, granted to or for the benefit of any executive 
officer, employee, director, or principal shareholder, including but not 
limited to payments or benefits derived from an employment contract, 
compensation or benefit agreement, fee arrangement, perquisite, stock 
option plan, postemployment benefit, or other compensatory arrangement.
    4. Director shall have the meaning described in 12 CFR 215.2(c).\3\
---------------------------------------------------------------------------

    \3\ In applying these definitions for savings associations, pursuant 
to 12 U.S.C. 1464, savings associations shall use the terms ``savings 
association'' and ``insured savings association'' in place of the terms 
``member bank'' and ``insured bank''.
---------------------------------------------------------------------------

    5. Executive officer shall have the meaning described in 12 CFR 
215.2(d).\4\
---------------------------------------------------------------------------

    \4\ See footnote 3 in section I.B.4. of this appendix.
---------------------------------------------------------------------------

    6. Principal shareholder shall have the meaning described in 12 CFR 
215.2(l).\5\
---------------------------------------------------------------------------

    \5\ See footnote 3 in section I.B.4. of this appendix.
---------------------------------------------------------------------------

                II. Operational and Managerial Standards

    A. Internal controls and information systems. An institution should 
have internal controls and information systems that are appropriate to 
the size of the institution and the nature, scope and risk of its 
activities and that provide for:
    1. An organizational structure that establishes clear lines of 
authority and responsibility for monitoring adherence to established 
policies;
    2. Effective risk assessment;

[[Page 569]]

    3. Timely and accurate financial, operational and regulatory 
reports;
    4. Adequate procedures to safeguard and manage assets; and
    5. Compliance with applicable laws and regulations.
    B. Internal audit system. An institution should have an internal 
audit system that is appropriate to the size of the institution and the 
nature and scope of its activities and that provides for:
    1. Adequate monitoring of the system of internal controls through an 
internal audit function. For an institution whose size, complexity or 
scope of operations does not warrant a full scale internal audit 
function, a system of independent reviews of key internal controls may 
be used;
    2. Independence and objectivity;
    3. Qualified persons;
    4. Adequate testing and review of information systems;
    5. Adequate documentation of tests and findings and any corrective 
actions;
    6. Verification and review of management actions to address material 
weaknesses; and
    7. Review by the institution's audit committee or board of directors 
of the effectiveness of the internal audit systems.
    C. Loan documentation. An institution should establish and maintain 
loan documentation practices that:
    1. Enable the institution to make an informed lending decision and 
to assess risk, as necessary, on an ongoing basis;
    2. Identify the purpose of a loan and the source of repayment, and 
assess the ability of the borrower to repay the indebtedness in a timely 
manner;
    3. Ensure that any claim against a borrower is legally enforceable;
    4. Demonstrate appropriate administration and monitoring of a loan; 
and
    5. Take account of the size and complexity of a loan.
    D. Credit underwriting. An institution should establish and maintain 
prudent credit underwriting practices that:
    1. Are commensurate with the types of loans the institution will 
make and consider the terms and conditions under which they will be 
made;
    2. Consider the nature of the markets in which loans will be made;
    3. Provide for consideration, prior to credit commitment, of the 
borrower's overall financial condition and resources, the financial 
responsibility of any guarantor, the nature and value of any underlying 
collateral, and the borrower's character and willingness to repay as 
agreed;
    4. Establish a system of independent, ongoing credit review and 
appropriate communication to management and to the board of directors;
    5. Take adequate account of concentration of credit risk; and
    6. Are appropriate to the size of the institution and the nature and 
scope of its activities.
    E. Interest rate exposure. An institution should:
    1. Manage interest rate risk in a manner that is appropriate to the 
size of the institution and the complexity of its assets and 
liabilities; and
    2. Provide for periodic reporting to management and the board of 
directors regarding interest rate risk with adequate information for 
management and the board of directors to assess the level of risk.
    F. Asset growth. An institution's asset growth should be prudent and 
consider:
    1. The source, volatility and use of the funds that support asset 
growth;
    2. Any increase in credit risk or interest rate risk as a result of 
growth; and
    3. The effect of growth on the institution's capital.
    G. Asset quality. An insured depository institution should establish 
and maintain a system that is commensurate with the institution's size 
and the nature and scope of its operations to identify problem assets 
and prevent deterioration in those assets. The institution should:
    1. Conduct periodic asset quality reviews to identify problem 
assets;
    2. Estimate the inherent losses in those assets and establish 
reserves that are sufficient to absorb estimated losses;
    3. Compare problem asset totals to capital;
    4. Take appropriate corrective action to resolve problem assets;
    5. Consider the size and potential risks of material asset 
concentrations; and
    6. Provide periodic asset reports with adequate information for 
management and the board of directors to assess the level of asset risk.
    H. Earnings. An insured depository institution should establish and 
maintain a system that is commensurate with the institution's size and 
the nature and scope of its operations to evaluate and monitor earnings 
and ensure that earnings are sufficient to maintain adequate capital and 
reserves. The institution should:
    1. Compare recent earnings trends relative to equity, assets, or 
other commonly used benchmarks to the institution's historical results 
and those of its peers;
    2. Evaluate the adequacy of earnings given the size, complexity, and 
risk profile of the institution's assets and operations;
    3. Assess the source, volatility, and sustainability of earnings, 
including the effect of nonrecurring or extraordinary income or expense;
    4. Take steps to ensure that earnings are sufficient to maintain 
adequate capital and reserves after considering the institution's asset 
quality and growth rate; and

[[Page 570]]

    5. Provide periodic earnings reports with adequate information for 
management and the board of directors to assess earnings performance.
    I. Compensation, fees and benefits. An institution should maintain 
safeguards to prevent the payment of compensation, fees, and benefits 
that are excessive or that could lead to material financial loss to the 
institution.

III. Prohibition on Compensation That Constitutes an Unsafe and Unsound 
                                Practice

                        A. Excessive Compensation

    Excessive compensation is prohibited as an unsafe and unsound 
practice. Compensation shall be considered excessive when amounts paid 
are unreasonable or disproportionate to the services performed by an 
executive officer, employee, director, or principal shareholder, 
considering the following:
    1. The combined value of all cash and non-cash benefits provided to 
the individual;
    2. The compensation history of the individual and other individuals 
with comparable expertise at the institution;
    3. The financial condition of the institution;
    4. Comparable compensation practices at comparable institutions, 
based upon such factors as asset size, geographic location, and the 
complexity of the loan portfolio or other assets;
    5. For postemployment benefits, the projected total cost and benefit 
to the institution;
    6. Any connection between the individual and any fraudulent act or 
omission, breach of trust or fiduciary duty, or insider abuse with 
regard to the institution; and
    7. Any other factors the agencies determines to be relevant.

           B. Compensation Leading to Material Financial Loss

    Compensation that could lead to material financial loss to an 
institution is prohibited as an unsafe and unsound practice.

[60 FR 35678, 35685, July 10, 1995; 61 FR 43951, Aug. 27, 1996, as 
amended at 71 FR 20527, Apr. 21, 2006]



    Sec. Appendix B to Part 364--Interagency Guidelines Establishing 
                     Information Security Standards

                            Table of Contents

I. Introduction
    A. Scope
    B. Preservation of Existing Authority
    C. Definitions
II. Standards for Safeguarding Customer Information
    A. Information Security Program
    B. Objectives
III. Development and Implementation of Customer Information Security 
Program
    A. Involve the Board of Directors
    B. Assess Risk
    C. Manage and Control Risk
    D. Oversee Service Provider Arrangements
    E. Adjust the Program
    F. Report to the Board
    G. Implement the Standards

                             I. Introduction

    The Interagency Guidelines Establishing Information Security 
Standards (Guidelines) set forth standards pursuant to section 39 of the 
Federal Deposit Insurance Act, 12 U.S.C. 1831p-1, and sections 501 and 
505(b), 15 U.S.C. 6801 and 6805(b), of the Gramm-Leach-Bliley Act. These 
Guidelines address standards for developing and implementing 
administrative, technical, and physical safeguards to protect the 
security, confidentiality, and integrity of customer information. These 
Guidelines also address standards with respect to the proper disposal of 
consumer information pursuant to sections 621 and 628 of the Fair Credit 
Reporting Act (15 U.S.C. 1681s and 1681w).
    A. Scope. The Guidelines apply to customer information maintained by 
or on behalf of, and to the disposal of consumer information by or on 
behalf of, entities over which the Federal Deposit Insurance Corporation 
(FDIC) has authority. Such entities, referred to as ``the bank'' are 
banks insured by the FDIC (other than members of the Federal Reserve 
System), insured state branches of foreign banks, and any subsidiaries 
of such entities (except brokers, dealers, persons providing insurance, 
investment companies, and investment advisers).
    B. Preservation of Existing Authority. Neither section 39 nor these 
Guidelines in any way limit the authority of the FDIC to address unsafe 
or unsound practices, violations of law, unsafe or unsound conditions, 
or other practices. The FDIC may take action under section 39 and these 
Guidelines independently of, in conjunction with, or in addition to, any 
other enforcement action available to the FDIC.
    C. Definitions. 1. Except as modified in the Guidelines, or unless 
the context otherwise requires, the terms used in these Guidelines have 
the same meanings as set forth in sections 3 and 39 of the Federal 
Deposit Insurance Act (12 U.S.C. 1813 and 1831p-1).
    2. For purposes of the Guidelines, the following definitions apply:
    a. Board of directors, in the case of a branch or agency of a 
foreign bank, means the managing official in charge of the branch or 
agency.
    b. Consumer information means any record about an individual, 
whether in paper, electronic, or other form, that is a consumer report 
or is derived from a consumer report

[[Page 571]]

and that is maintained or otherwise possessed by or on behalf of the 
bank for a business purpose. Consumer information also means a 
compilation of such records. The term does not include any record that 
does not personally identify an individual.
    i. Examples:
     (1) Consumer information includes:
    (A) A consumer report that a bank obtains;
    (B) information from a consumer report that the bank obtains from 
its affiliate after the consumer has been given a notice and has elected 
not to opt out of that sharing;
    (C) information from a consumer report that the bank obtains about 
an individual who applies for but does not receive a loan, including any 
loan sought by an individual for a business purpose;
    (D) information from a consumer report that the bank obtains about 
an individual who guarantees a loan (including a loan to a business 
entity); or
    (E) information from a consumer report that the bank obtains about 
an employee or prospective employee.
    (2) Consumer information does not include:
    (A) aggregate information, such as the mean score, derived from a 
group of consumer reports; or
    (B) blind data, such as payment history on accounts that are not 
personally identifiable, that may be used for developing credit scoring 
models or for other purposes.
    c. Consumer report has the same meaning as set forth in the Fair 
Credit Reporting Act, 15 U.S.C. 1681a(d).
    d. Customer means any customer of the bank as defined in Sec. 
332.3(h) of this chapter.
    e. Customer information means any record containing nonpublic 
personal information, as defined in Sec. 332.3(n) of this chapter, 
about a customer, whether in paper, electronic, or other form, that is 
maintained by or on behalf of the bank.
    f. Customer information systems means any methods used to access, 
collect, store, use, transmit, protect, or dispose of customer 
information.
    g. Service provider means any person or entity that maintains, 
processes, or otherwise is permitted access to customer information or 
consumer information through its provision of services directly to the 
bank.

                 II. Standards for Information Security

    A. Information Security Program. Each bank shall implement a 
comprehensive written information security program that includes 
administrative, technical, and physical safeguards appropriate to the 
size and complexity of the bank and the nature and scope of its 
activities. While all parts of the bank are not required to implement a 
uniform set of policies, all elements of the information security 
program must be coordinated.
    B. Objectives. A bank's information security program shall be 
designed to:
    1. Ensure the security and confidentiality of customer information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information;
    3. Protect against unauthorized access to or use of such information 
that could result in substantial harm or inconvenience to any customer; 
and
    4. Ensure the proper disposal of customer information and consumer 
information.

   III. Development and Implementation of Information Security Program

    A. Involve the Board of Directors. The board of directors or an 
appropriate committee of the board of each bank shall:
    1. Approve the bank's written information security program; and
    2. Oversee the development, implementation, and maintenance of the 
bank's information security program, including assigning specific 
responsibility for its implementation and reviewing reports from 
management.
    B. Assess Risk.
    Each bank shall:
    1. Identify reasonably foreseeable internal and external threats 
that could result in unauthorized disclosure, misuse, alteration, or 
destruction of customer information or customer information systems.
    2. Assess the likelihood and potential damage of these threats, 
taking into consideration the sensitivity of customer information.
    3. Assess the sufficiency of policies, procedures, customer 
information systems, and other arrangements in place to control risks.
    C. Manage and Control Risk. Each bank shall:
    1. Design its information security program to control the identified 
risks, commensurate with the sensitivity of the information as well as 
the complexity and scope of the bank's activities. Each bank must 
consider whether the following security measures are appropriate for the 
bank and, if so, adopt those measures the bank concludes are 
appropriate:
    a. Access controls on customer information systems, including 
controls to authenticate and permit access only to authorized 
individuals and controls to prevent employees from providing customer 
information to unauthorized individuals who may seek to obtain this 
information through fraudulent means.
    b. Access restrictions at physical locations containing customer 
information, such as buildings, computer facilities, and records storage 
facilities to permit access only to authorized individuals;
    c. Encryption of electronic customer information, including while in 
transit or in storage on networks or systems to which unauthorized 
individuals may have access;

[[Page 572]]

    d. Procedures designed to ensure that customer information system 
modifications are consistent with the bank's information security 
program;
    e. Dual control procedures, segregation of duties, and employee 
background checks for employees with responsibilities for or access to 
customer information;
    f. Monitoring systems and procedures to detect actual and attempted 
attacks on or intrusions into customer information systems;
    g. Response programs that specify actions to be taken when the bank 
suspects or detects that unauthorized individuals have gained access to 
customer information systems, including appropriate reports to 
regulatory and law enforcement agencies; and
    h. Measures to protect against destruction, loss, or damage of 
customer information due to potential environmental hazards, such as 
fire and water damage or technological failures.
    2. Train staff to implement the bank's information security program.
    3. Regularly test the key controls, systems and procedures of the 
information security program. The frequency and nature of such tests 
should be determined by the bank's risk assessment. Tests should be 
conducted or reviewed by independent third parties or staff independent 
of those that develop or maintain the security programs.
    4. Develop, implement, and maintain, as part of its information 
security program, appropriate measures to properly dispose of customer 
information and consumer information in accordance with each of the 
requirements of this paragraph III.
    D. Oversee Service Provider Arrangements. Each bank shall:
    1. Exercise appropriate due diligence in selecting its service 
providers;
    2. Require its service providers by contract to implement 
appropriate measures designed to meet the objectives of these 
Guidelines; and
    3. Where indicated by the bank's risk assessment, monitor its 
service providers to confirm that they have satisfied their obligations 
as required by paragraph D.2. As part of this monitoring, a bank should 
review audits, summaries of test results, or other equivalent 
evaluations of its service providers.
    E. Adjust the Program. Each bank shall monitor, evaluate, and 
adjust, as appropriate, the information security program in light of any 
relevant changes in technology, the sensitivity of its customer 
information, internal or external threats to information, and the bank's 
own changing business arrangements, such as mergers and acquisitions, 
alliances and joint ventures, outsourcing arrangements, and changes to 
customer information systems.
    F. Report to the Board. Each bank shall report to its board or an 
appropriate committee of the board at least annually. This report should 
describe the overall status of the information security program and the 
bank's compliance with these Guidelines. The report, which will vary 
depending upon the complexity of each bank's program should discuss 
material matters related to its program, addressing issues such as: risk 
assessment; risk management and control decisions; service provider 
arrangements; results of testing; security breaches or violations, and 
management's responses; and recommendations for changes in the 
information security program.
    G. Implement the Standards. 1. Effective date. Each bank must 
implement an information security program pursuant to these Guidelines 
by July 1, 2001.
    2. Two-year grandfathering of agreements with service providers. 
Until July 1, 2003, a contract that a bank has entered into with a 
service provider to perform services for it or functions on its behalf, 
satisfies the provisions of paragraph III.D., even if the contract does 
not include a requirement that the servicer maintain the security and 
confidentiality of customer information as long as the bank entered into 
the contract on or before March 5, 2001.
    3. Effective date for measures relating to the disposal of consumer 
information. Each bank must satisfy these Guidelines with respect to the 
proper disposal of consumer information by July 1, 2005.
    4. Exception for existing agreements with service providers relating 
to the disposal of consumer information. Notwithstanding the requirement 
in paragraph III.G.3., a bank's contracts with its service providers 
that have access to consumer information and that may dispose of 
consumer information, entered into before July 1, 2005, must comply with 
the provisions of the Guidelines relating to the proper disposal of 
consumer information by July 1, 2006.

Supplement A to Appendix B to Part 364--Interagency Guidance on Response 
 Programs for Unauthorized Access to Customer Information and Customer 
                                 Notice

                              I. Background

    This Guidance \1\ interprets section 501(b) of the Gramm-Leach-
Bliley Act (``GLBA'') and the Interagency Guidelines Establishing 
Information Security Standards (the ``Security

[[Page 573]]

Guidelines'')\2\ and describes response programs, including customer 
notification procedures, that a financial institution should develop and 
implement to address unauthorized access to or use of customer 
information that could result in substantial harm or inconvenience to a 
customer. The scope of, and definitions of terms used in, this Guidance 
are identical to those of the Security Guidelines. For example, the term 
``customer information'' is the same term used in the Security 
Guidelines, and means any record containing nonpublic personal 
information about a customer, whether in paper, electronic, or other 
form, maintained by or on behalf of the institution.
---------------------------------------------------------------------------

    \1\ This Guidance is being jointly issued by the Board of Governors 
of the Federal Reserve System (Board), the Federal Deposit Insurance 
Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), 
and the Office of Thrift Supervision (OTS).
    \2\ 12 CFR part 30, app. B (OCC); 12 CFR part 208, app. D-2 and part 
225, app. F (Board); 12 CFR part 364, app. B (FDIC); and 12 CFR part 
570, app. B (OTS). The ``Interagency Guidelines Establishing Information 
Security Standards'' were formerly known as ``The Interagency Guidelines 
Establishing Standards for Safeguarding Customer Information.''
---------------------------------------------------------------------------

                   A. Interagency Security Guidelines

    Section 501(b) of the GLBA required the Agencies to establish 
appropriate standards for financial institutions subject to their 
jurisdiction that include administrative, technical, and physical 
safeguards, to protect the security and confidentiality of customer 
information. Accordingly, the Agencies issued Security Guidelines 
requiring every financial institution to have an information security 
program designed to:
    1. Ensure the security and confidentiality of customer information;
    2. Protect against any anticipated threats or hazards to the 
security or integrity of such information; and
    3. Protect against unauthorized access to or use of such information 
that could result in substantial harm or inconvenience to any customer.

                     B. Risk Assessment and Controls

    1. The Security Guidelines direct every financial institution to 
assess the following risks, among others, when developing its 
information security program:
    a. Reasonably foreseeable internal and external threats that could 
result in unauthorized disclosure, misuse, alteration, or destruction of 
customer information or customer information systems;
    b. The likelihood and potential damage of threats, taking into 
consideration the sensitivity of customer information; and
    c. The sufficiency of policies, procedures, customer information 
systems, and other arrangements in place to control risks.\3\
---------------------------------------------------------------------------

    \3\ See Security Guidelines, III.B.
---------------------------------------------------------------------------

    2. Following the assessment of these risks, the Security Guidelines 
require a financial institution to design a program to address the 
identified risks. The particular security measures an institution should 
adopt will depend upon the risks presented by the complexity and scope 
of its business. At a minimum, the financial institution is required to 
consider the specific security measures enumerated in the Security 
Guidelines,\4\ and adopt those that are appropriate for the institution, 
including:
---------------------------------------------------------------------------

    \4\ See Security Guidelines, III.C.
---------------------------------------------------------------------------

    a. Access controls on customer information systems, including 
controls to authenticate and permit access only to authorized 
individuals and controls to prevent employees from providing customer 
information to unauthorized individuals who may seek to obtain this 
information through fraudulent means;
    b. Background checks for employees with responsibilities for access 
to customer information; and
    c. Response programs that specify actions to be taken when the 
financial institution suspects or detects that unauthorized individuals 
have gained access to customer information systems, including 
appropriate reports to regulatory and law enforcement agencies.\5\
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    \5\ See Security Guidelines, III.C.
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                          C. Service Providers

    The Security Guidelines direct every financial institution to 
require its service providers by contract to implement appropriate 
measures designed to protect against unauthorized access to or use of 
customer information that could result in substantial harm or 
inconvenience to any customer.\6\
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    \6\ See Security Guidelines, II.B. and III.D. Further, the Agencies 
note that, in addition to contractual obligations to a financial 
institution, a service provider may be required to implement its own 
comprehensive information security program in accordance with the 
Safeguards Rule promulgated by the Federal Trade Commission (``FTC''), 
16 CFR part 316.
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                          II. Response Program

    Millions of Americans, throughout the country, have been victims of 
identity theft.\7\ Identity thieves misuse personal information they 
obtain from a number of sources, including financial institutions, to 
perpetrate identity theft. Therefore, financial institutions should take 
preventative measures to

[[Page 574]]

safeguard customer information against attempts to gain unauthorized 
access to the information. For example, financial institutions should 
place access controls on customer information systems and conduct 
background checks for employees who are authorized to access customer 
information.\8\ However, every financial institution should also develop 
and implement a risk-based response program to address incidents of 
unauthorized access to customer information in customer information 
systems \9\ that occur nonetheless. A response program should be a key 
part of an institution's information security program.\10\ The program 
should be appropriate to the size and complexity of the institution and 
the nature and scope of its activities.
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    \7\ The FTC estimates that nearly 10 million Americans discovered 
they were victims of some form of identity theft in 2002. See The 
Federal Trade Commission, Identity Theft Survey Report, (September 
2003), available at http://www.ftc.gov/os/2003/09/synovatereport.pdf.
    \8\ Institutions should also conduct background checks of employees 
to ensure that the institution does not violate 12 U.S.C. 1829, which 
prohibits an institution from hiring an individual convicted of certain 
criminal offenses or who is subject to a prohibition order under 12 
U.S.C. 1818(e)(6).
    \9\ Under the Guidelines, an institution's customer information 
systems consist of all of the methods used to access, collect, store, 
use, transmit, protect, or dispose of customer information, including 
the systems maintained by its service providers. See Security 
Guidelines, I.C.2.d (I.C.2.c for OTS).
    \10\ See FFIEC Information Technology Examination Handbook, 
Information Security Booklet, Dec. 2002 available at http://
www.ffiec.gov/ffiecinfobase/html--pages/infosec--book--frame.htm. 
Federal Reserve SR 97-32, Sound Practice Guidance for Information 
Security for Networks, Dec. 4, 1997; OCC Bulletin 2000-14, 
``Infrastructure Threats--Intrusion Risks'' (May 15, 2000), for 
additional guidance on preventing, detecting, and responding to 
intrusions into financial institution computer systems.
---------------------------------------------------------------------------

    In addition, each institution should be able to address incidents of 
unauthorized access to customer information in customer information 
systems maintained by its domestic and foreign service providers. 
Therefore, consistent with the obligations in the Guidelines that relate 
to these arrangements, and with existing guidance on this topic issued 
by the Agencies,\11\ an institution's contract with its service provider 
should require the service provider to take appropriate actions to 
address incidents of unauthorized access to the financial institution's 
customer information, including notification to the institution as soon 
as possible of any such incident, to enable the institution to 
expeditiously implement its response program.
---------------------------------------------------------------------------

    \11\ See Federal Reserve SR Ltr. 00-04, Outsourcing of Information 
and Transaction Processing, Feb. 9, 2000; OCC Bulletin 2001-47, ``Third-
Party Relationships Risk Management Principles,'' Nov. 1, 2001; FDIC FIL 
68-99, Risk Assessment Tools and Practices for Information System 
Security, July 7, 1999; OTS Thrift Bulletin 82a, Third Party 
Arrangements, Sept. 1, 2004.
---------------------------------------------------------------------------

                   A. Components of a Response Program

    1. At a minimum, an institution's response program should contain 
procedures for the following:
    a. Assessing the nature and scope of an incident, and identifying 
what customer information systems and types of customer information have 
been accessed or misused;
    b. Notifying its primary Federal regulator as soon as possible when 
the institution becomes aware of an incident involving unauthorized 
access to or use of sensitive customer information, as defined below;
    c. Consistent with the Agencies' Suspicious Activity Report 
(``SAR'') regulations,\12\ notifying appropriate law enforcement 
authorities, in addition to filing a timely SAR in situations involving 
Federal criminal violations requiring immediate attention, such as when 
a reportable violation is ongoing;
---------------------------------------------------------------------------

    \12\ An institution's obligation to file a SAR is set out in the 
Agencies' SAR regulations and Agency guidance. See 12 CFR 21.11 
(national banks, Federal branches and agencies); 12 CFR 208.62 (State 
member banks); 12 CFR 211.5(k) (Edge and agreement corporations); 12 CFR 
211.24(f) (uninsured State branches and agencies of foreign banks); 12 
CFR 225.4(f) (bank holding companies and their nonbank subsidiaries); 12 
CFR part 353 (State non-member banks); and 12 CFR 563.180 (savings 
associations). National banks must file SARs in connection with computer 
intrusions and other computer crimes. See OCC Bulletin 2000-14, 
``Infrastructure Threats--Intrusion Risks'' (May 15, 2000); Advisory 
Letter 97-9, ``Reporting Computer Related Crimes'' (November 19, 1997) 
(general guidance still applicable though instructions for new SAR form 
published in 65 FR 1229, 1230 (January 7, 2000)). See also Federal 
Reserve SR 01-11, Identity Theft and Pretext Calling, Apr. 26, 2001; SR 
97-28, Guidance Concerning Reporting of Computer Related Crimes by 
Financial Institutions, Nov. 6, 1997; FDIC FIL 48-2000, Suspicious 
Activity Reports, July 14, 2000; FIL 47-97, Preparation of Suspicious 
Activity Reports, May 6, 1997; OTS CEO Memorandum 139, Identity Theft 
and Pretext Calling, May 4, 2001; CEO Memorandum 126, New Suspicious 
Activity Report Form, July 5, 2000; http://www.ots.treas.gov/BSA (for 
the latest SAR form and filing instructions required by OTS as of July 
1, 2003).

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[[Page 575]]

    d. Taking appropriate steps to contain and control the incident to 
prevent further unauthorized access to or use of customer information, 
for example, by monitoring, freezing, or closing affected accounts, 
while preserving records and other evidence;\13\ and
---------------------------------------------------------------------------

    \13\ See FFIEC Information Technology Examination Handbook, 
Information Security Booklet, Dec. 2002, pp. 68-74.
---------------------------------------------------------------------------

    e. Notifying customers when warranted.
    2. Where an incident of unauthorized access to customer information 
involves customer information systems maintained by an institution's 
service providers, it is the responsibility of the financial institution 
to notify the institution's customers and regulator. However, an 
institution may authorize or contract with its service provider to 
notify the institution's customers or regulator on its behalf.

                          III. Customer Notice

    Financial institutions have an affirmative duty to protect their 
customers' information against unauthorized access or use. Notifying 
customers of a security incident involving the unauthorized access or 
use of the customer's information in accordance with the standard set 
forth below is a key part of that duty. Timely notification of customers 
is important to manage an institution's reputation risk. Effective 
notice also may reduce an institution's legal risk, assist in 
maintaining good customer relations, and enable the institution's 
customers to take steps to protect themselves against the consequences 
of identity theft. When customer notification is warranted, an 
institution may not forgo notifying its customers of an incident because 
the institution believes that it may be potentially embarrassed or 
inconvenienced by doing so.

                    A. Standard for Providing Notice

    When a financial institution becomes aware of an incident of 
unauthorized access to sensitive customer information, the institution 
should conduct a reasonable investigation to promptly determine the 
likelihood that the information has been or will be misused. If the 
institution determines that misuse of its information about a customer 
has occurred or is reasonably possible, it should notify the affected 
customer as soon as possible. Customer notice may be delayed if an 
appropriate law enforcement agency determines that notification will 
interfere with a criminal investigation and provides the institution 
with a written request for the delay. However, the institution should 
notify its customers as soon as notification will no longer interfere 
with the investigation.

                    1. Sensitive Customer Information

    Under the Guidelines, an institution must protect against 
unauthorized access to or use of customer information that could result 
in substantial harm or inconvenience to any customer. Substantial harm 
or inconvenience is most likely to result from improper access to 
sensitive customer information because this type of information is most 
likely to be misused, as in the commission of identity theft. For 
purposes of this Guidance, sensitive customer information means a 
customer's name, address, or telephone number, in conjunction with the 
customer's social security number, driver's license number, account 
number, credit or debit card number, or a personal identification number 
or password that would permit access to the customer's account. 
Sensitive customer information also includes any combination of 
components of customer information that would allow someone to log onto 
or access the customer's account, such as user name and password or 
password and account number.

                          2. Affected Customers

    If a financial institution, based upon its investigation, can 
determine from its logs or other data precisely which customers' 
information has been improperly accessed, it may limit notification to 
those customers with regard to whom the institution determines that 
misuse of their information has occurred or is reasonably possible. 
However, there may be situations where the institution determines that a 
group of files has been accessed improperly, but is unable to identify 
which specific customers' information has been accessed. If the 
circumstances of the unauthorized access lead the institution to 
determine that misuse of the information is reasonably possible, it 
should notify all customers in the group.

                      B. Content of Customer Notice

    1. Customer notice should be given in a clear and conspicuous 
manner. The notice should describe the incident in general terms and the 
type of customer information that was the subject of unauthorized access 
or use. It also should generally describe what the institution has done 
to protect the customers' information from further unauthorized access. 
In addition, it should include a telephone number that customers can 
call for further information and assistance.\14\ The notice also should 
remind customers of the need to remain vigilant over the next twelve

[[Page 576]]

to twenty-four months, and to promptly report incidents of suspected 
identity theft to the institution. The notice should include the 
following additional items, when appropriate:
---------------------------------------------------------------------------

    \14\ The institution should, therefore, ensure that it has 
reasonable policies and procedures in place, including trained 
personnel, to respond appropriately to customer inquiries and requests 
for assistance.
---------------------------------------------------------------------------

    a. A recommendation that the customer review account statements and 
immediately report any suspicious activity to the institution;
    b. A description of fraud alerts and an explanation of how the 
customer may place a fraud alert in the customer's consumer reports to 
put the customer's creditors on notice that the customer may be a victim 
of fraud;
    c. A recommendation that the customer periodically obtain credit 
reports from each nationwide credit reporting agency and have 
information relating to fraudulent transactions deleted;
    d. An explanation of how the customer may obtain a credit report 
free of charge; and
    e. Information about the availability of the FTC's online guidance 
regarding steps a consumer can take to protect against identity theft. 
The notice should encourage the customer to report any incidents of 
identity theft to the FTC, and should provide the FTC's Web site address 
and toll-free telephone number that customers may use to obtain the 
identity theft guidance and report suspected incidents of identity 
theft.\15\
---------------------------------------------------------------------------

    \15\ Currently, the FTC Web site for the ID Theft brochure and the 
FTC Hotline phone number are http://www.consumer.gov/idtheft and 1-877-
IDTHEFT. The institution may also refer customers to any materials 
developed pursuant to section 151(b) of the FACT Act (educational 
materials developed by the FTC to teach the public how to prevent 
identity theft).
---------------------------------------------------------------------------

    2. The Agencies encourage financial institutions to notify the 
nationwide consumer reporting agencies prior to sending notices to a 
large number of customers that include contact information for the 
reporting agencies.

                     C. Delivery of Customer Notice

    Customer notice should be delivered in any manner designed to ensure 
that a customer can reasonably be expected to receive it. For example, 
the institution may choose to contact all customers affected by 
telephone or by mail, or by electronic mail for those customers for whom 
it has a valid e-mail address and who have agreed to receive 
communications electronically.

[66 FR 8638, Feb. 1, 2001, as amended at 69 FR 77619, Dec. 28, 2004; 70 
FR 15754, Mar. 29, 2005; 71 FR 5780, Feb. 3, 2006]



PART 365_REAL ESTATE LENDING STANDARDS--Table of Contents




Sec.
365.1 Purpose and scope.
365.2 Real estate lending standards.

Appendix A to Part 365--Interagency Guidelines for Real Estate Lending 
          Policies

    Authority: 12 U.S.C. 1828(o).

    Source: 57 FR 62896, 62900, Dec. 31, 1992, unless otherwise noted.



Sec. 365.1  Purpose and scope.

    This part, issued pursuant to section 304 of the Federal Deposit 
Insurance Corporation Improvement Act of 1991, 12 U.S.C. 1828(o), 
prescribes standards for real estate lending to be used by insured state 
nonmember banks (including state-licensed insured branches of foreign 
banks) in adopting internal real estate lending policies.



Sec. 365.2  Real estate lending standards.

    (a) Each insured state nonmember bank shall adopt and maintain 
written policies that establish appropriate limits and standards for 
extensions of credit that are secured by liens on or interests in real 
estate, or that are made for the purpose of financing permanent 
improvements to real estate.
    (b)(1) Real estate lending policies adopted pursuant to this section 
must:
    (i) Be consistent with safe and sound banking practices;
    (ii) Be appropriate to the size of the institution and the nature 
and scope of its operations; and
    (iii) Be reviewed and approved by the bank's board of directors at 
least annually.
    (2) The lending policies must establish:
    (i) Loan portfolio diversification standards;
    (ii) Prudent underwriting standards, including loan-to-value limits, 
that are clear and measurable;
    (iii) Loan administration procedures for the bank's real estate 
portfolio; and
    (iv) Documentation, approval, and reporting requirements to monitor 
compliance with the bank's real estate lending policies.
    (c) Each insured state nonmember bank must monitor conditions in the 
real estate market in its lending area

[[Page 577]]

to ensure that its real estate lending policies continue to be 
appropriate for current market conditions.
    (d) The real estate lending policies adopted pursuant to this 
section should reflect consideration of the Interagency Guidelines for 
Real Estate Lending Policies established by the Federal bank and thrift 
supervisory agencies.



  Sec. Appendix A to Part 365--Interagency Guidelines for Real Estate 
                            Lending Policies

    The agencies' regulations require that each insured depository 
institution adopt and maintain a written policy that establishes 
appropriate limits and standards for all extensions of credit that are 
secured by liens on or interests in real estate or made for the purpose 
of financing the construction of a building or other improvements.\5\ 
These guidelines are intended to assist institutions in the formulation 
and maintenance of a real estate lending policy that is appropriate to 
the size of the institution and the nature and scope of its individual 
operations, as well as satisfies the requirements of the regulation.
---------------------------------------------------------------------------

    \5\ The agencies have adopted a uniform rule on real estate lending. 
See 12 CFR part 365 (FDIC); 12 CFR part 208, subpart C (FRB); 12 CFR 
part 34, subpart D (OCC); and 12 CFR 563.100-101 (OTS).
---------------------------------------------------------------------------

    Each institution's policies must be comprehensive, and consistent 
with safe and sound lending practices, and must ensure that the 
institution operates within limits and according to standards that are 
reviewed and approved at least annually by the board of directors. Real 
estate lending is an integral part of many institutions' business plans 
and, when undertaken in a prudent manner, will not be subject to 
examiner criticism.

                Loan Portfolio Management Considerations

    The lending policy should contain a general outline of the scope and 
distribution of the institution's credit facilities and the manner in 
which real estate loans are made, serviced, and collected. In 
particular, the institution's policies on real estate lending should:
     Identify the geographic areas in which the 
institution will consider lending.
     Establish a loan portfolio diversification policy 
and set limits for real estate loans by type and geographic market 
(e.g., limits on higher risk loans).
     Identify appropriate terms and conditions by type 
of real estate loan.
     Establish loan origination and approval 
procedures, both generally and by size and type of loan.
     Establish prudent underwriting standards that are 
clear and measurable, including loan-to-value limits, that are 
consistent with these supervisory guidelines.
     Establish review and approval procedures for 
exception loans, including loans with loan-to-value percentages in 
excess of supervisory limits.
     Establish loan administration procedures, 
including documentation, disbursement, collateral inspection, 
collection, and loan review.
     Establish real estate appraisal and evaluation 
programs.
     Require that management monitor the loan 
portfolio and provide timely and adequate reports to the board of 
directors.

    The institution should consider both internal and external factors 
in the formulation of its loan policies and strategic plan. Factors that 
should be considered include:
     The size and financial condition of the 
institution.
     The expertise and size of the lending staff.
     The need to avoid undue concentrations of risk.
     Compliance with all real estate related laws and 
regulations, including the Community Reinvestment Act, anti-
discrimination laws, and for savings associations, the Qualified Thrift 
Lender test.
     Market conditions.

    The institution should monitor conditions in the real estate markets 
in its lending area so that it can react quickly to changes in market 
conditions that are relevant to its lending decisions. Market supply and 
demand factors that should be considered include:
     Demographic indicators, including population and 
employment trends.
     Zoning requirements.
     Current and projected vacancy, construction, and 
absorption rates.
     Current and projected lease terms, rental rates, 
and sales prices, including concessions.
     Current and projected operating expenses for 
different types of projects.
     Economic indicators, including trends and 
diversification of the lending area.
     Valuation trends, including discount and direct 
capitalization rates.

                         Underwriting Standards

    Prudently underwritten real estate loans should reflect all relevant 
credit factors, including:
     The capacity of the borrower, or income from the 
underlying property, to adequately service the debt.
     The value of the mortgaged property.

[[Page 578]]

     The overall creditworthiness of the borrower.
     The level of equity invested in the property.
     Any secondary sources of repayment.
     Any additional collateral or credit enhancements 
(such as guarantees, mortgage insurance or takeout commitments).

    The lending policies should reflect the level of risk that is 
acceptable to the board of directors and provide clear and measurable 
underwriting standards that enable the institution's lending staff to 
evaluate these credit factors. The underwriting standards should 
address:
     The maximum loan amount by type of property.
     Maximum loan maturities by type of property.
     Amortization schedules.
     Pricing structure for different types of real 
estate loans.
     Loan-to-value limits by type of property.

    For development and construction projects, and completed commercial 
properties, the policy should also establish, commensurate with the size 
and type of the project or property:
     Requirements for feasibility studies and 
sensitivity and risk analyses (e.g., sensitivity of income projections 
to changes in economic variables such as interest rates, vacancy rates, 
or operating expenses).
     Minimum requirements for initial investment and 
maintenance of hard equity by the borrower (e.g., cash or unencumbered 
investment in the underlying property).
     Minimum standards for net worth, cash flow, and 
debt service coverage of the borrower or underlying property.
     Standards for the acceptability of and limits on 
non-amortizing loans.
     Standards for the acceptability of and limits on 
the use of interest reserves.
     Pre-leasing and pre-sale requirements for income-
producing property.
     Pre-sale and minimum unit release requirements 
for non-income-producing property loans.
     Limits on partial recourse or nonrecourse loans 
and requirements for guarantor support.
     Requirements for takeout commitments.
     Minimum covenants for loan agreements.

                           Loan Administration

    The institution should also establish loan administration procedures 
for its real estate portfolio that address:
     Documentation, including:

     Type and frequency of financial statements, including requirements 
for verification of information provided by the borrower;
     Type and frequency of collateral evaluations (appraisals and other 
estimates of value).

     Loan closing and disbursement.
     Payment processing.
     Escrow administration.
     Collateral administration.
     Loan payoffs.
     Collections and foreclosure, including:

     Delinquency follow-up procedures;
     Foreclosure timing;
     Extensions and other forms of forbearance;
     Acceptance of deeds in lieu of foreclosure.

     Claims processing (e.g., seeking recovery on a 
defaulted loan covered by a government guaranty or insurance program).
     Servicing and participation agreements.

                    Supervisory Loan-to-Value Limits

    Institutions should establish their own internal loan-to-value 
limits for real estate loans. These internal limits should not exceed 
the following supervisory limits:

------------------------------------------------------------------------
                                                               Loan-to-
                                                                 value
                        Loan category                            limit
                                                               (percent)
------------------------------------------------------------------------
Raw land....................................................          65
Land development............................................          75
Construction:
    Commercial, multifamily,\1\ and other nonresidential....          80
    1- to 4-family residential..............................          85
Improved property...........................................          85
Owner-occupied 1- to 4-family and home equity...............       (\2\)
------------------------------------------------------------------------
\1\ Multifamily construction includes condominiums and cooperatives.
\2\ A loan-to-value limit has not been established for permanent
  mortgage or home equity loans on owner-occupied, 1- to 4-family
  residential property. However, for any such loan with a loan-to-value
  ratio that equals or exceeds 90 percent at origination, an institution
  should require appropriate credit enhancement in the form of either
  mortgage insurance or readily marketable collateral.

    The supervisory loan-to-value limits should be applied to the 
underlying property that collateralizes the loan. For loans that fund 
multiple phases of the same real estate project (e.g., a loan for both 
land development and construction of an office building), the 
appropriate loan-to-value limit is the limit applicable to the final 
phase of the project funded by the loan; however, loan disbursements 
should not exceed actual development or construction outlays. In 
situations where a loan is fully cross-collateralized by two or more 
properties or is secured by a collateral pool of two or more properties, 
the appropriate maximum loan amount under supervisory loan-to-value 
limits is the sum of the value of each property, less senior liens, 
multiplied by the appropriate loan-to-value limit for each property. To 
ensure that collateral margins remain within the supervisory limits, 
lenders should

[[Page 579]]

redetermine conformity whenever collateral substitutions are made to the 
collateral pool.
    In establishing internal loan-to-value limits, each lender is 
expected to carefully consider the institution-specific and market 
factors listed under ``Loan Portfolio Management Considerations,'' as 
well as any other relevant factors, such as the particular subcategory 
or type of loan. For any subcategory of loans that exhibits greater 
credit risk than the overall category, a lender should consider the 
establishment of an internal loan-to-value limit for that subcategory 
that is lower than the limit for the overall category.
    The loan-to-value ratio is only one of several pertinent credit 
factors to be considered when underwriting a real estate loan. Other 
credit factors to be taken into account are highlighted in the 
``Underwriting Standards'' section above. Because of these other 
factors, the establishment of these supervisory limits should not be 
interpreted to mean that loans at these levels will automatically be 
considered sound.

         Loans in Excess of the Supervisory Loan-to-Value Limits

    The agencies recognize that appropriate loan-to-value limits vary 
not only among categories of real estate loans but also among individual 
loans. Therefore, it may be appropriate in individual cases to originate 
or purchase loans with loan-to-value ratios in excess of the supervisory 
loan-to-value limits, based on the support provided by other credit 
factors. Such loans should be identified in the institution's records, 
and their aggregate amount reported at least quarterly to the 
institution's board of directors. (See additional reporting requirements 
described under ``Exceptions to the General Policy.'')
    The aggregate amount of all loans in excess of the supervisory loan-
to-value limits should not exceed 100 percent of total capital.\2\ 
Moreover, within the aggregate limit, total loans for all commercial, 
agricultural, multifamily or other non-1-to-4 family residential 
properties should not exceed 30 percent of total capital. An institution 
will come under increased supervisory scrutiny as the total of such 
loans approaches these levels.
---------------------------------------------------------------------------

    \2\ For the state member banks, the term ``total capital'' means 
``total risk-based capital'' as defined in appendix A to 12 CFR part 
208. For insured state non-member banks, ``total capital'' refers to 
that term described in table I of appendix A to 12 CFR part 325. For 
national banks, the term ``total capital'' is defined at 12 CFR 3.2(e). 
For savings associations, the term ``total capital'' is defined at 12 
CFR 567.5(c).
    In determining the aggregate amount of such loans, institutions 
should: (a) Include all loans secured by the same property if any one of 
those loans exceeds the supervisory loan-to-value limits; and (b) 
include the recourse obligation of any such loan sold with recourse. 
Conversely, a loan should no longer be reported to the directors as part 
of aggregate totals when reduction in principal or senior liens, or 
additional contribution of collateral or equity (e.g., improvements to 
the real property securing the loan), bring the loan-to-value ratio into 
compliance with supervisory limits.
---------------------------------------------------------------------------

                          Excluded Transactions

    The agencies also recognize that there are a number of lending 
situations in which other factors significantly outweigh the need to 
apply the supervisory loan-to-value limits. These include:
     Loans guaranteed or insured by the U.S. 
government or its agencies, provided that the amount of the guaranty or 
insurance is at least equal to the portion of the loan that exceeds the 
supervisory loan-to-value limit.
     Loans backed by the full faith and credit of a 
state government, provided that the amount of the assurance is at least 
equal to the portion of the loan that exceeds the supervisory loan-to-
value limit.
     Loans guaranteed or insured by a state, municipal 
or local government, or an agency thereof, provided that the amount of 
the guaranty or insurance is at least equal to the portion of the loan 
that exceeds the supervisory loan-to-value limit, and provided that the 
lender has determined that the guarantor or insurer has the financial 
capacity and willingness to perform under the terms of the guaranty or 
insurance agreement.
     Loans that are to be sold promptly after 
origination, without recourse, to a financially responsible third party.
     Loans that are renewed, refinanced, or 
restructured without the advancement of new funds or an increase in the 
line of credit (except for reasonable closing costs), or loans that are 
renewed, refinanced, or restructured in connection with a workout 
situation, either with or without the advancement of new funds, where 
consistent with safe and sound banking practices and part of a clearly 
defined and well-documented program to achieve orderly liquidation of 
the debt, reduce risk of loss, or maximize recovery on the loan.
     Loans that facilitate the sale of real estate 
acquired by the lender in the ordinary course of collecting a debt 
previously contracted in good faith.
     Loans for which a lien on or interest in real 
property is taken as additional collateral through an abundance of 
caution by the

[[Page 580]]

lender (e.g., the institution takes a blanket lien on all or 
substantially all of the assets of the borrower, and the value of the 
real property is low relative to the aggregate value of all other 
collateral).
     Loans, such as working capital loans, where the 
lender does not rely principally on real estate as security and the 
extension of credit is not used to acquire, develop, or construct 
permanent improvements on real property.
     Loans for the purpose of financing permanent 
improvements to real property, but not secured by the property, if such 
security interest is not required by prudent underwriting practice.

                Exceptions to the General Lending Policy

    Some provision should be made for the consideration of loan requests 
from creditworthy borrowers whose credit needs do not fit within the 
institution's general lending policy. An institution may provide for 
prudently underwritten exceptions to its lending policies, including 
loan-to-value limits, on a loan-by-loan basis. However, any exceptions 
from the supervisory loan-to-value limits should conform to the 
aggregate limits on such loans discussed above.
    The board of directors is responsible for establishing standards for 
the review and approval of exception loans. Each institution should 
establish an appropriate internal process for the review and approval of 
loans that do not conform to its own internal policy standards. The 
approval of any such loan should be supported by a written justification 
that clearly sets forth all of the relevant credit factors that support 
the underwriting decision. The justification and approval documents for 
such loans should be maintained as a part of the permanent loan file. 
Each institution should monitor compliance with its real estate lending 
policy and individually report exception loans of a significant size to 
its board of directors.

    Supervisory Review of Real Estate Lending Policies and Practices

    The real estate lending policies of institutions will be evaluated 
by examiners during the course of their examinations to determine if the 
policies are consistent with safe and sound lending practices, these 
guidelines, and the requirements of the regulation. In evaluating the 
adequacy of the institution's real estate lending policies and 
practices, examiners will take into consideration the following factors:
     The nature and scope of the institution's real 
estate lending activities.
     The size and financial condition of the 
institution.
     The quality of the institution's management and 
internal controls.
     The expertise and size of the lending and loan 
administration staff.
     Market conditions.
    Lending policy exception reports will also be reviewed by examiners 
during the course of their examinations to determine whether the 
institutions' exceptions are adequately documented and appropriate in 
light of all of the relevant credit considerations. An excessive volume 
of exceptions to an institution's real estate lending policy may signal 
a weakening of its underwriting practices, or may suggest a need to 
revise the loan policy.

                               Definitions

    For the purposes of these Guidelines:
    Construction loan means an extension of credit for the purpose of 
erecting or rehabilitating buildings or other structures, including any 
infrastructure necessary for development.
    Extension of credit or loan means:
    (1) The total amount of any loan, line of credit, or other legally 
binding lending commitment with respect to real property; and
    (2) The total amount, based on the amount of consideration paid, of 
any loan, line of credit, or other legally binding lending commitment 
acquired by a lender by purchase, assignment, or otherwise.
    Improved property loan means an extension of credit secured by one 
of the following types of real property:
    (1) Farmland, ranchland or timberland committed to ongoing 
management and agricultural production;
    (2) 1- to 4-family residential property that is not owner-occupied;
    (3) Residential property containing five or more individual dwelling 
units;
    (4) Completed commercial property; or
    (5) Other income-producing property that has been completed and is 
available for occupancy and use, except income-producing owner-occupied 
1- to 4-family residential property.
    Land development loan means an extension of credit for the purpose 
of improving unimproved real property prior to the erection of 
structures. The improvement of unimproved real property may include the 
laying or placement of sewers, water pipes, utility cables, streets, and 
other infrastructure necessary for future development.
    Loan origination means the time of inception of the obligation to 
extend credit (i.e., when the last event or prerequisite, controllable 
by the lender, occurs causing the lender to become legally bound to fund 
an extension of credit).
    Loan-to-value or loan-to-value ratio means the percentage or ratio 
that is derived at the time of loan origination by dividing an extension 
of credit by the total value of the property(ies) securing or being 
improved by the extension of credit plus the amount of any readily 
marketable collateral and other

[[Page 581]]

acceptable collateral that secures the extension of credit. The total 
amount of all senior liens on or interests in such property(ies) should 
be included in determining the loan-to-value ratio. When mortgage 
insurance or collateral is used in the calculation of the loan-to-value 
ratio, and such credit enhancement is later released or replaced, the 
loan-to-value ratio should be recalculated.
    Other acceptable collateral means any collateral in which the lender 
has a perfected security interest, that has a quantifiable value, and is 
accepted by the lender in accordance with safe and sound lending 
practices. Other acceptable collateral should be appropriately 
discounted by the lender consistent with the lender's usual practices 
for making loans secured by such collateral. Other acceptable collateral 
includes, among other items, unconditional irrevocable standby letters 
of credit for the benefit of the lender.
    Owner-occupied, when used in conjunction with the term 1- to 4-
family residential property means that the owner of the underlying real 
property occupies at least one unit of the real property as a principal 
residence of the owner.
    Readily marketable collateral means insured deposits, financial 
instruments, and bullion in which the lender has a perfected interest. 
Financial instruments and bullion must be salable under ordinary 
circumstances with reasonable promptness at a fair market value 
determined by quotations based on actual transactions, on an auction or 
similarly available daily bid and ask price market. Readily marketable 
collateral should be appropriately discounted by the lender consistent 
with the lender's usual practices for making loans secured by such 
collateral.
    Value means an opinion or estimate, set forth in an appraisal or 
evaluation, whichever may be appropriate, of the market value of real 
property, prepared in accordance with the agency's appraisal regulations 
and guidance. For loans to purchase an existing property, the term 
``value'' means the lesser of the actual acquisition cost or the 
estimate of value.
    1- to 4-family residential property means property containing fewer 
than five individual dwelling units, including manufactured homes 
permanently affixed to the underlying property (when deemed to be real 
property under state law).

[57 FR 62896, 62900, Dec. 31, 1992; 58 FR 4460, Jan. 14, 1993]



PART 366_MINIMUM STANDARDS OF INTEGRITY AND FITNESS FOR AN FDIC CONTRACTOR--

Table of Contents




Sec.
366.0 Definitions.
366.1 What is the purpose of this part?
366.2 What is the scope of this part?
366.3 Who cannot perform contractual services for the FDIC?
366.4 When is there a pattern or practice of defalcation?
366.5 What causes a substantial loss to a federal deposit insurance 
          fund?
366.6 How is my ownership or control determined?
366.7 Will the FDIC waive the prohibitions under Sec. 366.3?
366.8 Who can grant a waiver of a prohibition or conflict of interest?
366.9 What other requirements could prevent me from performing 
          contractual services for the FDIC?
366.10 When would I have a conflict of interest?
366.11 Will the FDIC waive a conflict of interest?
366.12 What are the FDIC's minimum standards of ethical responsibility?
366.13 What is my obligation regarding confidential information?
366.14 What information must I provide the FDIC?
366.15 What advice or determinations will the FDIC provide me on the 
          applicability of this part?
366.16 When may I seek a reconsideration or review of an FDIC 
          determination?
366.17 What are the possible consequences for violating this part?

    Authority: Section 9 (Tenth) of the Federal Deposit Insurance Act 
(FDI Act), 12 U.S.C. 1819 (Tenth); sections 12(f)(3) and (4) of the FDI 
Act, 12 U.S.C. 1822(f)(3) and (4); and section 19 of Pub. L. 103-204, 
107 Stat. 2369.

    Source: 67 FR 69991, Nov. 20, 2002, unless otherwise noted.



Sec. 366.0  Definitions.

    As used in this part:
    (a) The word person refers to an individual, corporation, 
partnership, or other entity with a legally independent existence.
    (b) The terms we, our, and us refer to the Federal Deposit Insurance 
Corporation (FDIC), except when acting as conservator or operator of a 
bridge bank.
    (c) The terms I, me, my, mine, you, and yourself refer to a person 
who submits an offer to perform or performs, directly or indirectly, 
contractual services or functions on our behalf.
    (d) The phrase insured depository institution refers to any bank or 
savings association whose deposits are insured by the FDIC.

[[Page 582]]



Sec. 366.1  What is the purpose of this part?

    This part establishes the minimum standards of integrity and fitness 
that contractors, subcontractors, and employees of contractors and 
subcontractors must meet if they perform any service or function on our 
behalf. This part includes regulations governing conflicts of interest, 
ethical responsibility, and use of confidential information in 
accordance with section 12(f)(3) of the FDI Act, 12 U.S.C. 1822(f)(3), 
and the prohibitions and the requirements for submission of information 
in accordance with section 12(f)(4) of the FDI Act, 12 U.S.C. 
1822(f)(4).



Sec. 366.2  What is the scope of this part?

    (a) This part applies to a person who submits an offer to perform or 
performs, directly or indirectly, a contractual service or function on 
our behalf.
    (b) This part does not apply to:
    (1) An FDIC employee for the purposes of title 18, United States 
Code; or
    (2) The FDIC when we operate an insured depository institution such 
as a bridge bank or conservatorship.



Sec. 366.3  Who cannot perform contractual services for the FDIC?

    We will not enter into a contract with you to perform a service or 
function on our behalf, if you or any person that owns or controls you, 
or any entity you own or control:
    (a) Has a felony conviction;
    (b) Was removed from or is prohibited from participating in the 
affairs of an insured depository institution as a result of a federal 
banking agency final enforcement action;
    (c) Has a pattern or practice of defalcation; or
    (d) Is responsible for a substantial loss to the Deposit Insurance 
Fund (or any predecessor deposit insurance fund).

[67 FR 69991, Nov. 20, 2002, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 366.4  When is there a pattern or practice of defalcation?

    (a) You have a pattern or practice of defalcation under Sec. 
366.3(c) when you, any person that owns or controls you, or any entity 
you own or control has a legal responsibility for the payment on at 
least two obligations that are:
    (1) To one or more insured depository institutions;
    (2) More than 90 days delinquent in the payment of principal, 
interest, or a combination thereof; and
    (3) More than $50,000 each.
    (b) The following are examples of when you have or do not have a 
pattern or practice of defalcation. These examples are not inclusive.
    (1) You have five loans at insured depository institutions. Three of 
them are 90 days past due. Two of the three loans have outstanding 
balances of more than $50,000 each. You have a pattern or practice of 
defalcation.
    (2) You have five loans at insured depository institutions. Two of 
them are 90 days past due. One of the two is with ABC Bank for $170,000. 
The other one is with XYZ bank for $60,000. You have a pattern or 
practice of defalcation.
    (3) You have five loans at insured depository institutions. Three of 
them are 90 days past due. One of the three has an outstanding balance 
of more than $50,000. The other two have outstanding balances of less 
than $50,000. You do not have a pattern or practice of defalcation.
    (4) You have five loans at insured depository institutions. Three of 
them have outstanding balances of more than $50,000. Two of those three 
were 90 days past due but are now current. You do not have a pattern or 
practice of defalcation.



Sec. 366.5  What causes a substantial loss to a federal deposit insurance 

fund?

    You cause a substantial loss to the Deposit Insurance Fund (or any 
predecessor deposit insurance fund) under Sec. 366.3(d) when you, or 
any person that owns or controls you, or any entity you own or control 
has:
    (a) An obligation to us that is delinquent for 90 days or more and 
on which there is an outstanding balance of principal, interest, or a 
combination thereof of more than $50,000;
    (b) An unpaid final judgment in our favor that is in excess of 
$50,000, regardless of whether it becomes discharged in whole or in part 
in a bankruptcy proceeding;

[[Page 583]]

    (c) A deficiency balance following foreclosure of collateral on an 
obligation owed to us that is in excess of $50,000, regardless of 
whether it becomes discharged in whole or in part in a bankruptcy 
proceeding; or
    (d) A loss to us that is in excess of $50,000 that we report on IRS 
Form 1099-C, Information Reporting for Discharge of Indebtedness.

[67 FR 69991, Nov. 20, 2002, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 366.6  How is my ownership or control determined?

    (a) Your ownership or control is determined on a case-by-case basis. 
Your ownership or control depends on the specific facts of your 
situation and the particular industry and legal entity involved. You 
must provide documentation to us to use in determining your ownership or 
control.
    (b) The interest of a spouse or other family member in the same 
organization is imputed to you in determining your ownership or control.
    (c) The following are examples of when your ownership or control may 
or may not exist. These examples are not inclusive.
    (1) You have control if you are the president or chief executive 
officer of an organization.
    (2) You have ownership or control if you are a partner in a small 
law firm. You might not have ownership or control if you are a partner 
in a large national law firm.
    (3) You have control if you are a general partner of a limited 
partnership. You have ownership or control if you have a limited 
partnership interest of 25 percent or more.
    (4) You have ownership or control if you have the:
    (i) Power to vote, directly or indirectly, 25% or more interest of 
any class of voting stock of a company;
    (ii) Ability to direct in any manner the election of a majority of a 
company's directors or trustees; or
    (iii) Ability to exercise a controlling influence over the company's 
management and policies.



Sec. 366.7  Will the FDIC waive the prohibitions under Sec. 366.3?

    We may waive the prohibitions for entities other than individuals 
for good cause shown at our discretion when our need to contract for 
your services outweighs all relevant factors. The statute does not allow 
us to waive the prohibitions for individuals.



Sec. 366.8  Who can grant a waiver of a prohibition or conflict of interest?

    The FDIC's Board of Directors delegates to the Chairman, or his 
designee, authority to issue waivers and implement procedures for part 
366.



Sec. 366.9  What other requirements could prevent me from performing 

contractual services for the FDIC?

    You must avoid a conflict of interest, be ethically responsible, and 
maintain confidential information as described in Sec. Sec. 366.10 
through 366.13. You must also provide us with the information we require 
in Sec. 366.14. Failure to meet these requirements may prevent you from 
contracting with us.



Sec. 366.10  When would I have a conflict of interest?

    (a) You have a conflict of interest when you, any person that owns 
or controls you, or any entity you own or control:
    (1) Has a personal, business, or financial interest or relationship 
that relates to the services you perform under the contract;
    (2) Is a party to litigation against us, or represents a party that 
is;
    (3) Submits an offer to acquire an asset from us for which services 
were performed during the past three years, unless the contract allows 
for the acquisition; or
    (4) Engages in an activity that would cause us to question the 
integrity of the service you provided, are providing or offer to provide 
us, or impairs your independence.
    (b) The following are examples of a conflict of interest. These 
examples are not inclusive.
    (1) You submit an offer to perform property management services for 
us and you own or manage a competing property.

[[Page 584]]

    (2) You audit a business under a contract with us and you or a 
partner in your firm has an ownership interest in that business.
    (3) You perform loan services on a pool of loans we are selling, and 
you submit a bid to purchase one or more of the loans in the pool.
    (4) You audit your own work or provide nonaudit services that are 
significant or material to the subject matter of the audit.



Sec. 366.11  Will the FDIC waive a conflict of interest?

    (a) We may waive a conflict of interest for good cause shown at our 
discretion when our need to contract for your services outweighs all 
relevant factors.
    (b) The following are examples of when we may grant you a waiver for 
a conflict of interest. These examples are not inclusive.
    (1) We may grant a waiver to an outside counsel who has a 
representational conflict. We will weigh all relevant facts and 
circumstances in making our determination.
    (2) We may grant a waiver to allow a contractor to acquire an asset 
from us who is providing or has provided services on that asset. We will 
consider whether granting the waiver will adversely affect the fairness 
of the sale, the type of services provided, and other facts and 
circumstances relevant to the sale in making our determination.



Sec. 366.12  What are the FDIC's minimum standards of ethical responsibility?

    (a) You and any person who performs services for us must not provide 
preferential treatment to any person in your dealings with the public on 
our behalf.
    (b) You must ensure that any person you employ to perform services 
for us is informed about their responsibilities under this part.
    (c) You must disclose to us waste, fraud, abuse or corruption. 
Contact the Inspector General at 1-800-964-FDIC or [email protected].
    (d) You and any person who performs contract services to us must 
not:
    (1) Accept or solicit for yourself or others any favor, gift, or 
other item of monetary value from any person who you reasonably believe 
is seeking an official action from you on our behalf, or has an interest 
that the performance or nonperformance of your duties to us may 
substantially affect;
    (2) Use or allow the use of our property, except as specified in the 
contract;
    (3) Make an unauthorized promise or commitment on our behalf; or
    (4) Provide impermissible gifts or entertainment to an FDIC employee 
or other person providing services to us.
    (e) The following are examples of when you are engaging in unethical 
behavior. These examples are not inclusive.
    (1) Using government resources, including our Internet connection, 
to conduct any business that is unrelated to the performance of your 
contract with us.
    (2) Submitting false invoices or claims, or making misleading or 
false statements.
    (3) Committing us to forgive or restructure a debt or portion of a 
debt, unless we provide you with written authority to do so.



Sec. 366.13  What is my obligation regarding confidential information?

    (a) Neither you nor any person who performs services on your behalf 
may use or disclose information obtained from us or a third party in 
connection with an FDIC contract, unless:
    (1) The contract allows or we authorize the use or disclosure;
    (2) The information is generally available to the general public; or
    (3) We make the information available to the general public.
    (b) The following are examples of when your use of confidential 
information is inappropriate. These examples are not inclusive.
    (1) Disclosing information about an asset, such as internal asset 
valuations, appraisals or environmental reports, except as part of 
authorized due diligence materials, to a prospective asset purchaser.
    (2) Disclosing a borrower's or guarantor's personal or financial 
information, such as a financial statement to an unauthorized party.

[[Page 585]]



Sec. 366.14  What information must I provide the FDIC?

    You must:
    (a) Certify in writing that you can perform services for us under 
Sec. 366.3 and have no conflict of interest under Sec. 366.10(a).
    (b) Submit a list and description of any instance during the 
preceding five years in which you, any person that owns or controls you, 
or any entity you own or control, defaulted on a material obligation to 
an insured depository institution. A default on a material obligation 
occurs when a loan or advance with an outstanding balance of more than 
$50,000 is or was delinquent for 90 days or more.
    (c) Notify us within 10 business days after you become aware that 
you, or any person you employ to perform services for us, are not in 
compliance with this part. Your notice must include a detailed 
description of the facts of the situation and how you intend to resolve 
the matter.
    (d) Agree in writing that you will employ only persons who meet the 
requirements of this part to perform services on our behalf.
    (e) Comply with any request from us for information.
    (f) Retain any information you prepare or rely upon regarding the 
provisions of this part for a period of three years following 
termination or expiration and final payment of the related contract for 
services whichever occurs last.



Sec. 366.15  What advice or determinations will the FDIC provide me on the 

applicability of this part?

    (a) We are available to you for consultation on those determinations 
you are responsible for making under this part, including those with 
respect to any person you employ or engage to perform services for us.
    (b) We will determine if this part prohibits you from performing 
services for us prior to contract award, after contract award, and 
during the performance of a contract.
    (c) We may determine what corrective action you must take.
    (d) We may grant you a waiver for good cause shown where provided 
for under this part.



Sec. 366.16  When may I seek a reconsideration or review of an FDIC 

determination?

    (a) You may seek reconsideration or review of our initial 
determination by sending a written request to the individual who issued 
you the initial decision.
    (b) You must provide new information or explain a change in 
circumstances for our reconsideration of an initial decision. The 
individual who issued you the initial decision may either make a new 
determination or refer your request to a higher authority for review.
    (c) You must provide an explanation of how you perceive that we 
misapplied this part that sets forth the legal or factual errors for our 
review of an initial decision.



Sec. 366.17  What are the possible consequences for violating this part?

    Depending on the circumstances, violations of this part may result 
in rescission or termination of a contract, as well as administrative, 
civil, or criminal sanctions.



PART 367_SUSPENSION AND EXCLUSION OF CONTRACTOR AND TERMINATION OF CONTRACTS--

Table of Contents




Sec.
367.1 Authority, purpose, scope and application.
367.2 Definitions.
367.3 Appropriate officials.
367.4 [Reserved]
367.5 Exclusions.
367.6 Causes for exclusion.
367.7 Suspensions.
367.8 Causes for suspension.
367.9 Imputation of causes.
367.10-67.11 [Reserved]
367.12 Procedures.
367.13 Notices.
367.14 Responses.
367.15 Additional proceedings as to disputed material facts.
367.16 Ethics Counselor decisions.
367.17 Duration of suspensions and exclusions.
367.18 Abrogation of contracts.
367.19 Exceptions to suspensions and exclusions.
367.20 Review and reconsideration of Ethics Counselor decisions.

    Authority: 12 U.S.C. 1822(f) (4) and (5).

[[Page 586]]


    Source: 61 FR 68560, Dec. 30, 1996, unless otherwise noted.



Sec. 367.1  Authority, purpose, scope and application.

    (a) Authority. This part is adopted pursuant to section 12(f) (4) 
and (5) of the Federal Deposit Insurance Act, 12 U.S.C. 1822(f) (4) and 
(5), and the rule-making authority of the Federal Deposit Insurance 
Corporation (FDIC) found at 12 U.S.C. 1819. Other regulations 
implementing these statutory directives appear at 12 CFR part 366.
    (b) Purpose. This part is designed to inform contractors and 
subcontractors (including their affiliated business entities, key 
employees and management officials) regarding their rights to notice and 
an opportunity to be heard on FDIC actions involving suspension and 
exclusion from contracting and rescission of existing contracts. This 
part is in addition to, and not in lieu of, any other statute or 
regulation that may apply to such contractual activities.
    (c) Scope. This part applies to:
    (1) Contractors, other than attorneys or law firms providing legal 
services, submitting offers to provide services or entering into 
contracts to provide services to the FDIC acting in any capacity; and
    (2) Subcontractors entering into contracts to perform services under 
a proposed or existing contract with the FDIC.
    (d) Application. (1) This part will apply to entities that become 
contractors, as defined in Sec. 367.2(f), on or after December 30, 
1996. In addition, this part will apply to contractors as defined in 
Sec. 367.2(f) that are performing contracts on December 30, 1996.
    (2) This part will also apply to actions initiated on or after 
December 30, 1996 regardless of the date of the cause giving rise to the 
actions.
    (3) Contracts entered into by the former Resolution Trust 
Corporation (RTC) that were transferred to the FDIC will be treated in 
the same manner as FDIC contracts under this part.
    (4) RTC actions taken under the RTC regulations on or before 
December 31, 1995, will be honored as if taken by the FDIC. A contractor 
subject to an RTC exclusion or suspension will be precluded thereby from 
participation in the FDIC's contracting program unless that exclusion or 
suspension is modified or terminated under the provisions of this part.



Sec. 367.2  Definitions.

    (a) Adequate evidence means information sufficient to support the 
reasonable belief that a particular act or omission has occurred.
    (b) Affiliated business entity means a company that is under the 
control of the contractor, is in control of the contractor, or is under 
common control with the contractor.
    (c) Civil judgment means a judgment of a civil offense or liability 
by any court of competent jurisdiction in the United States.
    (d) Company means any corporation, firm, partnership, society, joint 
venture, business trust, association, consortium or similar 
organization.
    (e) Conflict of interest means a situation in which:
    (1) A contractor; any management officials or affiliated business 
entities of a contractor; or any employees, agents, or subcontractors of 
a contractor who will perform services under a proposed or existing 
contract with the FDIC:
    (i) Has one or more personal, business, or financial interests or 
relationships which would cause a reasonable individual with knowledge 
of the relevant facts to question the integrity or impartiality of those 
who are or will be acting under a proposed or existing FDIC contract;
    (ii) Is an adverse party to the FDIC, RTC, the former Federal 
Savings and Loan Insurance Corporation (FSLIC), or their successors in a 
lawsuit; or
    (iii) Has ever been suspended, excluded, or debarred from 
contracting with a federal entity or has ever had a contract with the 
FDIC, RTC, FSLIC or their successors rescinded or terminated prior to 
the contract's completion and which rescission or termination involved 
issues of conflicts of interest or ethical responsibilities; or
    (2) Any other facts exist which the FDIC, in its sole discretion, 
determines may, through performance of a proposed or existing FDIC 
contract, provide a contractor with an unfair competitive advantage 
which favors the interests of the contractor or any person

[[Page 587]]

with whom the contractor has or is likely to have a personal or business 
relationship.
    (f) Contractor means a person or company which has submitted an 
offer to perform services for the FDIC or has a contractual arrangement 
with the FDIC to perform services. For purposes of this part, contractor 
also includes:
    (1) A contractor's affiliated business entities, key employees, and 
management officials of the contractor;
    (2) Any subcontractor performing services for the FDIC and the 
management officials and key employees of such subcontractors; and
    (3) Any entity or organization seeking to perform services for the 
FDIC as a minority or woman-owned business (MWOB).
    (g) Contract(s) means agreement(s) between FDIC and a contractor, 
including, but not limited to, agreements identified as ``Task Orders'', 
for a contractor to provide services to FDIC. Contracts also mean 
contracts between a contractor and its subcontractor.
    (h) Control means the power to vote, directly or indirectly, 25 
percent or more of any class of the voting stock of a company; the 
ability to direct in any manner the election of a majority of a 
company's directors or trustees; or the ability to exercise a 
controlling influence over the company's management and policies. For 
purposes of this definition, a general partner of a limited partnership 
is presumed to be in control of that partnership.
    (i) Conviction means a judgment or conviction of a criminal offense 
by any court of competent jurisdiction, whether entered upon a verdict 
or plea, and includes pleas of nolo contendere.
    (j) FDIC means the Federal Deposit Insurance Corporation acting in 
its receivership and corporate capacities, and FDIC officials or 
committees acting under delegated authority.
    (k) Indictment shall include an information or other filing by a 
competent authority charging a criminal offense.
    (l) Key employee means an individual who participates personally and 
substantially in the negotiation of, performance of, and/or monitoring 
for compliance under a contract with the FDIC. Such participation is 
made through, but is not limited to, decision, approval, disapproval, 
recommendation, or the rendering of advice under the contract.
    (m) Management official means any shareholder, employee or partner 
who controls a company and any individual who directs the day-to-day 
operations of a company. With respect to a partnership, all partners are 
deemed to be management officials unless the partnership is governed by 
a management or executive committee with responsibility for the day-to-
day operations. In partnerships with such committees, management 
official means only those partners who are a member of such a committee.
    (n) Material fact means one that is necessary to determine the 
outcome of an issue or case and without which the case could not be 
supported.
    (o) Offer means a proposal or other written or oral offer to provide 
services to FDIC.
    (p) Pattern or practice of defalcation regarding obligations means 
two or more instances in which a loan or advance from an insured 
depository institution:
    (1) Is in default for ninety (90) or more days as to payment of 
principal, interest, or a combination thereof, and there remains a legal 
obligation to pay an amount in excess of $50,000; or
    (2) Where there has been a failure to comply with the terms of a 
loan or advance to such an extent that the collateral securing the loan 
or advance was foreclosed upon, resulting in a loss in excess of $50,000 
to the insured depository institution.
    (q) Preponderance of the evidence means proof by information that, 
compared with that opposing it, leads to the conclusion that the fact at 
issue is more probably true than not.
    (r) Subcontractor means an entity or organization that enters into a 
contract with an FDIC contractor or another subcontractor to perform 
services under a proposed or existing contract with the FDIC.
    (s) Substantial loss to federal deposit insurance funds means:
    (1) A loan or advance from an insured depository institution, which 
is currently owed to the FDIC, RTC, FSLIC or their successors, or the 
former Bank Insurance Fund (BIF), the former Savings Association 
Insurance Fund

[[Page 588]]

(SAIF) or the Deposit Insurance Fund, the FSLIC Reserve Fund (FRF), or 
funds that were maintained by the RTC for the benefit of insured 
depositors, that is or has ever been delinquent for ninety (90) or more 
days as to payment of principal, interest, or a combination thereof and 
on which there remains a legal obligation to pay an amount in excess of 
$50,000;
    (2) An obligation to pay an outstanding, unsatisfied, final judgment 
in excess of $50,000 in favor of the FDIC, RTC, FSLIC, or their 
successors, or the BIF, the SAIF, the FRF or the funds that were 
maintained by the RTC for the benefit of insured depositors; or
    (3) A loan or advance from an insured depository institution which 
is currently owed to the FDIC, RTC, FSLIC or their successors, or the 
former BIF, the former SAIF, the Deposit Insurance Fund , the FRF or the 
funds that were maintained by the RTC for the benefit of insured 
depositors, where there has been a failure to comply with the terms to 
such an extent that the collateral securing the loan or advance was 
foreclosed upon, resulting in a loss in excess of $50,000.

[61 FR 68560, Dec. 30, 1996, as amended at 71 FR 20527, Apr. 21, 2006]



Sec. 367.3  Appropriate officials.

    (a) The Ethics Counselor is the Executive Secretary of the FDIC. The 
Ethics Counselor shall act as the official responsible for rendering 
suspension and exclusion decisions under this part. In addition to 
taking suspension and/or exclusion action under this part, the Ethics 
Counselor has authority to terminate exclusion and suspension 
proceedings. As used in this part, ``Ethics Counselor'' includes any 
official designated by the Ethics Counselor to act on the Ethics 
Counselor's behalf.
    (b) The Corporation Ethics Committee is the Committee appointed by 
the Chairman of the FDIC, or Chairman's designee, which provides review 
of any suspension or exclusion decision rendered by the Ethics Counselor 
that is appealed by a contractor who has been suspended and/or excluded 
from FDIC contracting.
    (c) Information concerning the possible existence of any cause for 
suspension or exclusion shall be reported to the Office of the Executive 
Secretary (Ethics Section). This part does not modify the responsibility 
to report allegations of fraud, waste and abuse, including but not 
limited to criminal violations, to the Office of Inspector General.



Sec. 367.4  [Reserved]



Sec. 367.5  Exclusions.

    (a) The Ethics Counselor may exclude a contractor from the FDIC 
contracting program for any of the causes set forth in Sec. 367.6, 
using procedures established in this part.
    (b) Exclusion is a serious action to be imposed when there exists a 
preponderance of the evidence that a contractor has violated one or more 
of the causes set forth in Sec. 367.6. Contractors excluded from FDIC 
contracting programs are prohibited from entering into any new contracts 
with FDIC for the duration of the period of exclusion as determined 
pursuant to this part. The FDIC shall not solicit offers from, award 
contracts to, extend or modify existing contracts, award task orders 
under existing contracts, or consent to subcontracts with such 
contractors. Excluded contractors are also prohibited from conducting 
business with FDIC as agents or representatives of other contractors. 
Provided however, that these limitations do not become effective upon 
the notification of the contractor that there is a possible cause to 
exclude under Sec. 367.13. Rather, they become effective only upon the 
Ethics Counselor's decision to exclude the contractor pursuant to Sec. 
367.16. Provided further, that the causes for exclusion set forth in 
Sec. 367.6(a)(1) through (4) reflect statutorily established mandatory 
bars to contracting with the FDIC.
    (c) Except when one or more of the statutorily established mandatory 
bars to contracting are shown to exist, the existence of a cause for 
exclusion does not necessarily require that the contractor be excluded; 
the seriousness of the contractor's acts or omissions and any mitigating 
or aggravating circumstances shall be considered in making any exclusion 
decision.

[[Page 589]]



Sec. 367.6  Causes for exclusion.

    The FDIC may exclude a contractor, in accordance with the procedures 
set forth in this part, upon a finding that:
    (a) The contractor has been convicted of any felony;
    (b) The contractor has been removed from, or prohibited from 
participating in the affairs of, any insured depository institution 
pursuant to any final enforcement action by the Office of the 
Comptroller of the Currency, the Office of Thrift Supervision, the Board 
of Governors of the Federal Reserve System, or the FDIC or their 
successors;
    (c) The contractor has demonstrated a pattern or practice of 
defalcation;
    (d) The contractor has caused a substantial loss to Deposit 
Insurance Fund (or any predecessor deposit insurance fund);
    (e) The contractor has failed to disclose, pursuant to 12 CFR 366.6, 
a material fact to the FDIC;
    (f) The contractor has failed to disclosed any material adverse 
change in the representations and certifications provided to FDIC under 
12 CFR 366.6;
    (g) The contractor has miscertified its status as a minority and/or 
woman owned business (MWOB);
    (h) The contractor has a conflict of interest that was not waived by 
the Ethics Counselor or designee;
    (i) The contractor has been subject to a final enforcement action by 
any federal financial institution regulatory agency, or has stipulated 
to such action;
    (j) The contractor is debarred from participating in other federal 
programs;
    (k) The contractor has been convicted of, or subject to a civil 
judgment for:
    (1) Commission of fraud or a criminal offense in connection with 
obtaining, attempting to obtain, or performing a public or private 
agreement or transaction, or conspiracy to do the same;
    (2) Violation of federal or state antitrust statutes, including 
those proscribing price fixing between competitors, allocation of 
customers between competitors, and bid rigging, or conspiracy to do the 
same;
    (3) Commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, 
receiving stolen property, making false claims, obstructing of justice, 
or conspiracy to do the same;
    (4) Commission of any other offense indicating a breach of trust, 
dishonesty or lack of integrity, or conspiracy to do the same;
    (l) The contractor's performance under previous contract(s) with 
FDIC or RTC has resulted in:
    (1) The FDIC or RTC declaring such contract(s) to be in default; or
    (2) The termination of such contract(s) for poor performance; or
    (3) A violation of the terms of a contract that would have resulted 
in a default or termination of the contract for poor performance if that 
violation had been discovered during the course of the contract; or
    (m) The contractor has engaged in any conduct:
    (1) Indicating a breach of trust, dishonesty, or lack of integrity 
that seriously and directly affects its ability to meet standards of 
present responsibility required of an FDIC contractor; or
    (2) So serious or compelling in nature that it adversely affects the 
ability of a contractor to meet the minimum ethical standards required 
by 12 CFR part 366.

[61 FR 68560, Dec. 30, 1996, as amended at 71 FR 20528, Apr. 21, 2006]



Sec. 367.7  Suspensions.

    (a) The Ethics Counselor may suspend a contractor for any of the 
causes in Sec. 367.8 using the procedures established in this section.
    (b) Suspension is an action to be imposed when there exists adequate 
evidence of one or more of the causes set out in Sec. 367.8. This 
includes, but is not limited to, situations where immediate action is 
necessary to protect the integrity of the FDIC contracting program and/
or the security of FDIC assets during the pendency of legal or 
investigative proceedings initiated by FDIC, any federal agency or any 
law enforcement authority.
    (c) The duration of any suspension action shall be for a temporary 
period pending the completion of an investigation and such other legal 
proceedings as may ensue.

[[Page 590]]

    (d) A suspension shall become effective immediately upon issuance of 
the notice specified in Sec. 367.13(b).
    (e) Contractors suspended from FDIC contracting programs are 
prohibited from entering into any new contracts with the FDIC for the 
duration of the period of suspension. The FDIC shall not solicit offers 
from, award contracts to, extend or modify existing contracts, award 
task orders under existing contracts, or consent to subcontracts with 
such contractors. Suspended contractors are also prohibited from 
conducting business with FDIC as agents or representatives of other 
contractors.



Sec. 367.8  Causes for suspension.

    (a) Suspension may be imposed under the procedures set forth in this 
section upon adequate evidence:
    (1) Of suspension by another federal agency;
    (2) That a cause for exclusion under Sec. 367.6 may exist;
    (3) Of the commission of any other offense indicating a breach of 
trust, dishonesty, or lack of integrity that seriously and directly 
affects the minimum ethical standards required of an FDIC contractor; or
    (4) Of any other cause so serious or compelling in nature that it 
adversely affects the ability of a contractor to meet the minimal 
ethical standards required by 12 CFR part 366.
    (b) Indictment for any offense described in Sec. 367.6 is adequate 
evidence to suspend a contractor.
    (c) In assessing the adequacy of the evidence, FDIC will consider 
how much information is available, how credible it is given the 
circumstances, whether or not important allegations are corroborated and 
what inferences can reasonably be drawn as a result.



Sec. 367.9  Imputation of causes.

    (a) Where there is cause to suspend and/or exclude any affiliated 
business entity of the contractor, that conduct may be imputed to the 
contractor if the conduct occurred in connection with the affiliated 
business entity's performance of duties for or on behalf of the 
contractor, or with the contractor's knowledge, approval, or 
acquiescence. The contractor's acceptance of the benefits derived from 
the conduct shall be evidence of such knowledge, approval, or 
acquiescence.
    (b) Where there is cause to suspend and/or exclude any contractor, 
that conduct may be imputed to any affiliated business entity, key 
employee, or management official of a contractor who participated in, 
knew of or had reason to know of the contractor's conduct.
    (c) Where there is cause to suspend and/or exclude a key employee or 
management official of a contractor, that cause may be imputed to the 
contractor if the conduct occurred in connection with the key employee 
or management official's performance of duties for or on behalf of the 
contractor, or with the contractor's knowledge, approval, or 
acquiescence. The contractor's acceptance of the benefits derived from 
the conduct shall be evidence of such knowledge, approval, or 
acquiescence.
    (d) Where there is cause to suspend and/or exclude one contractor 
participating in a joint venture or similar arrangement, that cause may 
be imputed to other participating contractors if the conduct occurred 
for or on behalf of the joint venture or similar arrangement, or with 
the knowledge, approval, or acquiescence of these contractors. 
Acceptance of the benefits derived from the conduct shall be evidence of 
such knowledge, approval, or acquiescence.
    (e) Where there is cause to suspend and/or exclude a subcontractor, 
that cause may be imputed to the contractor for which the subcontractor 
performed services, if the conduct occurred for or on behalf of the 
contractor and with the contractor's knowledge, approval, or 
acquiescence. Acceptance of the benefits derived from the conduct shall 
be evidence of such knowledge, approval, or acquiescence.



Sec. Sec. 367.10-367.11  [Reserved]



Sec. 367.12  Procedures.

    (a) FDIC shall process suspension and exclusion actions as 
informally as practicable, consistent with its policy of providing 
contractors with adequate information on the grounds that give

[[Page 591]]

rise to the proposed action and affording contractors with a reasonable 
opportunity to respond.
    (b) For purposes of determining filing dates for the pleadings 
required by this part, including responses, notices of appeal, appeals 
and requests for reconsideration, the provisions relating to the 
construction of time limits in 12 CFR 308.12 will control.



Sec. 367.13  Notices.

    (a) Exclusions. Before excluding a contractor, the FDIC shall send 
it a written notice of possible cause to exclude. Such notice shall 
include:
    (1) Notification that exclusion for a specified period of time is 
being considered based on the specified cause(s) in Sec. 367.6 to be 
relied upon;
    (2) Identification of the event(s), circumstance(s), or condition(s) 
that indicates that there is cause to believe a cause for exclusion 
exists, described in sufficient detail to put the contractor on notice 
of the conduct or transaction(s) upon which an exclusion proceeding is 
based;
    (3) Notification that the contractor is not prohibited from 
contracting with the FDIC unless and until it is either suspended from 
FDIC contracting or the FDIC Ethics Counselor issues a decision 
excluding the contractor, provided however, in any case where the 
possible cause for exclusion would also be an impediment to the 
contractor's eligibility pursuant to 12 CFR part 366, the contractor's 
eligibility for any contract will be determined under that part; and
    (4) Notification of the regulatory provisions governing the 
exclusion proceeding and the potential effect of a final exclusion 
decision.
    (b) Suspensions. Before suspending a contractor, the FDIC shall send 
it notice, including:
    (1) Notice that a suspension is being imposed based on specified 
causes in Sec. 367.8;
    (2) Identification of the event(s), circumstance(s), or condition(s) 
that indicate that there is adequate evidence to believe a cause for 
suspension exists, described in sufficient detail to put the contractor 
on notice of the basis for the suspension, recognizing that the conduct 
of ongoing investigations and legal proceedings, including criminal 
proceedings, place limitations on the evidence that can be released;
    (3) Notification that the suspension prohibits the contractor from 
contracting with the FDIC for a temporary period, pending the completion 
of an investigation or other legal proceedings; and
    (4) Notification of the regulatory provisions governing the 
suspension proceeding.
    (c) Service of notices. Notices will be sent to the contractor by 
first class mail, postage prepaid. For purposes of compliance with this 
section, notice shall be considered to have been received by the 
contractor if the notice is properly mailed to the last known address of 
such contractor. Whenever practical, a copy of the notice will also be 
transmitted to the contractor by facsimile. In the event the notice is 
not sent by facsimile, a copy will be sent by an overnight delivery 
service such as Express Mail or a commercial equivalent.



Sec. 367.14  Responses.

    (a) The contractor will have 15 days from the date of the notice 
within which to respond.
    (b) The response shall be in writing and may include: information 
and argument in opposition to the proposed exclusion and/or suspension, 
including any additional specific information pertaining to the possible 
causes for exclusion; and information and argument in mitigation of the 
proposed period of exclusion.
    (c) The response may request a meeting with an FDIC official 
identified in the notice to permit the contractor to discuss issues of 
fact or law relating to the suspension and/or proposed exclusion or to 
otherwise resolve the pending matters.
    (1) Any such meetings between a contractor and FDIC shall take such 
form as the FDIC deems appropriate.
    (2) In cases of suspensions, no meeting will be held where a 
representative of the Department of Justice has advised in writing that 
the substantial interests of the Government would be prejudiced by such 
a meeting and the Ethics Counselor determines that a suspension is based 
on the same facts

[[Page 592]]

as pending or contemplated legal proceedings referenced by the 
representative of the Department of Justice.
    (d) Failure to respond to the notice shall be deemed an admission of 
the existence of the cause(s) for suspension and/or exclusion set forth 
in the notice and an acceptance of the period of exclusion proposed 
therein. In such circumstances, the FDIC may proceed to a final decision 
without further proceedings.
    (e) Where a contractor has received more than one notice, the FDIC 
may consolidate the pending proceedings, including the scheduling of any 
meetings, in accordance with this section.



Sec. 367.15  Additional proceedings as to disputed material facts.

    (a) In actions not based upon a conviction or civil judgment, if the 
Ethics Counselor finds that the contractor's submission raises a genuine 
dispute over facts material to the proposed suspension and/or exclusion, 
the contractor shall be afforded an opportunity to appear (with counsel, 
if desired), submit documentary evidence, present witnesses, and 
confront any witnesses the FDIC presents.
    (b) The Ethics Counselor may refer disputed material facts to 
another official for analysis and recommendation.
    (c) If requested, a transcribed record of any additional proceedings 
shall be made available at cost to the contractor.



Sec. 367.16  Ethics Counselor decisions.

    (a) Standard of proof:
    (1) An exclusion must be based on a finding that the cause(s) for 
exclusion is established by a preponderance of the evidence in the 
administrative record of the case; and
    (2) A suspension must be based on a finding that the cause(s) for 
suspension is established by adequate evidence in the administrative 
record of the case.
    (b) The administrative record consists of the portion of any 
information, reports, documents or other evidence identified and relied 
upon in the Notice of Possible Cause to Exclude, the Notice of 
Suspension and/or supplemental notices, if any, together with any 
material portions of the contractor's response. When additional 
proceedings are necessary to determine disputed material facts, the 
Ethics Counselor shall base the decision on the facts as found, together 
with any information and argument submitted by the contractor and any 
other information in the administrative record.
    (c) In actions based upon a conviction, judgment, a final 
enforcement action by a federal financial institution regulatory agency, 
or in which all facts and circumstances material to the exclusion action 
have been finally adjudicated in another forum, the Ethics Counselor may 
exclude a contractor without regard to the procedures set out in 
Sec. Sec. 367.13 and 367.14. Any such decisions will be subject to the 
review and reconsideration provisions of Sec. 367.20.
    (d) Notice of decisions. Contractors shall be given prompt notice of 
the Ethics Counselor's decision in the manner described in Sec. 
367.13(c). If the Ethics Counselor suspends a contractor or imposes a 
period of exclusion, the decision shall:
    (1) Set forth the cause(s) for suspension and/or exclusion included 
in the notice that were found by a preponderance of the evidence with 
reference to the administrative record support for that finding;
    (2) Set forth the effect of the exclusion action and the effective 
dates of that action;
    (3) Refer the contractor to its procedural rights of review and 
reconsideration under Sec. 367.20; and
    (4) Inform the contractor that a copy of the exclusion decision 
shall be placed in the FDIC Public Reading Room.
    (e) If the FDIC Ethics Counselor decides that a period of exclusion 
is not warranted, the Notice of Possible Cause to Exclude may be 
withdrawn or the proceeding may be otherwise terminated. A decision to 
terminate an exclusion proceeding may include the imposition of 
appropriate conditions on the contractor in their future dealings with 
the FDIC.



Sec. 367.17  Duration of suspensions and exclusions.

    (a) Suspensions. (1) Suspensions shall be for a temporary period 
pending the

[[Page 593]]

completion of an investigation or other legal or exclusion proceedings.
    (2) If legal or administrative proceedings are not initiated within 
12 months after the date of the suspension notice, the suspension shall 
be terminated unless a representative of the Department of Justice 
requests its extension in writing. In such cases, the suspension may be 
extended for an additional six months. In no event may a suspension be 
imposed for more than 18 months, unless such proceedings have been 
initiated within that period.
    (3) FDIC shall notify the Department of Justice of an impending 
termination of a suspension at least 30 days before the 12-month period 
expires to give the Department of Justice an opportunity to request an 
extension.
    (4) The time limitations for suspension in this section may be 
waived by the affected contractor.
    (b) Exclusions. (1) Exclusions shall be for a period commensurate 
with the seriousness of the cause(s) after due consideration of 
mitigating evidence presented by the contractor.
    (2) If a suspension precedes an exclusion, the suspension period 
shall be considered in determining the exclusion period.
    (3) Exclusion for causes other than the mandatory bars in 12 CFR 
366.4(a) generally should not exceed three years, but where 
circumstances warrant, a longer period of exclusion may be imposed.
    (4) The Ethics Counselor may extend an existing exclusion for an 
additional period if the Ethics Counselor determines that an extension 
is necessary to protect the integrity of the FDIC contracting program 
and the public interest. However, an exclusion may not be extended 
solely on the basis of the facts and circumstances upon which the 
initial exclusion action was based. The standards and procedures in this 
part shall be applied in any proceeding to extend an exclusion.



Sec. 367.18  Abrogation of contracts.

    (a) The FDIC may, in its discretion, rescind or terminate any 
contract in existence at the time a contractor is suspended or excluded.
    (b) Any contract not rescinded or terminated shall continue in force 
in accordance with the terms thereof.
    (c) The right to rescind or terminate a contract in existence is 
cumulative and in addition to any other remedies or rights the FDIC may 
have under the terms of the contract, at law, or otherwise.



Sec. 367.19  Exceptions to suspensions and exclusions.

    (a) Exceptions to the effects of suspensions and exclusions may be 
available in unique circumstances, where there are compelling reasons to 
utilize a particular contractor for a specific task. Requests for such 
exceptions may be submitted only by the FDIC program office requesting 
the contract services.
    (b) In the case of the modification or extension of an existing 
contract, the Ethics Counselor may except such a contracting action from 
the effects of suspension and/or exclusion upon a determination, in 
writing, that a compelling reason exists for utilization of the 
contractor in the particular instance. The Ethics Counselor's authority 
under this section shall not be delegated to any lower official.
    (c) In the case of new contracts, the Corporation Ethics Committee 
may except a particular new contract from the effects of suspension and/
or exclusion upon a determination in writing that a compelling reason 
exists for utilization of the contractor in the particular instance.



Sec. 367.20  Review and reconsideration of Ethics Counselor decisions.

    (a) Review. (1) A suspended and/or excluded contractor may appeal 
the exclusion decision to the Corporation Ethics Committee.
    (2) In order to avail itself of the right to appeal, a suspended 
and/or excluded contractor must file a written notice of intent to 
appeal within 5 days of the Ethics Counselor's decision.
    (3) The appeal shall be filed in writing within 30 days of the 
decision.
    (4) The Corporation Ethics Committee, at its discretion and after 
determining that it is in the best interests of the FDIC, may stay the 
effect of

[[Page 594]]

the suspension and/or exclusion pending conclusion of its review of the 
matter.
    (b) Reconsideration. (1) A suspended and/or excluded contractor may 
submit a request to the Ethics Counselor to reconsider the suspension 
and/or exclusion decision, reduce the period of exclusion or terminate 
the suspension and/or exclusion.
    (2) Such requests shall be in writing and supported by documentation 
that the requested action is justified by:
    (i) Reversal of the conviction or civil judgment upon which the 
suspension and/or exclusion was based;
    (ii) Newly discovered material evidence;
    (iii) Bona fide change in ownership or management;
    (iv) Elimination of other causes for which the suspension and/or 
exclusion was imposed; or
    (v) Other reasons the FDIC Ethics Counselor deems appropriate.
    (3) A request for reconsideration based on the reversal of the 
conviction or civil judgment may be filed at any time.
    (4) Requests for reconsideration based on other grounds may only be 
filed during the period commencing 60 days after the Ethics Counselor's 
decision imposing the suspension and/or exclusion. Only one such request 
may be filed in any twelve month period.
    (5) The Ethics Counselor's decision on a request for reconsideration 
is subject to the review procedure set forth in paragraph (a) of this 
section.



PART 368_GOVERNMENT SECURITIES SALES PRACTICES--Table of Contents




Sec.
368.1 Scope.
368.2 Definitions.
368.3 Business conduct.
368.4 Recommendations to customers.
368.5 Customer information.
368.100 Obligations concerning institutional customers.

    Authority: 15 U.S.C. 78o-5.

    Source: 62 FR 13287, Mar. 19, 1997, unless otherwise noted.



Sec. 368.1  Scope.

    This part is applicable to state nonmember banks and insured state 
branches of foreign banks that have filed notice as, or are required to 
file notice as, government securities brokers or dealers pursuant to 
section 15C of the Securities Exchange Act (15 U.S.C. 78o-5) and 
Department of the Treasury rules under section 15C (17 CFR 400.1(d) and 
part 401).



Sec. 368.2  Definitions.

    (a) Bank that is a government securities broker or dealer means a 
state nonmember bank or an insured state branch of a foreign bank that 
has filed notice, or is required to file notice, as a government 
securities broker or dealer pursuant to section 15C of the Securities 
Exchange Act (15 U.S.C. 78o-5) and Department of the Treasury rules 
under section 15C (17 CFR 400.1(d) and part 401).
    (b) Customer does not include a broker or dealer or a government 
securities broker or dealer.
    (c) Government security has the same meaning as this term has in 
section 3(a)(42) of the Securities Exchange Act of 1934 (15 U.S.C. 
78c(a)(42)).
    (d) Non-institutional customer means any customer other than:
    (1) A bank, savings association, insurance company, or registered 
investment company;
    (2) An investment adviser registered under section 203 of the 
Investment Advisers Act of 1940 (15 U.S.C. 80b-3); or
    (3) Any entity (whether a natural person, corporation, partnership, 
trust, or otherwise) with total assets of at least $50 million.



Sec. 368.3  Business conduct.

    A bank that is a government securities broker or dealer shall 
observe high standards of commercial honor and just and equitable 
principles of trade in the conduct of its business as a government 
securities broker or dealer.



Sec. 368.4  Recommendations to customers.

    In recommending to a customer the purchase, sale or exchange of a 
government security, a bank that is a government securities broker or 
dealer shall have reasonable grounds for believing that the 
recommendation is suitable for the customer upon the basis of the facts, 
if any, disclosed by the customer

[[Page 595]]

as to the customer's other security holdings and as to the customer's 
financial situation and needs.



Sec. 368.5  Customer information.

    Prior to the execution of a transaction recommended to a non-
institutional customer, a bank that is a government securities broker or 
dealer shall make reasonable efforts to obtain information concerning:
    (a) The customer's financial status;
    (b) The customer's tax status;
    (c) The customer's investment objectives; and
    (d) Such other information used or considered to be reasonable by 
such bank in making recommendations to the customer.



Sec. 368.100  Obligations concerning institutional customers.

    (a) As a result of broadened authority provided by the Government 
Securities Act Amendments of 1993 (15 U.S.C. 78o-3 and 78o-5), the FDIC 
is adopting sales practice rules for the government securities market, a 
market with a particularly broad institutional component. Accordingly, 
the FDIC believes it is appropriate to provide further guidance to banks 
on their suitability obligations when making recommendations to 
institutional customers.
    (b) The FDIC's suitability rule (Sec. 368.4) is fundamental to fair 
dealing and is intended to promote ethical sales practices and high 
standards of professional conduct. Banks' responsibilities include 
having a reasonable basis for recommending a particular security or 
strategy, as well as having reasonable grounds for believing the 
recommendation is suitable for the customer to whom it is made. Banks 
are expected to meet the same high standards of competence, 
professionalism, and good faith regardless of the financial 
circumstances of the customer.
    (c) In recommending to a customer the purchase, sale, or exchange of 
any government security, the bank shall have reasonable grounds for 
believing that the recommendation is suitable for the customer upon the 
basis of the facts, if any, disclosed by the customer as to the 
customer's other security holdings and financial situation and needs.
    (d) The interpretation in this section concerns only the manner in 
which a bank determines that a recommendation is suitable for a 
particular institutional customer. The manner in which a bank fulfills 
this suitability obligation will vary, depending on the nature of the 
customer and the specific transaction. Accordingly, the interpretation 
in this section deals only with guidance regarding how a bank may 
fulfill customer-specific suitability obligations under Sec. 368.4. \1\
---------------------------------------------------------------------------

    \1\ The interpretation in this section does not address the 
obligation related to suitability that requires that a bank have `` * * 
* a `reasonable basis' to believe that the recommendation could be 
suitable for at least some customers.'' In the Matter of the Application 
of F.J. Kaufman and Company of Virginia and Frederick J. Kaufman, Jr., 
50 SEC 164 (1989).
---------------------------------------------------------------------------

    (e) While it is difficult to define in advance the scope of a bank's 
suitability obligation with respect to a specific institutional customer 
transaction recommended by a bank, the FDIC has identified certain 
factors that may be relevant when considering compliance with Sec. 
368.4. These factors are not intended to be requirements or the only 
factors to be considered but are offered merely as guidance in 
determining the scope of a bank's suitability obligations.
    (f) The two most important considerations in determining the scope 
of a bank's suitability obligations in making recommendations to an 
institutional customer are the customer's capability to evaluate 
investment risk independently and the extent to which the customer is 
exercising independent judgement in evaluating a bank's recommendation. 
A bank must determine, based on the information available to it, the 
customer's capability to evaluate investment risk. In some cases, the 
bank may conclude that the customer is not capable of making independent 
investment decisions in general. In other cases, the institutional 
customer may have general capability, but may not be able to understand 
a particular type of instrument or its risk. This is more likely to 
arise with relatively new types of instruments, or those

[[Page 596]]

with significantly different risk or volatility characteristics than 
other investments generally made by the institution. If a customer is 
either generally not capable of evaluating investment risk or lacks 
sufficient capability to evaluate the particular product, the scope of a 
bank's customer-specific obligations under Sec. 368.4 would not be 
diminished by the fact that the bank was dealing with an institutional 
customer. On the other hand, the fact that a customer initially needed 
help understanding a potential investment need not necessarily imply 
that the customer did not ultimately develop an understanding and make 
an independent investment decision.
    (g) A bank may conclude that a customer is exercising independent 
judgement if the customer's investment decision will be based on its own 
independent assessment of the opportunities and risks presented by a 
potential investment, market factors and other investment 
considerations. Where the bank has reasonable grounds for concluding 
that the institutional customer is making independent investment 
decisions and is capable of independently evaluating investment risk, 
then a bank's obligations under Sec. 368.4 for a particular customer 
are fulfilled. \2\ Where a customer has delegated decision-making 
authority to an agent, such as an investment advisor or a bank trust 
department, the interpretation in this section shall be applied to the 
agent.
---------------------------------------------------------------------------

    \2\ See footnote 1 in paragraph (d) of this section.
---------------------------------------------------------------------------

    (h) A determination of capability to evaluate investment risk 
independently will depend on an examination of the customer's capability 
to make its own investment decisions, including the resources available 
to the customer to make informed decisions. Relevant considerations 
could include:
    (1) The use of one or more consultants, investment advisers, or bank 
trust departments;
    (2) The general level of experience of the institutional customer in 
financial markets and specific experience with the type of instruments 
under consideration;
    (3) The customer's ability to understand the economic features of 
the security involved;
    (4) The customer's ability to independently evaluate how market 
developments would affect the security; and
    (5) The complexity of the security or securities involved.
    (i) A determination that a customer is making independent investment 
decisions will depend on the nature of the relationship that exists 
between the bank and the customer. Relevant considerations could 
include:
    (1) Any written or oral understanding that exists between the bank 
and the customer regarding the nature of the relationship between the 
bank and the customer and the services to be rendered by the bank;
    (2) The presence or absence of a pattern of acceptance of the bank's 
recommendations;
    (3) The use by the customer of ideas, suggestions, market views and 
information obtained from other government securities brokers or dealers 
or market professionals, particularly those relating to the same type of 
securities; and
    (4) The extent to which the bank has received from the customer 
current comprehensive portfolio information in connection with 
discussing recommended transactions or has not been provided important 
information regarding its portfolio or investment objectives.
    (j) Banks are reminded that these factors are merely guidelines that 
will be utilized to determine whether a bank has fulfilled its 
suitability obligation with respect to a specific institutional customer 
transaction and that the inclusion or absence of any of these factors is 
not dispositive of the determination of suitability. Such a 
determination can only be made on a case-by-case basis taking into 
consideration all the facts and circumstances of a particular bank/
customer relationship, assessed in the context of a particular 
transaction.
    (k) For purposes of the interpretation in this section, an 
institutional customer shall be any entity other than a natural person. 
In determining the applicability of the interpretation in this section 
to an institutional customer,

[[Page 597]]

the FDIC will consider the dollar value of the securities that the 
institutional customer has in its portfolio and/or under management. 
While the interpretation in this section is potentially applicable to 
any institutional customer, the guidance contained in this section is 
more appropriately applied to an institutional customer with at least 
$10 million invested in securities in the aggregate in its portfolio 
and/or under management.



PART 369_PROHIBITION AGAINST USE OF INTERSTATE BRANCHES PRIMARILY FOR DEPOSIT 

PRODUCTION--Table of Contents




Sec.
369.1 Purpose and scope.
369.2 Definitions.
369.3 Loan-to-deposit ratio screen.
369.4 Credit needs determination.
369.5 Sanctions.

    Authority: 12 U.S.C. 1819 (Tenth) and 1835a.

    Source: 62 FR 47737, Sept. 10, 1997, unless otherwise noted.



Sec. 369.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to implement section 109 
(12 U.S.C. 1835a) of the Riegle-Neal Interstate Banking and Branching 
Efficiency Act of 1994 (Interstate Act).
    (b) Scope. (1) This part applies to any State nonmember bank that 
has operated a covered interstate branch for a period of at least one 
year.
    (2) This part describes the requirements imposed under 12 U.S.C. 
1835a, which requires the appropriate Federal banking agencies (the 
FDIC, the Office of the Comptroller of the Currency, and the Board of 
Governors of the Federal Reserve System) to prescribe uniform rules that 
prohibit a bank from using any authority to engage in interstate 
branching pursuant to the Interstate Act, or any amendment made by the 
Interstate Act to any other provision of law, primarily for the purpose 
of deposit production.



Sec. 369.2  Definitions.

    For purposes of this part, the following definitions apply:
    (a) Bank means, unless the context indicates otherwise:
    (1) A State nonmember bank; and
    (2) A foreign bank as that term is defined in 12 U.S.C. 3101(7) and 
12 CFR 346.1(a).
    (b) Covered interstate branch means:
    (1) Any branch of a State nonmember bank, and any insured branch of 
a foreign bank licensed by a State, that:
    (i) Is established or acquired outside the bank's home State 
pursuant to the interstate branching authority granted by the Interstate 
Act or by any amendment made by the Interstate Act to any other 
provision of law; or
    (ii) Could not have been established or acquired outside of the 
bank's home State but for the establishment or acquisition of a branch 
described in paragraph (b)(1)(i) of this section; and
    (2) Any bank or branch of a bank controlled by an out-of-State bank 
holding company.
    (c) Home State means:
    (1) With respect to a State bank, the State that chartered the bank;
    (2) With respect to a national bank, the State in which the main 
office of the bank is located;
    (3) With respect to a bank holding company, the State in which the 
total deposits of all banking subsidiaries of such company are the 
largest on the later of:
    (i) July 1, 1966; or
    (ii) The date on which the company becomes a bank holding company 
under the Bank Holding Company Act;
    (4) With respect to a foreign bank:
    (i) For purposes of determining whether a U.S. branch of a foreign 
bank is a covered interstate branch, the home State of the foreign bank 
as determined in accordance with 12 U.S.C. 3103(c) and 12 CFR 
347.202(j); and
    (ii) For purposes of determining whether a branch of a U.S. bank 
controlled by a foreign bank is a covered interstate branch, the State 
in which the total deposits of all banking subsidiaries of such foreign 
bank are the largest on the later of:
    (A) July 1, 1966; or
    (B) The date on which the foreign bank becomes a bank holding 
company under the Bank Holding Company Act.
    (d) Host State means a State in which a covered interstate branch is 
established or acquired.

[[Page 598]]

    (e) Host state loan-to-deposit ratio generally means, with respect 
to a particular host state, the ratio of total loans in the host state 
relative to total deposits from the host state for all banks (including 
institutions covered under the definition of ``bank'' in 12 U.S.C. 
1813(a)(1)) that have that state as their home state, as determined and 
updated periodically by the appropriate Federal banking agencies and 
made available to the public.
    (f) Out-of-State bank holding company means, with respect to any 
State, a bank holding company whose home State is another State.
    (g) State means state as that term is defined in 12 U.S.C. 
1813(a)(3).
    (h) Statewide loan-to-deposit ratio means, with respect to a bank, 
the ratio of the bank's loans to its deposits in a state in which the 
bank has one or more covered interstate branches, as determined by the 
FDIC.

[62 FR 47737, Sept. 10, 1997, as amended at 67 FR 38848, June 6, 2002]



Sec. 369.3  Loan-to-deposit ratio screen.

    (a) Application of screen. Beginning no earlier than one year after 
a covered interstate branch is acquired or established, the FDIC will 
consider whether the bank's statewide loan-to-deposit ratio is less than 
50 percent of the relevant host State loan-to-deposit ratio.
    (b) Results of screen. (1) If the FDIC determines that the bank's 
statewide loan-to-deposit ratio is 50 percent or more of the host state 
loan-to-deposit ratio, no further consideration under this part is 
required.
    (2) If the FDIC determines that the bank's statewide loan-to-deposit 
ratio is less than 50 percent of the host state loan-to-deposit ratio, 
or if reasonably available data are insufficient to calculate the bank's 
statewide loan-to-deposit ratio, the FDIC will make a credit needs 
determination for the bank as provided in Sec. 369.4.

[62 FR 47737, Sept. 10, 1997, as amended at 67 FR 38848, June 6, 2002]



Sec. 369.4  Credit needs determination.

    (a) In general. The FDIC will review the loan portfolio of the bank 
and determine whether the bank is reasonably helping to meet the credit 
needs of the communities in the host state that are served by the bank.
    (b) Guidelines. The FDIC will use the following considerations as 
guidelines when making the determination pursuant to paragraph (a) of 
this section:
    (1) Whether covered interstate branches were formerly part of a 
failed or failing depository institution;
    (2) Whether covered interstate branches were acquired under 
circumstances where there was a low loan-to-deposit ratio because of the 
nature of the acquired institution's business or loan portfolio;
    (3) Whether covered interstate branches have a high concentration of 
commercial or credit card lending, trust services, or other specialized 
activities, including the extent to which the covered interstate 
branches accept deposits in the host state;
    (4) The Community Reinvestment Act (CRA) ratings received by the 
bank, if any, under 12 U.S.C. 2901 et seq.;
    (5) Economic conditions, including the level of loan demand, within 
the communities served by the covered interstate branches;
    (6) The safe and sound operation and condition of the bank; and
    (7) The FDIC's Community Reinvestment regulations (12 CFR Part 345) 
and interpretations of those regulations.



Sec. 369.5  Sanctions.

    (a) In general. If the FDIC determines that a bank is not reasonably 
helping to meet the credit needs of the communities served by the bank 
in the host state, and that the bank's statewide loan-to-deposit ratio 
is less than 50 percent of the host state loan-to-deposit ratio, the 
FDIC:
    (1) May order that a bank's covered interstate branch or branches be 
closed unless the bank provides reasonable assurances to the 
satisfaction of the FDIC, after an opportunity for public comment, that 
the bank has an acceptable plan under which the bank will reasonably 
help to meet the credit needs of the communities served by the bank in 
the host state; and
    (2) Will not permit the bank to open a new branch in the host state 
that would be considered to be a covered

[[Page 599]]

interstate branch unless the bank provides reasonable assurances to the 
satisfaction of the FDIC, after an opportunity for public comment, that 
the bank will reasonably help to meet the credit needs of the community 
that the new branch will serve.
    (b) Notice prior to closure of a covered interstate branch. Before 
exercising the FDIC's authority to order the bank to close a covered 
interstate branch, the FDIC will issue to the bank a notice of the 
FDIC's intent to order the closure and will schedule a hearing within 60 
days of issuing the notice.
    (c) Hearing. The FDIC will conduct a hearing scheduled under 
paragraph (b) of this section in accordance with the provisions of 12 
U.S.C. 1818(h) and 12 CFR part 308.



PART 370_TEMPORARY LIQUIDITY GUARANTEE PROGRAM--Table of Contents




Sec.
370.1 Scope.
370.2 Definitions.
370.3 Debt Guarantee Program.
370.4 Transaction Account Guarantee Program.
370.5 Participation.
370.6 Assessments under the Debt Guarantee Program.
370.7 Assessments for the Transaction Account Guarantee Program.
370.8 Systemic risk emergency special assessment to recover loss.
370.9 Recordkeeping requirements.
370.10 Oversight.
370.11 Enforcement mechanisms.
370.12 Payment on the guarantee.

    Authority: 12 U.S.C. U.S.C. 1813(l), 1813(m), 1817(i),1818, 
1819(a)(Tenth); 1820(f), 1821(a); 1821(c); 1821(d); 1823(c)(4).

    Source: 73 FR 72266, Nov. 26, 2008, unless otherwise noted.



Sec. 370.1  Scope.

    This part sets forth the eligibility criteria, limitations, 
procedures, requirements, and other provisions related to participation 
in the FDIC's temporary liquidity guarantee program.



Sec. 370.2  Definitions.

    As used in this part, the terms listed in this section are defined 
as indicated below. Other terms used in this part that are defined in 
the Federal Deposit Insurance Act (FDI Act) have the meanings given them 
in the FDI Act except as otherwise provided herein.
    (a) Eligible entity. (1) The term ``eligible entity'' means any of 
the following:
    (i) An insured depository institution;
    (ii) A U.S. bank holding company, provided that it controls, 
directly or indirectly, at least one subsidiary that is a chartered and 
operating insured depository institution;
    (iii) A U.S. savings and loan holding company, provided that it 
controls, directly or indirectly, at least one subsidiary that is a 
chartered and operating insured depository institution; or
    (iv) Any other affiliates of an insured depository institution that 
the FDIC, in its sole discretion and on a case-by-case basis, after 
written request and positive recommendation by the appropriate Federal 
banking agency, designates as an eligible entity; such affiliate, by 
seeking and obtaining such designation, also becomes a participating 
entity in the debt guarantee program.
    (b) Insured Depository Institution. The term ``insured depository 
institution'' means an insured depository institution as defined in 
section 3(c)(2) of the FDI Act, 12 U.S.C. 1813(c)(2), except that it 
does not include an ``insured branch'' of a foreign bank as defined in 
section 3(s)(3) of the FDI Act, 12 U.S.C. 1813(s)(3), for purposes of 
the debt guarantee program.
    (c) U.S. Bank Holding Company. The term ``U.S. Bank Holding 
Company'' means a ``bank holding company'' as defined in section 2(a) of 
the Bank Holding Company Act of 1956 (``BHCA''), 12 U.S.C. 1841(a), that 
is organized under the laws of any State or the District of Columbia.
    (d) U.S. Savings and Loan Holding Company. The term ``U.S. Savings 
and Loan Holding Company'' means a ``savings and loan holding company'' 
as defined in section 10(a)(1)(D) of the Home Owners' Loan Act of 1933 
(``HOLA''), 12 U.S.C. 1467a(a)(1)(D), that is organized under the laws 
of any State or the District of Columbia and either:
    (1) Engages only in activities that are permissible for financial 
holding companies under section 4(k) of the BHCA, 12 U.S.C. 1843(k), or

[[Page 600]]

    (2) Has at least one insured depository institution subsidiary that 
is the subject of an application under section 4(c)(8) of the BHCA, 12 
U.S.C. 1843(c)(8), that was pending on October 13, 2008.
    (e) Senior Unsecured Debt. (1) The term ``senior unsecured debt'' 
means
    (i) For the period from October 13, 2008 through December 5, 2008, 
unsecured borrowing that:
    (A) Is evidenced by a written agreement or trade confirmation;
    (B) Has a specified and fixed principal amount;
    (C) Is noncontingent and contains no embedded options, forwards, 
swaps, or other derivatives; and
    (D) Is not, by its terms, subordinated to any other liability; and
    (ii) After December 5, 2008, unsecured borrowing that satisfies the 
criteria listed in paragraphs (e)(1)(i)(A) through (e)(1)(i)(D) of this 
section and that has a stated maturity of more than 30 days.
    (2) Senior unsecured debt may pay either a fixed or floating 
interest rate based on a commonly-used reference rate with a fixed 
amount of scheduled principal payments. The term ``commonly-used 
reference rate'' includes a single index of a Treasury bill rate, the 
prime rate, and LIBOR.
    (3) Senior unsecured debt may include, for example, the following 
debt, provided it meets the requirements of paragraph (e)(1) of this 
section: Federal funds purchased, promissory notes, commercial paper, 
unsubordinated unsecured notes, including zero-coupon bonds, U.S. dollar 
denominated certificates of deposit owed to an insured depository 
institution, an insured credit union as defined in the Federal Credit 
Union Act, or a foreign bank, U.S. dollar denominated deposits in an 
international banking facility (IBF) of an insured depository 
institution owed to an insured depository institution or a foreign bank, 
and U.S. dollar denominated deposits on the books and records of foreign 
branches of U.S. insured depository institutions that are owed to an 
insured depository institution or a foreign bank. The term ``foreign 
bank'' does not include a foreign central bank or other similar foreign 
government entity that performs central bank functions or a quasi-
governmental international financial institution such as the 
International Monetary Fund or the World Bank. References to debt owed 
to an insured depository institution, an insured credit union, or a 
foreign bank mean owed to the institution solely in its own capacity and 
not as agent.
    (4) Senior unsecured debt, except deposits, may be denominated in 
foreign currency.
    (5) Senior unsecured debt excludes, for example, any obligation that 
has a stated maturity of ``one month'' \1\, obligations from guarantees 
or other contingent liabilities, derivatives, derivative-linked 
products, debts that are paired or bundled with other securities, 
convertible debt, capital notes, the unsecured portion of otherwise 
secured debt, negotiable certificates of deposit, deposits denominated 
in a foreign currency or other foreign deposits (except as allowed under 
paragraph (e)(3) of this section), revolving credit agreements, 
structured notes, instruments that are used for trade credit, retail 
debt securities, and any funds regardless of form that are swept from 
individual, partnership, or corporate accounts held at depository 
institutions. Also excluded are loans from affiliates, including parents 
and subsidiaries, and institution-affiliated parties.
---------------------------------------------------------------------------

    \1\ This recognizes that certain instruments have stated maturities 
of ``one month,'' but have a term of up to 35 days because of weekends, 
holidays, and calendar issues.
---------------------------------------------------------------------------

    (f) Newly issued senior unsecured debt. (1) The term ``newly issued 
senior unsecured debt'' means senior unsecured debt issued by a 
participating entity on or after October 14, 2008, and on or before:
    (i) The date the entity opts out, for an eligible entity that opts 
out of the debt guarantee program; or
    (ii) June 30, 2009, for an entity that does not opt out of the debt 
guarantee program.
    (2) The term ``newly issued senior unsecured debt'' includes, 
without limitation, senior unsecured debt
    (i) That matures on or after October 13, 2008 and on or before June 
30, 2009, and is renewed during that period, or
    (ii) That is issued during that period pursuant to a shelf 
registration, regardless of the date of creation of the shelf 
registration.

[[Page 601]]

    (g) Participating entity. The term ``participating entity'' means 
with respect to each of the debt guarantee program and the transaction 
account guarantee program,
    (1) An eligible entity that became an eligible entity on or before 
December 5, 2008 and that has not opted out, or
    (2) An entity that becomes an eligible entity after December 5, 
2008, and that the FDIC has allowed to participate in the program.
    (h) Noninterest-bearing transaction account. (1) The term 
``noninterest-bearing transaction account'' means a transaction account 
as defined in 12 CFR 204.2 that is
    (i) Maintained at an insured depository institution;
    (ii) With respect to which interest is neither accrued nor paid; and
    (iii) On which the insured depository institution does not reserve 
the right to require advance notice of an intended withdrawal.
    (2) A noninterest-bearing transaction account does not include, for 
example, an interest-bearing money market deposit account (MMDA) as 
those accounts are defined in 12 CFR 204.2.
    (3) Notwithstanding paragraphs (h)(1) and (h)(2) of this section, 
for purposes of the transaction account guarantee program, a 
noninterest-bearing transaction account includes:
    (i) Accounts commonly known as Interest on Lawyers Trust Accounts 
(IOLTAs) (or functionally equivalent accounts); and
    (ii) Negotiable order of withdrawal accounts (NOW accounts) with 
interest rates no higher than 0.50 percent if the insured depository 
institution at which the account is held has committed to maintain the 
interest rate at or below 0.50 percent.
    (4) Notwithstanding paragraph (h)(3) of this section, a NOW account 
with an interest rate above 0.50 percent as of November 21, 2008, may be 
treated as a noninterest-bearing transaction account for purposes of 
this part, if the insured depository institution at which the account is 
held reduces the interest rate on that account to 0.50 percent or lower 
before January 1, 2009, and commits to maintain that interest rate at no 
more than 0.50 percent at all times through December 31, 2009.
    (i) FDIC-guaranteed debt. The term ``FDIC-guaranteed debt'' means 
newly issued senior unsecured debt issued by a participating entity that 
meets the requirements of this part for debt that is guaranteed under 
the debt guarantee program, and is identified pursuant to Sec. 370.5(h) 
as guaranteed by the FDIC.
    (j) Debt guarantee program. The term ``debt guarantee program'' 
refers to the FDIC's guarantee program for newly issued senior unsecured 
debt as described in this part.
    (k) Transaction account guarantee program. The term ``transaction 
account guarantee program'' refers to the FDIC's guarantee program for 
funds in noninterest-bearing transaction accounts as described in this 
part.
    (l) Temporary liquidity guarantee program. The term ``temporary 
liquidity guarantee program'' includes both the debt guarantee program 
and the transaction account guarantee program.



Sec. 370.3  Debt Guarantee Program.

    (a) Upon the uncured failure of a participating entity to make a 
timely payment of principal or interest as required under an FDIC-
guaranteed debt instrument, the FDIC will pay the unpaid principal and/
or interest, in accordance with Sec. 370.12 and subject to the other 
provisions of this part.
    (b) Debt guarantee limit. (1) Except as provided in paragraphs 
(b)(2) through (b)(6) of this section, the maximum amount of outstanding 
debt that is guaranteed under the debt guarantee program for each 
participating entity at any time is limited to 125 percent of the par 
value of the participating entity's senior unsecured debt, as that term 
is defined in Sec. 370.2(e)(1)(i), that was outstanding as of the close 
of business September 30, 2008, and that was scheduled to mature on or 
before June 30, 2009.
    (2) If a participating entity that is an insured depository 
institution had either no senior unsecured debt as that term is defined 
in Sec. 370.2(e)(1)(i), or only had federal funds purchased, 
outstanding on September 30, 2008, its debt guarantee limit is two 
percent of its consolidated total liabilities as of September 30, 2008. 
For the purposes of this paragraph (b)(2) of this section, the term 
``federal funds purchased'' means:

[[Page 602]]

    (i) For insured depository institutions that file Reports of 
Condition and Income, unsecured ``federal funds purchased'' as that term 
is used in defining ``Federal Funds Transactions'' in the Glossary of 
the FFIEC Reports of Condition and Income Instructions, and
    (ii) For insured depository institutions that file Thrift Financial 
Reports, ``Federal Funds'' as that term is defined in the Glossary of 
the 2008 Thrift Financial Report Instruction Manual.
    (3) If a participating entity, other than an insured depository 
institution, had no senior unsecured debt as that term is defined in 
Sec. 370.2(e)(1)(i) outstanding on September 30, 2008, the entity may 
seek to have some amount of debt covered by the debt guarantee program. 
The FDIC, after consultation with the appropriate Federal banking 
agency, will decide, on a case-by-case basis, whether such a request 
will be granted and, if granted, what the entity's debt guarantee limit 
will be.
    (4) If an entity becomes an eligible entity after October 13, 2008, 
the FDIC will establish the entity's debt guarantee limit at the time of 
such designation.
    (5) If an affiliate of a participating entity is designated as an 
eligible entity by the FDIC after a written request and positive 
recommendation by the appropriate Federal banking agency (or if the 
affiliate has no appropriate Federal banking agency, a written request 
and positive recommendation by the appropriate Federal banking agency of 
the affiliated insured depository institution), the FDIC will establish 
the entity's debt guarantee limit at the time of such designation.
    (6) The FDIC may make exceptions to an entity's debt guarantee 
limit. For example, the FDIC may allow a participating entity to exceed 
the limit determined in paragraph (b)(1) or (b)(2) of this section, 
reduce the limit below the amount determined in paragraph (b)(1) or 
(b)(2) of this section, and/or impose other limits or requirements after 
consultation with the entity's appropriate Federal banking agency.
    (7) If a participating entity issues debt identified as guaranteed 
under the debt guarantee program that exceeds its debt guarantee limit, 
it will be subject to assessment increases and enforcement action as 
provided in Sec. 370.6(e).
    (8) A participating entity that is both an insured depository 
institution and a direct or indirect subsidiary of a parent 
participating entity may, absent direction by the FDIC to the contrary, 
increase its debt guarantee limit above the limit determined in 
accordance with paragraphs (b)(1) through (b)(6) of this section, 
provided that:
    (i) The amount of the increase does not exceed the debt guarantee 
limit(s) of one or more of its parent participating entities;
    (ii) The insured depository institution provides prior written 
notice to the FDIC and to each such parent participating entity of the 
amount of the increase, the name of each contributing parent 
participating entity, and the starting and ending dates of the increase; 
and
    (iii) For so long as the institution's debt guarantee limit is 
increased by such amount, the debt guarantee limit of each contributing 
parent participating entity is reduced by an amount corresponding to the 
amount of its contribution to the amount of the increase.
    (9) The debt guarantee limit of the surviving entity of a merger 
between or among eligible entities is equal to the sum of the debt 
guarantee limits of the merging eligible entities calculated on a pro 
forma basis as of the close of business September 30, 2008, absent 
action by the FDIC after consultation with the surviving entity and its 
appropriate Federal banking agency.
    (10) For purposes of determining the amount of guaranteed debt 
outstanding under paragraph (b)(1) of this section, debt issued in a 
foreign currency will be converted into U.S. dollars using the exchange 
rate in effect on the date that the debt is funded.
    (c) Calculation and reporting responsibility. Participating entities 
are responsible for calculating and reporting to the FDIC the amount of 
senior unsecured as defined in Sec. 370.2(e)(1)(i) as of September 30, 
2008.
    (1) Each participating entity shall calculate the amount of its 
senior unsecured debt outstanding as of the

[[Page 603]]

close of business September 30, 2008, that was scheduled to mature on or 
before June 30, 2009.
    (2) Each participating entity shall report the calculated amount to 
the FDIC, even if such amount is zero, in an approved format via 
FDICconnect no later than December 5, 2008.
    (3) In each subsequent report to the FDIC concerning debt issuances 
or balances outstanding, each participating entity shall state whether 
it has issued debt identified as FDIC-guaranteed debt that exceeded its 
debt guarantee limit at any time since the previous reporting period.
    (4) The Chief Financial Officer (CFO) or equivalent of each 
participating entity shall certify the accuracy of the information 
reported in each report submitted pursuant to this section.
    (d) Duration of Guarantee. For guaranteed debt issued on or before 
June 30, 2009, the guarantee expires on the earliest of the date of the 
entity's opt-out, if any, the maturity of the debt, or June 30, 2012.
    (e) Debt cannot be issued and identified as guaranteed by the FDIC 
if:
    (1) The proceeds are used to prepay debt that is not FDIC-
guaranteed;
    (2) The issuing entity has previously opted out of the debt 
guarantee program, except as provided in Sec. 370.5(d);
    (3) The issuing entity has had its participation in the debt 
guarantee program terminated by the FDIC;
    (4) The issuing entity has exceeded its debt guarantee limit for 
issuing guaranteed debt as specified in paragraph (b) of this section,
    (5) The debt is owed to an affiliate, an institution-affiliated 
party, insider of the participating entity, or an insider of an 
affiliate or
    (6) The debt does not otherwise meet the requirements of this part 
for FDIC guaranteed debt.
    (f) The FDIC's agreement to include a participating entity's senior 
unsecured debt in the debt guarantee program does not exempt the entity 
from complying with any applicable law including, without limitation, 
Securities and Exchange Commission registration or disclosure 
requirements.
    (g) Long term non-guaranteed debt option. On or before 11:59 p.m., 
Eastern Standard Time, December 5, 2008, a participating entity may also 
notify the FDIC that it has elected to issue senior unsecured non-
guaranteed debt with maturities beyond June 30, 2012, at any time, in 
any amount, and without regard to the guarantee limit. By making this 
election the participating entity agrees to pay to the FDIC the 
nonrefundable fee as provided in Sec. 370.6(f).
    (h) Applications for exceptions and eligibility. (1) The following 
requests require written application to the FDIC and the appropriate 
Federal banking agency of the entity or the entity's lead affiliated 
insured depository institution:
    (i) A request by a participating entity to establish or increase its 
debt guarantee limit,
    (ii) A request by an entity that becomes an eligible entity after 
October 13, 2008, for an increase in its presumptive debt guarantee 
limit of zero,
    (iii) A request by a non-participating surviving entity in a merger 
transaction to opt in to either the debt guarantee program or the 
transaction account guarantee program, and
    (iv) A request by an affiliate of an insured depository institution 
to participate in the debt guarantee program.
    (2) The letter application should describe the details of the 
request, provide a summary of the applicant's strategic operating plan, 
and describe the proposed use of the debt proceeds.
    (3) The factors to be considered by the FDIC in evaluating 
applications filed pursuant to paragraphs (h)(1)(i) through (h)(1)(iii) 
of this section include: The financial condition and supervisory history 
of the eligible/surviving entity. The factors to be considered by the 
FDIC in evaluating applications filed pursuant to paragraph (h)(1)(iv) 
of this section include: The extent of the financial activity of the 
entities within the holding company structure; the strength, from a 
ratings perspective of the issuer of the obligations that will be 
guaranteed; and the size and extent of the activities of the 
organization. The FDIC may consider any other relevant factors and may 
impose any conditions it deems appropriate in granting approval of 
applications filed pursuant to this paragraph.

[[Page 604]]

    (4) Applications required under this paragraph must be in letter 
form and addressed to the Director, Division of Supervision and Consumer 
Protection, Federal Deposit Insurance Corporation, 550 17th Street, NW., 
Washington, DC 20429. Applications made pursuant to paragraph 
(h)(1)(iii) of this section should be filed with the FDIC at the time 
the merger application is filed with the appropriate Federal banking 
agency and should incorporate a copy of the merger application therein.
    (5) The effective date of approvals granted by the FDIC under this 
paragraph will be the date of the FDIC's approval letter or, in the case 
of requests filed pursuant to paragraph (h)(1)(iii) of this section, the 
effective date of the merger.
    (i) The ability of a participating entity to issue guaranteed debt 
under the debt guarantee program expires on the earlier of the date of 
the entity's opt-out, if any, or June 30, 2009.



Sec. 370.4  Transaction Account Guarantee Program.

    (a) In addition to the coverage afforded to depositors under 12 CFR 
Part 330, a depositor's funds in a noninterest-bearing transaction 
account maintained at a participating entity that is an insured 
depository institution are guaranteed in full (irrespective of the 
standard maximum deposit insurance amount defined in 12 CFR 330.1(n)) 
from October 14, 2008, through the earlier of:
    (1) The date of opt-out, if the entity opts out, or
    (2) December 31, 2009.
    (b) In determining whether funds are in a noninterest-bearing 
transaction account for purposes of this section, the FDIC will apply 
its normal rules and procedures under Sec. 360.8 (12 CFR 360.8) for 
determining account balances at a failed insured depository institution. 
Under these procedures, funds may be swept or transferred from a 
noninterest-bearing transaction account to another type of deposit or 
nondeposit account. Unless the funds are in a noninterest-bearing 
transaction account after the completion of a sweep under Sec. 360.8, 
the funds will not be guaranteed under the transaction account guarantee 
program.
    (c) Notwithstanding paragraph (b) of this section, in the case of 
funds swept from a noninterest-bearing transaction account to a 
noninterest-bearing savings deposit account, the FDIC will treat the 
swept funds as being in a noninterest-bearing transaction account. As a 
result of this treatment, the funds swept from a noninterest-bearing 
transaction account to a noninterest-bearing savings account, as defined 
in 12 CFR 204.2(d), will be guaranteed under the transaction account 
guarantee program.



Sec. 370.5  Participation.

    (a) Initial period. All eligible entities are covered under the 
temporary liquidity guarantee program for the period from October 14, 
2008, through December 5, 2008, unless they opt out on or before 11:59 
p.m., Eastern Standard Time, December 5, 2008, in which case the 
coverage ends on the date of the opt-out.
    (b) The issuance of FDIC-guaranteed debt subject to the protections 
of the debt guarantee program is an affirmative action by a 
participating entity that constitutes its agreement to be:
    (1) Bound by the terms and conditions of the program, including 
without limitation, assessments and the terms of Master Agreement as 
required herein;
    (2) Subject to, and to comply with, any FDIC request to provide 
information relevant to participation in the debt guarantee program and 
to be subject to FDIC on-site reviews as needed, after consultation with 
the appropriate Federal banking agency, to determine compliance with the 
terms and requirements of the debt guarantee program; and
    (3) Bound by the FDIC's decisions, in consultation with the 
appropriate Federal banking agency, regarding the management of the 
temporary liquidity guarantee program.
    (c) Opt-out and opt-in options. From October 14, 2008, through 
December 5, 2008, each eligible entity is a participating entity in both 
the debt guarantee program and the transaction account guarantee 
program, unless the entity opts out. No later than 11:59

[[Page 605]]

p.m., Eastern Standard Time, December 5, 2008, each eligible entity must 
inform the FDIC if it desires to opt out of the debt guarantee program 
or the transaction account guarantee program, or both. Failure to opt 
out by 11:59 p.m., Eastern Standard Time, December 5, 2008, constitutes 
a decision to continue in the program after that date. Prior to December 
5, 2008, an eligible entity may opt in to either or both programs by 
informing the FDIC that it will not opt out of either or both programs.
    (d) An eligible entity may elect to opt out of either the debt 
guarantee program or the transaction account guarantee program or both. 
The choice to opt out, once made, is irrevocable, except that, in the 
case of a merger between two eligible entities, the resulting 
institution will have a one-time option to revoke a prior decision to 
opt-out. This option must be requested by application to the FDIC in 
accordance with Sec. 370.3(h). Similarly, the choice to affirmatively 
opt in, as provided in paragraph (c) of this section, once made, is 
irrevocable.
    (e) All eligible entities that are affiliates of a U.S. bank holding 
company or that are affiliates of an eligible entity that is a U.S. 
savings and loan holding company must make the same decision regarding 
continued participation in each guarantee program; failure to do so 
constitutes an opt out by all members of the group.
    (f) Except as provided in Sec. 370.3(g), participating entities are 
not permitted to select which newly issued senior unsecured debt is 
guaranteed debt; all senior unsecured debt issued by a participating 
entity up to its debt guarantee limit must be issued and identified as 
FDIC-guaranteed debt as and when issued.
    (g) Procedures for opting out. The FDIC will provide procedures for 
opting out and for making an affirmative decision to opt in using FDIC's 
secure e-business Web site, FDICconnect. Entities that are not insured 
depository institutions will select and solely use an affiliated insured 
depository institution to submit their opt-out election or their 
affirmative decision to opt in.
    (h) Disclosures regarding participation in the temporary liquidity 
guarantee program. (1) The FDIC will publish on its Web site:
    (i) A list of the eligible entities that have opted out of the debt 
guarantee program, and
    (ii) A list of the eligible entities that have opted out of the 
transaction account guarantee program.
    (2) Each eligible entity that does not opt out of the debt guarantee 
program must include the following disclosure statement in all written 
materials provided to lenders or creditors regarding any senior 
unsecured debt issued by it on or after December 19, 2008 through June 
30, 2009 that is guaranteed under the debt guarantee program:

    This debt is guaranteed under the Federal Deposit Insurance 
Corporation's Temporary Liquidity Guarantee Program and is backed by the 
full faith and credit of the United States. The details of the FDIC 
guarantee are provided in the FDIC's regulations, 12 CFR Part 370, and 
at the FDIC's Web site,http://www.fdic.gov/tlgp. The expiration date of 
the FDIC's guarantee is the earlier of the maturity date of the debt or 
June 30, 2012.

    (3) Each eligible entity that does not opt out of the debt guarantee 
program must include the following disclosure statement in all written 
materials provided to lenders or creditors regarding any senior 
unsecured debt issued by it on or after December 19, 2008 through June 
30, 2009 that is not guaranteed under the debt guarantee program:
    This debt is not guaranteed under the Federal Deposit Insurance 
Corporation's Temporary Liquidity Guarantee Program.
    (4) Each insured depository institution that offers noninterest-
bearing transaction accounts must post a prominent notice in the lobby 
of its main office, each domestic branch and, if it offers Internet 
deposit services, on its website clearly indicating whether the 
institution is participating in the transaction account guarantee 
program. If the institution is participating in the transaction account 
guarantee program, the notice must state that funds held in noninterest-
bearing transactions accounts at the entity are guaranteed in full by 
the FDIC.
    (i) These disclosures must be provided in simple, readily 
understandable text. Sample disclosures are as follows:

[[Page 606]]

                     For Participating Institutions

    [Institution Name] is participating in the FDIC's Transaction 
Account Guarantee Program. Under that program, through December 31, 
2009, all noninterest-bearing transaction accounts are fully guaranteed 
by the FDIC for the entire amount in the account. Coverage under the 
Transaction Account Guarantee Program is in addition to and separate 
from the coverage available under the FDIC's general deposit insurance 
rules.

                   For Non-Participating Institutions

    [Institution Name] has chosen not to participate in the FDIC's 
Transaction Account Guarantee Program. Customers of [Institution Name] 
with noninterest-bearing transaction accounts will continue to be 
insured through December 31, 2009 for up to $250,000 under the FDIC's 
general deposit insurance rules.

    (ii) If the institution uses sweep arrangements or takes other 
actions that result in funds being transferred or reclassified to an 
account that is not guaranteed under the transaction account guarantee 
program, for example, an interest-bearing account, the institution must 
disclose those actions to the affected customers and clearly advise 
them, in writing, that such actions will void the FDIC's guarantee with 
respect to the swept, transferred, or reclassified funds.
    (5) Effective date for paragraphs (h)(2), (h)(3) and (h)(4) of this 
section. Paragraphs (h)(2), (h)(3) and (h)(4) of this section are 
effective December 19, 2008. Prior to that date, eligible entities 
should provide adequate disclosures of the substance of paragraphs 
(h)(2), (h)(3) and (h)(4) of this section in a commercially reasonable 
manner.
    (i) Participation By New Eligible Entities And Continued 
Eligibility. The FDIC will determine eligibility in consultation with 
the eligible entity's appropriate Federal banking agency.
    (1) Participation by an entity that is organized after October 13, 
2008 or that becomes an entity described Sec. 370.2(a) after October 
13, 2008 will be: with respect to the transaction account guarantee 
program, effective on the date of the entity's opt-in as described in 
Sec. 370.2(g)(2), and with respect to the debt guarantee program, 
considered by the FDIC on a case-by-case basis in consultation with the 
entity's appropriate Federal banking agency.
    (2) An eligible entity that is not an insured depository institution 
will cease to be eligible to participate in the debt guarantee program 
once it is no longer affiliated with a chartered and operating insured 
depository institution.



Sec. 370.6  Assessments under the Debt Guarantee Program.

    (a) Waiver of assessment for certain initial periods. No eligible 
entity shall pay any assessment associated with the debt guarantee 
program for the period from October 14, 2008 through November 12, 2008. 
An eligible entity that opts out of the program on or before December 5, 
2008 will not pay any assessment under the program.
    (b) Notice to the FDIC. No guaranteed debt shall be issued by a 
participating entity under the FDIC's debt guarantee program unless 
notice of the issuance of such debt and payment of associated 
assessments is provided to the FDIC as required by this section and, for 
guaranteed debt issued after November 21, 2008, the participating entity 
agrees to be bound by the terms of the Master Agreement, as set forth on 
the FDIC's Web site.
    (1) Any eligible entity that does not opt out of the debt guarantee 
program on or before December 5, 2008, as provided in Sec. 370.5, and 
that issues any guaranteed debt during the period from October 14, 2008 
through December 5, 2008 which is still outstanding on December 5, 2008, 
shall notify the FDIC of that issuance via the FDIC's e-business Web 
site FDICconnect on or before December 19, 2008, and the entity's Chief 
Financial Officer or equivalent shall certify that the issuances 
identified as FDIC-guaranteed debt outstanding at each point of time did 
not exceed the debt guarantee limit as set forth in Sec. 370.3
    (2) Each participating entity that issues guaranteed debt after 
December 5, 2008, shall notify the FDIC of that issuance via the FDIC's 
e-business Web site FDICconnect within the time period specified by the 
FDIC. The eligible entity's Chief Financial Officer or equivalent shall 
certify that the issuance of guaranteed debt does not exceed the debt 
guarantee limit as set forth in Sec. 370.3.

[[Page 607]]

    (3) The FDIC will provide procedures governing notice to the FDIC 
and certification of guaranteed amount limits for purposes of this 
section.
    (c) Initiation of assessments. Assessments, calculated in accordance 
with paragraph (d) of this section, will accrue, with respect to each 
eligible entity that does not opt out of the debt guarantee program on 
or before December 5, 2008:
    (1) Beginning on November 13, 2008, on all senior unsecured debt, as 
defined in Sec. 370.2(e)(1)(i) (except for overnight debt), issued by 
it on or after October 14, 2008, and on or before December 5, 2008, that 
is still outstanding on December 5, 2008; and
    (2) Beginning on December 6, 2008, on all senior unsecured debt, as 
defined in Sec. 370.2(e)(1)(ii), issued by it on or after December 6, 
2008.
    (d) Amount of assessments for debt within the debt guarantee limit. 
(1) Calculation of assessment. Except as provided in paragraph (d)(3) of 
this section, the amount of assessment will be determined by multiplying 
the amount of FDIC-guaranteed debt times the term of the debt (expressed 
in years) times an annualized assessment rate determined in accordance 
with the following table.

------------------------------------------------------------------------
                                                         The annualized
                                                         assessment rate
              For debt with a maturity of                   (in basis
                                                           points) is
------------------------------------------------------------------------
180 days or less (excluding overnight debt)...........                50
181-364 days..........................................                75
365 days or greater...................................               100
------------------------------------------------------------------------

    (2) If the debt matures after June 30, 2012, June 30, 2012 will be 
used as the maturity date.
    (3) The amount of assessment for an eligible entity, other than an 
insured depository institution, that controls, directly or indirectly, 
or is otherwise affiliated with, at least one insured depository 
institution will be determined by multiplying the amount of FDIC-
guaranteed debt times the term of the debt (expressed in years) times an 
annualized assessment rate determined in accordance with the rates set 
forth in the table in paragraph (d)(1) of this section, except that each 
such rate shall be increased by 10 basis points, if the combined assets 
of all insured depository institutions affiliated with such entity 
constitute less than 50 percent of consolidated holding company assets. 
The comparison of assets for purposes of this paragraph shall be 
determined as of September 30, 2008, except that in the case of an 
entity that becomes an eligible entity after October 13, 2008, the 
comparison of assets shall be determined as of the date that it becomes 
an eligible entity
    (4) Assessment invoicing. Once the participating entity provides 
notice as required in paragraphs (b)(1) and (b)(2) of this section, the 
invoice for the appropriate fee will be automatically generated and 
posted on FDICconnect for the account associated with the participating 
entity, and the time limits for providing payment in paragraph (g) of 
this section will apply.
    (5) No assessment reduction for early retirement of guaranteed debt. 
A participating entity's assessment shall not be reduced if guaranteed 
debt is retired prior to its scheduled maturity date.
    (e) Increased assessments for debt exceeding the debt guarantee 
limit. Any participating entity that issues guaranteed debt represented 
as being guaranteed by the FDIC exceeding its debt guarantee limit as 
set forth in Sec. 370.3(b) shall have its applicable assessment rate(s) 
for all outstanding guaranteed debt increased by 100 percent for 
purposes of the calculations in paragraph (d)(1) of this section. The 
FDIC may reduce the assessments under this paragraph upon a showing of 
good cause by the entity. In addition, any entity making such a 
misrepresentation may also be subject to enforcement action under 12 
U.S.C. 1818, as further described in Sec. 370.11.
    (f) Long term non-guaranteed debt fee. Each participating entity 
that elects to issue long term non-guaranteed debt pursuant to Sec. 
370.3(g) must pay the FDIC a nonrefundable fee equal to 37.5 basis 
points times the amount of the entity's senior unsecured debt, as 
defined in Sec. 370.2(e)(1)(i), that had a maturity date on or before 
June 30, 2009, and was outstanding as of September 30, 2008. If the 
entity had no such debt outstanding as of September 30, 2008, the fee 
will equal 37.5 basis points times the amount of the entity's debt 
guarantee limit established under Sec. 370.3(b).

[[Page 608]]

    (1) The nonrefundable fee will be collected in six equal monthly 
installments.
    (2) An entity electing the nonrefundable fee option will also be 
billed as it issues guaranteed debt under the debt guarantee program, 
and the amounts paid as a nonrefundable fee under this paragraph will be 
applied to offset these bills until the nonrefundable fee is exhausted.
    (3) Thereafter, the institution will have to pay additional 
assessments on guaranteed debt as it issues the debt, as otherwise 
required by this section.
    (g) Collection of assessments--ACH Debit. (1) Each participating 
entity shall take all actions necessary to allow the Corporation to 
debit assessments from the participating entity's designated deposit 
account as provided for in Sec. 327.3(a)(2). The assessment payments of 
a participating entity that is not an insured depository institution 
shall be debited from the designated account of the affiliated insured 
depository institution it selected for FDICconnect access under Sec. 
370.5(g).
    (2) Each participating entity shall ensure that funds in an amount 
at least equal to the amount of the assessment are available in the 
designated account for direct debit by the Corporation on the first 
business day after posting of the invoice on FDICconnect. A 
participating entity that is not an insured depository institution shall 
provide the necessary funds for payment of its assessments.
    (3) Failure to take all necessary action or to provide funding to 
allow the Corporation to debit assessments shall be deemed to constitute 
nonpayment of the assessment, and such failure by any participating 
entity will be subject to the penalties for failure to timely pay 
assessments as provided for at Sec. 308.132(c)(3)(v).



Sec. 370.7  Assessment for the Transaction Account Guarantee Program.

    (a) Waiver of assessment for certain initial periods. No eligible 
entity shall pay any assessment associated with the transaction account 
guarantee program for the period from October 14, 2008, through November 
12, 2008. An eligible entity that opts out of the program on or before 
December 5, 2008 will not pay any assessment under the program.
    (b) Initiation of assessments. Beginning on November 13, 2008 each 
eligible entity that does not opt out of the transaction account 
guarantee program on or before December 5, 2008 will be required to pay 
the FDIC assessments on all deposit amounts in noninterest-bearing 
transaction accounts calculated in accordance with paragraph (c) of this 
section
    (c) Amount of assessment. Any eligible entity that does not opt out 
of the transaction account guarantee program shall pay quarterly an 
annualized 10 basis point assessment on any deposit amounts exceeding 
the existing deposit insurance limit of $250,000, as reported on its 
quarterly Consolidated Reports of Condition and Income, Thrift Financial 
Report, or Report of Assets and Liabilities of U.S. Branches and 
Agencies of Foreign Banks in any noninterest-bearing transaction 
accounts (as defined in Sec. 370.2(h)), including any such amounts 
swept from a noninterest bearing transaction account into an noninterest 
bearing savings deposit account as provided in Sec. 370.4(c). This 
assessment shall be in addition to an institution's risk-based 
assessment imposed under Part 327.
    (d) Collection of assessment. Assessments for the transaction 
account guarantee program shall be collected along with a participating 
entity's quarterly deposit insurance payment as provided in Sec. 327.3, 
and subject to penalties for failure to timely pay assessments as 
referenced in Sec. 308.132(c)(3)(v).



Sec. 370.8  Systemic risk emergency special assessment to recover loss.

    To the extent that the assessments provided under Sec. 370.6 or 
Sec. 370.7 are insufficient to cover any loss or expenses arising from 
the temporary liquidity guarantee program, the Corporation shall impose 
an emergency special assessment on insured depository institutions as 
provided under 12 U.S.C. 1823(c)(4)(G)(ii) of the FDI Act.



Sec. 370.9  Recordkeeping requirements.

    The FDIC will establish procedures, require reports, and require 
participating entities to provide and preserve

[[Page 609]]

any information needed for the operation of this program.



Sec. 370.10  Oversight.

    (a) Participating entities are subject to the FDIC's oversight 
regarding compliance with the terms of the temporary liquidity guarantee 
program.
    (b) A participating entity's default in the payment of any debt may 
be considered an unsafe or unsound practice and may result in 
enforcement action as described in Sec. 370.11.
    (c) In general, with respect to a participating entity that is an 
insured depository institution, the FDIC shall consider the existence of 
conditions which rise to an obligation to pay on its guarantee as 
providing grounds for the appointment of the FDIC as conservator or 
receiver under Section 11(c)(5)(C) and (F) of the Federal Deposit 
Insurance Act, 12 U.S.C. 1821(c)(5)(C) and (F).
    (d) By issuing guaranteed debt, all participating entities agree, 
for the duration of the temporary liquidity guarantee program, to be 
subject to the FDIC's authority to determine compliance with the 
provisions and requirements of the program.



Sec. 370.11  Enforcement mechanisms.

    (a) Termination of Participation. If the FDIC, in its discretion, 
after consultation with the participating entity's appropriate Federal 
banking agency, determines that the participating entity should no 
longer be permitted to continue to participate in the temporary 
liquidity guarantee program, the FDIC will inform the entity that it 
will no longer be provided the protections of the temporary liquidity 
guarantee program.
    (1) Termination of participation in the temporary liquidity 
guarantee program will solely have prospective effect. All previously 
issued guaranteed debt will continue to be guaranteed as set forth in 
this part.
    (2) The FDIC will work with the participating entity and its 
appropriate Federal banking agency to assure that the entity notifies 
its counterparties or creditors that subsequent debt issuances are not 
covered by the temporary liquidity guarantee program.
    (b) Enforcement Actions. Violating any provision of the temporary 
liquidity guarantee program constitutes a violation of a regulation and 
may subject the participating entity and its institution-affiliated 
parties to enforcement actions under Section 8 of the FDI Act (12 U.S.C. 
1818), including, for example, assessment of civil money penalties under 
section 8(i) of the FDI Act (12 U.S.C. 1818(i)), removal and prohibition 
orders under section 8(e) of the FDI Act (12 U.S.C. 1818(e)), and cease 
and desist orders under section 8(b) of the FDI Act (12 U.S.C. 1818(b)). 
The violation of any provision of the program by an insured depository 
institution also constitutes grounds for terminating the institution's 
deposit insurance under section 8(a)(2) of the FDI Act (12 U.S.C. 
1818(a)(2)). The appropriate Federal banking agency for the 
participating entity will consult with the FDIC in enforcing the 
provisions of this part. The appropriate Federal banking agency and the 
FDIC also have enforcement authority under section 18(a)(4)(C) of the 
FDI Act (12 U.S.C. 1828(a)(4)(C)) to pursue an enforcement action if a 
person knowingly misrepresents that any deposit liability, obligation, 
certificate, or share is insured when it is not in fact insured.



Sec. 370.12  Payment on the guarantee.

    (a) Claims for Deposits in Noninterest-bearing Transaction Accounts. 
(1) In general. The FDIC will pay the guaranteed claims of depositors 
for funds in a noninterest-bearing transaction account in an insured 
depository institution that is a participating entity as soon as 
possible upon the failure of the entity. Unless otherwise provided for 
in this paragraph (a), the guaranteed claims of depositors who hold 
noninterest-bearing transaction deposit accounts in such entities will 
be paid in accordance with 12 U.S.C. 1821(f) and 12 CFR parts 330 and 
370.
    (2) Subrogation rights of FDIC. Upon payment of such claims, the 
FDIC will be subrogated to the claims of depositors in accordance with 
12 U.S.C. 1821(g).
    (3) Review of final determination. The final determination of the 
amount guaranteed shall be considered a final agency action of the FDIC 
reviewable

[[Page 610]]

in accordance with Chapter 7 of Title 5, by the United States district 
court for the federal judicial district where the principal place of 
business of the depository institution is located. Any request for 
review of the final determination shall be filed with the appropriate 
district court not later than sixty (60) days of the date on which the 
final determination is issued.
    (b) Payments on Guaranteed Debt of participating entities in 
default--(1) In general. The FDIC's obligation to pay holders of FDIC-
guaranteed debt issued by a participating entity shall arise upon the 
uncured failure of such entity to make a timely payment of principal or 
interest as required under the debt instrument (a ``payment default'').
    (2) Method of payment. Upon the occurrence of a payment default, the 
FDIC shall satisfy its guarantee obligation by making scheduled payments 
of principal and interest pursuant to the terms of the debt instrument 
through maturity (without regard to default or penalty provisions). The 
FDIC may in its discretion, at any time after June 30, 2012, elect to 
make a final payment of all outstanding principal and interest due under 
a guaranteed debt instrument whose maturity extends beyond that date. In 
such case, the FDIC shall not be liable for any prepayment penalty.
    (3) Demand for payment; proofs of claim--(i) Payment through 
authorized representative. Except as provided in paragraph (b)(3)(ii) of 
this section, a demand for payment on the guaranteed amount shall be 
made on behalf of all holders of debt subject to a payment default that 
is made by a duly authorized representative of such debtholders if the 
issuer shall have elected to provide for one in the Master Agreement 
submitted pursuant Sec. 370.6(b). Such demand must be accompanied by a 
proof of claim, which shall include evidence, to the extent not 
previously provided in the Master Agreement, in form and content 
satisfactory to the FDIC, of : the representative's financial and 
organizational capacity to act as representative; the representative's 
exclusive authority to act on behalf each and every debtholder and its 
fiduciary responsibility to the debtholder when acting as such, as 
established by the terms of the debt instrument; the occurrence of a 
payment default; and the authority to make an assignment of each 
debtholder's right, title, and interest in the FDIC-guaranteed debt to 
the FDIC and to effect the transfer to the FDIC of each debtholder's 
claim in any insolvency proceeding. This assignment shall include the 
right of the FDIC to receive any and all distributions on the debt from 
the proceeds of the receivership or bankruptcy estate. If any holder of 
the FDIC-guaranteed debt has received any distribution from the 
receivership or bankruptcy estate prior to the FDIC's payment under the 
guarantee, the guaranteed amount paid by the FDIC shall be reduced by 
the amount the holder has received in the distribution from the 
receivership or bankruptcy estate. All such demands must be made within 
60 days of the occurrence of the payment default upon which the demand 
is based. Upon receipt of a conforming proof of claim, if timely filed, 
the FDIC will make a payment of the amount guaranteed.
    (ii) Individual debtholders: Individual debtholders who are not 
represented by an authorized representative provided for in a Master 
Agreement submitted pursuant to Sec. 370.6(b), or who elect not to be 
represented by such authorized representative, may make demand for 
payment of the guaranteed amount upon the FDIC. The FDIC may reject a 
demand made by a person who the FDIC determines has not opted out of 
representation by an authorized representative. In order to be 
considered for payment, such demand must be accompanied by a proof of 
claim, which shall include evidence in form and content satisfactory to 
the FDIC of: the occurrence of a payment default; and the claimant's 
ownership of the FDIC-guaranteed debt obligation. The demand also must 
be accompanied by an assignment, in form and content satisfactory to the 
FDIC, of the debtholder's rights, title, and interest in the FDIC-
guaranteed debt to the FDIC and the transfer to the FDIC of the 
debtholder's claim in any insolvency proceeding. This assignment shall 
include the right of the FDIC to receive any and all distributions on 
the debt from the proceeds of the receivership or bankruptcy estate. If 
any holder of

[[Page 611]]

the FDIC-guaranteed debt has received any distribution from the 
receivership or bankruptcy estate prior to the FDIC's payment under the 
guarantee, the guaranteed amount paid by the FDIC shall be reduced by 
the amount the holder has received in the distribution from the 
receivership or bankruptcy estate. All such demands must be made within 
60 days of the occurrence of the payment default upon which the demand 
is based. Upon receipt of a conforming proof of claim, if timely filed, 
the FDIC will make a payment of the amount guaranteed.
    (iii) Any demand under this subsection shall be made in writing and 
directed to the Director, Division of Resolutions and Receiverships, 
Federal Deposit Insurance Corporation, Washington, DC., and must include 
all supporting evidence as set forth in the previous subsections, and 
shall certify to the accuracy thereof
    (iv) Demand period. Failure of the holder of the FDIC-guaranteed 
debt or an authorized representative to make demand for payment within 
sixty (60) days of the occurrence of payment default will deprive the 
holder of the FDIC-guaranteed debt of all further rights and remedies 
with respect to the guarantee claim.
    (4) Subrogation. Upon payment under either method under paragraph 
(b)(2) of this section, the FDIC will be subrogated to the rights of any 
debtholder against the issuer, including in respect of any insolvency 
proceeding, to the extent of the payments made under the guarantee.
    (5) Release and satisfaction. Payment under paragraph (b)(2) of this 
section shall constitute, to the extent of payments made, satisfaction 
of all FDIC obligations under the debt guarantee program with respect to 
that debtholder or holders. Acceptance of any such payments shall 
constitute a release of any liability of the FDIC under the debt 
guarantee program with respect to those payments. Each participating 
entity agrees and acknowledges that it shall be indebted to the FDIC for 
any payments made under these provisions (including amounts paid to a 
participating entity in return for its assumption of a guaranteed debt 
issuance) and shall honor immediately a demand by the FDIC for 
reimbursement therefore. A participating entity's undertakings in this 
regard shall be evidenced and governed by the ``Master Agreement'' it 
shall execute and submit, in connection with its election pursuant to 
Sec. 370.6(b) to participate in the Debt Guarantee Program.
    (6) Final determination; review of final determination. The FDIC's 
determination under this paragraph shall be a final administrative 
determination subject to judicial review. The holder of FDIC-guaranteed 
debt shall have the right to seek judicial review of the FDIC's final 
determination in the United States District Court for the District of 
Columbia or the United States District Court for the federal district 
where the issuer's principal place of business was located. Failure of 
the holder of the FDIC-guaranteed debt to seek such judicial review 
within sixty (60) days of the date of the rendering of the final 
determination will deprive the holder of the FDIC-guaranteed debt of all 
further rights and remedies with respect to the guarantee claim.



PART 371_RECORDKEEPING REQUIREMENTS FOR QUALIFIED FINANCIAL CONTRACTS--Table 

of Contents




Sec.
371.1 Scope, purpose and applicability.
371.2 Definitions.
371.3 Form, availability and maintenance of records.
371.4 Content of records.
371.5 Enforcement actions.

Appendix A to Part 371--File Structure for Qualified Financial Contract 
          (QFC) Records

    Authority: 12 U.S.C. 1819(a)(Tenth); 1820(g); 1821(e)(8)(D) and (H); 
1831g; 1831i, and 1831s.

    Source: 73 FR 78170, Dec. 22, 2008, unless otherwise noted.

    Effective Date Note: At 73 FR 78170, Dec. 22, 2008, part 371 was 
added, effective January 21, 2009.



Sec. 371.1  Scope, purpose and applicability.

    (a) Scope. This part applies to insured depository institutions that 
are in a

[[Page 612]]

troubled condition as defined in Sec. 371.2(f).
    (b) Purpose. This part establishes recordkeeping requirements with 
respect to qualified financial contracts for insured depository 
institutions that are in a troubled condition.
    (c) Applicability. An insured depository institution shall comply 
with this part within 60 days after written notification by the 
institution's appropriate Federal banking agency or the FDIC that it is 
in a troubled condition under Sec. 371.2(f). The FDIC may, at its 
discretion, grant one or more extensions of time for compliance with 
this part. No single extension shall be for a period of more than 30 
days. An insured depository institution may request an extension of time 
by submitting a written request to the FDIC at least 15 days prior to 
the deadline for its compliance with the requirements of this part. The 
written request for an extension must contain a statement of the reasons 
why the institution cannot comply by the deadline for compliance.



Sec. 371.2  Definitions.

    For purposes of this part:
    (a) Affiliate means any company that controls, is controlled by, or 
is under common control with another company.
    (b) Appropriate Federal banking agency means the agency or agencies 
designated under 12 U.S.C. 1813(q).
    (c) Insured depository institution means any bank or savings 
association, as defined in 12 U.S.C. 1813, the deposits of which are 
insured by the FDIC.
    (d) Position means the rights and obligations of a person or entity 
as a party to an individual transaction under a QFC.
    (e) Qualified financial contracts (QFCs) mean those qualified 
financial contracts that are defined in 12 U.S.C. 1821(e)(8)(D) to 
include securities contracts, commodity contracts, forward contracts, 
repurchase agreements, and swap agreements and any other contract 
determined by the FDIC to be a QFC as defined in that section.
    (f) Troubled condition means for purposes of this part, any insured 
depository institution that:
    (1) Has a composite rating, as determined by its appropriate Federal 
banking agency in its most recent report of examination, of 3 (only for 
insured depository institutions with total consolidated assets of ten 
billion dollars or greater), 4, or 5 under the Uniform Financial 
Institution Rating System, or in the case of an insured branch of a 
foreign bank, an equivalent rating;
    (2) Is subject to a proceeding initiated by the FDIC for termination 
or suspension of deposit insurance;
    (3) Is subject to a cease-and-desist order or written agreement 
issued by the appropriate Federal banking agency, as defined in 12 
U.S.C. 1813(q), that requires action to improve the financial condition 
of the insured depository institution or is subject to a proceeding 
initiated by the appropriate Federal banking agency which contemplates 
the issuance of an order that requires action to improve the financial 
condition of the insured depository institution, unless otherwise 
informed in writing by the appropriate Federal banking agency;
    (4) Is informed in writing by the insured depository institution's 
appropriate Federal banking agency that it is in troubled condition for 
purposes of 12 U.S.C. 1831i on the basis of the institution's most 
recent report of condition or report of examination, or other 
information available to the institution's appropriate Federal banking 
agency; or
    (5) Is determined by the appropriate Federal banking agency or the 
FDIC in consultation with the appropriate Federal banking agency to be 
experiencing a significant deterioration of capital or significant 
funding difficulties or liquidity stress, notwithstanding the composite 
rating of the institution by its appropriate Federal banking agency in 
its most recent report of examination.



Sec. 371.3  Form, availability and maintenance of records.

    (a) Form and availability. The records required to be maintained by 
an insured depository institution for QFCs under this part--
    (1) Except for records that must be maintained through electronic 
files under appendix A of this part, may be maintained in any form, 
including in

[[Page 613]]

an electronic file, provided that the records are updated at least 
daily;
    (2) If the records are not maintained in written form, will be 
capable of being reproduced or printed in written form; and
    (3) Will be made available upon written request by the FDIC 
immediately at the close of processing of the institution's business 
day, for a period provided in that written request.
    (b) Maintenance of records after the institution is no longer in a 
troubled condition. Insured depository institutions that are in a 
troubled condition as defined in Sec. 371.2(f) shall continue to 
maintain the capacity to produce records required under this part on a 
daily basis for a period of one year after the date that the appropriate 
Federal banking agency notifies the institution that it is no longer in 
a troubled condition as defined in Sec. 371.2(f).
    (c) Maintenance of records after an acquisition of an institution 
that is in a troubled condition. If an insured depository institution 
that has been determined by the appropriate Federal banking agency to be 
in a troubled condition ceases to exist as an insured depository 
institution as a result of a merger or a similar transaction into an 
insured depository institution that is not in a troubled condition 
immediately following the acquisition, the obligation to maintain 
records under this part on a daily basis will terminate when the 
institution in a troubled condition ceases to exist as a separately 
insured depository institution.



Sec. 371.4  Content of records.

    For each QFC for which an insured depository institution is a party 
or is subject to a master netting agreement involving the QFC, that 
institution must maintain records as listed under appendix A of this 
part.



Sec. 371.5  Enforcement actions.

    Violating the terms or requirements of the recordkeeping 
requirements set forth in this part constitutes a violation of a 
regulation and subjects the participating entity to enforcement actions 
under Section 8 of the FDI Act (12 U.S.C. 1818).



  Sec. Appendix A to Part 371--File Structure for Qualified Financial 
                         Contract (QFC) Records

                     QFC Recordkeeping Requirements

              A. Electronic Files To Be Maintained for QFCs

    Any insured depository institution that is subject to this part 
(``institution'') must produce and maintain, in an electronic file in a 
format acceptable to the FDIC, the position level data found in Table A1 
for all open positions in QFCs entered into by that institution or for 
which the institution is subject. To fulfill this requirement, not later 
than three business days after the institution's receipt of the written 
notification from the FDIC under Sec. 371.1(c) of this part, the 
institution must provide the FDIC with (i) a directory of the electronic 
files that will be used by the institution to maintain the position 
level data found in Table A1 and (ii) a point of contact at the 
institution should the FDIC have follow-up questions concerning this 
information. In addition, for such data, the institution must produce at 
the close of processing of the institution's business day a report in a 
format acceptable to the FDIC that aggregates the current market value 
and the amount of QFCs by each of the fields in Table A1. The 
institution must produce the report within 60 days of a written 
notification by the FDIC for the period specified in the notification. 
Notwithstanding the above requirements, for institutions in a troubled 
condition with less than twenty open QFC positions upon receipt of the 
written notification from the FDIC or the institution's appropriate 
Federal banking agency under part 371 and this appendix, the data 
required in Table A1 are not required to be recorded and maintained in 
electronic form as would otherwise be required by this part, so long as 
all required information is capable of being updated on a daily basis. 
If at any time after receiving such notification an institution has 
twenty or more open QFC positions at any point in time, it must within 
60 days after that first occurs, comply with all provisions of part 371.

                      Table A1--Position-Level Data
------------------------------------------------------------------------
             Field                   Example          Data application
------------------------------------------------------------------------
Unique position identifier and  999999999AU......  Information needed to
 CUSIP, if available.                               readily track and
                                                    distinguish
                                                    positions; unique
                                                    trade confirmation
                                                    number if available.

[[Page 614]]

 
Portfolio location identifier   XY12Z............  Information needed to
 (to identify the headquarters                      determine the
 or branch where the position                       headquarters or
 is booked).                                        branch where the
                                                    position is booked
                                                    (see section B.1 of
                                                    this Appendix).
Type of position (including     Interest rate      Information needed to
 the general nature of the       swap, credit       determine the extent
 reference asset or interest     default swap,      to which the
 rate).                          equity swap,       institution is
                                 foreign exchange   involved in any
                                 forward,           particular QFC
                                 securities         market.
                                 repurchase
                                 agreement, loan
                                 repurchase
                                 agreement.
Purpose of the position (if     Trading, hedging   Information needed to
 the purpose consists of         mortgage           determine the role
 hedging strategies, include     servicing,         of the QFC in the
 the general category of the     hedging            institution's
 item(s) hedged).                certificates of    business strategy.
                                 deposit.
Termination date (date the      3/31/2010........  Information needed to
 position terminates or is                          determine when the
 expected to terminate,                             institution's rights
 expire, mature, or when final                      and obligations
 performance is required).                          regarding the
                                                    position are
                                                    expected to end.
Next call, put, or              9/30/08..........  Information needed to
 cancellation date.                                 determine when a
                                                    call, put, or
                                                    cancellation may
                                                    occur with respect
                                                    to a position.
Next payment date.............  9/30/08..........  Information needed to
                                                    anticipate potential
                                                    upcoming
                                                    obligations.
Current market value of the     $995,000.........  Information needed to
 position (as of the date of                        determine if the
 the file).                                         institution is in or
                                                    out-of-the money
                                                    with the
                                                    counterparty.
Unique counterparty identifier  AB999C...........  Information needed to
                                                    aggregate positions
                                                    by counterparty.
Notional or principal amount    $1,000,000.......  Information needed to
 of the position (this is the                       help evaluate the
 notional amount, where                             position.
 applicable).
Documentation status of         Affirmed,          Information needed to
 position.                       confirmed, or      determine
                                 neither affirmed   reliability of a
                                 nor confirmed.     booked position and
                                                    its legal status.
------------------------------------------------------------------------

Also, the institution must maintain, in an electronic file in a format 
acceptable to the FDIC, the counterparty-level data found in Table A2 
for all open positions in QFCs entered into by that institution. In 
addition, the institution must, at the FDIC's written request, produce 
immediately at the close of processing of the institution's business 
day, for a period provided in that written request, a report in a format 
acceptable to the FDIC that (i) itemizes, by each counterparty and by 
each of its affiliates, the data required in each field in Table A2, and 
(ii) aggregates by field, for each counterparty and its affiliates, the 
data required in each field in Table A2. Notwithstanding the above 
requirements, for institutions in a troubled condition with less than 
twenty open QFC positions upon receipt of the written notification from 
the FDIC or the institution's appropriate Federal banking agency under 
part 371 and this Appendix, the data required in Table A2 is not 
required to be recorded in electronic form as would otherwise be 
required by this part, so long as all required information is maintained 
and is capable of being updated on a daily basis. If at any time after 
receiving such notification an institution has twenty or more open QFC 
positions at any point in time, it must within 60 days after that first 
occurs, comply with all provisions of part 371.

                    Table A2--Counterparty-Level Data
------------------------------------------------------------------------
             Field                   Example          Data Application
------------------------------------------------------------------------
Unique counterparty identifier  AB999C...........  Information needed to
                                                    aggregate positions
                                                    by counterparty.
Current market value of all     ($1,000,000).....  Information needed to
 positions, as aggregated and,                      help evaluate the
 to the extent permitted under                      positions.
 each applicable agreement,
 netted \29\ (as of the date
 of the file).
Current market value of all     $950,000; U.S.     Information needed to
 collateral and the type of      treasuries.        determine the extent
 collateral, if any, that the                       to which the
 institution has posted                             institution has
 against all positions with                         provided collateral.
 each counterparty.
Current market value of all     $50,000; U.S.      Information needed to
 collateral and the type of      treasuries.        determine the extent
 collateral, if any, that the                       to which the
 counterparty has posted                            counterparty has
 against all positions.                             provided collateral.

[[Page 615]]

 
Institution's collateral        ($25,000)........  Information needed to
 excess or deficiency with                          determine the extent
 respect to all of the                              to which the
 institution's positions, as                        institution has
 determined under each                              satisfied collateral
 applicable agreement                               requirements under
 including thresholds and                           each applicable
 haircuts where applicable\30\.                     agreement.
Counterparty's collateral       $50,000..........  Information needed to
 excess or deficiency with                          determine the extent
 respect to all of the                              to which the
 institution's positions with                       counterparty has
 each counterparty, as                              satisfied collateral
 determined under each                              requirements under
 applicable agreement                               each applicable
 including thresholds and                           agreement.
 haircuts where applicable.
The institution's collateral    ($50,000)........  Information needed to
 excess or deficiency with                          determine the extent
 respect to all the positions,                      to which the
 based on the aggregate market                      institution's
 value of the positions (after                      obligations
 netting to the extent                              regarding the
 permitted under each                               positions may be
 applicable agreement) and the                      unsecured.
 aggregate market value of all
 collateral posted by the
 institution against the
 positions, in whole or in
 part.
------------------------------------------------------------------------
\29\ If one or more positions cannot be netted against others, they
  should be maintained as separate entries.
\30\ If all positions are not secured by the same collateral, then
  separate entries should be maintained for each position or set of
  positions secured by the same collateral.

B. Other Files (in Written or Electronic Form) To Be Maintained for QFCs

    Within 60 days after the written notification by the FDIC, the 
institution must, produce the following files at the close of processing 
of the institution's business day, for a period provided in that written 
notification.
    1. Each institution must maintain the following files in written or 
electronic form:
     A list of counterparty identifiers, with the 
associated counterparties and contact information;
     A list of the affiliates of the counterparties 
that are also counterparties to QFC transactions with the institution or 
its affiliates, and the specific master netting agreements, if any, 
under which they are counterparties;
     A list of affiliates of the institution that are 
counterparties to QFC transactions where such transactions are subject 
to a master agreement that also governs QFC transactions entered into by 
the institution. Such list must specify (i) which affiliates are direct 
or indirect subsidiaries of the institution and (ii) the specific master 
agreements under which those affiliates are counterparties to QFC 
transactions; and
     A list of portfolio identifiers (see Table A1), 
with the associated booking locations.
    2. For each QFC, the institution must maintain in a readily-
accessible format all of the following documents:
     Agreements (including master agreements and 
annexes, supplements or other modifications with respect to the 
agreements) between the institution and its counterparties that govern 
the QFC transactions;
     Documents related to and affirming the position;
     Active or ``open'' confirmations, if the position 
has been confirmed;
     Credit support documents; and
     Assignment documents, if applicable, including 
documents that confirm that all required consents, approvals, or other 
conditions precedent for such assignment(s) have been obtained or 
satisfied.
    3. The institution must maintain:
     A legal-entity organizational chart, showing the 
institution, its corporate parent and all other affiliates, if any; and
     An organizational chart, including names and 
position titles, of all personnel significantly involved in QFC-related 
activities at the institution, its parent and its affiliates.
     Contact information for the primary contact 
person for purposes of compliance with this part by the institution.
    4. The institution must maintain a list of vendors supporting the 
QFC-related activities and their contact information.

[[Page 617]]



           CHAPTER IV--EXPORT-IMPORT BANK OF THE UNITED STATES




  --------------------------------------------------------------------
Part                                                                Page
400             Employee financial disclosure and ethical 
                    conduct standards regulations...........         619
403             Classification, declassification, and 
                    safeguarding of national security 
                    information.............................         619
404             Information disclosure......................         630
405

[Reserved]

407             Regulations governing public observation of 
                    Ex-imbank meetings......................         646
408             Procedures for compliance with the National 
                    Environmental Policy Act................         650
410             Enforcement of nondiscrimination on the 
                    basis of handicap in programs or 
                    activities conducted by Export-Import 
                    Bank of the United States...............         652
411             New restrictions on lobbying................         658
412             Acceptance of payment from a non-federal 
                    source for travel expenses..............         669
414             Conference and other fees...................         671
415-499

[Reserved]

[[Page 619]]



PART 400_EMPLOYEE FINANCIAL DISCLOSURE AND ETHICAL CONDUCT STANDARDS 

REGULATIONS--Table of Contents




    Authority: 5 U.S.C. 7301.



Sec. 400.101  Cross-reference to employee financial disclosure and ethical 

conduct standards regulations.

    Employees of the Export-Import Bank of the United States (Bank) 
should refer to:
    (a) The executive branch-wide financial disclosure regulations at 5 
CFR part 2634;
    (b) The executive branch-wide Standards of Ethical Conduct at 5 CFR 
part 2635; and
    (c) The Bank regulations at 5 CFR part 6201 which supplement the 
executive branch-wide standards.

[60 FR 17628, Apr. 7, 1995]



PART 403_CLASSIFICATION, DECLASSIFICATION, AND SAFEGUARDING OF NATIONAL 

SECURITY INFORMATION--Table of Contents




Sec.
403.1 General policies and definitions.
403.2 Responsibilities.
403.3 Classification principles and authority.
403.4 Derivative classification.
403.5 Declassification and downgrading.
403.6 Systematic review for declassification.
403.7 Mandatory review for declassification.
403.8 Appeals.
403.9 Fees.
403.10 Safeguarding.
403.11 Enforcement and investigation procedures.

    Authority: E.O. 12356, National Security Information, April 2, 1982 
(3 CFR, 1982 Comp. p. 166) (hereafter referred to as the Order), 
Information Security Oversight Directive No. 1, June 25, 1982 (32 CFR 
part 2001) (hereafter referred to as the Directive), and National 
Security Decision Directive 84, ``Safeguarding National 
SecurityInformation,'' signed by the President on March 11, 1983 
(hereafter referred to as NSDD 84).

    Source: 50 FR 27215, July 2, 1985, unless otherwise noted.



Sec. 403.1  General policies and definitions.

    (a) This regulation of the Export-Import Bank (the Bank) implements 
executive orders which govern the classification, declassification, and 
safeguarding of national security information and material of the United 
States. This regulation is based on Executive Order 12356, National 
Security Information, April 2, 1982 (3 CFR, 1982 Comp. p. 166) 
(hereafter referred to as the Order), Information Security Oversight 
Directive No. 1, June 25, 1982 (32 CFR part 2001) (hereafter referred to 
as the Directive), and National Security Decision Directive 84, 
``Safeguarding National Security Information,'' signed by the President 
on March 11, 1983 (hereafter referred to as NSDD 84). Violation of the 
provisions of part 403 may result in the imposition of administrative 
penalties, and civil and criminal penalties under applicable law. 
Executive Order 12356 prescribes a uniform system for classifying, 
declassifying, and safeguarding national security information. It 
recognizes that it is essential that the public be informed concerning 
the activities of the Government, but that the interests of the United 
States and its citizens require that certain information concerning the 
national defense and foreign relations be protected against unauthorized 
disclosure. Information may not be classified under the Order unless its 
disclosure reasonably could be expected to cause damage to the national 
security.
    (b) For the purposes of the Order, the Directive and these 
guidelines, the following terms shall have the meanings specified below:
    (1) Information means any information or material, regardless of its 
physical form or characteristics, that is owned by, produced by or for, 
or is under the control of the United States Government.
    (2) National security information means information that has been 
determined pursuant to this Order or any predecessor order to require 
protection against unauthorized disclosure and that is so designated.
    (3) Foreign government information means: (i) Information provided 
by a foreign government or governments, an international organization of 
governments, or any element thereof with the expectation, expressed or 
implied, that

[[Page 620]]

the information, the source of the information, or both, are to be held 
in confidence; or
    (ii) Information produced by the United States pursuant to or as a 
result of a joint arrangement with a foreign government or governments 
or an international organization of governments, or any element thereof, 
requiring that the information, the arrangement, or both, are to be held 
in confidence.
    (4) National security means the national defense or foreign 
relations of the United States.
    (5) Confidential source means any individual or organization that 
has provided, or that may reasonably be expected to provide, information 
to the United States on matters pertaining to the national security with 
the expectation, expressed or implied, that the information or 
relationship, or both, be held in confidence.
    (6) Original classification means an initial determination that 
information requires, in the interest of national security, protection 
against unauthorized disclosure, together with a classification 
designation signifying the level of protection required.



Sec. 403.2  Responsibilities.

    In the carrying out of security procedures, responsibility falls on 
all personnel generally and on certain personnel in a more particular 
manner.
    (a) Individual. Each employee of the Bank having access to 
classified material has an individual responsibility to protect such 
information. Classified information should be secured in approved 
equipment or facilities whenever it is not under the direct control of 
the employee.
    (b) Office and Division Heads. These officials have the additional 
responsibility of a continuing review for ascertaining that security 
procedures are properly observed by the personnel comprising their 
respective offices.
    (c) Security Officer. (1) The Security Officer has the 
responsibility for developing, inspecting, and advising on procedures 
and controls for safeguarding classified material originating in, 
received by, in transit through, or in custody of the Bank; the training 
and orientation of employees; the carrying out of inspections; and the 
destruction of obsolete and non-record material.
    (2) The Security Officer shall be responsible for disseminating 
written material and conducting oral briefings to inform Bank personnel 
of the Order, Directive, and regulations. An explanation of the 
practical application of these procedures and the underlying policy 
objectives thereof shall be emphasized.
    (d) Security Committee. (1) This Committee consists of the General 
Counsel, as Chairperson, the Security Officer, and other Bank employees, 
as designated by the President and Chairman (hereinafter referred to as 
the Chairman) and is responsible for the implementation and enforcement 
of the Order and the Directive. This Committee will act on all matters 
with respect to the Bank's administration of these regulations.
    (2) All suggestions and complaints regarding the Bank's Information 
Security Program, including those regarding over-classification, failure 
to declassify, or delay in declassifying, not otherwise provided for 
herein, shall be referred to the Security Committee for review.
    (3) The Security Committee shall have responsibility for 
recommending to the Chairman appropriate administrative action to 
correct abuse or violation of these regulations or of any provision of 
the Order or Directive thereunder, including but not limited to 
notification by warning letter, formal suspension without pay, and 
removal. Upon receipt of such a recommendation, the Chairman shall make 
a decision and advise the Security Committee of this action.



Sec. 403.3  Classification principles and authority.

    (a) Classification Principles. (1) Except as provided in the Atomic 
Energy Act of 1954, as amended, the Order provides the only basis for 
classifying national security information. Information held by the Bank 
will be made available to the public to the extent possible consistent 
with the need to protect the national defense or foreign relations, as 
required by the interests of the United

[[Page 621]]

States and its citizens. Accordingly, security classification shall be 
applied only to protect the national security.
    (2) Before a classification determination is made, each item of 
information that may require protection shall be identified exactly. 
This requires identification of that specific information, disclosure of 
which could affect the national security. When there is reasonable doubt 
about the need to classify, the information should be safeguarded as if 
it were confidential until a final determination is made by an 
authorized classifier as to its classification. The final determination 
must be made within thirty (30) days.
    (b) Classification Designations. Information which requires 
protection against unauthorized disclosure in the interest of national 
security (classified information) shall be classified at one of the 
following three levels:
    (1) TOP SECRET shall be applied only to information, the 
unauthorized disclosure of which reasonably could be expected to cause 
exceptionally grave damage to the national security.
    (2) SECRET shall be applied only to information, the unauthorized 
disclosure of which reasonably could be expected to cause serious damage 
to the national security.
    (3) CONFIDENTIAL shall be applied to information, the unauthorized 
disclosure of which reasonably could be expected to cause damage to the 
national security.

Except as provided by statute, no other terms, such as SENSITIVE, 
OFFICIAL BUSINESS ONLY, AGENCY, BUSINESS, ADMINISTRATIVELY, etc., shall 
be used within the Bank in conjunction with any of the three 
classification levels defined above.
    (c) Original Classification Authority and Criteria. (1) The Bank's 
authority to assign original classification to any document is limited 
as follows and is nondelegable:

------------------------------------------------------------------------
              Classification                         Classifier
------------------------------------------------------------------------
CONFIDENTIAL..............................
                                            President and Chairman.
                                            First Vice President and
                                             Vice Chairman.
                                            General Counsel.
                                            Senior Vice Presidents.
                                            Security Officer.
------------------------------------------------------------------------

    (2) A determination to classify information shall be made by an 
original classification authority when the information concerns one or 
more of categories (i) through (x) of this paragraph, and when the 
unauthorized disclosure of the information, either by itself or in the 
context of other information, reasonably could be expected to cause 
damage to the national security. Information shall be considered for 
classification if it concerns:
    (i) Military plans, weapons, or operations;
    (ii) The vulnerabilities or capabilities of systems, installations, 
projects, or plans relating to the national security;
    (iii) Foreign government information;
    (iv) Intelligence activities (including special activities), or 
intelligence sources or methods;
    (v) Foreign relations or foreign activities of the United States;
    (vi) Scientific, technological, or economic matters relating to the 
national security;
    (vii) United States Government programs for safeguarding nuclear 
materials or facilities;
    (viii) Cryptology;
    (ix) A confidential source; or
    (x) Other categories of information that are related to the national 
security and that require protection against unauthorized disclosure as 
determined by the President of the United States, by the Chairman or by 
other officials who have been delegated original classification 
authority by the President. Recommendations concerning the need to 
designate additional categories of information that may be considered 
for classification shall be forwarded through the Security Officer to 
the Chairman for determination. Such a determination shall be reported 
to the Director of the Information Security Oversight Office.
    (3) Information that is determined to concern one or more of the 
above categories shall be classified when an original classification 
authority also determines that its unauthorized disclosure, either by 
itself or in the context of other information, reasonably could be 
expected to cause damage to

[[Page 622]]

the national security. Accordingly, certain information which would 
otherwise be unclassified may require classification when associated 
with other unclassified or classified information. Classification on 
this basis shall be supported by a written explanation that, at a 
minimum, shall be maintained with the file or reference on the recent 
copy of the information.
    (4) Unauthorized disclosure of foreign government information, the 
identity of a confidential foreign source, or disclosure of intelligence 
sources or methods is presumed to cause damage to the national security.
    (5) Information classified in accordance with the above 
classification categories shall not be declassified automatically as a 
result of any unofficial publication or inadvertent or unauthorized 
disclosure in the United States or abroad of identical or similar 
information.
    (d) Duration of Original Classification. (1) Information shall be 
classified as long as required by national security considerations. When 
it can be determined, a specific date or event for declassification 
shall be set by the original classification authority at the time the 
information is originally classified. If the date or event for 
declassification cannot be determined at the time of classification, the 
standard notation ``Originating Agency's Determination Required'', or 
its abbreviation ``OADR'', should be entered on the ``Declassify on'' 
line.
    (2) Automatic declassification determinations under predecessor 
orders shall remain valid unless the classification is extended by an 
authorized declassification authority. These extensions may be by 
individual documents or categories of information, provided, however, 
that any extension of classification on other than an individual 
document basis shall be reported to the Director of the Information 
Security Oversight Office. The declassification authority shall be 
responsible for notifying holders of the information of such extensions.
    (3) Information classified under predecessor orders and marked for 
declassification review shall remain classified until reviewed for 
declassification under the provisions of the Order.
    (e) Marking and Identification. (1) Classified information must be 
marked, or otherwise identified, to inform and warn the holder of the 
information of its sensitivity. The classifier is responsible for 
ensuring that proper classification markings are applied. At the time of 
classification, the following information shall be shown on the face of 
all classified documents, or clearly associated with other forms of 
classified information in a manner appropriate to the medium involved, 
unless this information itself would reveal a confidential source or 
relationship not otherwise evident in the document or information:
    (i) One of the three classification levels defined in Sec. 
403.3(b); ``(TS)'' for Top Secret, ``(S)'' for Secret, ``(C)'' for 
Confidential, and ``(U)'' for Unclassified; with each page marked at top 
and bottom according to the highest level of classified information on 
each page.
    (ii) The identity of the original classification authority if other 
than the person whose name appears as the approving or signing official;
    (iii) The agency and office of origin; and
    (iv) The date or event for declassification, or the notation 
``Originating Agency's Determination Required.''
    (2) Each classified document shall, by marking or other means, 
indicate which portions are classified, with the applicable 
classification level, and which portions are not classified. The 
Chairman may, for good cause, grant and revoke waivers of this 
requirement for specified classes of documents or information. The 
Director of the Information Security Oversight Office shall be notified 
of any waivers.
    (3) Marking designations implementing the provisions of the Order, 
including abbreviations, shall conform to the standards prescribed in 
implementing directives issued by the Information Security Oversight 
Office. All authorized classifiers shall be issued a uniform stamp that 
has a ``Classified by'' line and a ``Declassify on'' line.
    (4) Documents that contain foreign government information shall 
include either the marking, ``FOREIGN GOVERNMENT INFORMATION'', or a 
marking that otherwise indicates that the information is foreign 
government

[[Page 623]]

information. If that fact must be concealed, the document will be marked 
as if it were of U.S. origin. Foreign government information shall 
either retain its original classification or be assigned a United States 
classification that shall ensure a degree of protection at least 
equivalent to that required by the entity that furnished the 
information.
    (5) Documents that contain information relating to intelligence 
sources or methods shall include the following marking unless proscribed 
by the Director of the Central Intelligence; WARNING NOTICE--
INTELLIGENCE SOURCES OR METHODS INVOLVED.
    (6) Information assigned a level of classification under predecessor 
orders shall be considered as classified at that level of classification 
despite the omission of other required markings. Omitted markings may be 
inserted on a document by the General Counsel or the Security Officer.
    (f) Limitations on Classification. (1) In no case shall information 
be classified in order to conceal violations of law, inefficiency, or 
administrative error; to prevent embarrassment to a person, 
organization, or agency; to restrain competition; or to prevent or delay 
the release of information that does not require protection in the 
interest of national security.
    (2) Basic scientific research information not clearly related to the 
national security may not be classified.
    (3) The Chairman or other authorized original classifiers may 
reclassify information previously declassified and disclosed if it is 
determined in writing that--
    (i) The information requires protection in the interest of national 
security, and
    (ii) The information may reasonably be recovered.

In making such determination, the Chairman or any other authorized 
original classifier shall consider the following factors: The lapse of 
time following disclosure; the nature and extent of disclosure; the 
ability to bring the fact of reclassification to the attention of 
persons to whom the information was disclosed; the ability to prevent 
further disclosure; and the ability to retrieve the information 
voluntarily from persons not authorized access to its reclassified 
state. These reclassification actions shall be reported promptly to the 
Director of the Information Security Oversight Office.
    (4) Information may be classified or reclassified after an agency 
has received a request for it under the Freedom of Information Act (5 
U.S.C. 552) or the Privacy Act of 1974 (5 U.S.C. 552a), or the mandatory 
review provisions of the Order and these regulations, if such 
classification meets the requirements of the Order and is accomplished 
personally and on a document-by-document basis by the Chairman, the Vice 
Chairman, or the Security Officer.



Sec. 403.4  Derivative classification.

    (a) Use of derivative classification. (1) Unlike original 
classification which is an initial determination, derivative 
classification is an incorporation, paraphrasing, restatement, or 
generation in new form of information that is already classified. 
Derivative classification is the responsibility of those who only 
reproduce, extract, or summarize classified information, or who only 
apply classification markings derived from source material or as 
directed by a classification guide. Original classification authority is 
not required for derivative classification.
    (2) Persons who apply such derivative classification markings shall:
    (i) Respect original classification decisions;
    (ii) Verify the information's current level of classification so far 
as practicable before applying the markings; and
    (iii) Carry forward to any newly created documents the assigned 
dates or events for declassification or review. The latest date for 
declassification should be entered in the case of multiple source 
documents.
    (b) New Material. (1) New material that derives its classification 
from information classified on or after the effective date of the Order, 
April 2, 1982, shall be marked with the declassification date or event, 
or the date for review, as assigned to the source information.

[[Page 624]]

    (2) New material that derives its classification under prior orders 
shall be treated as follows:
    (i) If the source material bears a classification date or event 20 
years or less from the date or origin, that date or event shall be 
carried forward on the new material.
    (ii) If the source material bears no declassification date or event 
or is marked for declassification beyond 20 years, the new material 
shall be marked with a date for review for declassification at 20 years 
from the date of original classification of the source material.
    (iii) If the source material is foreign government information 
bearing no date or event for declassification or is marked for 
declassification beyond 30 years, the new material shall be marked for 
review for declassification at 30 years from the date of original 
classification of the source materials.
    (iv) A copy of the source document or documents should be maintained 
with the file copy of the new document or documents which have been 
derivatively classified.



Sec. 403.5  Declassification and downgrading.

    (a) Authority and policy for declassification and downgrading. 
Information that continues to meet the classification requirements 
prescribed in Sec. 403.3(c) despite the passage of time will continue 
to be safeguarded. However, information which is properly classified at 
the time it is developed may not necessarily require protection 
indefinitely. National security information over which the Bank 
exercises final classification jurisdiction shall be declassified or 
downgraded as soon as national security considerations permit. 
Information shall be declassified or downgraded by:
    (1) The official who authorized the original classification, if that 
official is still serving in the same position, by a successor, or by a 
supervisory official of either; or
    (2) Officials specifically delegated this authority in writing by 
the Chairman or by the Security Officer. A list of those who may be so 
delegated shall be maintained by the Security Officer.
    (3) If the Director of the Information Security Oversight Office 
determines that information is unlawfully classified, the Director may 
require the Export-Import Bank to declassify it. Any such decision by 
the Director may be appealed to the National Security Council. The 
information shall remain classified until the appeal is decided.
    (b) Declassification Procedure. Information marked with a specific 
declassification date or event shall be declassified on that date or 
upon occurrence of that event. The overall classification markings shall 
be lined through a statement placed on the cover or first page to 
indicate the declassification authority, by name and title, and the date 
of declassification. If practicable, the classification markings on each 
page shall be cancelled; otherwise, the statement on the cover or first 
page shall indicate that the declassification applies to the entire 
document.
    (c) Notification to Holders. When classified information has been 
properly marked with specific dates or events for declassification it is 
not necessary to issue notices of declassification to any holders. 
However, when declassification action is taken earlier than originally 
scheduled, or the duration of classification is extended, the authority 
making such changes shall promptly notify all holders to whom the 
information was originally transmitted. This notification shall include 
the marking action to be taken, the authority for the change (name and 
title), and the effective date of the change. Upon receipt of 
notification, recipients shall make the proper changes and shall notify 
holders to whom they have transmitted the classified information.
    (d) Downgrading. Information designated a particular level of 
classification may be assigned a lower classification level by the 
original classifier or by an official authorized to declassify the same 
information. Prompt notice of such downgrading shall be provided to 
known holders of the information. Classified information marked for 
automatic downgrading under previous Executive Orders shall be reviewed 
to determine that it no longer continues to meet classification 
requirements despite the passage of time.

[[Page 625]]

    (e) Transferred Information. Classified information transferred from 
one agency to another in conjunction with a transfer of functions, and 
not merely for storage purposes, shall be considered under the control 
of the receiving agency for purposes of downgrading and 
declassification, subject to consultation with any other agency that has 
an interest in the subject matter of the information. Prior to 
forwarding classified information to an approved storage facility of the 
Bank, to a Federal records center, or to the National Archives for 
permanent preservation, the information shall be reviewed for 
downgrading or declassification.



Sec. 403.6  Systematic review for declassification.

    Classified information determined by the Archivist of the United 
States to be of sufficient value to warrant permanent retention will be 
subject to systematic declassification review by the Archivist in 
accordance with guidelines provided by the Bank, as originator of the 
information. These guidelines shall be developed by the Security Officer 
who is designated by the Bank to assist the Archivist in the review 
process. The guidelines shall be reviewed every five years or as 
requested by the Archivist of the United States.



Sec. 403.7  Mandatory review for declassification.

    (a) Classified information under the jurisdiction of the Bank shall 
be reviewed for declassification upon receipt of a request by a United 
States citizen or permanent resident alien, a Federal agency, or a State 
or local government. A request for mandatory review of classified 
information shall be submitted in writing and describe the information 
with sufficient particularity to locate it with a reasonable amount of 
effort. Requests may be addressed to the:

General Counsel, Export-Import Bank of the U.S., 811 Vermont Avenue, 
NW., Washington, DC 20571

    (b) The Bank's response to mandatory review requests will be 
governed by the amount of search and review time required to process the 
request. The Bank will acknowledge receipt of all requests, and will 
inform the requester if additional time is needed to process the 
request. Except in unusual circumstances, the Bank will make a final 
determination within one year from the date of receipt of the request.
    (c) When information cannot be declassified in its entirety, the 
Bank will make a reasonable effort to release, consistent with other 
applicable laws, those declassified portions that constitute a coherent 
segment.
    (d) The bank shall determine whether information under the 
classification jurisdiction of the Bank or any reasonably segregable 
portion of it no longer requires protection. If so, the General Counsel 
shall promptly make such information available to the requester, and 
shall inform the requester of any fees due before releasing the 
document. If the information may not be released, in whole or in part, 
the General Counsel shall give the requester a brief statement of the 
reasons, and a notice, mailed with return receipt requested, of the 
right to appeal the determination within 60 days of the denial letter's 
receipt.
    (e) The agency that initially received or classified records 
containing foreign government information shall be responsible for 
making a declassification determination on review requests for 
classified records which contain such foreign government information. 
Such requests shall be referred to the appropriate agency for action.
    (f) When the Bank receives a mandatory declassification review 
request for records in its possession that were originated by another 
agency, it shall forward the request to that agency. The Bank may 
request notification of the declassification determination.
    (g) Information originated by a President, the White House staff, by 
committees, commissions, or boards appointed by the President, or other 
specifically providing advice and counsel to a President or acting on 
behalf of a President is exempted from the provisions of mandatory 
review for declassification, except as consistent with applicable laws 
that pertain to presidential papers or records.
    (h) The bank shall process requests for declassification that are 
submitted under the provisions of the Freedom of Information Act, as 
amended, or the

[[Page 626]]

Privacy Act of 1974, in accordance with the provisions of those acts. 
(See, 12 CFR part 404 and 12 CFR part 405, respectively.) In any case, 
however, exemptions under the Freedom of Information Act or other 
exemptions under applicable law may be invoked by the Bank to deny 
material on grounds other than classification.
    (i) The Bank shall refuse to confirm or deny the existence or non-
existence of requested information whenever the fact of its existence or 
non-existence is itself classifiable under the Order.



Sec. 403.8  Appeals.

    (a) The Vice Chairman is designated to receive appeals on requests 
for declassification which have been denied by the Bank. Such appeals 
shall be addressed to:

First Vice President & Vice Chairman, Export-Import Bank of the United 
States, 811 Vermont Avenue NW., Washington, DC 20571


The appeal must be received within 60 days after receipt by appellant of 
the denial letter. Appeals shall be decided within 30 days of their 
receipt by the Vice Chairman.
    (1) If the decision is to declassify the materials in their 
entirety, the Vice Chairman shall promptly make such information 
available to the requester, and inform the requester of any fees due 
before releasing the documents.
    (2) If the decision is to deny declassification of a portion of the 
material, the Vice Chairman shall promptly make the part which was 
declassified available to the requester, and shall advise the requester, 
in writing, of the reasons for the partial denial of declassification.
    (3) If the decision is to deny declassification of all the material, 
the Vice Chairman shall promptly advise the requester, in writing, of 
the reasons for such denial.



Sec. 403.9  Fees.

    The following specific fees shall be applicable with respect to 
services rendered to members of the public under these regulations, by 
the Bank, except that the search fee will normally be waived when the 
search involves less than one-half hour of clerical time.

    (a) Search for records, per hour or fraction thereof:
 (i) Professional.................................................$11.00
 (ii) Clerical......................................................6.00
 (b) Computer service charges per second for actual use of computer 
central processing unit...............................................25
 (c) Copies made by photostat or otherwise (per page); maximum of 5 
copies will be provided...............................................10
 (d) Certification of each record as a true copy....................1.00
 (e) Certification of each record as a true copy under official seal 
                                                                    1.50
 (f) Duplication of architectural photographs and drawings..........2.00


Fees must be paid in full prior to issuance of requested copies. 
Remittances shall be in the form either of a personal check or bank 
draft drawn on a bank in the United States, or postal money order. 
Remittances shall be made payable to the order of the Export-Import Bank 
of the United States, and mailed to:

General Counsel, Export-Import Bank of the United States, 811 Vermont 
Avenue NW., Washington, DC 20571



Sec. 403.10  Safeguarding.

    (a) General Access Requirements. Except as provided in Sec. 
403.10(c), access to classified information shall be granted in 
accordance with the following:
    (1) Determination of Trustworthiness. No person shall be given 
access to classified information or material unless a favorable 
determination has been made as to his trustworthiness. The determination 
of eligibility, refered to as a security clearance, shall be based on 
such investigations as the Bank may require in accordance with the 
standards and criteria of applicable law and Executive orders.
    (2) Determination of Need to Know. In addition to a security 
clearance, a person must have a need for access to the particular 
classified information or material sought in connection with the 
performance of official duties or contractual obligations. The 
determination of that need shall be made by officials having 
responsibility for the classified information or material.
    (b) Classified Information Nondisclosure Agreement. All persons with 
authorized access to classified information shall be required to sign a 
nondisclosure agreement, Standard Form 189, as a

[[Page 627]]

condition of access. This form shall be retained in the security file of 
the individual for 50 years.
    (c) Access by Historical Researchers and Former Presidential 
Appointees. The Bank shall obtain written agreements from requesters to 
safeguard the information to which they are given access as permitted by 
the Order and written consent to the Bank's review of their notes and 
manuscripts for the purpose of determining that no classified 
information is contained therein. A determination of trustworthiness is 
a pre-condition to a requester's access. If the access requested by 
historical researchers and former Presidential Appointees requires the 
rendering of services for which fair and equitable fees may be charged 
pursuant to Title 5 of the Independent Offices Appropriations Act, 65 
Stat. 290, 31 U.S.C. 483a (1976), the requester shall be so notified and 
the fees may be imposed.
    (d) Media Contacts. All contacts by members of the media which 
concern classified information shall be directed to the attention of the 
Security Officer, Room 1031, Export-Import Bank of the United States, 
811 Vermont Avenue NW., Washington, DC 20571.
    (e) Dissemination. Except as otherwise provided by directives issued 
by the President through the National Security Council, classified 
information originating in another agency and in the possession of the 
Bank may not be disseminated outside the Bank without the consent of the 
originating agency.
    (f) Accountability Procedures. Dissemination of various levels of 
classified information or material shall be within the control and 
responsibility of designated control officers. Particularly stringent 
controls shall be placed on information and material classified as TOP 
SECRET.
    (1) TOP SECRET. Designated as TOP SECRET control officers are the 
Chairman, Vice Chairman and the Security Officer who alone have 
authority to receive TOP SECRET information for the Bank. Other 
personnel authorized in writing by the Chairman or Security Officer also 
may receive TOP SECRET information for the Bank. It shall be the 
responsibility of these individuals with respect to all TOP SECRET 
information:
    (i) To receive the material for the Bank;
    (ii) To maintain registers which will reflect the routing of the 
material and the return thereof in a reasonable length of time for 
security storage;
    (iii) To dispatch and make record of material disseminated to 
authorize persons outside the Bank;
    (iv) To make a physical inventory of all material at least annually; 
and
    (v) To maintain current access records.
    (2) SECRET. Designated as SECRET control officers are the Security 
Officer and the Analysis, Records & Communications Manager, who have the 
responsibility with respect to all information classified in this 
category:
    (i) To receive the material for the Bank;
    (ii) To maintain registers which will reflect the routing of the 
material and the return thereof in a reasonable length of time for 
security storage;
    (iii) To dispatch and make record of material disseminated to 
authorized persons outside the Bank;
    (iv) To maintain current access records.
    (3) CONFIDENTIAL. Designated as CONFIDENTIAL control officers are 
the Security Officer and the Analysis, Records & Communications Manager 
who have responsibility with respect to all information classified in 
this category:
    (i) To review material for the Bank;
    (ii) To route the material to proper Bank offices;
    (iii) To dispatch and make record of material disseminated to 
authorized persons outside the Bank;
    (iv) To maintain current access records.
    (g) Storage. Classified information shall be stored only in 
facilities or under conditions adequate to prevent unauthorized persons 
from gaining access to it and in accordance with the Directive as well 
as General Services Administration standards and specifications. 
Reference may be made to 32 CFR 2001.41, 2001.43 for preliminary 
guidance regarding these standards and specifications.
    (h) Coversheets. Department of State (DSC) classified incoming 
cables are to

[[Page 628]]

be logged in and routed to the appropriate offices in double envelopes. 
When these cables are being used in various offices, classified 
coversheets must be used to protect the documents. This practice 
eliminates the possibility of inadvertently mixing classified with non-
classified material, and promotes security awareness. Coversheets are 
obtainable from the Office of the Security Director.
    (i) Transmittal. (1) To be transmitted outside the Bank, all 
classified documents must be sent through the Security Office and have 
attached EIB Form 71-2, approved by one of the following: the President 
and Chairman, First Vice President and Vice Chairman, a Senior Vice 
President, General Counsel, Vice President or Security Officer.
    (2) Preparation and Receipting. Classified information shall be 
enclosed in opaque inner and outer covers before transmitting. The inner 
cover shall be a sealed wrapper or envelope plainly marked with the 
assigned classification and addresses of both sender and addressee. 
Transmittal documents shall indicate on their face the highest level of 
any information transmitted, and must clearly state whether or not the 
transmittal document itself is classified after removal of enclosures 
and attachments. The outer cover shall be sealed and addressed with no 
identification of the classification of its contents. A receipt shall be 
attached to or enclosed in the inner cover, except that CONFIDENTIAL 
information shall require a receipt only if the sender deems it 
necessary. The receipt shall identify the sender, addressee, and the 
document but shall contain no classified information. It shall be 
immediately signed by the recipient and returned to the sender. Any of 
these wrapping and receipting requirements may be waived by agency heads 
under conditions that will provide adequate protection and prevent 
access by unauthorized persons.
    (3) Transmittal of CONFIDENTIAL information. CONFIDENTIAL 
information shall be transmitted within and between the fifty States, 
the District of Columbia, the Commonwealth of Puerto Rico, and U.S. 
territories or possessions by one of the means established for higher 
classifications, or by United States Postal Service, certified first 
class, or express mail service, when prescribed by an agency head. 
Outside these areas, CONFIDENTIAL information shall be transmitted only 
as is authorized for higher classification levels.
    (4) Transmittal of TOP SECRET and SECRET information shall be in 
accordance with the Directive. Reference may be made to 32 CFR 2001.44 
for preliminary guidance.
    (j) Destruction. Classified information no longer needed in working 
files or for record or reference purposes shall be processed for 
appropriate disposition in accordance with Chapters 21 and 33 of title 
44 U.S.C., when govern disposition of Federal Records. All classified 
information approved for destruction must be torn and placed in 
containers designated as burnbags which are available through the Office 
Services Section of the Bank. Destruction of such information will be 
carried out by the Security Officer or a designee by use of a 
disintegrator or by burning. The method of destruction selected must 
preclude recognition or reconstruction of the classified information or 
material. Records of destruction will be maintained by the Security 
Office for TOP SECRET information and material with serialized markings 
or material for which there is a special need to record its destruction.
    (k) Reproduction controls. (1) Reproduction of classified documents 
is prohibited, except by personnel authorized in writing by the Chairman 
or Security Officer.
    (2) TOP SECRET documents may not be reproduced without the consent 
of the originating agency unless otherwise marked by the originating 
office.
    (3) Reproduction of SECRET and CONFIDENTIAL documents may be 
restricted by the originating agency.
    (4) Reproduced copies of classified documents are subject to the 
same accountability and controls as the original documents.
    (5) Records shall be maintained by the Security Officer to show the 
number and distribution or reproduced copies of all TOP SECRET 
documents, of all documents covered by special access programs 
distributed outside the

[[Page 629]]

originating agency, and all SECRET and all CONFIDENTIAL documents which 
are marked with special dissemination and reproduction limitations.



Sec. 403.11  Enforcement and investigation procedures.

    (a) Loss or Possible Compromise. Any person who has knowledge of the 
loss or possible compromise of classified information shall immediately 
report the circumstances to the Security Officer of the Bank. In turn, 
the originating agency shall be notified about the loss or compromise in 
order that a damage assessment may be conducted and appropriate measures 
taken to negate or minimize any adverse effect, and prevent further such 
loss or compromise. An immediate inquiry shall be initiated by the Bank 
for the purposes: (1) Of determining cause and responsibility and (2) 
taking corrective measures and appropriate administrative, disciplinary, 
or legal action.
    (b) Reporting and Investigating Unauthorized Disclosures. (1) 
Employees who have reason to believe that an unauthorized disclosure of 
classified information has occurred shall report the disclosure to their 
supervisor, who shall inform the Security Officer.
    (2) The Bank shall promptly notify the Information Security 
Oversight Office at the General Services Administration, Washington, DC 
20405, of all unauthorized disclosures of classified information.
    (3) If the Bank believes that it is the source of an unauthorized 
disclosure of classified information that it originated, it shall 
evaluate the disclosure under paragraph (b)(7) of this section. If the 
disclosure is serious, the Bank shall report the disclosure and the 
results of the evaluation to the Department of Justice together with 
notification that it is conducting an internal investigation.
    (4) If the Bank believes that it is the source of an unauthorized 
disclosure of classified information that it handled but did not 
originate, it shall report the disclosure to the Department of Justice 
and to the originating agency(ies) or department(s) for evaluation under 
paragraph (b)(7) of this section. If the Bank cannot determine the 
identity of the originating agency(ies) or department(s), it shall 
report the disclosure to the Department of Justice together with any 
information or reasonable inferences as to the identity of the 
originating agency(ies) or department(s).
    (5) If the Bank receives a request for an evaluation of information 
it originated, it shall, if the evaluation shows the disclosure was 
serious, inform the agency(ies) or department(s) from which the 
disclosure occurred of this conclusion and request that the agency(ies) 
or department(s) conduct an internal investigation.
    (6) If the Bank determines that an unauthorized disclosure of 
classified information has occurred but that it neither originated, 
handled nor disclosed the information, it shall report the disclosure to 
the likely originating agency(ies) or department(s).
    (7) In determining whether a disclosure is sufficiently serious to 
warrant reporting to the Department of Justice, the Bank, if it is the 
originating agency, shall ascertain the nature of the disclosed 
information, determine the extent to which it disseminated the 
information and evaluate the disclosure to determine whether it 
seriously damages its mission and responsibilities. In evaluating the 
damage caused by the disclosure, the Bank shall consider such matters as 
whether the disclosure jeopardizes an ongoing project, operation or 
source of information and to what extent the policy goals underlying the 
project or operation must be altered.
    (8) In any instance where the Bank is determined to be the source of 
an unauthorized disclosure and an evaluation by the Bank or the 
originating agency(ies) or department(s) determines the disclosure to be 
of a serious nature, an internal investigation will be initiated and an 
investigation report, containing such information as may be required by 
the Department of Justice, will be submitted to the Department of 
Justice within 15 days after notification from the originating agency or 
Department of Justice, but in any case no later than 30 days. If the 
investigation report is not completed within 15 days, the Bank shall 
submit as much of the required information as is available at that time 
and furnish

[[Page 630]]

additional information as it is developed.
    (9) Whenever the Bank determines during the course of an 
investigation that it is necessary to compel or induce the cooperation 
of an employee, the Bank shall first consult with the Department of 
Justice. The Department of Justice will coordinate with the Bank to 
determine the procedures the Bank may use to compel an employee's 
participation without foreclosing possible criminal proceedings.
    (10) The Bank shall maintain records of all disclosures that have 
been reported or investigated.
    (11) All employees shall cooperate fully with officials of the Bank 
or other agencies who are conducting investigations of unauthorized 
disclosures of classified information.
    (12) Employees determined by the Bank to have knowingly participated 
in an unauthorized disclosure of classified information or who have 
refused to cooperate with an investigation of such a disclosure shall be 
denied further access to classified information and shall be subject to 
other appropriate administrative sanctions. Prior to taking action 
against an employee in connection with the unauthorized disclosure or 
classified information, the Bank shall consult with the Department of 
Justice, National Security Division.

[50 FR 27215, July 2, 1985, as amended at 72 FR 66043, Nov. 27, 2007]



PART 404_INFORMATION DISCLOSURE--Table of Contents




  Subpart A_Procedures for Disclosure of Records Under the Freedom of 
                            Information Act.

Sec.
404.1 General provisions.
404.2 Definitions.
404.3 Public reference facilities.
404.4 Request requirements.
404.5 Time for processing.
404.6 Release of records under the Freedom of Information Act.
404.7 Confidential business information.
404.8 Initial determination.
404.9 Schedule of fees.
404.10 Fee waivers or reductions.
404.11 Administrative appeal.

Subpart B_Protection of Privacy and Access to Records Under the Privacy 
                               Act of 1974

404.12 General provisions.
404.13 Definitions.
404.14 Requirements of request for access.
404.15 Initial determination.
404.16 Schedule of fees.
404.17 Appeal of denials of access.
404.18 Requests for correction of records.
404.19 Request for accounting of record disclosures.
404.20 Notice of court-ordered and emergency disclosures.
404.21 Submission of social security and passport numbers.
404.22 Government contracts.
404.23 Other rights and services.

    Subpart C_Demands for Testimony of Current and Former Ex-Im Bank 
           Personnel and for Production of Ex-Im Bank Records

404.24 General provisions.
404.25 Applicability.
404.26 Definitions.
404.27 Demand requirements.
404.28 Notification of General Counsel required.
404.29 Restrictions on testimony and production of records.
404.30 Factors General Counsel may consider in determining whether to 
          authorize testimony and/or the production of records.
404.31 Procedure for declining to testify and/or produce records.
404.32 Procedure in the event a decision concerning a demand is not made 
          prior to the time a response to the demand is required.
404.33 Procedure in the event of an adverse ruling.
404.34 Procedure for demands for testimony or production of documents 
          regarding confidential information.
404.35 Procedure for requests for Ex-Im Bank employees to provide expert 
          or opinion testimony.
404.36 No private right of action.

Subparts D-E [Reserved]

    Authority: 5 U.S.C. 552 and 552a.
    Section 404.7 also issued under E.O. 12600, 52 FR 23781, 3 CFR, 1987 
Comp., p. 235.
    Section 404.21 also issued under 5 U.S.C. 552a note.
    Subpart C also issued under 5 U.S.C. 301, 12 U.S.C. 635.

    Source: 64 FR 14374, Mar. 25, 1999, unless otherwise noted.

[[Page 631]]



  Subpart A_Procedures for Disclosure of Records Under the Freedom of 
                            Information Act.



Sec. 404.1  General provisions.

    (a) Purpose. This subpart establishes policy, procedures, 
requirements, and responsibilities for administration of the Freedom of 
Information Act (FOIA), 5 U.S.C. 552, at the Export-Import Bank of the 
United States (Ex-Im Bank).
    (b) Policy. It is Ex-Im Bank's policy to honor all requests for the 
disclosure of its records, provided that disclosure would not adversely 
affect a legitimate public or private interest and would not impose an 
unreasonable burden on Ex-Im Bank. However, this subpart also recognizes 
that the soundness of many Ex-Im Bank programs depends upon the receipt 
of reliable commercial, technical, financial, and business information 
relating to applicants for Ex-Im Bank assistance and that receipt of 
such information depends on Ex-Im Bank's ability to hold such 
information in confidence. Consequently, except as provided by 
applicable law and this regulation, information provided to Ex-Im Bank 
in confidence will not be disclosed without the submitter's consent.
    (c) Scope. All record requests made to Ex-Im Bank shall be processed 
under this subpart, except that information customarily furnished to the 
public in the regular course of the performance of official duties may 
continue to be furnished to the public without complying with this 
subpart. Requests made by individuals under the Privacy Act of 1974 
which are processed under subpart B of this part also shall be processed 
under this subpart A.
    (d) Ex-Im Bank Internet site. Ex-Im Bank maintains an Internet site 
at http://www.exim.gov. The site contains information on Ex-Im Bank 
functions, activities, programs, and transactions. Web site visitors 
have access to Board of Directors and Loan Committee meeting minutes, 
country information, and Ex-Im Bank press releases, among other 
information. Ex-Im Bank encourages all prospective FOIA requesters to 
visit the site prior to submission of a FOIA request.
    (e) Delegation. Any action or determination in this subpart which is 
the responsibility of a specific Ex-Im Bank employee, may be delegated 
to a duly designated alternate.
    (f) Ex-Im Bank address. The Export-Import Bank of the United States 
is located at 811 Vermont Avenue, NW, Washington, DC 20571.



Sec. 404.2  Definitions.

    For purposes of this subpart, the following definitions shall apply:
    All other requesters--Requesters other than commercial use 
requesters, educational and non-commercial scientific requesters, or 
representatives of the news media.
    Appeal--A written request to the Ex-Im Bank Assistant General 
Counsel for Administration for reversal of an adverse initial 
determination.
    Business information--Potentially confidential commercial or 
financial information that is provided to Ex-Im Bank.
    Business submitter--Any person who provides business information to 
Ex-Im Bank.
    Commercial use request--A request for a use or purpose that furthers 
the commercial, trade or profit interest of the requester.
    Direct costs--Expenditures incurred in the search, review, and 
duplication of records in response to a FOIA request.
    Educational institution--A preschool, a public or private elementary 
or secondary school, an institution of undergraduate or graduate higher 
education, or an institution of professional or vocational education.
    Final determination--The written decision by the Assistant General 
Counsel for Administration on an appeal.
    Initial determination--The initial written determination by Ex-Im 
Bank regarding disclosure of requested records.
    Non-commercial scientific institution--An institution that is 
operated for the purpose of conducting scientific research the results 
of which are not intended to promote any particular product or industry 
and that is not operated solely for purposes of furthering a business, 
trade or profit interest.

[[Page 632]]

    Person--An individual, partnership, corporation, association or 
organization other than a federal government agency.
    Record--All papers, memoranda or other documentary material, or 
copies thereof, regardless of physical form or characteristics, created 
or received by Ex-Im Bank and preserved as evidence of the activities of 
Ex-Im Bank. ``Record'' does not include publications which are available 
to the public through the Federal Register, sale or free distribution.
    Redaction--The process of removing non-disclosable material from a 
record so that the remainder may be released.
    Representative of the news media--A person actively gathering 
information on behalf of an entity organized and operated to publish or 
broadcast news to the public. Freelance journalists shall qualify as 
representatives of the news media when they can demonstrate that a 
request is reasonably likely to lead to publication.
    Request--Any record request made to Ex-Im Bank under the FOIA.
    Requester--Any person making a request.
    Review--The process of examining a record to determine whether any 
portion is required to be withheld. It includes redaction, duplication, 
and any other preparation for release. Review does not include time 
spent resolving general legal and policy issues regarding the 
application of exemptions.
    Search--The process of identifying and collecting records pursuant 
to a request.
    Trade secrets--All forms and types of financial, business, 
scientific, technical, economic or engineering information, including, 
but not limited to, patterns, plans, compilations, program devices, 
formulas, designs, prototypes, methods, techniques, processes, 
procedures, programs or codes.
    Unusual circumstances--The need to search for and collect requested 
records from facilities that are separate from Ex-Im Bank headquarters; 
the need to search for, collect, and appropriately examine a voluminous 
amount of separate and distinct records which are demanded in a single 
request; or the need for consultation with another agency a person that 
has a substantial interest in the determination of the request.
    Working days--All calendar days excluding Saturdays, Sundays, and 
Federal Government holidays.



Sec. 404.3  Public reference facilities.

    Ex-Im Bank maintains a public reading room which contains the Ex-Im 
Bank records that the FOIA requires to be made available for public 
inspection and copying. The records available under this section include 
copies of records released pursuant to the FOIA that Ex-Im Bank 
determines have, or are likely to, become the subject of subsequent 
requests for substantially the same records. Requesters shall be 
responsible for the cost of duplicating such material in accordance with 
the provisions of Sec. 404.9(e). Persons desiring to use the reading 
room should contact the Ex-Im Bank Freedom of Information and Privacy 
Office, either in writing at the address at Sec. 404.1(f) or by 
telephone at (202) 565-3946 or (800) 565-3946, to arrange a time to 
inspect the available records.



Sec. 404.4  Request requirements.

    (a) Form. Requests must be made in writing and must be signed by, or 
on behalf of, the requester. Requests should be addressed to the Freedom 
of Information and Privacy Office at the address in Sec. 404.1(f) and 
should contain both the return address and telephone number of the 
requester.
    (b) Description of records requested. Each request must describe the 
records sought in sufficient detail so as to enable a professional 
employee of Ex-Im Bank familiar with the subject matter of the request 
to locate the record with a reasonable amount of effort. A request shall 
not be deemed to have been received until such time as the request 
adequately identifies the records sought. To the extent practicable, a 
description should include relevant dates, format, subject matter, and 
the name of any person to whom the record is known to relate. A general 
request for records with no accompanying date restriction, either 
express or implied, shall be deemed to be a request for records created 
within the preceding twelve months.

[[Page 633]]

    (c) Fee statement. The request must contain a statement expressing 
willingness to pay fees for the requested records or a request for a fee 
waiver (see Sec. 404.10) before the request shall be deemed to have 
been received. A fee statement may specify the maximum amount a 
requester is willing to pay for processing the request.
    (1) Whenever a requester submits a FOIA request that does not 
contain a fee statement or a request for a fee waiver, Ex-Im Bank shall 
advise the requester of the requirements of this paragraph. If the 
requester fails to respond within ten working days of such notification, 
then the Freedom of Information and Privacy Office shall notify the 
requester, in writing, that Ex-Im Bank will not process the request.
    (2) A general statement by the requester expressing willingness to 
pay all applicable fees under Sec. 404.9 shall be deemed an agreement 
to pay up to $50.00. If Ex-Im Bank estimates that the fees for a request 
will exceed $50.00, then Ex-Im Bank shall offer the requester the 
opportunity to agree, in writing, either to pay a greater fee or to 
modify the request as a means of limiting the cost.
    (d) Written notice of amendment. The requester should provide any 
amendment to the original request in writing to Ex-Im Bank.
    (e) Requester assistance. Ex-Im Bank shall make reasonable efforts 
to assist a requester in complying with the requirements of this 
section.



Sec. 404.5  Time for processing.

    (a) General. Ex-Im Bank shall respond to requests within twenty 
working days of the date of receipt of the request unless unusual 
circumstances exist. Ex-Im Bank shall provide written notice to the 
requester whenever such unusual circumstances necessitate an extension. 
If the extension is expected to exceed ten working days, then Ex-Im Bank 
shall offer the requester the opportunity to:
    (1) Alter the request so that it may be processed within the time 
limit; or
    (2) Propose an alternative, feasible time frame for processing the 
request.
    (b) Date of receipt. A request shall be deemed to have been received 
on the date that the request is received in the Freedom of Information 
and Privacy Office, provided that the requester has met all the 
requirements of Sec. 404.4. Ex-Im Bank shall notify the requester of 
the date on which a request was officially received.
    (c) Order of processing. Ex-Im Bank ordinarily shall process 
requests according to their order of receipt.
    (d) Expedited processing. A request for expedited processing must be 
included in the original request for records and may be granted at the 
discretion of Ex-Im Bank based upon the requester's demonstration of:
    (1) An imminent threat to the life or physical safety of an 
individual; or
    (2) In the case of a requester who is a representative of the news 
media, an urgency to inform the public concerning actual or alleged 
Federal Government activity. Ex-Im Bank shall provide notice of its 
determination on expedited processing to the requester. A requester may 
file an administrative appeal, as set forth at Sec. 404.11, based on a 
denial of a request for expedited processing. Ex-Im Bank shall grant 
expeditious consideration to any such appeal.



Sec. 404.6  Release of records under the Freedom of Information Act.

    (a) Creation of records. A reasonable request for material not in 
existence may be honored at Ex-Im Bank's discretion when tabulation or 
compilation will not significantly burden Ex-Im Bank, its programs or 
its activities.
    (b) Discretionary release. Consistent with federal government 
policy, material technically qualifying for exemption from disclosure 
under 5 U.S.C. 552(b)(5) may be made available when disclosure would not 
adversely affect legitimate public or private interests, violate law or 
impose an unreasonable burden on Ex-Im Bank. This policy does not, 
however, create any right enforceable in a court of law.
    (c) Segregable records. Whenever it is determined that a portion of 
a record is exempt from disclosure, any reasonably segregable portion of 
the record shall be provided to the requester after redaction of the 
exempt material. If segregation would render the document meaningless, 
Ex-Im Bank shall withhold the entire record.

[[Page 634]]

    (d) Date for determining responsive records. Only those records 
within Ex-Im Bank's possession and control as of the date of receipt of 
a request shall be deemed to be responsive to a request.



Sec. 404.7  Confidential business information.

    (a) Scope. This section applies to all business information, as 
defined in Sec. 404.2. Such information shall only be disclosed 
pursuant to a FOIA request in accordance with this section.
    (b) Submitter designation. All business submitters should designate, 
by appropriate markings, either at the time of submission or at a 
reasonable time thereafter, any portion of any submission that they 
consider to be exempt from disclosure under 5 U.S.C. 552(b)(4).
    (c) Pre-disclosure notice to the business submitter. Whenever Ex-Im 
Bank receives a FOIA request seeking disclosure of business information, 
Ex-Im Bank shall provide prompt written notice to the submitter of such 
information. This notice shall include a description or a copy of the 
records containing the business information. Such notice shall not be 
required, however, if:
    (1) Ex-Im Bank determines that the records shall not be disclosed;
    (2) The records have been published or otherwise made available to 
the public; or
    (3) disclosure of the records is required by law.
    (d) Opportunity to object to disclosure. The business submitter 
shall have ten working days from and including the date of the 
notification letter to provide Ex-Im Bank with a detailed statement of 
any objection to disclosure of the records. A submitter located outside 
the United States shall have twenty working days to object to 
disclosure. Ex-Im Bank may extend the time for objection upon timely 
request from the submitter and for good cause shown. A statement of 
objection must specify all grounds under the FOIA for withholding the 
information.
    (e) Notice to the requester. The Freedom of Information and Privacy 
Office shall notify the requester in writing whenever a business 
submitter is afforded the opportunity to object to disclosure of records 
pursuant to paragraph (c) of this section.
    (f) Disclosure of confidential business information. Ex-Im Bank 
shall consider any objections raised by the business submitter prior to 
making its disclosure decision.
    (g) Notice of intent to disclose. Whenever Ex-Im Bank determines to 
disclose business information over the objection of a business 
submitter, Ex-Im Bank shall notify the business submitter, in writing, 
of such determination, the reasons for the decision, and the expected 
disclosure date. This notification--which shall be provided at least ten 
days prior to the planned disclosure date and which shall include a copy 
or description of the records at issue--is intended to afford the 
submitter the opportunity to seek judicial review.
    (h) Notice to requester of disclosure date. If Ex-Im Bank determines 
to disclose records over a business submitter's objection, then Ex-Im 
Bank shall notify the requester of the expected disclosure date.
    (i) Appeal. Whenever Ex-Im Bank determines to disclose, pursuant to 
an administrative appeal, business information that initially was 
withheld from disclosure under 5 U.S.C. 552(b)(4), Ex-Im Bank shall 
notify the business submitter. Such notice shall be in writing and shall 
be provided ten working days prior to the proposed disclosure date. It 
shall include a copy or description of the records at issue and a 
statement of Ex-Im Bank's reasons for disclosure.
    (j) Notice of FOIA lawsuit. Ex-Im Bank shall promptly notify the 
submitter whenever a requester brings suit against Ex-Im Bank seeking to 
compel the release of business information covered by this section. Ex-
Im Bank shall promptly notify the requester when a submitter brings suit 
against Ex-Im seeking to restrict the release of business information 
that is covered by this section.
    (k) Exception. Notwithstanding the foregoing provisions of this 
part, Ex-Im Bank may, upon request or on its own initiative, publicly 
disclose the parties to transactions for which Ex-Im Bank approves 
support, the amount of such

[[Page 635]]

support, the identity of any participants involved, a general 
description of the related U.S. exports, and the country to which such 
exports are destined.



Sec. 404.8  Initial determination.

    (a) Authority to grant or deny requests. The Freedom of Information 
and Privacy Office shall be responsible for search, review, and the 
initial determination.
    (b) Referrals to other government agencies. A requested record in 
Ex-Im Bank's possession that was created or classified by another 
Federal agency shall be referred to such agency for direct response to 
the requester. The Freedom of Information and Privacy Office shall 
notify the requester of any such referral, the number of documents so 
referred, and the name and address of each agency to which the request 
has been referred.
    (c) Notification of Ex-Im Bank action. The Freedom of Information 
and Privacy Office shall notify the requester in writing of its decision 
to grant or deny the request.
    (1) If the decision is made to grant a request, then Ex-Im Bank 
shall promptly disclose the requested records and shall inform the 
requester of any fee payable under Sec. 404.9.
    (2) A denial is a determination to withhold any requested record in 
whole or in part, a determination that a requested record does not exist 
or cannot be located or a determination that what has been requested is 
not a record subject to the FOIA. Whenever Ex-Im Bank withholds 
information, such notice shall include:
    (i) The name, title, and signature of the person responsible for the 
determination;
    (ii) The statutory basis for non-disclosure; and
    (iii) A statement that any denial may be appealed under Sec. 404.11 
and a brief description of the requirements of that section.
    (d) Material withheld. Ex-Im Bank shall make reasonable efforts to 
inform the requester of the volume of material withheld pursuant to a 
full or partial denial and the extent of any redaction. Ex-Im Bank shall 
not, however, indicate the extent of any denial when doing so could harm 
an interest protected by an applicable exemption.



Sec. 404.9  Schedule of fees.

    (a) General. Ex-Im Bank shall charge fees to recover the full 
allowable direct costs it incurs in processing requests. Ex-Im Bank 
shall attempt to conduct searches in the most efficient manner to 
minimize costs for both Ex-Im Bank and the requester.
    (b) Categories of requesters. Fees shall be assessed according to 
the status of the requester. The specific schedule of fees for each 
requester category (each as defined in Sec. 404.2) is prescribed as 
follows:
    (1) Commercial use requesters. Ex-Im Bank shall charge the full 
costs for search, review, and duplication.
    (2) Educational and non-commercial scientific institution 
requesters. Ex-Im Bank shall charge only for the cost of duplication in 
excess of 100 pages. No fee will be charged for search or review.
    (3) Representatives of the news media. Ex-Im Bank shall charge only 
for the cost of duplication in excess of 100 pages. No fee will be 
charged for search or review.
    (4) All other requesters. Ex-Im Bank shall charge for the cost of 
search, review, and duplication, except that 100 pages of duplication 
and two hours of professional search time shall be furnished without 
charge.
    (c) Search and review fees. Ex-Im Bank shall charge the following 
fees for search and review:
    (1) Clerical. Hourly rate--$16.00.
    (2) Professional. Hourly rate--$32.00.
    (3) Computer Searches. Hourly rate--based upon the salary of the 
employee performing the work and the cost of operating any equipment.
    (d) Administrative appeals. Ex-Im Bank shall not charge for 
administrative review of an exemption applied in an initial 
determination. Ex-Im Bank shall charge, however, for search and review 
pursuant to an administrative appeal if the appeal is based on a claim 
other than the application of an exemption in the initial determination.
    (e) Duplication. Ex-Im Bank shall charge $.10 per page for paper 
copy duplication. Ex-Im Bank shall charge the actual or estimated cost 
of copies prepared by computer, such as tape or

[[Page 636]]

printouts, or for other methods of duplication. When duplication charges 
are expected to exceed $50.00, Ex-Im Bank shall seek the requester's 
consent to be responsible for the estimated charges unless a requester 
has already expressed a willingness to pay duplication fees in excess of 
$50.00. Ex-Im Bank shall also offer the requester the opportunity to 
alter the request in order to reduce duplication costs.
    (f) Fees for searches that produce no records. Fees shall be payable 
as provided in this section even though searches and review do not 
generate any disclosable records.
    (g) Aggregating requests. A requester, or a group of requesters 
acting in concert, shall not file multiple requests, seeking portions of 
a record or similar or related records, in order to avoid payment of 
fees. Ex-Im Bank shall aggregate any such requests and charge as if the 
requests were a single request.
    (h) Special services charges. Complying with requests for special 
services such as those listed in this paragraph is entirely at the 
discretion of Ex-Im Bank. Ex-Im Bank shall recover the full costs of 
providing such services to the extent that it elects to provide them.
    (1) Certifications. Ex-Im Bank shall charge $25.00 to certify the 
authenticity of any Ex-Im Bank record or any copy of such record.
    (2) Special shipping. Ex-Im Bank may ship by special means (e.g., 
express mail) if the requester so desires, provided that the requester 
has paid or has expressly undertaken to pay all costs of such special 
services. Ex-Im Bank shall not charge for ordinary packaging and 
mailing.
    (i) Minimum fee. Ex-Im Bank shall waive a final fee of $5.00 or 
less.
    (j) Advance payment. Whenever Ex-Im Bank estimates that the fees are 
likely to exceed $250.00, Ex-Im Bank shall notify the requester of the 
likely cost and shall require an advance payment of an amount up to the 
full estimated charges.
    (k) Failure to pay fee. Ex-Im Bank shall not process a request by a 
requester who has failed to pay a fee for a previous request unless and 
until such a requester had paid the full amount owed and also has paid, 
in advance, the total estimated charges for the new request. The 
administrative time limits for the new request--set forth in Sec. 
404.5--shall begin to run only after Ex-Im Bank has received the 
payments described in this section.



Sec. 404.10  Fee waivers or reductions.

    (a) General. Upon request, Ex-Im Bank shall consider a discretionary 
fee waiver or reduction of the fees chargeable under Sec. 404.9.
    (b) Form of request for fee waiver. Ex-Im Bank shall deny a request 
for a waiver or reduction of fees that does not clearly address each of 
the following:
    (1) The proposed use of the records and whether the requester will 
derive income or other benefit from such use;
    (2) An explanation of the reasons why the public will benefit from 
such use; and
    (3) If specialized use of the records is contemplated, a statement 
of the requester's qualifications that are relevant to the specialized 
use.
    (d) Burden of proof. In all cases, the requester has the burden of 
presenting sufficient evidence or information to justify the fee waiver 
or reduction. The requester may use the procedures set forth in Sec. 
404.11 to appeal a denial of a fee waiver request.
    (e) Employee requests. Fees of less than $50.00 shall be waived in 
connection with any request by an employee, former employee, or 
applicant for employment, related to a grievance or complaint of 
discrimination against Ex-Im Bank.



Sec. 404.11  Administrative appeal.

    (a) General. Whenever a request for records, a fee waiver or 
expedited processing has been denied, the requester may appeal the 
denial within thirty days of the date of Ex-Im Bank's issuance of notice 
of such action. Any denial under this subpart must be appealed according 
to this section before a requester is eligible to seek judicial review.
    (b) Form. Appeals must be made in writing and must be signed by the 
appellant. Appeals should be addressed to the Assistant General Counsel 
for Administration at the address at Sec. 404.1(f). Both the envelope 
and the appeal letter

[[Page 637]]

should be clearly marked in capital letters: ``FREEDOM OF INFORMATION 
ACT APPEAL.'' Failure to properly mark or address the appeal may slow 
its processing. The letter should include:
    (1) A copy of the denied request or a description of the records 
requested;
    (2) The name and title of the Ex-Im Bank employee who denied the 
request;
    (3) The date on which the request was denied;
    (4) The Ex-Im Bank identification number assigned to the request; 
and
    (5) The return address and telephone number of the appellant.
    (c) Processing schedule. Appeals shall not be deemed to have been 
received until the Assistant General Counsel for Administration receives 
the appeal. Ex-Im Bank shall notify the requester of the date on which 
an appeal was officially received. The disposition of an appeal shall be 
made in writing within twenty working days after the date of receipt of 
an appeal. The Assistant General Counsel for Administration may extend 
the time for response an additional ten working days if unusual 
circumstances exist, provided that the Assistant General Counsel for 
Administration notifies the requester in writing.
    (d) Ex-Im Bank decision. A final determination which affirms an 
adverse initial determination shall set forth the reasons for affirming 
the denial and shall advise the requester of the right to seek judicial 
review. If the initial determination is reversed on appeal, the request 
shall be remanded to the Freedom of Information and Privacy Office to be 
processed promptly in accordance with the decision on appeal, subject to 
Sec. 404.7(i).



        Subpart B_Access to Records Under the Privacy Act of 1974



Sec. 404.12  General provisions.

    (a) Purpose. This subpart establishes policies, procedures, 
requirements, and responsibilities for administration of the Privacy Act 
of 1974, 5 U.S.C. 552a, at the Export-Import Bank of the United States 
(Ex-Im Bank).
    (b) Relationship to the Freedom of Information Act. The Privacy Act 
applies to records contained in a systems of records, as defined in 
Sec. 404.13. If an individual submits a request for access to records 
and cites the Privacy Act, but the records sought are not contained in a 
Privacy Act system of records, then the request shall be processed only 
under subpart A of this part, Procedures for Disclosure of Records Under 
the Freedom of Information Act. All requests properly processed under 
this subpart B shall also be processed under subpart A of this part.
    (c) Appellate authority. The Ex-Im Bank Assistant General Counsel 
for Administration is the appellate authority for all Privacy Act 
requests.
    (d) Delegation. Any action or determination in this subpart which is 
the responsibility of a specific Ex-Im Bank employee may be delegated to 
a duly designated alternate.
    (e) Ex-Im Bank address. The Export-Import Bank of the United States 
is located at 811 Vermont Avenue, NW, Washington, DC 20571.



Sec. 404.13  Definitions.

    For purposes of this subpart, the following definitions shall apply:
    Appeal--A written request to the Ex-Im Bank Assistant General 
Counsel for Administration for reversal of an adverse initial 
determination.
    Final determination--The written decision by the Assistant General 
Counsel for Administration on an appeal.
    Individual--A citizen of the United States or an alien lawfully 
admitted for permanent residence.
    Initial determination--The initial written determination in response 
to a Privacy Act request.
    Record--Any item, collection or grouping of information about an 
individual that is maintained within a system of records and that 
contains the individual's name or an identifying number, symbol or other 
identifying particular assigned to the individual.
    Redaction--The process of removing non-disclosable material from a 
record so that the remainder may be released.
    Request for access--A request to view a record.
    Request for accounting--A request for a list of all disclosures of a 
record.
    Request for correction--A request to modify a record.

[[Page 638]]

    Requester--An individual who makes a request under the Privacy Act.
    Review--The process of examining a record to determine whether any 
portion is required to be withheld.
    Search--The process of identifying and collecting records pursuant 
to a request.
    System of records--A group of any records under the control of an 
agency from which information is retrieved by the name of the individual 
or some identifying number, symbol or other identifying particular 
assigned to the individual.
    Working days--All calendar days excluding Saturdays, Sundays, and 
Federal Government holidays.



Sec. 404.14  Requirements of request for access.

    (a) Form. Requests for access must be made in writing and must be 
signed by the requester. Requests should be addressed to the Freedom of 
Information and Privacy Office at the address in Sec. 404.12(e) and 
should contain both the return address and telephone number of the 
requester.
    (b) Description of records sought. A request for access must 
describe the records sought in sufficient detail so as to enable Ex-Im 
Bank personnel to locate the system of records containing the records 
with a reasonable amount of effort. To the extent practicable, such 
description should include the nature of the record sought, the date of 
the record or the period in which the record was compiled, and the name 
or identifying number of the system of records in which the requester 
believes the record is kept. A requester may include his or her social 
security number in the request in order to facilitate the identification 
and location of the requested records.
    (c) Fee statement. The request must contain a statement expressing 
willingness to pay fees for processing the request or a request for a 
fee waiver (see Sec. 404.16(d)).
    (1) Whenever a requester submits a request for access that does not 
contain a fee statement or a request for a fee waiver, Ex-Im Bank shall 
advise the requester of the requirements of this section. If the 
requester fails to respond within ten working days of such notification, 
then the Freedom of Information and Privacy Office shall notify the 
requester, in writing, that Ex-Im Bank will not process the request.
    (2) A general statement by the requester expressing willingness to 
pay all applicable fees shall be deemed an agreement to pay up to 
$25.00. If Ex-Im Bank estimates that the fees for a request will exceed 
$25.00, then Ex-Im Bank shall notify the requester. Ex-Im Bank shall 
offer the requester the opportunity to agree, in writing, either to pay 
a greater fee or to modify the request as a means of limiting the cost.
    (3) Whenever the estimated fee chargeable under this section exceeds 
$25.00, Ex-Im Bank reserves the right to require a requester to make an 
advance payment prior to processing the request.
    (4) Ex-Im Bank shall not process a request by a requester who has 
failed to pay a fee for a previous request unless and until such 
requester had paid the full amount owed and also has paid, in advance, 
the total estimated charges for the new request.
    (d) Verification of identity. An individual who submits a request 
for access must verify his or her identity. The request must include the 
requesters full name, current address, and date and place of birth. In 
addition, such requester must provide a notarized statement attesting to 
his or her identity.
    (e) Verification of guardianship. When a parent or guardian of a 
minor or the guardian of a person judicially determined to be 
incompetent submits a request for access to records that relate to the 
minor or incompetent, such parent or guardian must establish:
    (1) His or her own identity and the identity of the subject of the 
record in accordance with paragraph (d) of this section; and
    (2) Parentage or guardianship of the subject of the record, either 
by providing a copy of the subject's birth certificate showing parentage 
or by providing a court order establishing guardianship.
    (f) Written notice of amendment. The requester must provide any 
amendment to the original request in writing to Ex-Im Bank.
    (g) Requester assistance. Ex-Im Bank shall make reasonable efforts 
to assist

[[Page 639]]

a requester in complying with the requirements of this section.
    (h) Date of receipt. Requests for access shall be deemed to have 
been received on the date that the request is received by the Freedom of 
Information and Privacy Office, provided that all the requirements of 
this section have been met. Ex-Im Bank shall notify the requester of the 
date on which it officially received a request.



Sec. 404.15  Initial determination.

    (a) Time for processing. The Freedom of Information and Privacy 
Office shall respond to valid requests for access within twenty working 
days of the date of receipt of the request letter. The time for response 
may be extended an additional ten working days for good cause, provided 
that the Freedom of Information and Privacy Office notifies the 
requester in writing.
    (b) Notice regarding request for access. The Freedom of Information 
and Privacy Office shall notify the requester in writing of its decision 
to grant or deny a request for access.
    (1) If the request is granted, then the notice shall either include 
the requested records, in releasable form, or shall describe the manner 
in which access to the record will be granted. The notice also shall 
inform the requester of any processing fee.
    (2) A denial is a determination to withhold any requested record in 
whole or in part or a determination that the requested record does not 
exist or cannot be located. If the request is denied, then the denial 
notice shall state:
    (i) The name, signature, and title or position of the person 
responsible for the denial;
    (ii) The reasons for the denial; and
    (iii) The procedure for appeal of the denial under Sec. 404.17 and 
a brief description of the requirements of that section.
    (c) Form of record disclosure. Ex-Im Bank shall grant access to the 
requested records either by providing the requester with a copy of the 
record or, at the requester's option, by making the record available for 
inspection at a reasonable time and place. If Ex-Im Bank makes the 
record available for inspection, such inspection shall not unreasonably 
disrupt Ex-Im Bank operations. In addition, the requester must provide a 
form of official photographic identification--such as a passport, 
driver's license or identification badge--and any other form of 
identification bearing his or her name and address prior to inspection 
of the requested records. Records may be inspected by the requester in 
the presence of another individual, provided that the requester signs a 
form stating that Ex-Im Bank is authorized to disclose the record in the 
presence of both individuals.



Sec. 404.16  Schedule of fees.

    (a) Search and review. Ex-Im Bank shall not charge for search and 
review.
    (b) Duplication. Ex-Im Bank shall charge $.10 per page for paper 
copy duplication. Ex-Im Bank shall charge the actual or estimated cost 
of copies prepared by computer, such as tape or printouts, or for other 
methods of reproduction or duplication.
    (c) Minimum fee. Ex-Im Bank shall waive final fees of $5.00 or less.
    (d) Fee waivers. Ex-Im Bank may waive fees whenever it is determined 
to be in the public interest. Fees of less than $50.00 shall be waived 
in connection with any request by an employee, former employee or 
applicant for employment, related to a grievance or complaint of 
discrimination against Ex-Im Bank.
    (e) Special services charges. Complying with requests for special 
services such as those listed in this paragraph is entirely at the 
discretion of Ex-Im Bank. Ex-Im Bank shall recover the full costs of 
providing such services to the extent that it elects to provide them.
    (1) Certifications. Ex-Im Bank shall charge $25.00 to certify the 
authenticity of any Ex-Im Bank record or any copy of such record.
    (2) Special shipping. Ex-Im Bank may ship by special means (e.g., 
express mail) if the requester so desires, provided that the requester 
has paid or has expressly undertaken to pay all costs of such special 
services. Ex-Im Bank shall not charge for ordinary packaging and 
mailing.



Sec. 404.17  Appeal of denials of access.

    (a) Appeals to the Assistant General Counsel for Administration. 
Whenever

[[Page 640]]

Ex-Im Bank denies a request for access or for waiver or reduction of 
fees, the requester may appeal the denial to the Assistant General 
Counsel for Administration within 30 working days of the date of Ex-Im 
Bank's issuance of notice of such action. Appeals must be made in 
writing and must be signed by the appellant. Appeals should be addressed 
to the Assistant General Counsel for Administration at the address in 
Sec. 404.12(e). Both the envelope and the appeal letter should be 
clearly marked in capital letters: ``PRIVACY ACT APPEAL.'' Failure to 
properly mark or address the appeal may slow its processing. An appeal 
shall not be deemed to have been received by Ex-Im Bank until the 
Assistant General Counsel for Administration receives the appeal letter. 
The letter should include:
    (1) A copy of the denied request or a description of the records 
requested;
    (2) The name and title of the Ex-Im Bank employee who denied the 
request;
    (3) The date on which the request was denied; and
    (4) The Ex-Im Bank identification number assigned to the request.
    (b) Final determination. The disposition of an access appeal shall 
be made in writing within twenty working days after the date of receipt 
of the appeal. The Assistant General Counsel for Administration may 
extend the time for response an additional ten working days for good 
cause, provided that the requester is notified in writing. A decision 
affirming the denial of a request for access shall include a brief 
statement of the reasons for affirming the denial and shall advise the 
requester of the right to seek judicial review. If the initial 
determination is reversed, then the request shall be remanded to the 
Freedom of Information and Privacy Office to be processed in accordance 
with the decision on appeal.



Sec. 404.18  Requests for correction of records.

    (a) Form. Requests for correction must be made in writing and must 
be signed by the requester. Requests should be addressed to the Freedom 
of Information and Privacy Office at the address in Sec. 404.12(e) and 
should contain both the return address and telephone number of the 
requester. The request must identify the particular record in question, 
state the correction sought, and set forth the justification for the 
correction. The requester also must verify his or her identity in 
accordance with the procedures set forth at Sec. 404.14(d) and (e). 
Both the envelope and the request for correction itself should be 
clearly marked in capital letters: ``PRIVACY ACT CORRECTION REQUEST.''
    (b) Initial determination. The Freedom of Information and Privacy 
Office shall respond to valid correction requests within ten working 
days of receipt of the request letter. If Ex-Im Bank grants the request 
for correction, then the Freedom of Information and Privacy Office shall 
advise the requester of his or her right to obtain a copy, in releasable 
form, of the corrected record. A denial notice shall state the reasons 
for the denial and shall advise the requester of the right to appeal. 
Ex-Im Bank shall not charge for processing requests for correction.
    (c) Appeal of denial of request for correction. Whenever Ex-Im Bank 
denies a request for correction, the requester may appeal the denial to 
the Assistant General Counsel for Administration within thirty working 
days of Ex-Im Bank's issuance of notice of such action. Appeals must be 
made in writing and must be signed by the appellant. Appeals should be 
addressed to the Assistant General Counsel for Administration at the 
address set forth in Sec. 404.12(e). Both the envelope and the appeal 
letter should be clearly marked in capital letters: ``PRIVACY ACT 
CORRECTION APPEAL.'' Failure to properly mark or address the appeal may 
slow its processing. An appeal shall not be deemed to have been received 
by Ex-Im Bank until the Assistant General Counsel for Administration 
receives the appeal letter. The letter must include:
    (1) A copy of the denied request or a description of the correction 
sought;
    (2) The name and title of the Ex-Im Bank employee who denied the 
request;
    (3) The date on which the request was denied;
    (4) The Ex-Im Bank identification number assigned to the request; 
and
    (5) Any information said to justify the correction.

[[Page 641]]

    (d) Final determination on correction appeal. (1) The disposition of 
an appeal shall be made in writing within twenty working days after the 
date of receipt of an appeal. The Assistant General Counsel for 
Administration may extend the time for response an additional ten 
working days for good cause, provided that the requester is notified in 
writing.
    (2) A decision affirming the denial of a request for access shall 
advise the appellant of the:
    (i) Reasons for affirming the denial;
    (ii) Right to seek judicial review; and
    (iii) Right to file a statement of disagreement, as provided in 
paragraph (e) of this section.
    (3) If the initial determination is reversed, then the request shall 
be remanded to the Freedom of Information and Privacy Office to be 
processed in accordance with the decision on appeal.
    (e) Statement of disagreement. Upon denial of a correction appeal, 
the appellant shall have the right to file a statement of disagreement 
with Ex-Im Bank, setting forth his or her reasons for disagreeing with 
the Agency's action. The statement should be addressed to the Freedom of 
Information and Privacy Office at the address in Sec. 404.12(e) and 
must be received within thirty working days of Ex-Im Bank's issuance of 
the denial notice. A statement of disagreement must not exceed one typed 
page per fact disputed. Statements exceeding this limit shall be 
returned to the requester for editing. Upon receipt of a statement of 
disagreement under this section, the Freedom of Information and Privacy 
Office shall have the statement included in the system of records in 
which the disputed record is maintained and shall have the disputed 
record marked so as to indicate that a Statement of Disagreement has 
been filed. Ex-Im Bank may also append to the disputed record a written 
statement regarding Ex-Im Bank's reasons for denying the request to 
correct the record.
    (f) Notices of correction or disagreement. In any disclosure of a 
record for which Ex-Im Bank has received a statement of disagreement, 
Ex-Im Bank shall clearly note any portion of the record which is 
disputed and shall provide a copy of the statement of disagreement. Ex-
Im Bank also may provide its own statement regarding the disputed 
record. In addition, whenever Ex-Im Bank corrects a record or receives a 
statement of disagreement, Ex-Im Bank shall, as is reasonable under the 
circumstances, advise any person or agency to which it previously 
disclosed such record of the correction or statement, provided that an 
accounting of such disclosure exists.



Sec. 404.19  Request for accounting of record disclosures.

    (a) Required information. With respect to each system of records 
under Ex-Im Bank control, Ex-Im Bank shall maintain an accurate 
accounting of the date, nature, and purpose of each external disclosure 
of a record and the name and address of all persons, organizations, and 
agencies to which disclosure has been made. Ex-Im Bank shall retain this 
accounting for at least five years or the life of the record, whichever 
is longer.
    (b) Form. An individual may obtain an accounting of all disclosures 
of a record, provided that such individual establishes his or her 
identity as the subject of such record in accordance with the procedures 
set forth at Sec. 404.14(d) and (e). A request for an accounting must 
be made in writing and must be signed by the requester. The request 
should be addressed to the Freedom of Information and Privacy Office at 
the address in Sec. 404.12(e) and should contain both the return 
address and telephone number of the requester. Both the envelope and the 
request itself should be clearly be marked in capital letters: ``PRIVACY 
ACT ACCOUNTING REQUEST.'' Failure to properly mark or address the 
request may slow its processing. The request shall not be deemed to have 
been received by Ex-Im Bank until the Freedom of Information and Privacy 
Office receives the request. The letter must clearly identify the 
particular record for which the accounting is requested.
    (c) Initial determination. The Freedom of Information and Privacy 
Office shall notify the requester whether the request will be granted or 
denied within ten working days of receipt of a valid request for an 
accounting. Ex-Im Bank

[[Page 642]]

shall not charge for processing such a request.
    (d) Exceptions. Ex-Im Bank shall not be required to provide an 
accounting to an individual when the accounting relates to a disclosure 
made:
    (1) To an employee within the agency;
    (2) Under the FOIA; or
    (3) To a law enforcement agency for an authorized law enforcement 
activity in response to a written request from such agency which 
specified the law enforcement activity for which the disclosure was 
sought.



Sec. 404.20  Notice of court-ordered and emergency disclosures.

    (a) Court-ordered disclosures. When a record pertaining to an 
individual is required to be disclosed by a court order, the Assistant 
General Counsel for Administration shall make reasonable efforts to 
provide notice to the subject individual. Notice shall be given within a 
reasonable time after Ex-Im Bank's receipt of the order, except that in 
a case in which the order is not a matter of public record, notice shall 
be given only after the order becomes public. Such notice shall be 
mailed to the individual's last known address and shall contain a copy 
of the order and a description of the information disclosed.
    (b) Emergency disclosures. If a record has been disclosed by Ex-Im 
Bank under compelling circumstances affecting the health or safety of 
any person, then, within ten working days, the Assistant General Counsel 
for Administration shall notify the subject individual of the disclosure 
at his or her last known address. The notice of such disclosure shall be 
in writing and shall state the:
    (1) Nature of the information disclosed;
    (2) Person, organization or agency to which it was disclosed;
    (3) Date of disclosure; and
    (4) Compelling circumstances justifying the disclosure.



Sec. 404.21  Submission of social security and passport numbers.

    (a) Policy. Ex-Im Bank recognizes the importance of assessing, to 
the extent reasonably possible, the risks associated with transactions 
supported by Ex-Im Bank. It is often difficult to assess risks related 
to individuals and non-publicly trade entities. Therefore, when an 
individual or a non-publicly traded entity applies for participation in 
an Ex-Im Bank program or is proposed as a guarantor for an Ex-Im Bank 
transaction, Ex-Im Bank may request social security and/or U.S. passport 
numbers from such individual or from the principals of such entity. Ex-
Im Bank shall not require submission of this information, and 
unwillingness or inability to provide a social security or passport 
number shall not affect Ex-Im Bank's decision on an application for Ex-
Im Bank assistance.
    (b) Use. Ex-Im Bank shall use social security and passport numbers 
to assess the creditworthiness of Ex-Im Bank program participants and as 
a mechanism for enforcing agreements with Ex-Im Bank. Such information 
shall not be disclosed, except as warranted by law and regulation.
    (c) Notice. Whenever Ex-Im Bank requests a social security or 
passport number, Ex-Im Bank shall place an appropriate Privacy Act 
notification on the form used to collect the information.



Sec. 404.22  Government contracts.

    (a) Approval by Assistant General Counsel for Administration. Ex-Im 
Bank shall not contract for the operation of a system of records or for 
an activity that requires access to a system of records without the 
express, written approval of the Assistant General Counsel for 
Administration.
    (b) Contract clauses. Any contract authorized under paragraph (a) of 
this section shall contain the standard contract clauses required by the 
Federal Acquisition Regulation (48 CFR 24.104) to ensure compliance with 
the requirements imposed by the Privacy Act. The division within Ex-Im 
Bank that is responsible for technical supervision of the contract shall 
be responsible for ensuring that the contractor complies with the 
Privacy Act contract requirements.
    (c) Contractor status. Any contractor that operates an Ex-Im Bank 
system of records or engages in an activity that requires access to an 
Ex-Im Bank system of records shall be considered an

[[Page 643]]

Ex-Im Bank employee for purposes of this subpart. Ex-Im Bank shall 
supply any such contractor with a copy of the regulations in this 
subpart upon entering into a contract with Ex-Im Bank.



Sec. 404.23  Other rights and services.

    Nothing in this subpart shall be construed to entitle any person to 
any service or to the disclosure of any record to which such person is 
not entitled under the Privacy Act.



    Subpart C_Demands for Testimony of Current and Former Ex-Im Bank 
           Personnel and for Production of Ex-Im Bank Records

    Source: 71 FR 14361, Mar. 22, 2006, unless otherwise noted.



Sec. 404.24  General provisions.

    (a) Purpose. This subpart establishes policy, assigns 
responsibilities and prescribes procedures with respect to:
    (1) The production or disclosure of official information or records 
of Ex-Im Bank in all legal proceedings to which Ex-Im Bank is not a 
party;
    (2) Demands for testimony of Ex-Im Bank personnel related to 
information acquired as a result of performance of their official 
duties, or by virtue of their official status, in all legal proceedings 
where Ex-Im Bank is not a party; and
    (3) The offer of expert or opinion testimony by Ex-Im Bank personnel 
regarding matters related to the performance of their official duties.
    (b) Policy. Ex-Im Bank seeks to further the following goals in 
enacting this subpart:
    (1) Conservation of agency resources for official business;
    (2) Minimization of agency involvement in controversial issues 
unrelated to its mission;
    (3) Maintenance of the agency's impartiality amongst private 
litigants;
    (4) Protection of confidential and/or sensitive information; and
    (5) Maintenance of the integrity of the agency's deliberative 
processes.



Sec. 404.25  Applicability.

    This subpart applies exclusively to demands for testimony and/or 
production of records issued to Ex-Im Bank personnel, in connection with 
legal proceedings to which Ex-Im Bank is not a party, regarding 
information acquired in the course of the performance of official duties 
or due to their official status. Nothing in this subpart shall be 
construed to waive the sovereign immunity of the United States. This 
subpart shall not apply to the following:
    (a) Demands for testimony and/or production of records pursuant to a 
legal proceeding to which Ex-Im Bank is a party:
    (b) Demands for testimony and/or production of records in those 
instances in which Ex-Im Bank personnel are asked to disclose 
information wholly unrelated to their official duties; and
    (c) Congressional demands and requests for testimony or records.



Sec. 404.26  Definitions.

    For purposes of this subpart, the following definitions shall 
apply--
    Demand--includes an order, subpoena, or other compulsory process 
issued by a party in litigation or a court of competent jurisdiction, 
requiring the production or release of Ex-Im Bank information or 
records, or requiring the testimony of Ex-Im Bank personnel.
    Ex-Im Bank personnel--includes any current or former officer or 
employee of Ex-Im Bank, including all individuals who have been 
appointed by, or subject to, the official supervision, jurisdiction, or 
control of any Ex-Im Bank employees. This definition encompasses all 
individuals hired through contractual agreements with Ex-Im Bank, such 
as: consultants, contractors, sub-contractors, and their employees.
    Legal proceeding--a case or controversy pending before any federal, 
state, or local court, including a grand jury proceeding; a proceeding 
before a federal, state, or local administrative judge, board, or other 
similar body with adjudicative powers; or a legislative proceeding 
before a state or local legislative body.

[[Page 644]]

    Records--all documentary materials that Ex-Im Bank creates or 
receives in connection with the transaction of official business, 
including any materials classified as ``Federal records'' under 44 
U.S.C. 3301 and its implementing regulations.
    Testimony--written or oral statements, including, but not limited 
to, depositions, answers to interrogatories, affidavits, declarations, 
and any other statements made in a legal proceeding, including any 
expert or opinion testimony.



Sec. 404.27  Demand requirements.

    A party's demand for testimony and/or production of records by Ex-Im 
Bank personnel regarding information acquired in the course of their 
performance of official duties or due to their official status shall be 
set forth in, or accompanied by, a signed affidavit or other written 
statement. Such affidavit or written statement must be submitted at 
least 30 days prior to the date such testimony and/or production of 
records is requested to be taken and/or produced. A copy of the 
affidavit or written statement shall be served on the other parties to 
the legal proceeding. The affidavit or written statement must:
    (a) Be addressed to the Export-Import Bank of the United States, 
Office of the General Counsel, 811 Vermont Ave., NW., Washington, DC 
20571;
    (b) State the nature of the legal proceeding, including any docket 
number, title of the case, and the name of the administrative or 
adjudicative body before which the proceedings are to be heard;
    (c) State the nature of the testimony or records sought;
    (d) State the relevance of the information sought to the legal 
proceedings;
    (e) State why such information can only be obtained through 
testimony or production of records by Ex-Im Bank personnel; and
    (f) Comply with all procedures governing valid service of process.



Sec. 404.28  Notification of General Counsel required.

    Ex-Im Bank personnel receiving a demand for testimony and/or 
production of records regarding information acquired in the course of 
their performance of official duties, or due to their official status, 
shall immediately notify the General Counsel of Ex-Im Bank (``General 
Counsel'') upon receipt of such demand. The General Counsel maintains 
the exclusive authority to waive the requirements of any or all sections 
of this subpart and reserves the right to delegate his or her authority 
under this subpart to other appropriate Ex-Im Bank personnel.



Sec. 404.29  Restrictions on testimony and production of records.

    Ex-Im Bank personnel may not provide testimony and/or produce 
records regarding information acquired in the course of their 
performance of official duties, or due to their official status, in 
connection with any legal proceeding to which this subpart applies, 
without authorization by the General Counsel. Such authorization must be 
in writing, unless the General Counsel determines that circumstances 
warrant an oral authorization, and such oral authorization is 
subsequently documented.



Sec. 404.30  Factors General Counsel may consider in determining whether to 

authorize testimony and/or the production of records.

    In determining whether to authorize Ex-Im Bank personnel to provide 
testimony and/or produce records regarding information acquired in the 
course of their performance of official duties, or due to their official 
status, the General Counsel may consider factors including, but not 
limited to, the following:
    (a) Efficiency--the conservation of the time and resources of Ex-Im 
Bank personnel for the conduct of official business;
    (b) Undue burden--whether the demand creates an undue burden upon 
Ex-Im Bank or is otherwise inappropriate under any applicable 
administrative or court rules;
    (c) Appearance of bias--whether the testimony and/or production of 
records could result in the public perception that Ex-Im Bank is 
favoring one party over another, or advocating the position of a party 
to the proceeding;

[[Page 645]]

    (d) Furtherance of agency policy--whether the testimony and/or 
production of records is consistent with the policy and mission of the 
Ex-Im Bank;
    (e) Prevention of fraud or injustice--whether the disclosure of the 
information requested is necessary to prevent the perpetration of fraud 
or injustice;
    (f) Relevance to litigation--whether the testimony and/or production 
of records sought is relevant to the subject litigation;
    (g) Necessity--whether the testimony and/or production of records, 
including a release of such in camera, is appropriate or necessary as 
determined by either the procedural rules governing the legal 
proceeding, or according to the relevant laws concerning privilege;
    (h) Availability from another source--whether the information sought 
through testimony or production of records is available from another 
source;
    (i) Violations of laws or regulations--whether the testimony and/or 
production of records would violate a statute, regulation, executive 
order, or other official directive;
    (j) Classified information--whether the testimony and/or production 
of records would improperly reveal information classified pursuant to 
applicable statute or Executive Order; and
    (k) Compromise of rights and interests--whether the testimony and/or 
production of records would compromise any of the following: law 
enforcement interests, constitutional rights, national security 
interests, foreign policy interests, or the confidentiality of 
commercial and/or financial information.



Sec. 404.31  Procedure for declining to testify and/or produce records.

    Ex-Im Bank personnel receiving a demand to provide testimony and/or 
produce records regarding information acquired in the course of their 
performance of official duties, or due to their official status, and who 
have not received written authorization from the General Counsel to 
provide such information, shall:
    (a) Respectfully decline to answer or appear for examination on the 
grounds that such testimony is forbidden by this subpart;
    (b) Request the opportunity to consult with the General Counsel;
    (c) Explain that only upon consultation may they be granted approval 
to provide such testimony;
    (d) Explain that providing such testimony or records absent approval 
may subject the individual to criminal liability under 18 U.S.C. 641, as 
well as other applicable laws, and other disciplinary action; and
    (e) Request a stay of the request or demand pending a determination 
by the General Counsel.



Sec. 404.32  Procedure in the event a decision concerning a demand is not made 

prior to the time a response to the demand is required.

    If response to a demand is required before a determination has been 
rendered by the General Counsel, the U.S. Attorney or such other 
attorney as may be designated for the purpose will appear with the Ex-Im 
Bank personnel upon whom the demand has been made, and will furnish the 
court or other authority with a copy of the regulations contained in 
this subpart and inform the court or other authority that the demand has 
been or is being, as the case may be, referred for prompt consideration 
of the General Counsel. The court or other authority shall be requested 
respectfully to stay the demand pending determination by the General 
Counsel.



Sec. 404.33  Procedure in the event of an adverse ruling.

    If the court or other authority declines to stay the effect of the 
demand in response to a request made in accordance with Sec. 404.32 
pending a determination by the General Counsel, or if the court or other 
authority rules that the demand must be complied with irrespective of 
the instructions from the General Counsel not to produce the material or 
disclose the information sought, the Ex-Im Bank personnel upon whom the 
demand has been made shall respectfully decline to comply with the 
demand (United States ex rel. Touhy v. Ragen, 340 U.S. 462).

[[Page 646]]



Sec. 404.34  Procedure for demands for testimony or production of documents 

regarding confidential information.

    In addition to compliance with the requirements of this subpart, 
demands to provide testimony and/or produce records that concern 
information protected by the Privacy Act, 5 U.S.C. 552a, or any other 
authority mandating confidentiality of certain classes of records or 
information, must also satisfy the requirements for disclosure imposed 
by such authority before records may be produced or testimony given.



Sec. 404.35  Procedures for requests for Ex-Im Bank employees to provide 

expert or opinion testimony.

    No Ex-Im Bank personnel may, unless specifically authorized by the 
General Counsel, testify in any legal proceeding as an expert or opinion 
witness as to any matter related to his or her duties or the functions 
of the Ex-Im Bank, including the meaning of Ex-Im Bank documents. Any 
demand for expert or opinion testimony shall comply with the policies 
and procedures outlined in this subpart.



Sec. 404.36  No private right of action.

    Nothing in this subpart shall be construed as creating any right, 
substantive or procedural, enforceable at law or equity by a party 
against Ex-Im Bank or the United States.

Subparts D-E [Reserved]

                           PART 405 [RESERVED]



PART 407_REGULATIONS GOVERNING PUBLIC OBSERVATION OF EX-IMBANK MEETINGS--Table 

of Contents




Sec.
407.1 Purpose, scope and definitions.
407.2 Closing meetings.
407.3 Procedures applicable to regularly scheduled meetings.
407.4 Procedures applicable to other meetings.
407.5 Certification by General Counsel.
407.6 Transcripts, recordings and minutes of closed meetings.
407.7 Relationship to Freedom of Information Act.

    Authority: Sec. (g) Government in the Sunshine Act, 5 U.S.C. 
552b(g); secs. (b) through (f), 5 U.S.C. 552b.

    Source: 42 FR 12417, Mar. 4, 1977, unless otherwise noted.



Sec. 407.1  Purpose, scope and definitions.

    (a) Consistent with the principles that: (1) The public is entitled 
to the fullest practicable information regarding the decision-making 
processes of the Federal Government, and (2) the rights of individuals 
and the ability of the Export-Import Bank of the United States to carry 
out its statutory responsibilities should be protected, this part is 
promulgated pursuant to the directive of section (g) of the Government 
in the Sunshine Act, 5 U.S.C. 552b(g), and specifically implements 
sections (b) through (f) of said Act, 5 U.S.C. 552b (b) through (f).
    (b) The term meeting means any meeting of the Board of Directors of 
Eximbank at which a quorum is present and where deliberations determine 
or result in the joint conduct or disposition of official Eximbank 
business.
    (c) The term regularly scheduled meeting means meetings of the Board 
of Directors or the Executive Committee which are held at 9:30 a.m. on 
Thursday of each week.
    (d) The term General Counsel means the General Counsel and his or 
her designees.

[42 FR 12417, Mar. 4, 1977, as amended at 47 FR 12136, Mar. 22, 1982; 49 
FR 41237, Oct. 22, 1984; 72 FR 66043, Nov. 27, 2007]



Sec. 407.2  Closing meetings.

    (a) Except where Eximbank finds that the public interest requires 
otherwise, a meeting, or any portion thereof, may be closed to the 
public, where the Board of Directors determines that such meetings, or 
any portion thereof, or information pertaining to such meeting, or any 
portion thereof, is likely to:
    (1) Disclose matters that are: (i) Specifically authorized under 
criteria established by an Executive order to be kept secret in the 
interests of national defense or foreign policy and (ii) in fact 
properly classified pursuant to such Executive order;

[[Page 647]]

    (2) Relate solely to the internal personnel rules and practices of 
Eximbank or any other agency;
    (3) Disclose matters specifically exempted from disclosure by 
statute (other than section 552 of title 5 U.S.C.), provided that such 
statute: (i) Requires that the matters be withheld from the public in 
such a manner as to leave no discretion on the issue, or (ii) 
establishes particular criteria for withholding or refers to particular 
types of matters to be withheld;
    (4) Disclose trade secrets and commercial or financial information 
obtained from a person and privileged or confidential;
    (5) Involve accusing any person of a crime, or formally censuring 
any person;
    (6) Disclose information of a personal nature where disclosure would 
constitute a clearly unwarranted invasion of personal privacy;
    (7) Disclose investigatory records compiled for law enforcement 
purposes, or information which if written would be contained in such 
records, but only to the extent that the production of such records or 
information would:
    (i) Interfere with enforcement proceedings,
    (ii) Deprive a person of a right to a fair trial or an impartial 
adjudication,
    (iii) Constitute an unwarranted invasion of personal privacy,
    (iv) Disclose the identity of a confidential source and, in the case 
of a record compiled by a criminal law enforcement authority in the 
course of a criminal investigation, or by an agency conducting a lawful 
national security intelligence investigation, confidential information 
funished only by the confidential source,
    (v) Disclose investigative techniques and procedures, or
    (vi) Endanger the life or physical safety of law enforcement 
personnel;
    (8) Disclose information contained in or related to examination, 
operating, or condition reports prepared by, on behalf of, or for the 
use of an agency responsible for the regulation or supervision of 
financial institutions;
    (9) Disclose information the premature disclosure of which would:
    (i) In the case of an agency which regulates currencies, securities, 
commodities, or financial institutions, be likely to: (A) Lead to 
significant financial speculation in currencies, securities, or 
commodities, or (B) significantly endanger the stability of any 
financial institution; or
    (ii) In the case of Eximbank or any other agency, be likely to 
significantly frustrate implementation of a proposed agency action;

except that paragraph (a)(9)(ii) of this section shall not apply in any 
instance where the agency has already disclosed to the public the 
content or nature of its proposed action, or where the agency is 
required by law to make such disclosure on its own initiative prior to 
taking final agency on such proposal; or
    (10) Specifically concern Eximbank's issuance of a subpoena, or 
Eximbank's participation in a civil action or proceeding, an action in a 
foreign court or international tribunal, or an arbitration.
    (b) Inasmuch as opening any regularly scheduled meeting, or any 
portion thereof, to public observation will be likely to result in the 
disclosure of the kind of information set forth in paragraph (a) (4), 
(8), (9)(i) or (a)(10) of this section, or any combination thereof, of 
paragraph (a) of this section, the Board of Directors expects to close 
all regularly scheduled meetings to the public.
    (c) Any other meeting of Eximbank, or any portion thereof, will be 
open to public observation except where the Board of Directors 
determines that such meeting, or any portion thereof, is likely to 
disclose information of the kind set forth in any paragraph of Sec. 
407.2(a). In the event that the Board of Directors closes such meeting, 
or any portion thereof, by virtue of paragraph (a)(4), (8), (9)(i)(A) or 
(a)(10) of this section, or any combination thereof, the procedure set 
forth in Sec. 407.3 below will apply, and in the event that the Board 
of Directors closes such meeting, or any portion thereof, by virtue of 
any of the remaining paragraphs of Sec. 407.2(a), or any combination 
thereof, the procedures set forth in Sec. 407.4 will apply.

[42 FR 12417, Mar. 4, 1977, as amended at 72 FR 66043, Nov. 27, 2007]

[[Page 648]]



Sec. 407.3  Procedures applicable to regularly scheduled meetings.

    (a) Announcements. Regularly scheduled meetings of the Board of 
Directors will be held at 9:30 a.m. every Thursday in the Board Room 
(Room 1141) of the Bank's headquarters. In the event that a regularly 
scheduled meeting is rescheduled, public announcement of the time, date 
and place of such meeting will be made at the earliest practicable time 
in the form of a notice posted in the Office of the Secretary. An agenda 
setting forth the subject matter of each regularly scheduled meeting 
will be made available in the Office of the Secretary (Room 935), 
telephone number (202) (566-8871) at the earliest practicable time, 
Provided, That individual items may be added to or deleted from any 
agenda at any time. Inquiries from the public regarding any regularly 
scheduled meeting shall be directed to the Office of the Secretary.
    (b) Voting. At the beginning of each regularly scheduled meeting, 
the Board of Directors will vote by recorded vote on whether to close 
such meeting. No proxy vote will be permitted. A record of such vote 
indicating the vote of each Director will be posted in the Office of the 
Secretary immediately following the conclusion of such meeting.

[42 FR 12417, Mar. 4, 1977, as amended at 47 FR 12136, Mar. 22, 1982; 49 
FR 9560, Mar. 14, 1984; 49 FR 41237, Oct. 22, 1984; 50 FR 8606, Mar. 4, 
1985; 72 FR 66043, Nov. 27, 2007]



Sec. 407.4  Procedures applicable to other meetings.

    (a) Amendments. (1) For every meeting which is to be open to public 
observation or which is to be closed pursuant to any paragraph of Sec. 
407.2(a) other than paragraphs (a) (4), (8), (9)(i) or (10), or any 
combination thereof, public announcement will be made at least one week 
before the meeting of the time, place, and the agenda setting forth the 
subject matter of such meeting, and whether the meeting, or any portion 
thereof, is to be open or closed to the public.
    (2) Inquiries from the public regarding any such meeting shall be 
directed to the Office of the Secretary.
    (3) The one-week period for the announcement required by paragraph 
(a)(1) of this section may be reduced if the Board of Directors 
determines by a recorded vote that Eximbank business requires such 
meeting to be called at an earlier date. Public announcement of the 
time, place, and subject matter of such meeting, and whether open or 
closed to the public, will be made at the earliest practicable time.
    (4) The time or place of a meeting may be changed following the 
announcement required by paragraph (a)(1) of this section only if public 
announcement is made of such change at the earliest practicable time.
    (5) The subject matter of a meeting or the determination of the 
Board of Directors to open or close a meeting, or any portion thereof, 
to the public, may be changed following the announcement required by 
paragraph (a) of this section only if:
    (i) A majority of the entire voting membership of the Board of 
Directors determines by a recorded vote that Eximbank business so 
requires and that no earlier announcement of the change was possible; 
and
    (ii) The Board of Directors announces such change and the vote of 
each Director upon such change at the earliest practicable time.
    (6) Individual items may be added to or deleted from any agenda at 
any time.
    (7) The announcements required pursuant to this section shall be 
made in the form of a notice posted in the Office of the Secretary. In 
addition, immediately following each announcement required by this 
section, notice of: (i) The time, place and subject matter of a meeting 
which is to be open to public observation or which is to be closed 
pursuant to any section of Sec. 407.2(a) other than paragraphs (a) (4), 
(8), (9)(i) or (10), or any combination thereof, (ii) the decision to 
open or close such meeting, or any portion thereof, or (iii) any change 
in any announcement previously made shall be submitted for publication 
in the Federal Register.
    (8) The information required by this subsection shall be disclosed 
except to the extent that it is exempt from disclosure under any section 
of Sec. 407.2(a).
    (b) Voting. (1) Action to close a meeting, or any portion thereof, 
pursuant to any section of Sec. 407.2(a), other than

[[Page 649]]

paragraphs (a) (4), (8), (9)(i), or (10), or any combination thereof, 
shall be taken only when a majority of the entire voting membership of 
the Board of Directors votes to take such action.
    (2) A separate vote of the Board of Directors shall be taken with 
respect to each meeting, or any portion thereof, which is proposed to be 
closed to the public pursuant to any section of Sec. 407.2(a) other 
than paragraphs (a) (4), (8), (9)(i) or (10), or any combination 
thereof, or with respect to any information which is proposed to be 
withheld under any section of Sec. 407.2(a), other than paragraphs (a) 
(4), (8), (9)(i) or (10), or any combination thereof.
    (3) A single vote of the Board of Directors may be taken with 
respect to a series of meetings, or any portion thereof, which are 
proposed to be closed to the public pursuant to any paragraph of Sec. 
407.2(a), other than paragraphs (a) (4), (8), (9)(i) or (10), or 
combination thereof, or with respect to any information concerning such 
series of meetings, so long as each meeting in such series involves the 
same particular matters and is scheduled to be held no more than 30 days 
after the initial meeting in such series.
    (4) Whenever any person whose interests may be directly affected by 
any portion of a meeting which is to be open to public observation 
submits a request in writing to the Office of the Secretary that the 
Board of Directors close such portion to the public under paragraph (a) 
(5), (6) or (7) of Sec. 407.2, the Board of Directors, shall vote by 
recorded vote on whether to close such portion.
    (5) No proxy vote will be permitted for any vote required under this 
section.
    (6) A record of each vote indicating the vote of each Director 
pursuant to paragraphs (b) (1), (2), (3) or (4) of this section will be 
posted in the Office of the Secretary within one day after it has been 
taken, Provided, That if a meeting or portion thereof is to be closed, 
such record shall be accompanied by: (i) A full written explanation of 
the reasons for closing such meeting or portion thereof and (ii) a list 
of all persons expected to attend such meeting or portion thereof and 
their affiliation.

[42 FR 12417, Mar. 4, 1977, as amended at 72 FR 66043, Nov. 27, 2007]



Sec. 407.5  Certification by General Counsel.

    For every meeting closed pursuant to any paragraph of Sec. 
407.2(a), the General Counsel of Eximbank will be asked to certify prior 
to such meeting that in his or her opinion such meeting may properly be 
closed to the public, and to state which of the exemptions set forth in 
Sec. 407.2(a) he or she has relied upon. A copy of such certification 
will be posted in the Office of the Secretary. The original 
certification together with a statement from the presiding officer of 
such meeting setting forth the time, date and place of such meeting and 
the persons present will be retained by Eximbank as part of the 
transcript, recording or minutes of such meeting described below.



Sec. 407.6  Transcripts, recordings and minutes of closed meetings.

    Eximbank will maintain a complete transcript or electronic recording 
of the proceedings of every meeting or portion thereof closed to the 
public, Provided, however, That if any meeting or portion thereof is 
closed pursuant to paragraphs (8), (9)(i) or (10) of Sec. 407.2(a), 
Eximbank may maintain a set of detailed minutes for such meetings in 
lieu of a transcript or electronic recording. The entire transcript, 
electronic recording or set of minutes of a meeting will be made 
promptly available to the public for inspection and copying in the 
Office of the Secretary. Copies of such transcript or minutes, as well 
as copies of the transcription of such recording disclosing the identity 
of each speaker, will be furnished to any person at the actual cost of 
duplication or transcription. However, Eximbank will not make available 
for inspection or copying the transcript, electronic recording or 
minutes of the discussions of any item on the agenda of such meeting 
which contains information of the kind described in Sec. 407.2(a). 
Requests to inspect or to have copies made of any transcript, electronic 
recording or set of minutes

[[Page 650]]

of any meeting or item(s) on the agenda, thereof should be made in 
writing to the General Counsel and if possible, identify the time, date 
and place of such meeting and briefly describe the item(s) being sought. 
Eximbank will maintain a complete verbatim copy of the transcript, a 
complete electronic recording or a complete copy of the minutes of each 
meeting, or portion thereof, closed to the public for two years after 
such meeting or one year from the date of final action of the Board of 
Directors on all items on the agenda of such meeting, whichever occurs 
later.

[42 FR 12417, Mar. 4, 1977, as amended at 72 FR 66043, Nov. 27, 2007]



Sec. 407.7  Relationship to Freedom of Information Act.

    Nothing in this part expands or limits the present rights of any 
person under part 404, except that the exemptions contained in Sec. 
407.2 shall govern in the case of any request made pursuant to part 404 
to copy or inspect the transcripts, recordings or minutes described in 
Sec. 407.6.



PART 408_PROCEDURES FOR COMPLIANCE WITH THE NATIONAL ENVIRONMENTAL POLICY ACT--Table of Contents




                            Subpart A_General

Sec.
408.1 Background.
408.2 Purpose.
408.3 Applicability.

               Subpart B_Eximbank Implementing Procedures

408.4 Early involvement in foreign activities for which Eximbank 
          financing may be requested.
408.5 Ensuring environmental documents are actually considered in Agency 
          decision-making.
408.6 Typical classes of action.
408.7 Environmental information.

    Authority: National Environmental Policy Act of 1969; 42 U.S.C. 4321 
et seq.

    Source: 44 FR 50811, Aug. 30, 1979, unless otherwise noted.



                            Subpart A_General



Sec. 408.1  Background.

    (a) The National Environmental Policy Act (NEPA) of 1969 (42 U.S.C. 
4321 et seq.) establishes national policies and goals for the protection 
of the environment. Section 102(2) of NEPA contains certain procedural 
requirements directed toward the attainment of such goals. In 
particular, all Federal agencies are required to give appropriate 
consideration to the environmental effects of their proposed actions in 
their decision-making and to prepare detailed environmental statements 
on recommendations or reports on proposals for legislation and other 
major Federal Actions significantly affecting the quality of the human 
environment.
    (b) Executive Order 11991 of May 24, 1977, directed the Council on 
Environmental Quality (CEQ) to issue regulations to implement the 
procedural provisions of NEPA (NEPA Regulations). Accordingly, CEQ 
issued final NEPA Regulations which are binding on all Federal agencies 
as of July 30, 1979 (40 CFR parts 1500 through 1508) on November 29, 
1979. These Regulations provide that each Federal agency shall as 
necessary adopt implementing procedures to supplement the NEPA 
Regulations. Section 1507.3(b) of the NEPA Regulations identifies those 
sections of the NEPA Regulations which must be addressed in agency 
procedures.



Sec. 408.2  Purpose.

    The purpose of this part is to establish procedures which supplement 
the NEPA Regulations and provide for the implementation of those 
provisions identified in Sec. 1507.3(b) of the NEPA Regulations.



Sec. 408.3  Applicability.

    Historically, virtually all financing provided by Eximbank has been 
in aid of U.S. exports which involve no effects on the quality of the 
environment within the United States, its territories or possessions. 
Eximbank has separate procedures for conducting environmental reviews 
where such reviews are required by E.O. 12114 (January 4, 1979) because 
of potential effects on the environment of global commons areas or on 
the environment of foreign

[[Page 651]]

nations. The procedures set forth in this part apply to the relatively 
rare cases where Eximbank financing of U.S. exports may affect 
environmental quality in the United States, its territories or 
possessions.



               Subpart B_Eximbank Implementing Procedures



Sec. 408.4  Early involvement in foreign activities for which Eximbank 

financing may be requested.

    (a) Section 1501.2(d) of the NEPA Regulations requires agencies to 
provide for early involvement in actions which, while planned by private 
applicants or other non-Federal entities, require some form of Federal 
approval. Pursuant to the Export-Import Bank Act of 1945, as amended, 
Eximbank is asked to provide financing for transactions involving 
exports of U.S. goods and services for projects in foreign countries 
which are planned by non-U.S. entities (Transactions).
    (b) To implement the requirements of Sec. 1501.2(d) with respect to 
these Transactions, Eximbank:
    (1) Will provide on a project-by-project basis to applicant seeking 
financing from Eximbank guidance as to the scope and level of 
environmental information to be used in evaluating a proposed 
Transaction where: (i) The proposed Eximbank financing would be a major 
action and (ii) a Transaction may significantly affect the quality of 
the human environment in the United States, its territories or 
possessions.
    (2) Upon receipt of an application for Eximbank financing or 
notification that an application will be filed, will consult as required 
with other appropriate parties to initiate and coordinate the necessary 
environmental analyses.

These responsibilities will be performed by the General Counsel and the 
Engineers of Eximbank.
    (c) To facilitate Eximbank review of Transactions for which positive 
determinations have been made under paragraphs (b)(1)(i) and (ii) of 
this section, applicants should:
    (1) Consult with the Engineer as early as possible in the planning 
process for guidance on the scope and level of environmental information 
required to be submitted in support of their application;
    (2) Conduct any studies which are deemed necessary and appropriate 
by Eximbank to determine the impact of the proposed action on the 
quality of the human environment;
    (3) Consult with appropriate U.S. (Federal, regional, State and 
local) agencies and other potentially interested parties during 
preliminary planning stages to ensure that all environmental factors are 
identified;
    (4) Submit applications for all U.S. (Federal, regional, State and 
local) approvals as early as possible in the planning process;
    (5) Notify Eximbank as early as possible of all other applicable 
legal requirements for project completion so that all applicable Federal 
environmental reviews may be coordinated; and
    (6) Notify Eximbank of all known parties potentially affected by or 
interested in the proposed action.



Sec. 408.5  Ensuring environmental documents are actually considered in Agency 

decision-making.

    Section 1505.1 of the NEPA Regulations contains requirements to 
ensure adequate consideration of environmental documents in agency 
decision-making. To implement these requirements, Eximbank officials 
will:
    (a) Consider all relevant environmental documents in evaluating 
applications for Eximbank financing;
    (b) Ensure that all relevant environmental documents, comments and 
responses accompany the application through Eximbank's review processes;
    (c) Consider only those alternatives encompassed by the range of 
alternatives discussed in the relevant environmental documents when 
evaluating an application which is the subject of an EIS.

[[Page 652]]



----------------------------------------------------------------------------------------------------------------
                                                                                     Key officials or offices
         Eximbank actions           Start of NEPA process    Completion of NEPA        required to consider
                                                                  process             environmental documents
----------------------------------------------------------------------------------------------------------------
Issuance of Preliminary Commitment  When application is    When the Board of      Under Sec.  408.4(b)(1) (i)
 (P.C.).                             received.              Directors meets to     and (ii), General Counsel to
                                                            consider               determine whether requested
                                                            application. The       Eximbank financing is a major
                                                            Board may notify       action and Engineer to
                                                            applicant that         determine whether proposed
                                                            environmental          Transaction may significantly
                                                            effects will be        affect the quality of the
                                                            considered when        human environment in the
                                                            final commitment is    United States, its
                                                            requested and          territories or possessions.
                                                            request information
                                                            on environmental
                                                            matters.
Issuance of Final Commitment......  When application is    When the Board of      (If no P.C. has been issued,
                                     received.              Directors meets to     key offices will make
                                                            consider application.  determinations mentioned
                                                                                   above.) Engineer to collect,
                                                                                   prepare or arrange for
                                                                                   preparation of all
                                                                                   environmental documents.
----------------------------------------------------------------------------------------------------------------



Sec. 408.6  Typical classes of action.

    (a) Section 1507.3(c)(2) of the NEPA Regulations in conjunction with 
Sec. 1508.4 thereof requires agencies to establish three typical 
classes of action for similar treatment under NEPA. These typical 
classes of action are set forth below:

----------------------------------------------------------------------------------------------------------------
                                              Actions normally requiring
    Actions normally requiring EIS's        assessments but not necessarily      Actions normally not requiring
                                                         EIS's                        assessments or EIS's
----------------------------------------------------------------------------------------------------------------
None...................................  Applications for Eximbank financing   Applications for Eximbank
                                          under the direct lending program in   financing in the form of
                                          support of transactions for which     insurance or guarantees.
                                          determinations under Sec.
                                          408.4(b)(1) (i) and (ii) above may
                                          be affirmative.
----------------------------------------------------------------------------------------------------------------

    (b) Eximbank will independently determine whether an EIS or an 
environmental assessment is required where:
    (1) A proposal for agency action is not covered by one of the 
typical classes of action above; or
    (2) For actions which are covered, the presence of extraordinary 
circumstances indicates that some other level of environmental review 
may be appropriate.



Sec. 408.7  Environmental information.

    Interested persons may contact the General Counsel regarding 
Eximbank's compliance with NEPA.



PART 410_ENFORCEMENT OF NONDISCRIMINATION ON THE BASIS OF HANDICAP IN PROGRAMS 

OR ACTIVITIES CONDUCTED BY EXPORT-IMPORT BANK OF THE UNITED STATES--Table of 

Contents




Sec.
410.101 Purpose.
410.102 Application.
410.103 Definitions.
410.104-410.109 [Reserved]
410.110 Self-evaluation.
410.111 Notice.
410.112-410.129 [Reserved]
410.130 General prohibitions against discrimination.
410.131-410.139 [Reserved]
410.140 Employment.
410.141-410.148 [Reserved]
410.149 Program accessibility: Discrimination prohibited.
410.150 Program accessibility: Existing facilities.
410.151 Program accessibility: New construction and alterations.
410.152-410.159 [Reserved]
410.160 Communications.
410.161-410.169 [Reserved]
410.170 Compliance procedures.
410.171-410.999 [Reserved]

    Authority: 29 U.S.C. 794.

    Source: 51 FR 4575, 4579, Feb. 5, 1986, unless otherwise noted.



Sec. 410.101  Purpose.

    This part effectuates section 119 of the Rehabilitation, 
Comprehensive Services, and Developmental Disabilities Amendments of 
1978, which amended section 504 of the Rehabilitation Act of 1973 to 
prohibit discrimination on the basis of handicap in programs or 
activities conducted by Executive agencies or the United States Postal 
Service.

[[Page 653]]



Sec. 410.102  Application.

    This part applies to all programs or activities conducted by the 
agency.



Sec. 410.103  Definitions.

    For purposes of this part, the term--
    Assistant Attorney General means the Assistant Attorney General, 
Civil Rights Division, United States Department of Justice.
    Auxiliary aids means services or devices that enable persons with 
impaired sensory, manual, or speaking skills to have an equal 
opportunity to participate in, and enjoy the benefits of, programs or 
activities conducted by the agency. For example, auxiliary aids useful 
for persons with impaired vision include readers, Brailled materials, 
audio recordings, telecommunications devices and other similar services 
and devices. Auxiliary aids useful for persons with impaired hearing 
include telephone handset amplifiers, telephones compatible with hearing 
aids, telecommunication devices for deaf persons (TDD's), interpreters, 
notetakers, written materials, and other similar services and devices.
    Complete complaint means a written statement that contains the 
complainant's name and address and describes the agency's alleged 
discriminatory action in sufficient detail to inform the agency of the 
nature and date of the alleged violation of section 504. It shall be 
signed by the complainant or by someone authorized to do so on his or 
her behalf. Complaints filed on behalf of classes or third parties shall 
describe or identify (by name, if possible) the alleged victims of 
discrimination.
    Facility means all or any portion of buildings, structures, 
equipment, roads, walks, parking lots, rolling stock or other 
conveyances, or other real or personal property.
    Handicapped person means any person who has a physical or mental 
impairment that substantially limits one or more major life activities, 
has a record of such an impairment, or is regarded as having such an 
impairment.
    As used in this definition, the phrase:
    (l) Physical or mental impairment includes--
    (i) Any physiological disorder or condition, cosmetic disfigurement, 
or anatomical loss affecting one of more of the following body systems: 
Neurological; musculoskeletal; special sense organs; respiratory, 
including speech organs; cardiovascular; reproductive; digestive; 
genitourinary; hemic and lymphatic; skin; and endocrine; or
    (ii) Any mental or psychological disorder, such as mental 
retardation, organic brain syndrome, emotional or mental illness, and 
specific learning disabilities. The term physical or mental impairment 
includes, but is not limited to, such diseases and conditions as 
orthopedic, visual, speech, and hearing impairments, cerebral palsy, 
epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, 
diabetes, mental retardation, emotional illness, and drug addition and 
alcholism.
    (2) Major life activities includes functions such as caring for 
one's self, performing manual tasks, walking, seeing, hearing, speaking, 
breathing, learning, and working.
    (3) Has a record of such an impairment means has a history of, or 
has been misclassified as having, a mental or physical impairment that 
substantially limits one or more major life activities.
    (4) Is regarded as having an impairment means--
    (i) Has a physical or mental impairment that does not substantially 
limit major life activities but is treated by the agency as constituting 
such a limitation;
    (ii) Has a physical or mental impairment that substantially limits 
major life activities only as a result of the attitudes of others toward 
such impairment; or
    (iii) Has none of the impairments defined in paragraph (1) of this 
definition but is treated by the agency as having such an impairment.
    Qualified handicapped person means--
    (1) With respect to any agency program or activity under which a 
person is required to perform services or to achieve a level of 
accomplishment, a handicapped person who meets the essential eligibility 
requirements and who can achieve the purpose of the program or activity 
without modifications in the program or activity that the agency can 
demonstrate would result in a fundamental alteration in its nature; or

[[Page 654]]

    (2) With respect to any other program or activity, a handicapped 
person who meets the essential eligibility requirements for 
participation in, or receipt of benefits from, that program or activity.
    (3) Qualified handicapped person is defined for purposes of 
employment in 29 CFR 1613.702(f), which is made applicable to this part 
by Sec. 410.140.
    Section 504 means section 504 of the Rehabilitation Act of 1973 
(Pub. L. 93-112, 87 Stat. 394 (29 U.S.C. 794)), as amended by the 
Rehabilitation Act Amendments of 1974 (Pub. L. 93-516, 88 Stat. 1617), 
and the Rehabilitation, Comprehensive Services, and Developmental 
Disabilities Amendments of 1978 (Pub. L. 95-602, 92 Stat. 2955). As used 
in this part, section 504 applies only to programs or activities 
conducted by Executive agencies and not to federally assisted programs.

[51 FR 4575, 4579, Feb. 5, 1986; 51 FR 7543, Mar. 5, 1986]



Sec. Sec. 410.104-410.109  [Reserved]



Sec. 410.110  Self-evaluation.

    (a) The agency shall, by April 9, 1987, evaluate its current 
policies and practices, and the effects thereof, that do not or may not 
meet the requirements of this part, and, to the extent modification of 
any such policies and practices is required, the agency shall proceed to 
make the necessary modifications.
    (b) The agency shall provide an opportunity to interested persons, 
including handicapped persons or organizations representing handicapped 
persons, to participate in the self-evaluation process by submitting 
comments (both oral and written).
    (c) The agency shall, until three years following the completion of 
the self-evaluation, maintain on file and make available for public 
inspections:
    (1) A description of areas examined and any problems identified, and
    (2) A description of any modifications made.



Sec. 410.111  Notice.

    The agency shall make available to employees, applicants, 
participants, beneficiaries, and other interested persons such 
information regarding the provisions of this part and its applicability 
to the programs or activities conducted by the agency, and make such 
information available to them in such manner as the head of the agency 
finds necessary to apprise such persons of the protections against 
discrimination assured them by section 504 and this regulation.



Sec. Sec. 410.112-410.129  [Reserved]



Sec. 410.130  General prohibitions against discrimination.

    (a) No qualified handicapped person shall, on the basis of handicap, 
be excluded from participation in, be denied the benefits of, or 
otherwise be subjected to discrimination under any program or activity 
conducted by the agency.
    (b)(1) The agency, in providing any aid, benefit, or service, may 
not, directly or through contractual, licensing, or other arrangements, 
on the basis of handicap--
    (i) Deny a qualified handicapped person the opportunity to 
participate in or benefit from the aid, benefit, or service;
    (ii) Afford a qualfied handicapped person an opportunity to 
participate in or benefit from the aid, benefit, or service that is not 
equal to that afforded others;
    (iii) Provide a qualified handicapped person with an aid, benefit, 
or service that is not as effective in affording equal opportunity to 
obtain the same result, to gain the same benefit, or to reach the same 
level of achievement as that provided to others;
    (iv) Provide different or separate aid, benefits, or services to 
handicapped persons or to any class of handicapped persons than is 
provided to others unless such action is necessary to provide qualified 
handicapped persons with aid, benefits, or services that are as 
effective as those provided to others;
    (v) Deny a qualified handicapped person the opportunity to 
participate as a member of planning or advisory boards; or
    (vi) Otherwise limit a qualified handicapped person in the enjoyment 
of any right, privilege, advantage, or opportunity enjoyed by others 
receiving the aid, benefit, or service.

[[Page 655]]

    (2) The agency may not deny a qualified handicapped person the 
opportunity to participate in programs or activities that are not 
separate or different, despite the existence of permissibly separate or 
different programs or activities.
    (3) The agency may not, directly or through contractual or other 
arrangements, utilize criteria or methods of administration the purpose 
or effect of which would--
    (i) Subject qualified handicapped persons to discrimination on the 
basis of handicap; or
    (ii) Defeat or substantially impair accomplishment of the objectives 
of a program or activity with respect to handicapped persons.
    (4) The agency may not, in determining the site or location of a 
facility, make selections the purpose or effect of which would--
    (i) Exclude handicapped persons from, deny them the benefits of, or 
otherwise subject them to discrimination under any program or activity 
conducted by the agency; or
    (ii) Defeat or substantially impair the accomplishment of the 
objectives of a program or activity with respect to handicapped persons.
    (5) The agency, in the selection of procurement contractors, may not 
use criteria that subject qualified handicapped persons to 
discrimination on the basis of handicap.
    (c) The exclusion of nonhandicapped persons from the benefits of a 
program limited by Federal statute or Executive order to handicapped 
persons or the exclusion of a specific class of handicapped persons from 
a program limited by Federal statute or Executive order to a different 
class of handicapped persons is not prohibited by this part.
    (d) The agency shall administer programs and activities in the most 
integrated setting appropriate to the needs of qualified handicapped 
persons.



Sec. Sec. 410.131-410.139  [Reserved]



Sec. 410.140  Employment.

    No qualified handicapped person shall, on the basis of handicap, be 
subjected to discrimination in employment under any program or activity 
conducted by the agency. The definitions, requirements, and procedures 
of section 501 of the Rehabilitation Act of 1973 (29 U.S.C. 791), as 
established by the Equal Employment Opportunity Commission in 29 CFR 
part 1613, shall apply to employment in federally conducted programs or 
activities.



Sec. Sec. 410.141-410.148  [Reserved]



Sec. 410.149  Program accessibility: Discrimination prohibited.

    Except as otherwise provided in Sec. 410.150, no qualified 
handicapped person shall, because the agency's facilities are 
inaccessible to or unusable by handicapped persons, be denied the 
benefits of, be excluded from participation in, or otherwise be 
subjected to discrimination under any program or activity conducted by 
the agency.



Sec. 410.150  Program accessibility: Existing facilities.

    (a) General. The agency shall operate each program or activity so 
that the program or activity, when viewed in its entirety, is readily 
accessible to and usable by handicapped persons. This paragraph does 
not--
    (1) Necessarily require the agency to make each of its existing 
facilities accessible to and usable by handicapped persons; or
    (2) Require the agency to take any action that it can demonstrate 
would result in a fundamental alteration in the nature of a program or 
activity or in undue financial and administrative burdens. In those 
circumstances where agency personnel believe that the proposed action 
would fundamentally alter the program or activity or would result in 
undue financial and administrative burdens, the agency has the burden of 
proving that compliance with Sec. 410.150(a) would result in such 
alteration or burdens. The decision that compliance would result in such 
alteration or burdens must be made by the agency head or his or her 
designee after considering all agency resources available for use in the 
funding and operation of the conducted program or activity, and must be 
accompanied by a written statement of the reasons for reaching that 
conclusion. If an action would result in such an alteration or

[[Page 656]]

such burdens, the agency shall take any other action that would not 
result in such an alteration or such burdens but would nevertheless 
ensure that handicapped persons receive the benefits and services of the 
program or activity.
    (b) Methods. The agency may comply with the requirements of this 
section through such means as redesign of equipment, reassignment of 
services to accessible buildings, assignment of aides to beneficiaries, 
home visits, delivery of services at alternate accessible sites, 
alteration of existing facilities and construction of new facilities, 
use of accessible rolling stock, or any other methods that result in 
making its programs or activities readily accessible to and usable by 
handicapped persons. The agency is nor required to make structural 
changes in existing facilities where other methods are effective in 
achieving compliance with this section. The agency, in making 
alterations to existing buildings, shall meet accessibility requirements 
to the extent compelled by the Architectural Barriers Act of 1968, as 
amended (42 U.S.C. 4151 through 4157), and any regulations implementing 
it. In choosing among available methods for meeting the requirements of 
this section, the agency shall give priority to those methods that offer 
programs and activities to qualified handicapped persons in the most 
integrated setting appropriate.
    (c) Time period for compliance. The agency shall comply with the 
obligations established under this section by June 6, 1986, except that 
where structural changes in facilities are undertaken, such changes 
shall be made by April 7, 1989, but in any event as expeditiously as 
possible.
    (d) Transition plan. In the event that structural changes to 
facilities will be undertaken to achieve program accessibility, the 
agency shall develop, by October 7, 1986, a transition plan setting 
forth the steps necessary to complete such changes. The agency shall 
provide an opportunity to interested persons, including handicapped 
persons or organizations representing handicapped persons, to 
participate in the development of the transition plan by submitting 
comments (both oral and written). A copy of the transition plan shall be 
made available for public inspection. The plan shall, at a minimum--
    (1) Identify physical obstacles in the agency's facilities that 
limit the accessibility of its programs or activities to handicapped 
persons;
    (2) Describe in detail the methods that will be used to make the 
facilities accessible;
    (3) Specify the schedule for taking the steps necessary to achieve 
compliance with this section and, if the time period of the transition 
plan is longer than one year, identify steps that will be taken during 
each year of the transition period; and
    (4) Indicate the official responsible for implementation of the 
plan.

[51 FR 4575, 4579, Feb. 5, 1986; 51 FR 7543, Mar. 5, 1986]



Sec. 410.151  Program accessibility: New construction and alterations.

    Each building or part of a building that is constructed or altered 
by, on behalf of, or for the use of the agency shall be designed, 
constructed, or altered so as to be readily accessible to and usable by 
handicapped persons. The definitions, requirements, and standards of the 
Architectural Barriers Act (42 U.S.C. 4151 through 4157), as established 
in 41 CFR 101-19.600 to 101-19.607, apply to buildings covered by this 
section.



Sec. Sec. 410.152-410.159  [Reserved]



Sec. 410.160  Communications.

    (a) The agency shall take appropriate steps to ensure effective 
communication with applicants, participants, personnel of other Federal 
entities, and members of the public.
    (1) The agency shall furnish appropriate auxiliary aids where 
necessary to afford a handicapped person an equal opportunity to 
participate in, and enjoy the benefits of, a program or activity 
conducted by the agency.
    (i) In determining what type of auxiliary aid is necessary, the 
agency shall give primary consideration to the requests of the 
handicapped person.
    (ii) The agency need not provide individually prescribed devices, 
readers for

[[Page 657]]

personal use or study, or other devices of a personal nature.
    (2) Where the agency communicates with applicants and beneficiaries 
by telephone, telecommunication devices for deaf persons (TDD's) or 
equally effective telecommunication systems shall be used.
    (b) The agency shall ensure that interested persons, including 
persons with impaired vision or hearing, can obtain information as to 
the existence and location of accessible services, activities, and 
facilities.
    (c) The agency shall provide signage at a primary entrance to each 
of its inaccessible facilities, directing users to a location at which 
they can obtain information about accessible facilities. The 
international symbol for accessibility shall be used at each primary 
entrance of an accessible facility.
    (d) This section does not require the agency to take any action that 
it can demonstrate would result in a fundamental alteration in the 
nature of a program or activity or in undue financial and administrative 
burdens. In those circumstances where agency personnel believe that the 
proposed action would fundamentally alter the program or activity or 
would result in undue financial and administrative burdens, the agency 
has the burden of proving that compliance with Sec. 410.160 would 
result in such alteration or burdens. The decision that compliance would 
result in such alteration or burdens must be made by the agency head or 
his or her designee after considering all agency resources available for 
use in the funding and operation of the conducted program or activity, 
and must be accompanied by a written statement of the reasons for 
reaching that conclusion. If an action required to comply with this 
section would result in such an alteration or such burdens, the agency 
shall take any other action that would not result in such an alteration 
or such burdens but would nevertheless ensure that, to the maximum 
extent possible, handicapped persons receive the benefits and services 
of the program or activity.



Sec. Sec. 410.161-410.169  [Reserved]



Sec. 410.170  Compliance procedures.

    (a) Except as provided in paragraph (b) of this section, this 
section applies to all allegations of discrimination on the basis of 
handicap in programs or activities conducted by the agency.
    (b) The agency shall process complaints alleging violations of 
section 504 with respect to employment according to the procedures 
established by the Equal Employment Opportunity Commission in 29 CFR 
part 1613 pursuant to section 501 of the Rehabilitation Act of 1973 (29 
U.S.C. 791).
    (c) General Counsel, Export-Import Bank of the United States shall 
be responsible for coordinating implementation of this section. 
Complaints may be sent to General Counsel, Export-Import Bank of the 
United States, 811 Vermont Avenue, NW., Room 947, Washington, DC 20571.
    (d) The agency shall accept and investigate all complete complaints 
for which it has jurisdiction. All complete complaints must be filed 
within 180 days of the alleged act of discrimination. The agency may 
extend this time period for good cause.
    (e) If the agency receives a complaint over which it does not have 
jurisdiction, it shall promptly notify the complainant and shall make 
reasonable efforts to refer the complaint to the appropriate government 
entity.
    (f) The agency shall notify the Architectural and Transportation 
Barriers Compliance Board upon receipt of any complaint alleging that a 
building or facility that is subject to the Architectural Barriers Act 
of 1968, as amended (42 U.S.C. 4151 through 4157), or section 502 of the 
Rehabilitation Act of 1973, as amended (29 U.S.C. 792), is not readily 
accessible to and usable by handicapped persons.
    (g) Within 180 days of the receipt of a complete complaint for which 
it has jurisdiction, the agency shall notify the complainant of the 
results of the investigation in a letter containing--
    (1) Findings of fact and conclusions of law;
    (2) A description of a remedy for each violation found;
    (3) A notice of the right to appeal.

[[Page 658]]

    (h) Appeals of the findings of fact and conclusions of law or 
remedies must be filed by the complainant within 90 days of receipt from 
the agency of the letter required by Sec. 410.170(g). The agency may 
extend this time for good cause.
    (i) Timely appeals shall be accepted and processed by the head of 
the agency.
    (j) The head of the agency shall notify the complainant of the 
results of the appeal within 60 days of the receipt of the request. If 
the head of the agency determines that additional information is needed 
from the complainant, he or she shall have 60 days from the date of 
receipt of the additional information to make his or her determination 
on the appeal.
    (k) The time limits cited in paragraphs (g) and (j) of this section 
may be extended with the permission of the Assistant Attorney General.
    (l) The agency may delegate its authority for conducting complaint 
investigations to other Federal agencies, except that the authority for 
making the final determination may not be delegated to another agency.

[51 FR 4575, 4579, Feb. 5, 1986, as amended at 51 FR 7543, Mar. 5, 1986]



Sec. Sec. 410.171-410.999  [Reserved]



PART 411_NEW RESTRICTIONS ON LOBBYING--Table of Contents




                            Subpart A_General

Sec.
411.100 Conditions on use of funds.
411.105 Definitions.
411.110 Certification and disclosure.

                  Subpart B_Activities by Own Employees

411.200 Agency and legislative liaison.
411.205 Professional and technical services.
411.210 Reporting.

            Subpart C_Activities by Other Than Own Employees

411.300 Professional and technical services.

                   Subpart D_Penalties and Enforcement

411.400 Penalties.
411.405 Penalty procedures.
411.410 Enforcement.

                          Subpart E_Exemptions

411.500 Secretary of Defense.

                        Subpart F_Agency Reports

411.600 Semi-annual compilation.
411.605 Inspector General report.

Appendix A to Part 411--Certification Regarding Lobbying
Appendix B to Part 411--Disclosure Form To Report Lobbying

    Authority: Sec. 319, Pub. L. 101-121 (31 U.S.C. 1352); 5 U.S.C. 
552a.

    Source: 55 FR 6737, 6747, Feb. 26, 1990, unless otherwise noted.

    Cross Reference: See also Office of Management and Budget notice 
published at 54 FR 52306, Dec. 20, 1989.



                            Subpart A_General



Sec. 411.100  Conditions on use of funds.

    (a) No appropriated funds may be expended by the recipient of a 
Federal contract, grant, loan, or cooperative ageement to pay any person 
for influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with any of the following 
covered Federal actions: the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (b) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or cooperative agreement shall file with that 
agency a certification, set forth in appendix A, that the person has not 
made, and will not make, any payment prohibited by paragraph (a) of this 
section.
    (c) Each person who requests or receives from an agency a Federal 
contract, grant, loan, or a cooperative agreement shall file with that 
agency a disclosure form, set forth in appendix B, if such person has 
made or has agreed to make any payment using nonappropriated funds (to 
include profits from any covered Federal action),

[[Page 659]]

which would be prohibited under paragraph (a) of this section if paid 
for with appropriated funds.
    (d) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a statement, set forth in appendix A, whether that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.
    (e) Each person who requests or receives from an agency a commitment 
providing for the United States to insure or guarantee a loan shall file 
with that agency a disclosure form, set forth in appendix B, if that 
person has made or has agreed to make any payment to influence or 
attempt to influence an officer or employee of any agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with that loan insurance or guarantee.



Sec. 411.105  Definitions.

    For purposes of this part:
    (a) Agency, as defined in 5 U.S.C. 552(f), includes Federal 
executive departments and agencies as well as independent regulatory 
commissions and Government corporations, as defined in 31 U.S.C. 
9101(1).
    (b) Covered Federal action means any of the following Federal 
actions:
    (1) The awarding of any Federal contract;
    (2) The making of any Federal grant;
    (3) The making of any Federal loan;
    (4) The entering into of any cooperative agreement; and,
    (5) The extension, continuation, renewal, amendment, or modification 
of any Federal contract, grant, loan, or cooperative agreement.

Covered Federal action does not include receiving from an agency a 
commitment providing for the United States to insure or guarantee a 
loan. Loan guarantees and loan insurance are addressed independently 
within this part.
    (c) Federal contract means an acquisition contract awarded by an 
agency, including those subject to the Federal Acquisition Regulation 
(FAR), and any other acquisition contract for real or personal property 
or services not subject to the FAR.
    (d) Federal cooperative agreement means a cooperative agreement 
entered into by an agency.
    (e) Federal grant means an award of financial assistance in the form 
of money, or property in lieu of money, by the Federal Government or a 
direct appropriation made by law to any person. The term does not 
include technical assistance which provides services instead of money, 
or other assistance in the form of revenue sharing, loans, loan 
guarantees, loan insurance, interest subsidies, insurance, or direct 
United States cash assistance to an individual.
    (f) Federal loan means a loan made by an agency. The term does not 
include loan guarantee or loan insurance.
    (g) Indian tribe and tribal organization have the meaning provided 
in section 4 of the Indian Self-Determination and Education Assistance 
Act (25 U.S.C. 450B). Alaskan Natives are included under the definitions 
of Indian tribes in that Act.
    (h) Influencing or attempting to influence means making, with the 
intent to influence, any communication to or appearance before an 
officer or employee or any agency, a Member of Congress, an officer or 
employee of Congress, or an employee of a Member of Congress in 
connection with any covered Federal action.
    (i) Loan guarantee and loan insurance means an agency's guarantee or 
insurance of a loan made by a person.
    (j) Local government means a unit of government in a State and, if 
chartered, established, or otherwise recognized by a State for the 
performance of a governmental duty, including a local public authority, 
a special district, an intrastate district, a council of governments, a 
sponsor group representative organization, and any other instrumentality 
of a local government.
    (k) Officer or employee of an agency includes the following 
individuals who are employed by an agency:

[[Page 660]]

    (1) An individual who is appointed to a position in the Government 
under title 5, U.S. Code, including a position under a temporary 
appointment;
    (2) A member of the uniformed services as defined in section 101(3), 
title 37, U.S. Code;
    (3) A special Government employee as defined in section 202, title 
18, U.S. Code; and,
    (4) An individual who is a member of a Federal advisory committee, 
as defined by the Federal Advisory Committee Act, title 5, U.S. Code 
appendix 2.
    (l) Person means an individual, corporation, company, association, 
authority, firm, partnership, society, State, and local government, 
regardless of whether such entity is operated for profit or not for 
profit. This term excludes an Indian tribe, tribal organization, or any 
other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (m) Reasonable compensation means, with respect to a regularly 
employed officer or employee of any person, compensation that is 
consistent with the normal compensation for such officer or employee for 
work that is not furnished to, not funded by, or not furnished in 
cooperation with the Federal Government.
    (n) Reasonable payment means, with respect to perfessional and other 
technical services, a payment in an amount that is consistent with the 
amount normally paid for such services in the private sector.
    (o) Recipient includes all contractors, subcontractors at any tier, 
and subgrantees at any tier of the recipient of funds received in 
connection with a Federal contract, grant, loan, or cooperative 
agreement. The term excludes an Indian tribe, tribal organization, or 
any other Indian organization with respect to expenditures specifically 
permitted by other Federal law.
    (p) Regularly employed means, with respect to an officer or employee 
of a person requesting or receiving a Federal contract, grant, loan, or 
cooperative agreement or a commitment providing for the United States to 
insure or guarantee a loan, an officer or employee who is employed by 
such person for at least 130 working days within one year immediately 
preceding the date of the submission that initiates agency consideration 
of such person for receipt of such contract, grant, loan, cooperative 
agreement, loan insurance commitment, or loan guarantee commitment. An 
officer or employee who is employed by such person for less than 130 
working days within one year immediately preceding the date of the 
submission that initiates agency consideration of such person shall be 
considered to be regularly employed as soon as he or she is employed by 
such person for 130 working days.
    (q) State means a State of the United States, the District of 
Columbia, the Commonwealth of Puerto Rico, a territory or possession of 
the United States, an agency or instrumentality of a State, and a multi-
State, regional, or interstate entity having governmental duties and 
powers.



Sec. 411.110  Certification and disclosure.

    (a) Each person shall file a certification, and a disclosure form, 
if required, with each submission that initiates agency consideration of 
such person for:
    (1) Award of a Federal contract, grant, or cooperative agreement 
exceeding $100,000; or
    (2) An award of a Federal loan or a commitment providing for the 
United States to insure or guarantee a loan exceeding $150,000.
    (b) Each person shall file a certification, and a disclosure form, 
if required, upon receipt by such person of:
    (1) A Federal contract, grant, or cooperative agreement exceeding 
$100,000; or
    (2) A Federal loan or a commitment providing for the United States 
to insure or guarantee a loan exceeding $150,000,

Unless such person previously filed a certification, and a disclosure 
form, if required, under paragraph (a) of this section.
    (c) Each person shall file a disclosure form at the end of each 
calendar quarter in which there occurs any event that requires 
disclosure or that materially affects the accuracy of the information 
contained in any disclosure form previously filed by such person

[[Page 661]]

under paragraph (a) or (b) of this section. An event that materially 
affects the accuracy of the information reported includes:
    (1) A cumulative increase of $25,000 or more in the amount paid or 
expected to be paid for influencing or attempting to influence a covered 
Federal action; or
    (2) A change in the person(s) or individual(s) influencing or 
attempting to influence a covered Federal action; or,
    (3) A change in the officer(s), employee(s), or Member(s) contacted 
to influence or attempt to influence a covered Federal action.
    (d) Any person who requests or receives from a person referred to in 
paragraph (a) or (b) of this section:
    (1) A subcontract exceeding $100,000 at any tier under a Federal 
contract;
    (2) A subgrant, contract, or subcontract exceeding $100,000 at any 
tier under a Federal grant;
    (3) A contract or subcontract exceeding $100,000 at any tier under a 
Federal loan exceeding $150,000; or,
    (4) A contract or subcontract exceeding $100,000 at any tier under a 
Federal cooperative agreement,

Shall file a certification, and a disclosure form, if required, to the 
next tier above.
    (e) All disclosure forms, but not certifications, shall be forwarded 
from tier to tier until received by the person referred to in paragraph 
(a) or (b) of this section. That person shall forward all disclosure 
forms to the agency.
    (f) Any certification or disclosure form filed under paragraph (e) 
of this section shall be treated as a material representation of fact 
upon which all receiving tiers shall rely. All liability arising from an 
erroneous representation shall be borne solely by the tier filing that 
representation and shall not be shared by any tier to which the 
erroneous representation is forwarded. Submitting an erroneous 
certification or disclosure constitutes a failure to file the required 
certification or disclosure, respectively. If a person fails to file a 
required certification or disclosure, the United States may pursue all 
available remedies, including those authorized by section 1352, title 
31, U.S. Code.
    (g) For awards and commitments in process prior to December 23, 
1989, but not made before that date, certifications shall be required at 
award or commitment, covering activities occurring between December 23, 
1989, and the date of award or commitment. However, for awards and 
commitments in process prior to the December 23, 1989 effective date of 
these provisions, but not made before December 23, 1989, disclosure 
forms shall not be required at time of award or commitment but shall be 
filed within 30 days.
    (h) No reporting is required for an activity paid for with 
appropriated funds if that activity is allowable under either subpart B 
or C.



                  Subpart B_Activities by Own Employees



Sec. 411.200  Agency and legislative liaison.

    (a) The prohibition on the use of appropriated funds, in Sec. 
411.100 (a), does not apply in the case of a payment of reasonable 
compensation made to an officer or employee of a person requesting or 
receiving a Federal contract, grant, loan, or cooperative agreement if 
the payment is for agency and legislative liaison activities not 
directly related to a covered Federal action.
    (b) For purposes of paragraph (a) of this section, providing any 
information specifically requested by an agency or Congress is allowable 
at any time.
    (c) For purposes of paragraph (a) of this section, the following 
agency and legislative liaison activities are allowable at any time only 
where they are not related to a specific solicitation for any covered 
Federal action:
    (1) Discussing with an agency (including individual demonstrations) 
the qualities and characteristics of the person's products or services, 
conditions or terms of sale, and service capabilities; and,
    (2) Technical discussions and other activities regarding the 
application or adaptation of the person's products or services for an 
agency's use.
    (d) For purposes of paragraph (a) of this section, the following 
agencies and

[[Page 662]]

legislative liaison activities are allowable only where they are prior 
to formal solicitation of any covered Federal action:
    (1) Providing any information not specifically requested but 
necessary for an agency to make an informed decision about initiation of 
a covered Federal action;
    (2) Technical discussions regarding the preparation of an 
unsolicited proposal prior to its official submission; and,
    (3) Capability presentations by persons seeking awards from an 
agency pursuant to the provisions of the Small Business Act, as amended 
by Pub. L. 95-507 and other subsequent amendments.
    (e) Only those activities expressly authorized by this section are 
allowable under this section.



Sec. 411.205  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
411.100 (a), does not apply in the case of a payment of reasonable 
compensation made to an officer or employee of a person requesting or 
receiving a Federal contract, grant, loan, or cooperative agreement or 
an extension, continuation, renewal, amendment, or modification of a 
Federal contract, grant, loan, or cooperative agreement if payment is 
for professional or technical services rendered directly in the 
preparation, submission, or negotiation of any bid, proposal, or 
application for that Federal contract, grant, loan, or cooperative 
agreement or for meeting requirements imposed by or pursuant to law as a 
condition for receiving that Federal contract, grant, loan, or 
cooperative agreement.
    (b) For purposes of paragraph (a) of this section, professional and 
technical services shall be limited to advice and analysis directly 
applying any professional or technical discipline. For example, drafting 
of a legal document accompanying a bid or proposal by a lawyer is 
allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of his or her client's 
proposal, but generally advocate one proposal over another are not 
allowable under this section because the lawyer is not providing 
professional legal services. Similarly, communications with the intent 
to influence made by an engineer providing an engineering analysis prior 
to the preparation or submission of a bid or proposal are not allowable 
under this section since the engineer is providing technical services 
but not directly in the preparation, submission or negotiation of a 
covered Federal action.
    (c) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.
    (d) Only those services expressly authorized by this section are 
allowable under this section.



Sec. 411.210  Reporting.

    No reporting is required with respect to payments of reasonable 
compensation made to regularly employed officers or employees of a 
person.



            Subpart C_Activities by Other Than Own Employees



Sec. 411.300  Professional and technical services.

    (a) The prohibition on the use of appropriated funds, in Sec. 
411.100 (a), does not apply in the case of any reasonable

[[Page 663]]

payment to a person, other than an officer or employee of a person 
requesting or receiving a covered Federal action, if the payment is for 
professional or technical services rendered directly in the preparation, 
submission, or negotiation of any bid, proposal, or application for that 
Federal contract, grant, loan, or cooperative agreement or for meeting 
requirements imposed by or pursuant to law as a condition for receiving 
that Federal contract, grant, loan, or cooperative agreement.
    (b) The reporting requirements in Sec. 411.110 (a) and (b) 
regarding filing a disclosure form by each person, if required, shall 
not apply with respect to professional or technical services rendered 
directly in the preparation, submission, or negotiation of any 
commitment providing for the United States to insure or guarantee a 
loan.
    (c) For purposes of paragraph (a) of this section, professional and 
technical services shall be limited to advice and analysis directly 
applying any professional or technical discipline. For example, drafting 
or a legal document accompanying a bid or proposal by a lawyer is 
allowable. Similarly, technical advice provided by an engineer on the 
performance or operational capability of a piece of equipment rendered 
directly in the negotiation of a contract is allowable. However, 
communications with the intent to influence made by a professional (such 
as a licensed lawyer) or a technical person (such as a licensed 
accountant) are not allowable under this section unless they provide 
advice and analysis directly applying their professional or technical 
expertise and unless the advice or analysis is rendered directly and 
solely in the preparation, submission or negotiation of a covered 
Federal action. Thus, for example, communications with the intent to 
influence made by a lawyer that do not provide legal advice or analysis 
directly and solely related to the legal aspects of his or her client's 
proposal, but generally advocate one proposal over another are not 
allowable under this section because the lawyer is not providing 
professional legal services. Similarly, communications with the intent 
to influence made by an engineer providing an engineering analysis prior 
to the preparation or submission of a bid or proposal are not allowable 
under this section since the engineer is providing technical services 
but not directly in the preparation, submission or negotiation of a 
covered Federal action.
    (d) Requirements imposed by or pursuant to law as a condition for 
receiving a covered Federal award include those required by law or 
regulation, or reasonably expected to be required by law or regulation, 
and any other requirements in the actual award documents.
    (e) Persons other than officers or employees of a person requesting 
or receiving a covered Federal action include consultants and trade 
associations.
    (f) Only those services expressly authorized by this section are 
allowable under this section.



                   Subpart D_Penalties and Enforcement



Sec. 411.400  Penalties.

    (a) Any person who makes an expenditure prohibited herein shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such expenditure.
    (b) Any person who fails to file or amend the disclosure form (see 
appendix B) to be filed or amended if required herein, shall be subject 
to a civil penalty of not less than $10,000 and not more than $100,000 
for each such failure.
    (c) A filing or amended filing on or after the date on which an 
administrative action for the imposition of a civil penalty is commenced 
does not prevent the imposition of such civil penalty for a failure 
occurring before that date. An administrative action is commenced with 
respect to a failure when an investigating official determines in 
writing to commence an investigation of an allegation of such failure.
    (d) In determining whether to impose a civil penalty, and the amount 
of any such penalty, by reason of a violation by any person, the agency 
shall consider the nature, circumstances, extent, and gravity of the 
violation, the effect on the ability of such person to

[[Page 664]]

continue in business, any prior violations by such person, the degree of 
culpability of such person, the ability of the person to pay the 
penalty, and such other matters as may be appropriate.
    (e) First offenders under paragraph (a) or (b) of this section shall 
be subject to a civil penalty of $10,000, absent aggravating 
circumstances. Second and subsequent offenses by persons shall be 
subject to an appropriate civil penalty between $10,000 and $100,000, as 
determined by the agency head or his or her designee.
    (f) An imposition of a civil penalty under this section does not 
prevent the United States from seeking any other remedy that may apply 
to the same conduct that is the basis for the imposition of such civil 
penalty.



Sec. 411.405  Penalty procedures.

    Agencies shall impose and collect civil penalties pursuant to the 
provisions of the Program Fraud and Civil Remedies Act, 31 U.S.C. 
sections 3803 (except subsection (c)), 3804, 3805, 3806, 3807, 3808, and 
3812, insofar as these provisions are not inconsistent with the 
requirements herein.



Sec. 411.410  Enforcement.

    The head of each agency shall take such actions as are necessary to 
ensure that the provisions herein are vigorously implemented and 
enforced in that agency.



                          Subpart E_Exemptions



Sec. 411.500  Secretary of Defense.

    (a) The Secretary of Defense may exempt, on a case-by-case basis, a 
covered Federal action from the prohibition whenever the Secretary 
determines, in writing, that such an exemption is in the national 
interest. The Secretary shall transmit a copy of each such written 
exemption to Congress immediately after making such a determination.
    (b) The Department of Defense may issue supplemental regulations to 
implement paragraph (a) of this section.



                        Subpart F_Agency Reports



Sec. 411.600  Semi-annual compilation.

    (a) The head of each agency shall collect and compile the disclosure 
reports (see appendix B) and, on May 31 and November 30 of each year, 
submit to the Secretary of the Senate and the Clerk of the House of 
Representatives a report containing a compilation of the information 
contained in the disclosure reports received during the six-month period 
ending on March 31 or September 30, respectively, of that year.
    (b) The report, including the compilation, shall be available for 
public inspection 30 days after receipt of the report by the Secretary 
and the Clerk.
    (c) Information that involves intelligence matters shall be reported 
only to the Select Committee on Intelligence of the Senate, the 
Permanent Select Committee on Intelligence of the House of 
Representatives, and the Committees on Appropriations of the Senate and 
the House of Representatives in accordance with procedures agreed to by 
such committees. Such information shall not be available for public 
inspection.
    (d) Information that is classified under Executive Order 12356 or 
any successor order shall be reported only to the Committee on Foreign 
Relations of the Senate and the Committee on Foreign Affairs of the 
House of Representatives or the Committees on Armed Services of the 
Senate and the House of Representatives (whichever such committees have 
jurisdiction of matters involving such information) and to the 
Committees on Appropriations of the Senate and the House of 
Representatives in accordance with procedures agreed to by such 
committees. Such information shall not be available for public 
inspection.
    (e) The first semi-annual compilation shall be submitted on May 31, 
1990, and shall contain a compilation of the disclosure reports received 
from December 23, 1989 to March 31, 1990.
    (f) Major agencies, designated by the Office of Management and 
Budget (OMB), are required to provide machine-readable compilations to 
the Secretary of the Senate and the Clerk of the House of 
Representatives no

[[Page 665]]

later than with the compilations due on May 31, 1991. OMB shall provide 
detailed specifications in a memorandum to these agencies.
    (g) Non-major agencies are requested to provide machine-readable 
compilations to the Secretary of the Senate and the Clerk of the House 
of Representatives.
    (h) Agencies shall keep the originals of all disclosure reports in 
the official files of the agency.



Sec. 411.605  Inspector General report.

    (a) The Inspector General, or other official as specified in 
paragraph (b) of this section, of each agency shall prepare and submit 
to Congress each year, commencing with submission of the President's 
Budget in 1991, an evaluation of the compliance of that agency with, and 
the effectiveness of, the requirements herein. The evaluation may 
include any recommended changes that may be necessary to strengthen or 
improve the requirements.
    (b) In the case of an agency that does not have an Inspector 
General, the agency official comparable to an Inspector General shall 
prepare and submit the annual report, or, if there is no such comparable 
official, the head of the agency shall prepare and submit the annual 
report.
    (c) The annual report shall be submitted at the same time the agency 
submits its annual budget justifications to Congress.
    (d) The annual report shall include the following: All alleged 
violations relating to the agency's covered Federal actions during the 
year covered by the report, the actions taken by the head of the agency 
in the year covered by the report with respect to those alleged 
violations and alleged violations in previous years, and the amounts of 
civil penalties imposed by the agency in the year covered by the report.



      Sec. Appendix A to Part 411--Certification Regarding Lobbying

 Certification for Contracts, Grants, Loans, and Cooperative Agreements

    The undersigned certifies, to the best of his or her knowledge and 
belief, that:
    (1) No Federal appropriated funds have been paid or will be paid, by 
or on behalf of the undersigned, to any person for influencing or 
attempting to influence an officer or employee of an agency, a Member of 
Congress, an officer or employee of Congress, or an employee of a Member 
of Congress in connection with the awarding of any Federal contract, the 
making of any Federal grant, the making of any Federal loan, the 
entering into of any cooperative agreement, and the extension, 
continuation, renewal, amendment, or modification of any Federal 
contract, grant, loan, or cooperative agreement.
    (2) If any funds other than Federal appropriated funds have been 
paid or will be paid to any person for influencing or attempting to 
influence an officer or employee of any agency, a Member of Congress, an 
officer or employee of Congress, or an employee of a Member of Congress 
in connection with this Federal contract, grant, loan, or cooperative 
agreement, the undersigned shall complete and submit Standard Form-LLL, 
``Disclosure Form to Report Lobbying,'' in accordance with its 
instructions.
    (3) The undersigned shall require that the language of this 
certification be included in the award documents for all subawards at 
all tiers (including subcontracts, subgrants, and contracts under 
grants, loans, and cooperative agreements) and that all subrecipients 
shall certify and disclose accordingly.
    This certification is a material representation of fact upon which 
reliance was placed when this transaction was made or entered into. 
Submission of this certification is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required certification shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

            Statement for Loan Guarantees and Loan Insurance

    The undersigned states, to the best of his or her knowledge and 
belief, that:
    If any funds have been paid or will be paid to any person for 
influencing or attempting to influence an officer or employee of any 
agency, a Member of Congress, an officer or employee of Congress, or an 
employee of a Member of Congress in connection with this commitment 
providing for the United States to insure or guarantee a loan, the 
undersigned shall complete and submit Standard Form-LLL, ``Disclosure 
Form to Report Lobbying,'' in accordance with its instructions.
    Submission of this statement is a prerequisite for making or 
entering into this transaction imposed by section 1352, title 31, U.S. 
Code. Any person who fails to file the required statement shall be 
subject to a civil penalty of not less than $10,000 and not more than 
$100,000 for each such failure.

[[Page 666]]



     Sec. Appendix B to Part 411--Disclosure Form To Report Lobbying

[GRAPHIC] [TIFF OMITTED] TC23SE91.003


[[Page 667]]


[GRAPHIC] [TIFF OMITTED] TC23SE91.004


[[Page 668]]


[GRAPHIC] [TIFF OMITTED] TC23SE91.005


[[Page 669]]





PART 412_ACCEPTANCE OF PAYMENT FROM A NON-FEDERAL SOURCE FOR TRAVEL EXPENSES--

Table of Contents




Sec.
412.1 Authority.
412.3 General.
412.5 Policy.
412.7 Conditions for acceptance.
412.9 Conflict of interest analysis.
412.11 Payment guidelines.
412.13 Limitations and penalties.

    Authority: 5 U.S.C. 5701-5709; 12 U.S.C. 635(2)(a)(1).

    Source: 59 FR 31136, June 17, 1994, unless otherwise noted.



Sec. 412.1  Authority.

    This part is issued under the authority of 5 U.S.C. 553, 5 U.S.C. 
5701-5709 and 12 U.S.C. 635(2)(a)(1).



Sec. 412.3  General.

    (a) Applicability. This part applies to acceptance by the Export-
Import Bank of the United States (Eximbank) of payment from a non-
Federal source for travel, subsistence, and related expenses with 
respect to the attendance of an employee in a travel status at any 
meeting or similar event relating to the official duties of the 
employee, other than those described in 41 CFR 304-1.2. This part does 
not authorize acceptance of such payments by an employee in his/her 
personal capacity.
    (b) Solicitation prohibited. An employee shall not solicit payment 
for travel, subsistence and related expenses from a non-Federal source. 
However, after receipt of an invitation from a non-Federal source to 
attend a meeting or similar event, Eximbank or the employee may inform 
the non-Federal source of this authority.
    (c) Definitions. As used in this part, the following definitions 
apply:
    (1) Conflicting non-Federal source. Conflicting non-Federal source 
means any person who, or entity other than the Government of the United 
States which, has interests that may be substantially affected by the 
performance or nonperformance of the employee's duties.
    (2) Employee. Employee means any director, officer or other employee 
of Eximbank.
    (3) Meeting or similar event. Meeting or similar event means a 
meeting, formal gathering, site visit, negotiation session or similar 
event that takes place away from the employee's official station and 
which is directly related to the mission of Eximbank. This term does not 
include any meeting or similar function described in 41 CFR 304-1.2 or 
sponsored by Eximbank. A meeting or similar event need not be widely 
attended for purposes of this definition.
    (4) Non-Federal source. Non-Federal source means any person or 
entity other than the Government of the United States. The term includes 
any individual, private or commercial entity, nonprofit organization or 
association, state, local, or foreign government, or international or 
multinational organization.
    (5) Payment. Payment means funds paid or reimbursed to Eximbank by a 
non-Federal source for travel, subsistence, and related expenses by 
check or similar instrument, or payment in kind.
    (6) Payment in kind. Payment in kind means goods, services or other 
benefits provided by a non-Federal source for travel, subsistence, and 
related expenses in lieu of funds paid to Eximbank by check or similar 
instrument for the same purpose.
    (7) Travel, subsistence and related expenses. Travel, subsistence 
and related expenses means the same types of expenses payable under 41 
CFR chapter 301.



Sec. 412.5  Policy.

    As provided in this part, Eximbank may accept payment from a non-
Federal source (or authorize an employee to receive such payment on its 
behalf) with respect to attendance of the employee at a meeting or 
similar event which the employee has been authorized to attend in an 
official capacity on behalf of Eximbank. The employee's immediate 
supervisor and Eximbank's designated agency ethics official or his/her 
designee (DAEO) must approve any offer and acceptance of payment under 
this part in accordance with the procedures described below. If the 
employee is a member of Eximbank's Board of Directors, only the DAEO's 
approval is required. Any employee authorized to

[[Page 670]]

travel in accordance with this part is subject to the maximum per diem 
or actual subsistence expense rates and transportation class of service 
limitations prescribed in 41 CFR chapter 301.



Sec. 412.7  Conditions for acceptance.

    (a) Eximbank may accept payment for employee travel from a non-
Federal source when a written authorization to accept payment is issued 
in advance of the travel following a determination by the employee's 
supervisor (except in the case of Board members) and the DAEO that the 
payment is:
    (1) For travel relating to an employee's official duties under an 
official travel authorization issued to the employee;
    (2) For attendance at a meeting or similar event as defined in Sec. 
412.3(c)(3):
    (i) In which the employee's participation is necessary in order to 
further the mission of Eximbank;
    (ii) Which cannot be held at the offices of Eximbank for justifiable 
business reasons in light of the location and number of participants and 
the purpose of the meeting or similar event; and
    (iii) Which is taking place at a location and for a period of time 
that is appropriate for the purpose of the meeting or similar event;
    (3) From a non-Federal source that is not a conflicting non-Federal 
source or from a conflicting non-Federal source that has been approved 
under Sec. 412.9; and
    (4) In an amount which does not exceed the maximum per diem or 
actual subsistence expense rates and transportation class of service 
limitations prescribed in 41 CFR chapter 301.
    (b) An employee requesting approval of payment of travel expenses by 
a non-Federal source under this part shall submit to the employee's 
supervisor (except in the case of Board members) and the DAEO a written 
description of the following: the nature of the meeting or similar event 
and the reason that it cannot be held at Eximbank, the date(s) and 
location of the meeting or similar event, the identities of all 
participants in the meeting or similar event, the name of the non-
Federal source offering to make the payment, the amount and method of 
the proposed payment, and the nature of the expenses.
    (c) Payments may be accepted from multiple sources under paragraph 
(a) of this section.



Sec. 412.9  Conflict of interest analysis.

    Eximbank may accept payment from a conflicting non-Federal source if 
the conditions of Sec. 412.7 are met and the employee's supervisor 
(except in the case of Board members) and the DAEO determine that 
Eximbank's interest in the employee's attendance at or participation in 
the meeting or similar event outweighs concern that acceptance of the 
payment by Eximbank may cause a reasonable person to question the 
integrity of Eximbank's programs and operations. In determining whether 
to accept payment, Eximbank shall consider all relevant factors, 
including the purpose of the meeting or similar event, the importance of 
the travel for Eximbank, the nature and sensitivity of any pending 
matter affecting the interests of the conflicting non-Federal source, 
the significance of the employee's role in any such matter, the identity 
of other expected participants, and the location and duration of the 
meeting or similar event.



Sec. 412.11  Payment guidelines.

    (a) Payments from a non-Federal source, other than payments in kind, 
shall be by check or similar instrument made payable to Eximbank. 
Payments from a non-Federal source, including payments in kind, are 
subject to the maximum per diem or actual subsistence expense rates and 
transportation class of service limitations prescribed in 41 CFR chapter 
301.
    (b) If Eximbank determines in advance of the travel that a payment 
covers some but not all of the per diem costs to be incurred by the 
employee, Eximbank shall authorize a reduced per diem rate, in 
accordance with 41 CFR part 301-7.12.



Sec. 412.13  Limitations and penalties.

    (a) This part is in addition to and not in place of any other 
authority under which Eximbank may accept payment from a non-Federal 
source or authorize an employee to accept such payment on behalf of 
Eximbank. This part shall

[[Page 671]]

not be applied in connection with the acceptance by Eximbank of payment 
for travel, subsistence, and related expenses incurred by an employee to 
attend a meeting or similar function described in and authorized by 41 
CFR part 304-1.
    (b) An employee who accepts any payment in violation of this part is 
subject to the following:
    (1) The employee may be required, in addition to any penalty 
provided by law and applicable regulations, to repay for deposit to the 
general fund of the Treasury, an amount equal to the amount of the 
payment so accepted; and
    (2) When repayment is required under paragraph (b)(1) of this 
section, the employee shall not be entitled to any payment or 
reimbursement from Eximbank for such expenses.



PART 414_CONFERENCE AND OTHER FEES--Table of Contents




    Authority: 12 U.S.C. 635(a)(1), 5 U.S.C. 553.



Sec. 414.1  Collection of conference and other fees.

    Ex-Im Bank may impose and collect reasonable fees to cover the costs 
of conferences and seminars sponsored by, and publications provided by 
Ex-Im Bank. Amounts received under the preceding sentence shall be 
credited to the fund which initially paid for such activities and shall 
be offset against the expenses of Ex-Im Bank for such activities.

[72 FR 66043, Nov. 27, 2007]

                        PARTS 415-499 [RESERVED]


[[Page 673]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  List of CFR Sections Affected

[[Page 675]]



                    Table of CFR Titles and Chapters




                     (Revised as of January 1, 2009)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 100--
                199)
        II  Office of Management and Budget Circulars and Guidance 
                (200--299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300-- 
                399)
        VI  Department of State (Parts 600--699)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1880--1899)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Housing and Urban Development (Parts 2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)
     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)
      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
    XXXVII  Peace Corps (Parts 3700--3799)

[[Page 676]]

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--99)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600-- 3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Parts 4300--
                4399)
      XXXV  Office of Personnel Management (Parts 4500--4599)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)
       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)

[[Page 677]]

       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
      XCIX  Department of Defense Human Resources Management and 
                Labor Relations Systems (Department of Defense--
                Office of Personnel Management) (Parts 9900--9999)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 0--99)
         X  Privacy and Civil Liberties Oversight Board (Parts 
                1000--1099)

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)

[[Page 678]]

       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)
      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)

[[Page 679]]

      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)
         L  Rural Business-Cooperative Service, Rurual Housing 
                Service, and Rural Utilities Service, Department 
                of Agriculture (Parts 5000--5099)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1303--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)
     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts9400--9499)

[[Page 680]]

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)
         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)

[[Page 681]]

        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  Bureau of Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)

[[Page 682]]

        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Bureau of Immigration and Customs Enforcement, 
                Department of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)
        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millenium Challenge Corporation (Parts 1300--1399)

[[Page 683]]

       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                HousingCommissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)
        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)

[[Page 684]]

         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--899)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)
        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)

[[Page 685]]

      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)

[[Page 686]]

            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)
    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)

[[Page 687]]

            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvmeent, 
                Department of Education [Reserved]
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)
        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                301--399)

[[Page 688]]

        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)
            Chapters 62--100 [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
            Chapters 103--104 [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)

[[Page 689]]

            Chapters 129--200 [Reserved]
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10010)

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare

[[Page 690]]

        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899) 
                [Reserved]
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)
       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)

[[Page 691]]

       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)
        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)

[[Page 692]]

        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)

[[Page 693]]

        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR

[[Page 695]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of January 1, 2009)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII, L
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV, L
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII, L
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX

[[Page 696]]

Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    28, VIII
     for the District of Columbia
Customs and Border Protection Bureau              19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII

[[Page 697]]

  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                5, III, LXXVII; 14, VI; 
                                                  48, 99
  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2

[[Page 698]]

  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    12, XII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II
General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61

[[Page 699]]

  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A,
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  6, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection Bureau            19, I
  Federal Emergency Management Agency             44, I
  Immigration and Customs Enforcement Bureau      19, IV
  Immigration and Naturalization                  8, I
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV
Immigration and Naturalization                    8, I
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII
Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V

[[Page 700]]

Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                2, XXVII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V
  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50

[[Page 701]]

  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
  Copyright Royalty Board                         37, III
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Millenium Challenge Corporation                   22, XIII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Intelligence, Office of Director of      32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII
National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
   and Technology Policy
[[Page 702]]

National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Privacy and Civil Liberties Oversight Board       6, X
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
     National Security Council
Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII

[[Page 703]]

Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection Bureau            19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8
Veterans' Employment and Training Service,        41, 61; 20, IX
   Office of the Assistant Secretary for
[[Page 704]]

Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 705]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations that were 
made by documents published in the Federal Register since January 1, 
2001, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 
11 separate volumes.

                                  2001

12 CFR
                                                                   66 FR
                                                                    Page
Chapter III
303.14 Added.......................................................54650
303.120 Regulation at 65 FR 15529 confirmed; revised................1027
303.121 Regulation at 65 FR 15529 confirmed.........................1027
303.122 Regulation at 65 FR 15530 confirmed; (a) and (b) amended 
                                                                    1027
303.123 Regulation at 65 FR 15530 confirmed.........................1027
303.141 (b)(1)(ii) revised..........................................1028
303.142 (a), (b) and (c) amended....................................1028
308 Authority citation revised................................8638, 9189
308.101 (b) revised.................................................9189
308.132 (c)(3)(xv) revised..........................................9189
308.302 (a) revised.................................................8638
308.500--308.546 (Subpart T) Added..................................9189
325.2 (g) through (x) redesignated as (i) through (z); new (g) and 
        (h) added; new (v) and (x) revised.........................59652
325.3 (b)(1) amended...............................................59652
325.5 (f) and (g)(2) revised.......................................59652
325.103 (b) amended................................................59653
325 Appendix A amended.............................................59653
    Appendix B amended.............................................59661
337.4 Removed.......................................................1028
337.6 (e) removed..................................................17622
343 Regulation at 65 FR 75843 eff. date delayed....................15348
346 Added...........................................................2099
346.9 (a)(1) corrected.............................................14071
346.11 (j)(2)(iv) corrected........................................14071
362 Authority citation revised......................................1028
362.1 (c) revised...................................................1028
362.2 (r) revised...................................................1028
362.4 (b)(5)(ii) introductory text and (c)(2)(vi) revised...........1028
362.5 (b)(1), (2) and (3) removed...................................1028
362.6 Revised.......................................................1028
362.7 (a) and (b) revised...........................................1028
362.8 Revised.......................................................1028
362.10 (a) revised..................................................1029
362.12 (b)(2)(i) and (4) removed; (c) heading and (b)(1) amended 
                                                                    1029
362.16--362.18 (Subpart E) Regulation at 65 FR 15530 confirmed; 
        revised.....................................................1029
364 Authority citation revised......................................8638
364.101 (b) revised.................................................8638
364 Appendix B revised..............................................8638

                                  2002

12 CFR
                                                                   67 FR
                                                                    Page
Chapter III
Chapter III Nomenclature change....................................44351
303 Revised........................................................79247
304 Revised........................................................18794
308.102 (b)(2) amended.............................................71070
309.5 (b)(1), (ii), (iii), (d)(1), (2)(i), (ii), (f)(1)(x), 
        (4)(ii) and (h)(1) amended.................................71071
309.6 (b) amended..................................................71071
309.7 (a) and (b) amended..........................................71071
310.3 (b) amended..................................................71071
310.4 (a) amended..................................................71071
310.5 (b) and (c) amended..........................................71071

[[Page 706]]

310.7 Amended......................................................71071
310.8 (a) amended..................................................71071
310.9 (a) amended..................................................71071
311.4 (e) amended..................................................71071
311.5 (b)(2) amended...............................................71071
311.8 (d)(1) and (2) amended.......................................71071
313 Added..........................................................48527
325.2 (v) and (x) revised...........................................3804
325.5 (f)(3), (4) and (g)(2)(i) revised.............................3804
325 Appendix A amended.......................................3804, 16978
    Appendix A corrected...........................................34991
337.10 Amended.....................................................71071
360 Authority citation revised.....................................34386
360.7 Added........................................................34386
366 Revised........................................................69991
366 Revised; interim...............................................34596
369.2 (b), (c) and (d) revised; (f) and (g) redesignated as (g) 
        and (h); new (f) added.....................................38848
369.3 (a) revised..................................................38849

                                  2003

12 CFR
                                                                   68 FR
                                                                    Page
Chapter III
303.2 Amended......................................................50459
303.4 Amended......................................................50459
303.11 (g)(3)(ii) revised..........................................50459
303.12 Added.......................................................50459
303.15 Added........................................................7308
303.22 (a)(1) amended..............................................50459
303.80 Revised.....................................................50459
303.81 Revised.....................................................50459
303.82 (a) through (d) revised.....................................50460
303.83 (a)(1), (2), (6) and (7), (b)(1) and (2) revised; (a)(8) 
        added......................................................50460
303.85 (a) and (b) revised.........................................50460
303.86 (c) revised.................................................50461
303.244 (c)(4) and (5) revised; (c)(6) added.......................50461
308 Authority citation revised.....................................48269
308.109 (b)(3) amended.............................................48270
308.600--308.605 (Subpart U) Added.................................48270
325 Appendix A amended; interim....................................56536
326 Authority citation revised.....................................25112
326.8 (b) revised..................................................25112
333.4 (a) and (c) amended..........................................50461
347.108 (f) revised................................................50461
348.2 (j)(1)(iii) revised..........................................50461
359.1 (f)(1)(ii)(C) amended........................................50461
Chapter IV
413 Added; interim..........................................66544, 66569
413.440 Added; interim.............................................66570

                                  2004

12 CFR
                                                                   69 FR
                                                                    Page
Chapter III
308.116 (b)(4) introductory text, (i), (ii), (iii)(A) and (B) 
        amended....................................................61305
308.132 (c)(2)(ii), (iii)(B), (C), (3) introductory text, (i), 
        (ii), (iii), (ix), (xiv), (xv) and (xvi) amended...........61305
325 Appendix A amended; interim....................................22385
    Appendix A amended.............................................44921
    Appendix C amended.............................................44924
327.2 Revised; eff. 3-1-05.........................................68073
330.10 (f) revised..................................................2829
334 Added; eff. 7-1-05.............................................77618
335.101 (a) amended; interim.......................................19088
    (a) amended....................................................59783
335.111 Amended; interim...........................................19088
    Amended........................................................59783
    Form F-7 amended...............................................59784
    Form F-8 amended...............................................59786
    Form F-8A amended..............................................59787
335.601 Revised; interim...........................................19088
    Revised........................................................59783
335.611 Heading revised; interim...................................19088
    Heading revised................................................59783
    Form F-7 amended...............................................59784
335.612 Heading revised; interim...................................19088
    Heading revised................................................59783
    Form F-8 amended...............................................59786
335.613 Heading revised; interim...................................19088
    Heading revised................................................59783
    Form F-8A amended..............................................59787
335.701 (a) and (b) revised; interim...............................19088
    (a) and (b) revised............................................59783
335.801 (b) revised; interim.......................................19088
    (b) revised....................................................59783
345.12 (g) removed; (h) through (q) and (s) through (w) 
        redesignated as (g) through (p) and (t) through (x); new 
        (q) and (s) added; (b)(1), new (k), (l) and (r) revised; 
        interim....................................................41187
345.27 (g)(1) amended; interim.....................................41188
345.41 (b), (c)(1) and (e)(4) revised; interim.....................41188
345.42 (i) revised; interim........................................41188

[[Page 707]]

352 Revised........................................................26492
364 Authority citation revised.....................................77619
364.101 (b) revised; eff. 7-1-05...................................77619
364 Appendix B amended; eff. 7-1-05................................77619

                                  2005

12 CFR
                                                                   70 FR
                                                                    Page
Chapter III--Federal Deposit Insurance Corporation (Parts 300--399)
303 Authority citation revised.....................................17558
303.182 Revised....................................................17558
303.183 Heading, (a), (b)(1) and (c)(1) revised....................17558
303.184 (b)(1) revised; (e) added..................................17559
303.186 Heading and (a)(1) revised.................................17559
303.187 Heading, (a)(1), (2)(iv) and (b)(1) revised................17559
308.1 (f) amended; (g) redesignated as (h); new (g) added..........69639
323 Policy statement...............................................59987
325.103 (c) revised................................................17559
327.4 (a)(1)(i)(B)(1), (2), (ii)(B)(1) and (2) revised.............17559
330.11 (a)(2) revised; interim.....................................33692
    (a)(2) revised.................................................62059
333.101 (b) revised................................................60422
334 Authority citation revised..............................33985, 70685
334.1--334.3 (Subpart A) Added; interim; eff. 3-7-06...............33985
    Regulation at 70 FR 33985 eff. date delayed to 4-1-06..........70664
    Added; eff. 4-1-06.............................................70685
    Correctly revised..............................................75931
334.30--334.32 (Subpart D) Added; interim; eff. 3-7-06.............33986
    Regulation at 70 FR 33986 eff. date delayed to 4-1-06..........70664
    Added; eff. 4-1-06.............................................70686
    Correctly revised..............................................75931
335 Authority citation revised.....................................16400
335.101 (b) revised; interim.......................................16400
    (b) revised....................................................44272
335.121 Revised; interim...........................................16400
    Revised........................................................44272
335.201 Revised; interim...........................................16400
    Revised........................................................44272
335.211 Revised; interim...........................................16400
    Revised........................................................44272
335.221 (d) added; interim.........................................16400
    Heading and (d) revised........................................44272
335.261 Revised; interim...........................................16400
    Revised........................................................44272
335.331 Revised; interim...........................................16400
    Revised........................................................44272
335.801 (a) revised; interim.......................................16400
    (a) revised....................................................44273
335.901 Heading and (a) revised; interim...........................16400
    Heading and (a) revised........................................44273
336.10--336.13 (Subpart C) Added...................................69639
345.12 Regulation at 69 FR 41187 confirmed.........................15574
    (g)(4) and (u) revised.........................................44269
345.26 Revised.....................................................44269
345.27 Regulation at 69 FR 41188 confirmed.........................15574
345.28 (c) revised.................................................44269
345.41 Regulation at 69 FR 41188 confirmed.........................15574
345.42 Regulation at 69 FR 41188 confirmed.........................15574
345 Appendix A amended.............................................44270
347 Revised........................................................17560
347.301--347.305 (Subpart C) Correctly added.......................20704
363.1 (b)(2)(ii)(B) revised........................................71232
363.2 (b)(2) revised; (b)(3) added.................................71232
363.3 (b) revised..................................................71232
363.5 (a) revised..................................................71232
363 Appendix A amended.............................................71232
364 Authority citation revised.....................................15754
364 Appendix B amended.............................................15754

                                  2006

12 CFR
                                                                   71 FR
                                                                    Page
Chapter III
303.61 (d) removed; (e) redesignated as (d)........................20526
303.62 (b)(3) removed; (b)(4), (5) and (6) redesignated as (b)(3), 
        (4) and (5)................................................20526
303.162 (b) amended................................................20526
303.187 (a)(2)(vi) amended.........................................20526
303.245 (a) amended................................................20526
303.246 Removed; redesignated from 303.247.........................20526
303.247 Redesignated as 303.246; redesignated from 303.248.........20526
303.248 Redesignated as 303.247; redesignated from 303.249.........20526
303.249 Redesignated as 303.248; redesignated from 303.250.........20526
303.250 Redesignated as 303.249; redesignated from 303.251.........20526

[[Page 708]]

303.251 Redesignated as 303.250; redesignated from 303.252.........20526
303.252 Redesignated as 303.251....................................20526
307 Revised.........................................................8791
308.111 (f) amended................................................20526
308.132 (c)(3)(v) revised..........................................65713
312 Removed........................................................20526
313 Authority citation revised.....................................75661
313.1 (c) revised..................................................75661
313.3 (n) through (v) redesignated as (o) through (w); new (n) 
        added; (d), (h), (j) and new (r) revised...................75661
313.4 Introductory text revised....................................75661
313.125 Redesignated as 313.126; new 313.125 added.................75661
313.126 Redesignated as 313.127; new 313.126 redesignated from 
        313.125....................................................75661
313.127 Redesignated as 313.128; new 313.127 redesignated from 
        313.126....................................................75661
313.128 Redesignated from 313.127..................................75661
325 Appendix C amended..............................................8937
327 Authority citation revised.....................................69277
327.1 Revised......................................................69277
327.2 Revised......................................................69277
327.3 Revised......................................................69277
327.4 Revised......................................................69277
    (g) added......................................................69326
327.5 Revised......................................................69277
327.6 Revised......................................................69277
327.7 Revised......................................................69277
327.8 Revised......................................................69277
327.9 Revised......................................................69309
327.10 Revised.....................................................69309
327.1--327.10 (Subpart A) Appendices A, B and C added..............69313
327.30--327.36 (Subpart B) Revised.................................61383
327.50--327.55 (Subpart C) Added...................................61389
328 Revised; eff. 11-13-07.........................................66102
330.1 (n), (o) and (p) redesignated as (o), (p) and (q); new (n) 
        added; interim.............................................14631
330.6 (a) through (d) amended; interim.............................14631
330.7 (e) amended; interim.........................................14631
330.8 (a) amended; interim.........................................14631
330.9 (a) and (b) amended; interim.................................14631
330.10 (a), (c), (d) and (f)(3) amended; interim...................14631
330.11 Amended; interim............................................14631
330.12 (a) and (b)(1) amended; interim.............................14631
330.13 Amended; interim............................................14631
330.14 (b) and (h) removed; (c) through (g) redesignated as (b) 
        through (f); new (c)(3), (d) and (e) amended; (a) and new 
        (b)(2) revised; interim....................................14631
    (b)(2)(A), (B) and (C) redesignated as (b)(2)(i), (ii) and 
(iii); (a) and new (b)(2)(ii) revised..............................53550
330.15 Amended; interim............................................14631
330.16 Removed; interim............................................14631
336.3 (f) revised..................................................20526
345.12 (u)(1) revised..............................................78337
345.26 (d) added...................................................78337
347.202 (u) amended................................................20527
347.209 (a) and (b)(3) amended.....................................20527
347.212 (b) amended................................................20527
348.6 (d) amended..................................................20527
349 Removed........................................................78338
357.1 (a) amended..................................................20527
362.1 (d) amended..................................................20527
362.2 (p) amended..................................................20527
362.3 (a)(2)(iii)(A)(2), (b)(2)(i), (iii)(A) and (B) amended.......20527
362.4 (b)(1), (3), (5), (6) and (7) amended........................20527
362.9 (c) amended..................................................20527
362.11 Amended.....................................................20527
362.12 Amended.....................................................20527
363.1 (b)(3) amended...............................................20527
364 Appendix B correctly amended....................................5780
    Appendix A amended.............................................20527
366.3 (d) amended..................................................20527
366.5 Introductory text amended....................................20527
367.2 (s)(1) and (3) amended.......................................20527
367.6 (d) amended..................................................20528
Chapter IV
404 Authority citation revised.....................................14361
404.24--404.36 (Subpart C) Added...................................14361

                                  2007

12 CFR
                                                                   72 FR
                                                                    Page
Chapter III
308 Authority citation revised.....................................67235
308.127 (a) revised................................................67235
308.161--308.164 (Subpart N) Revised...............................67235
325 Appendix D added and amended; eff. 4-1-08......................69437

[[Page 709]]

334 Authority citation revised..............................62963, 63760
334.1 Added........................................................62963
334.3 Introductory text revised....................................63760
334.20--334.28 (Subpart C) Added...................................62963
334.80--334.83 (Subpart I) Heading revised.........................63760
334.82 Added.......................................................63760
334.90--334.91 (Subpart J) Added...................................63760
334 Appendices A, B and C added....................................62971
    Appendix J added...............................................63762
337 Authority citation revised.....................................17803
337.12 (b) revised; interim........................................17803
    Regulation at 72 FR 17803 confirmed............................54349
344.9 (a)(3) revised...............................................60547
345.12 (u)(1) correctly revised....................................72573
345.26 (a)(1) heading correctly revised............................72573
347.211 (b)(1)(i) revised; interim.................................17803
    Regulation at 72 FR 17803 confirmed............................54349
348.2 (j)(1)(vi) amended; interim...................................1276
    Regulation at 72 FR 1276 confirmed.............................38755
348.3 (b) amended; interim..........................................1276
    Regulation at 72 FR 1276 confirmed.............................38755
364 Authority citation revised.....................................63764
364.101 (b) amended................................................63764
Chapter IV
403.11 (b)(12) amended.............................................66043
407.1 (b) revised; (c) amended.....................................66043
407.2 (a) introductory text amended................................66043
407.3 (a) and (b) amended..........................................66043
407.4 Amended......................................................66043
407.6 Amended......................................................66043
413 Removed........................................................30244
414 Added..........................................................66043

                                  2008

12 CFR
                                                                   73 FR
                                                                    Page
Chapter III
303 Authority citation revised......................................2145
    Regulation at 73 FR 2145 confirmed.............................55434
    Comment resubmission opportunity...............................63338
303.20 Amended; interim.............................................2145
    Regulation at 73 FR 2145 confirmed.............................55434
303.41 (a) introductory text revised; interim......................35338
    (a) revised....................................................55432
303.46 Added; interim..............................................35338
    Added..........................................................55432
303.61 (b) revised; interim.........................................2145
    Regulation at 73 FR 2145 confirmed.............................55434
303.63 (d) removed; interim.........................................2145
    Regulation at 73 FR 2145 confirmed.............................55434
308.111 (c) revised; interim........................................2145
    Regulation at 73 FR 2145 confirmed.............................55434
308.116 (b)(4) introductory text, (i), (ii), (iii)(A) and (B) 
        correctly amended..........................................73157
308.132 (c)(2)(i) introductory text, (A), (B), (ii), (iii)(B), 
        (C), (3) introductory text, (i) introductory text, (ii), 
        (iii), (vi), (ix), (xiv), (xv) and (xvi) correctly 
        amended; (c)(3)(xvii) correctly added......................73157
309.6 (b)(3) amended; interim.......................................2146
    Regulation at 73 FR 2146 confirmed.............................55434
325 Technical correction...........................................21690
    Policy statement...............................................44620
325.5 (g)(5) revised; eff. 1-29-09.................................79606
327.10 (d) added...................................................78161
327.50--327.54 (Subpart C) Revised.................................73162
330.1 (n) revised; interim.........................................61660
330.7 (d) revised; interim.........................................61660
330.10 Revised; interim............................................56711
338.4 (b) amended..................................................45855
345.12 (u)(1) revised..............................................78155
352.9 (b) amended..................................................45857
352.10 (c) amended.................................................45857
360.8 Added; interim; eff. in part 7-1-09..........................41179
360.9 Added........................................................41195
360 Appendices A through H added...................................41197
370 Added; interim.................................................64186
    Revised........................................................72266
370.2 (f) and (g) amended; interim.................................66163
370.3 (b) and (f) amended; interim.................................66163
370.5 (a), (c), (f), (h) and (j) amended; interim..................66163

[[Page 710]]

370.6 (a), (b)(1), (2) and (c) revised; interim....................66163
370.7 (a) and (b) revised; interim.................................66163
371 Added; eff. 1-21-09............................................78170


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